A taxpayer recognized a $40,000 loss in 2020 from a small farm (which was a secondary activity to a full-time job as a dentist).What is the maximum deduction that would be allowed from the farm loss for the 2020 tax year?
A)$0
B)$17,500.
C)$21,250.
D)$40,000.

Question

Quizplus · Accepted Answer

The maximum deduction for a farm loss in 2020, when the farming activity is not the taxpayer's primary occupation, is limited to $25,000. However, for taxpayers whose adjusted gross income (AGI) exceeds $150,000, the maximum deductible amount is reduced. The reduction is $0.50 for every dollar of AGI over $150,000. Assuming the dentist's AGI is high enough to trigger this phase-out, the maximum deduction they could claim would be reduced, but without specific AGI information, the closest standard option provided is $17,500. This reflects a scenario where the deduction limit is applied considering a high AGI.

A Taxpayer Recognized a $40,000 Loss in 2020 from a Small