REG – Separately Stated Items

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  • December 27, 2020 at 6:34 am #3194330
    VD
    Participant

    Hi,

    In Becker’s book there was an example that states Rent Expense is included in Ordinary Business Income calculation and not Separately Stated Items.

    Rental Income/Loss is a Separately Stated Items right? Shouldn’t Rent Expense be part of the Separately Stated Items calculation?

    If anyone knows the reason why, please help explain to me.

    Thank you!

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  • January 7, 2021 at 1:10 pm #3204191
    DS
    Participant

    Rental income is separately stated since it must be accounted for under the passive income rules by the pass-through owner. Rental expense is a deductible business expense with no limitation so it does not need to be separated out of the business's ordinary income.

    AUD - NINJA in Training
    BEC - 91
    FAR - 97
    REG - 99
    Foobar
    January 7, 2021 at 4:54 pm #3204338
    ellabella
    Participant

    I agree; I think the confusion lies in that in one instance, the business is paying rent, and in the other instance, they have passive income/loss from a property they own. I am currently studying for the exam using UWorld Roger, and can see this being on the exam as a “thought-type” question designed to befuddle one a bit.

    Ella

    Mom of Two, studying for the CPA Exam

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