Guarantor Analysis, Global Cash Flow, and the Second Way Out (#3 in series)
Q: Footnote 4 of the Exercise handout for the table titled Personal Cash Flow states that the sum of the net loss of $50,212 is located at Line 26 on Schedule E / Part I, but I was only able to locate it at Line 21.
A: As you pointed out, the net loss is reported at Line 21 and not at Line 26. The footnote is incorrect.
Nothing is reported at Line 26 on Schedule E / Part I since Fritz Schumacher did not have any passive income against which he could offset the passive loss of $50,212. Had that not been the case and if Schumacher had at least $50,212 in passive income, then the $50,212 net loss would be reported initially at Line 21 and then carried to Line 26.