Michelle is an active participant in the rental condominium property she owns. D
ID: 2436830 • Letter: M
Question
Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($25,000) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $130,000 of salary, $12,000 of long-term capital gains, $5,000 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?
Multiple Choice
$1,500.
$25,000.
None of the choices are correct.
Zero; losses from rental property are passive losses and can only be offset by passive income.
$23,500.
Explanation / Answer
correct answer would be $1,500
$25,000 exception - $23,500 ($147,000-$100,000)0.50
= $1,500