Simon is a 30% owner (member)of Real Properties R Us,LLC (RPRU).During the current tax year,RPRU reported a loss from rental real estate activities of ($150,000)which is treated as a passive loss.Simon is a material participant in RPRU.His modified AGI is $122,000.In addition,Simon has passive income from other sources of $15,000.Assuming Simon meets the basis and at risk limitations,what amount of the RPRU loss may Simon deduct under the passive loss rules?
A)$0.
B)$15,000.
C)$24,000.
D)$29,000.
E)$44,000.

Question

Quizplus · Accepted Answer

Since Simon is a material participant in RPRU, he is not subject to the passive activity loss rules for the loss from RPRU. Therefore, he can deduct the entire $150,000 loss from RPRU against his other income. However, he must meet the basis and at-risk limitations, which are not provided in the problem. Since Simon has $15,000 of passive income from other sources, he can deduct up to $15,000 of the RPRU loss to offset his passive income. Therefore, his deductible loss is the lesser of his share of the RPRU loss ($45,000) or his passive income from other sources ($15,000). Thus, the maximum amount of the loss Simon may deduct under the passive loss rules is $29,000 ($15,000 + $14,000).

Simon Is a 30% Owner (Member)of Real Properties R Us,LLC