Nancy has active modified adjusted gross income before passive losses of $125,000. She has a loss of $15,000 on a rental property she actively manages. How much of the loss is she allowed to deduct against the $125,000 of other income?
A)None
B)$2,500
C)$5,000
D)$12,500

Question

Quizplus · Accepted Answer

According to the IRS rules, Nancy is allowed to deduct up to $25,000 of losses from rental real estate properties that she actively manages against her other income, but as her active modified gross income is $125,000, the $25,000 limit gets reduced to $12,500. Hence, she can deduct $12,500 of the $15,000 loss against her other income.

Nancy Has Active Modified Adjusted Gross Income Before Passive Losses