Michelle Is an Active Participant in the Rental Condominium Property

Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($15,000) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $115,000 of salary, $10,000 of long-term capital gains, $3,000 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?

A) Zero; losses from rental property are passive losses and can only be offset by passive income.
B) $4,000
C) $11,000
D) $15,000
E) None of the above

Correct Answer:

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