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Paul, who is single, has $80,000 of salary, and $5,000 of passive income. He also has...

Paul, who is single, has $80,000 of salary, and $5,000 of passive income. He also has a $35,000 passive loss from a real estate rental activity in which he satisfies the requirements for ownership, basis, and "active participation". Of the $35,000 loss, how much is deductible in the current year? 1. $30,000 2. $25,000 3. $5,000 4. $15,000

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Answer #1

$30,000

Paul participated in a passive rental real estate activity, the amount of the passive activity loss that's disallowed is decreased and therefore can deduct up to $25,000 of loss from the activity from your nonpassive income.

Deductible in Current Year = $5,000 + $25,000 = $30,000

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