"Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses with rental real estate.
I.A taxpayer qualifying under both exceptions is limited to a maximum annual deduction of $25,000.
II.Active participation results from owning at least a 10% interest in the activity and arranging for repairs and maintenance and collecting rents.

Question

"Active participation" and "real estate professional" are both exceptions to the general rule for passive activity losses with rental real estate.
I.A taxpayer qualifying under both exceptions is limited to a maximum annual deduction of $25,000.
II.Active participation results from owning at least a 10% interest in the activity and arranging for repairs and maintenance and collecting rents.
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Quizplus · Accepted Answer

Statement II is correct as it describes active participation accurately, involving a significant but not necessarily managerial involvement, such as making management decisions or arranging for services. Statement I is incorrect because the $25,000 maximum annual deduction specifically applies to taxpayers who actively participate in a rental real estate activity, not to those who qualify as real estate professionals. Real estate professionals, under certain conditions, can deduct losses without the $25,000 limitation if they materially participate in their real estate activities.

"Active Participation" and "Real Estate Professional" Are Both Exceptions to the General