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 ($18,500) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $122,000 of salary, $10,700 of long-term capital gains, $3,700 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?

A) $0; losses from rental property are passive losses and can only be offset by passive income.
B) $11,700.
C) $6,800.
D) $18,500.
E) None of the choices are correct.