Arnold purchased two rental properties 6 years ago.He actively participates in their management.During 2018, Arnold had income of $22,000 from one of the rentals.He had a loss from the other rental of $32,000, as well as salary income of $35,000, and dividend income of $2,000.What is Arnold's net passive income or loss deduction?

Question

Quizplus · Accepted Answer

Arnold has a net passive loss of $10,000 for the year.

The $22,000 income from one rental property is offset by the $32,000 loss from the other rental property, resulting in a net loss of $10,000.

Since Arnold actively participates in managing the rental properties, he can deduct up to $25,000 of net passive losses against his other income.

Therefore, the answer is (B) $10,000 net loss, which is within the limit of $25,000 that Arnold can deduct from his other income.

Arnold Purchased Two Rental Properties 6 Years Ago