Lucy owns and actively participates in the operations of an apartment complex that produces a $50,000 loss during the year.Her modified AGI is $125,000 from an active business.Disregarding any at-risk amount limitation,she may deduct $25,000 of the loss,and the remaining $25,000 is a suspended passive loss.

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Lucy actively participates in the apartment complex, which is considered a passive activity. However, due to her modified AGI exceeding $100,000, the special allowance for rental real estate losses phases out, and she cannot deduct the $25,000 loss. The entire $50,000 loss is suspended as a passive loss.

Lucy Owns and Actively Participates in the Operations of an Apartment