Bonnie owns and actively participates in the operations of an apartment building that produces a $40,000 loss during the year.In addition, she has AGI of $100,000 from an active business.Her at-risk amount in the apartment building is $200,000.She may deduct $25,000 of the loss in the current year, while the remaining $15,000 is a suspended passive loss.

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Bonnie is allowed to deduct up to $25,000 of her passive losses from her nonpassive income since her AGI is less than $100,000. The remaining $15,000 is a suspended passive loss that can be carried forward to future years when she has passive income or if she sells the rental property. Her at-risk amount of $200,000 means that she has enough personal financial exposure in the activity to qualify for the at-risk rules.

Bonnie Owns and Actively Participates in the Operations of an Apartment