Pedro owns a 50% interest in a limited partnership that operates an apartment complex. During the current year, the partnership generates a taxable rental loss of $42,000. Pedro's other sources of income are salary of $55,000 and interest of $18,000. What is Pedro's allowable loss from the apartment?
A)$ - 0 -
B)$18,000
C)$21,000
D)$25,000
E)None of the above.

Question

Quizplus · Accepted Answer

Pedro's allowable loss from the apartment is $0 because passive activity loss rules generally prevent individuals from deducting losses from passive activities, such as a rental activity, against non-passive income like salary and interest. Since the rental loss is from a passive activity and Pedro's other income sources are non-passive, he cannot use the $42,000 loss to offset his other income under these rules.

Pedro Owns a 50% Interest in a Limited Partnership That