Susan is the owner of a 35-unit apartment complex. She spends 950 hours a year managing the property. In addition, she works part-time for a mortgage company. She spends 1,150 hours a year as a bookkeeper at the mortgage company. The apartment complex generated a loss of $32,000, and Susan's adjusted gross income for the current year, before considering the apartment complex, is $48,000. How much of the loss can Susan deduct?

Question

Quizplus · Accepted Answer

Susan can deduct up to $25,000 of the loss from the rental activity because she actively participates in managing the property and her adjusted gross income (before the rental loss) is below $100,000. The deduction phases out for incomes above $100,000, but since her income is $48,000, she can take the full $25,000 deduction. The remaining $7,000 loss that cannot be deducted this year can be carried forward to future years.

Susan Is the Owner of a 35-Unit Apartment Complex