Rose has an adjusted gross income of $130,000. Not included in her adjusted gross income is a $15,000 loss from a passive activity. Which of the following statements regarding the effect of the passive loss on his adjusted gross income is/are correct?
I.If the activity is rental real estate and Rose meets the real estate professional exception, she can deduct the $15,000 loss for adjusted gross income.
II.If the activity is rental real estate and Rose is an active participant, she can deduct $5,000 of the loss for adjusted gross income.

Question

Rose has an adjusted gross income of $130,000. Not included in her adjusted gross income is a $15,000 loss from a passive activity. Which of the following statements regarding the effect of the passive loss on his adjusted gross income is/are correct?
I.If the activity is rental real estate and Rose meets the real estate professional exception, she can deduct the $15,000 loss for adjusted gross income.
II.If the activity is rental real estate and Rose is an active participant, she can deduct $5,000 of the loss for adjusted gross income.
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Quizplus · Accepted Answer

Statement I is correct because if Rose meets the real estate professional exception, she can deduct the entire passive loss of $15,000 from her adjusted gross income. Statement II is not correct because if Rose is an active participant in the rental real estate activity, she can only deduct up to $25,000 of passive losses from her adjusted gross income unless her modified adjusted gross income is below $100,000, which is not the case in this scenario.

Rose Has an Adjusted Gross Income of $130,000