Sherri owns an interest in a business that is not a passive activity and in which she has $20,000 at risk.If the business incurs a $32,000 loss from operations during the year,this loss will be fully deductible.

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Sherri can only deduct losses up to the amount she has at risk, which is $20,000. The remaining $12,000 loss is not deductible until she has additional amounts at risk in the future.

Sherri Owns an Interest in a Business That Is Not