Question

Henry rents his second home. During the year, Henry reported a net loss of $40,000 from the rental. If Henry is an active participant in the rental and his AGI is $110,000, how much of the loss can he deduct against ordinary income for the year?

Select one:

a. $0.

b. $25,000

c. $20,000

d. $40,000

Answer 1

Henry is the owner of the property and is the active participant in the rental.

So the limits for the rental loss deduction is as follows :-

1) Person can deduct $25000 rental loss if the AGI of the person is less than $100000

2) Person can deduct NO rental loss if the AGI of the person is more than $150000

Active Participant means that the person is able to make meaningful decisions regarding the rental property so known as active participant.

In Our case Harvey's AGI is less than $100000 i.e $110000so the he can deduct NO rental loss

So the correct answer is option a

answered by: anonymous