Question

Q. Pablo, who is single, has $180,000 of salary, and a $27,000 passive activity loss from a real estate rental activity in which he actively participates. Of the $27,000 loss, how much is deductible?
a. $0
b. $10,000

c. $25,000
d. $27,000
e. None of these

Answer 1

Under the passive activity rules you can deduct up to $25,000 in passive losses against your ordinary income (W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less. This deduction phases out $1 for every $2 of MAGI above $100,000 until $150,000 when it is completely phased out. If your MAGI is over $150,000 then you can’t deduct any of these losses against your ordinary income and the entire passive loss is carried forward.

Here the MAGI exceeds $ 150,000,so nothing is deductible.

Option a. is correct