Question

Lucy owns and actively participates in the operations of an apartment complex that produces a $50,000 loss during the year. Her modified AGI is $125,000 from an active business. Disregarding any at-risk amount limitation, she may deduct $25,000 of the loss, and the remaining $25,000 is a suspended passive loss.

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Answer 1

Lucy can deduct $25,000 of the loss against her current year's income, and the remaining $25,000 is a suspended passive loss.

Step-by-step explanation:

In this scenario, Lucy owns and actively participates in the operations of an apartment complex that produces a $50,000 loss during the year. Her modified AGI (Adjusted Gross Income) is $125,000 from an active business. According to the tax rules, Lucy is allowed to deduct $25,000 of the loss against her current year's income. The remaining $25,000 is considered a suspended passive loss. This means that Lucy cannot currently deduct the remaining loss from her business income, but she may be able to use it to offset future passive income or gain from the same rental activity.