Question

Bruce owns a small apartment building that produces a $25,000 loss during the year. His AGI before considering the rental loss is $85,000. Bruce must be a material participant with respect to the rental activity in order to deduct the $25,000 loss under the real estate rental exception.

t
f

Answer 1

In order for Bruce to deduct the $25,000 loss from his apartment building, he must be a material participant in the rental activity. So, the correct answer is true.

Step-by-step explanation:

Under the real estate rental exception, in order for Bruce to deduct the $25,000 loss from his small apartment building, he must be a material participant in the rental activity. Being a material participant means that Bruce is actively and substantially involved in the management and operations of the rental property. It is not enough for him to just own the property and collect rent. He must meet certain requirements set by the IRS, such as spending a significant amount of time on the rental activity or performing most of the work himself.

So, the correct answer is true, Bruce must be a material participant with respect to the rental activity