Question

Roger owns and actively participates in the operations of an apartment building which produces a $40,000 loss during the year. He has AGI of $150,000 from an active business. He may deduct $25,000 of the loss.

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Answer 1

Roger may be able to deduct $25,000 of the rental property loss against his AGI of $150,000 from another active business if his MAGI falls within the allowable thresholds for the special allowance for active participation in rental real estate set by IRS passive activity loss rules.

Step-by-step explanation:

The question refers to the deductibility of rental real estate losses against other income, which depends on the tax code and the taxpayer's active participation in the rental activity. Under the passive activity loss rules, losses from rental real estate activities in which the taxpayer actively participates are generally limited.

The IRS allows a special allowance for people who actively participate and have a modified adjusted gross income (MAGI) below a certain threshold. Based on the information provided, Roger has a $40,000 loss from his active participation in an apartment building and has an adjusted gross income (AGI) of $150,000 from another active business.

If Roger's AGI is within the allowable range, he can deduct up to $25,000 of his rental real estate loss against his other income; if it is not, then the amount he can deduct may be limited and the excess loss can be carried forward to future years.

Therefore, whether Roger can deduct $25,000 of the loss against his other income depends on his MAGI and whether it falls within the IRS thresholds for passive activity losses.