Final answer:
Helen, who has a modified adjusted gross income of $126,000 and actively manages her rental property, can deduct $12,000 of her $15,000 rental property loss. This is determined after applying the phase-out due to her income level, which reduces her maximum special allowance of $25,000 by $13,000.
Step-by-step explanation:
The question pertains to the allowable passive loss deductions for a single taxpayer with modified adjusted gross income (AGI) and rental property losses. In the case of Helen, with a modified adjusted gross income of $126,000 and a rental property loss of $15,000, the IRS allows a special allowance for a single taxpayer who actively participates in their rental real estate activity. As of the latest tax laws, single filers can claim a passive activity loss of up to $25,000 if their modified AGI is $100,000 or less, which phases out by $0.50 for each dollar above $100,000 and completely phases out at $150,000.
Since Helen's income is $126,000, the phase-out would apply. Here's the calculation: $126,000 (Helen's modified AGI) - $100,000 (beginning of phase-out) equals $26,000 over the limit. The phase-out would be $26,000 * $0.50 = $13,000. Therefore, Helen's allowable passive loss deduction would be $25,000 (max allowable) - $13,000 (phase-out) = $12,000.
Thus, Helen can deduct $12,000 of her $15,000 rental property loss against her regular income. The remaining $3,000 loss that cannot be deducted in the current year can be carried forward to subsequent years subject to similar passive loss limitation rules.