I'm not quite sure why the answer is B. Is the $35,000 not subject to $25,000 deduction because Lane isn't a real estate professional even if he/she materially participated in the real estate rental activity? And also, is the answer B because the $15,000 income from S corp which was not materially participated could be offset with the $35,000 passive loss?
#14 of 2010 Bisk released questions
Lane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S Corp. in which Lane does NOT materially participate, and a $35,000 passive loss from real estate rental activity in which Lane materially participated. Lane's modified adjusted gross income was $165,000. What amount of the real estate rental activity loss was deductible?
A. $0
B. $15,000
C. $25,000
D. $35,000
Answer : B