13

Question 13 (1 point) Cletus and Martha Willard own an apartment building which produces a $20,000 loss. The couple have a modified AGI of $225,000. Cletus is retired and works on the apartment building for 500 hours per year. Martha is a part-time real estate agent and works 300 hours in that business and also works 80 hours on matters concerning the apartment building. Which statement below characterizes the correct tax treatment for the apartment building? SEE BOTH PROVISIONS RELATING TO RENTAL REAL ESTATE IN THE CHAPTER 11 NOTES AND HANDOUT (SPECIAL PASSIVE ACTIVITY LOSS ALLOWANCE FOR RENTAL REAL ESTATE WITH ACTIVE PARTICIPATION AND WHEN RENTAL REAL ESTATE IS PART OF A TRADE OR BUSINESS FOR REAL ESTATE PROFESSIONALS) Cletus and Martha can deduct the loss on the apartment building as real estate professionals. Cletus and Martha can deduct the loss on the apartment building under the special allowance for real estate with active participation. Cletus and Martha cannot deduct the loss on the apartment building Cletus and Martha can deduct the loss on the apartment building because it is a trade/business