Determining Whether Rental Property Is Active or Passive Does the taxpayer spend more than 500 hours on the rental property or meet the 100-hour test? No Does the taxpayer own more than a 10% interest in the rental property? No Activity is passive. No loss allowed. Yes Yes Does the taxpayer spend more than 750 hours in real property trades or businesses? No Does the taxpayer have a significant and bona fide involvement in the property? No Yes Yes Does the taxpayer spend more than 50% of working hours in real property trades or businesses No Is the taxpayer's adjusted gross income more than $100,000? No Activity is considered passive. Active participation exception applies. Maximum rental loss allowed is $25,000 Yes Yes Does the taxpayer own more than a 5% share in a real property trade or business? No Is the taxpayer's adjusted gross income more than $150,000? No Activity is considered passive. Active participation exception applies. The $25,000 maximum loss allowed is reduced by 50 cents for every $1 of adjusted gross income in excess of $100,000 Yes Yes Real estate professional exception applies. Activity is active. Loss deductions are allowed. Activity is passive. No loss is allowed. Jacqueline is a 60% owner of a rental property and has a significant role in the management of the property. During the current year, the property has a rental loss of $21,500. Click here to view Figure 7-3. Complete the statements below which outline her allowable loss based on the adjusted gross income provided in each of the following. a. $71,000: can deduct up to $ of losses from rental real estate against Jacqueline is allowed loss deduction of $ cap of $ She will have a suspended rental loss of $ that can be deducted b. $187,000: Jacqueline's adjusted gross income exceeds the in the following year against either passive income or next year's $ limit. c. $129,000: Jacqueline must adjust her loss when adjusted gross income exceeds $ . Her allowable loss is capped at $ d. $107,000: Jacqueline's rental real estate deduction is reduced by $ Her allowable loss deduction is s