Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($18,000) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $121,000 of salary, $10,600 of long-term capital gains, $3,600 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?

Multiple Choice

• $0; losses from rental property are passive losses and can only be offset by passive income.
• $10,600.
• $7,400.
• $18,000.
• None of the choices are correct.