Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a ($25,000) loss; however, Michelle has sufficient tax basis and at-risk amounts to absorb the loss. If Michelle has $130,000 of salary, $12,000 of long-term capital gains, $5,000 of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?

Multiple Choice

• $23,500.
• Zero; losses from rental property are passive losses and can only be offset by passive income.
• $1,500.
• None of the choices are correct.
• $25,000.