Question 65 of 75. When a taxpayer sells or otherwise disposes of rental property, how are any unallowed, prior-year, passive-activity losses treated? They become nonpassive losses and may be used to reduce both passive and nonpassive income in the year of disposition. + They may be used to reduce up to $3,000 of ordinary income, then carried forward to future tax years and used to reduce up to $3,000 of ordinary income each year until the entire loss is depleted. ? up do mh lossen They may be used to reduce passive income in the year of disposition, but any remaining losses will be permanently disallowed. + They may be used to reduce passive income in the year of disposition. Any unused amount must be carried forward and can only be used to offset passive income in future tax years