This tax year, Shally, who is an ER doctor, earned $200,000 of salary income and $50,000 of dividend income. She has no other income.

A few years ago, Shally invested $25,000 in a real estate limited partnership called Rentoo. Rentoo owns rental properties operating at a substantial loss. Shally invested in Rentoo because she wanted to use her share of its generated losses to reduce her medical salary income.

For this tax year, Shally received a Schedule K-1 from Rentoo that shows her share of its annual operating loss is $75,000.

How much, if any, is Shallys gross income subject to tax? Why?

(Include Passive and At-Risk Rules)