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Scenario $3$: Section $469$ Passive Activity Losses Deep Dive

Taxpayer owns several rental properties that generate losses of $$60,000$ in total.

Investor has other income:

Wages: $$200,000$

Interest and Dividend Income: $$5,000$

Actively participates in one rental property, but not the others.

Itemized Deductions: $$36,000$

Allowable deduction for self$-$employment tax: None

Calculate:

How much of the rental losses are potentially deductible under Section $469$ rules.

AGI, Taxable Income, and Total Tax Liability

Analyze the difference between "active participation" and "material participation".