Since 2010, Gary has been a limited partner of XYZ Company, which has not been profitable. He has a $3,500 prior year loss disallowed by the passive activity rules. Gary's status changed to general partner during the tax year, and he used his management skills full-time for five months, resulting in $5,000 net income from XYZ for Gary for this tax year. How should he treat his prior year XYZ loss on his return for the current tax year?

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