Rental Real Estate · See Special Enrollment Exam

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SEE PART 2: BUSINESSES

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Alex is a real estate broker and owns two residential rental properties that he operates for profit. In 2025 he worked 1,600 hours in his own brokerage and 800 hours managing his two rentals—approving tenants, setting rents, and supervising repairs—and he materially participated in the brokerage and both rentals. His brokerage and rental work were the only personal services he performed. The rentals produced a $30,000 current-year loss, and he had $12,000 of suspended passive activity losses from 2024, when he did not qualify as a real estate professional and took no management role in the rentals. His modified AGI is above the rental real estate loss allowance phase-out. He has sufficient tax basis and at-risk amounts to support the loss.

Which statement is correct for Alex's 2025 return?

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