$20000 is suspended and a $30 000 loss is deductable. IRS regulations known as the "passive activity loss rules"
Only passive revenue is subtracted from passive losses. deductions are capped at $500 000 for married couples filing jointly and $250 000 for single tax payers.
In order to deduct the $30 000 in passive income from the $50,000 in losses, $20 000 of the suspended losses must also be deducted.
IRS regulations known as the "passive activity loss rules" forbid the use of passive losses to reduce earned or ordinary income. Investors are prohibited from recovering losses from income producing businesses in which they are not significantly participating under passive activity loss regulations.
The income is active income and cannot be decreased by passive losses if it is materially related to earned or regular revenue-producing activities. Only passive income can be used to cover passive losses.
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