Sam rents his second home. During the current year, he reported a $40,000 net loss from the rental. Assume Sam actively participates in the rental activity and no phase-out limitations apply. What is the greatest amount of the rental loss that Sam can deduct against ordinary income in the current year?
_$25,000
_$40,000
_$0
_$5,000
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Since Sam actively participates in his rental activity, the loss rental real estate allowance allows Sam to deduct $25,000 of the $40,000 in rental loss. Therefore, Sam can deduct up to $25,000 in rental losses.