@burgerguy14 wrote:
Just so I could understand how for Passive Activity losses work, I created a simple example in TT.
Yes, you created a simple example that was too simple.
Try increasing your interest income first to $125,000 and see what happens. Next, increase your interest income to $150,000 and see what happens.
What you are seeing with the figures you posted is not an NOL, it is the special allowance for active participation (up to $25,000 depending upon your MAGI).
See https://www.irs.gov/publications/p527#en_US_2022_publink1000219124
