passive activity loss
IRS Rejects Court’s Passive Activity Loss 5% Owner and Grouping Decision
The passive activity loss (“PAL”) rules can limit the ability to deduct losses from passive activities, such as rental losses. The real estate professional and activity grouping rules can allow taxpayers to avoid having their losses limited by the PAL …..
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Court Says Mortgage Broker Not a Real Estate Professional
The passive activity loss rules can prevent real estate investors from being able to deduct their real estate losses. That is the intent and purpose of the rules. The rules and how they have been interpreted draw some known but …..
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IRS Cannot Group Nonpassive Activities to Trigger Loss Limitation
Taxpayers are often surprised to learn that some losses may not be netted against gains in the current tax year. This is often due to the passive activity loss and material participation rules. The IRS National Office addressed these rules in TAM 20163…
Material Participation Must Always Be Documented
The IRS frequently argues that losses are limited by the passive activity loss rules. This often turns on whether the taxpayer materially participated in the business or rental activity. The Hailstock v. Commissioner case shows that the IRS expects taxpayers to document their participation even when it seems clear that the tests are met. The[…]
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Real Estate Professionals Are Subject to Material Participation Rules
Most individuals who invest in real estate to generate rental income hate the passive activity loss rules. These rules often prevent real estate investors from benefiting from the otherwise generous deductions that are associated with real estate. In G…