Passive Activity Loss


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Passive Activity Loss (PAL)

A loss incurred in participating in passive investing.

Passive Activity Loss

A loss resulting from a passive investment. For example, rental income is considered passive; if a tenant does not pay his/her rent, this may be considered a passive income loss. Passive income losses may only offset passive income gains; they may not offset earned income. Furthermore, passive income loss may not be carried back; it may only be carried forward.

passive activity loss

The situation when expenses are greater than income from a passive activity.
References in periodicals archive ?
The remainder of C's income, $15,000, can be offset by the unused, carried-over passive activity loss of B and A, $40,000.
See also the Instructions to Form 8582, Passive Activity Loss Limitations, p.
Although partnerships and S corporations are not listed, the passive activity loss rules apply to partners and S corporation shareholders.
Passive Activity Loss Audit Technique Guide, published by the IRS in 2005 for training purposes, Training 3149-115, Catalog Number 83479V, p.
Navigating the passive activity loss rules can be a daunting task at times.
One of those nuances is the treatment of self-rentals under the passive activity loss rules.
Flowthrough losses, shareholder transactions, and the sale of the company are just a few of the reasons that practitioners advising such companies need to be keenly aware of the passive activity loss rules under Sec.
469(k), in which the passive activity loss limitation hales are applied to MLPs on an entity-by-entity basis.
Federal Income Taxation of Passive Activities, by Laura Howell-Smith and Amy Sutton (WG&L, 2008), is an online reference that gives quick answers to questions on how to minimize the tax consequences of the passive activity loss rules.
Government officials at a May IRS hearing said there will be no changes to proposed regulations under Internal Revenue Code section 469(c)(7) passive activity loss rules to permit real estate professionals to combine non-rental real estate activities with rental real estate activities when testing for material participation in rental operations.
Through the netting process on Form 8810, Corporate Passive Activity Loss and Credit Limitations, the $20,000 capital gain allows full use of the $16,000 suspended PALs and the $2,000 current-year PALs.
Chapter 5 of the IRS Passive Activity Loss Audit Technique Guide (December 2004) indicates that taxpayers may need to maintain separate books and records of their activities to be able to establish with reasonable certainty the suspended and current deductions and credits allocable on disposition.