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 ?
analogous to those of the passive activity loss rules.
Not all partners are affected by the passive activity loss rules.
via other real estate-related activities), the mortgage broker's rental real estate activities will be subject to the passive activity loss rules of Sec.
Furthermore, the $6,000 loss suspended under the passive activity loss rules can be deducted because W sold his entire interest in the passive activity to an unrelated party.
25) If the taxpayer does not meet both of these requirements, any losses that arise from the rental activity will be considered passive and will be subject to the passive activity loss limitation.
The Tax Court held that a managing member of a California LLC and S corporation was not prevented by the passive activity loss limitation roles of IRC [section] 469 from deducting his share of the entities' net losses.
Congressional inaction regarding positive, constructive changes in the Tax Law affecting the Passive Activity Loss Rules have put a jackboot on our throat.
If the taxpayer has losses which qualify under the At-Risk provisions, he must then look to the Passive Activity loss limitation rules which became
162 and is not subject to the passive activity loss rules of Sec.
A practitioner can easily observe that the compliance and planning issues associated with the net investment income tax are complex and riddled with interconnecting issues including passive activity loss considerations, self-employment taxes, and entity selection.
If a taxpayer borrows funds to invest in a passive activity, the interest expense incurred on that borrowing is treated as a passive activity loss (Reg.