Passive Activity Loss

(redirected from Passive Activity Losses)

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 ?
As a result, the taxpayers' deduction of certain suspended passive activity losses was disallowed, and a significant portion of their refund claim was denied.
A decedent's suspended passive activity losses are allowed on the final income tax return, subject to certain limitations.
For example, real estate professionals may be able to avoid the limit on passive activity losses.
Rental activities such as rental real estate ventures generally are passive activities for the rules on passive activity losses.
com)-- Finally a solution to investors that have been carrying suspended Passive Activity Losses (PALs) on their tax return (Form 8582) every year.
Definition of Passive Activity and Passive Activity Losses
In determining passive activity income, passive activity profits are offset by passive activity losses.
The S corp may have generated passive activity losses to the shareholder if it conducted rental activities or if the shareholder did not materially participate in the business activity of the corporation.
Passive activity losses in excess of passive activity income are suspended.
Special topics include tax research, employment taxes, tax accounting methods, passive activity losses, net operating losses, specially taxed corporations, taxation of securities, retirement plans, estate and gift taxation, and taxation of international transactions.
In other words, suspended passive activity losses from the years in which the corporation was closely held will still only be able to be offset against passive activity income and net active income.

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