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 ?
469 for many taxpayers when they apply the passive loss rules to determine whether they owe tax under Sec.
469(c)(7) passive loss exception for real estate professionals.
In the tax area, IREM will work with National Association of Realtors (NAR) to retain current capital gains rules as they apply to appreciated property, like-kind exchanges and carried interest, in particular by keeping capital gains tax rates at the existing 15 percent while suspending passive loss rules.
Just think back to 1986's enactment of the passive loss rules, which significantly curtailed the deductions available to real estate investors, setting the stage for a major decline in real estate values that lasted for more than a decade.
The passive loss rules apply to individuals, estates, trust, closely-held C Corporations and "any personal service corporation.
A section on preliminary considerations covers anti-abuse rules, investment joint venture rules, liability issues, passive loss limitations and related tax issues.
The passive loss rules govern the extent to which an operating loss (the amount by which current expenses exceed income) from a particular activity, such as forest land, can be offset against income from other sources.
First, we should adopt the Senate's passive loss rule.
704 rules and the member has sufficient basis to deduct the loss, the loss may still be limited under either the at-risk or the passive loss limitations.
Any time a pass-through entity has a tax-exempt partner--which includes IRAs, Roth IRAs, pension plans, foundations or charities (entities that file Form 990)--the deductibility of losses by the non tax-exempt entities will likely be reduced with rules similar to the passive loss limitations.
The passive loss limitation restricted the deduction of real estate losses against regular income