469 originally were created to limit a taxpayer's ability to deduct passive losses
against nonpassive income.
The IRS concluded in a Chief Counsel Advice memo (CCA) that excluded gain from the sale of a former principal residence that was converted to rental property is not an item of passive activity gross income and, as such, does not offset any suspended passive losses
upon disposition of the property.
PIG/PAL Strategies can unleash frozen Passive Losses
creating a non-taxable income.
You can, however, store passive losses
and use them later on to offset taxable profit when you eventually sell that second home.
A foreclosure on real property treated as a passive activity, "freed up" suspended passive losses
Since passive losses
are limited by the IRS to passive income, passive status limits your ability to maximize your losses and minimize your taxes.
The FA4517S EDFA allows amplification of optical broadcast and narrowcast signals, as needed, for extending reach or overcoming passive losses
associated with splitting and combining of optical signals.
According to the Act, in order to deduct passive losses
from rental activity, an individual must be a material participant in the real estate trade or business, and spend more than 750 hours and a minimum of 50 percent of their time in various real estate activities.
16] Thus, passive losses
may only offset passive income and not operating income that is generally allowed for C Corporations subject to the passive loss rules.
The concept is still used today, but changes in the tax laws in 1986 limiting the use of passive losses
to offset other income made it much less appealing to investors.
For a corporation in the 40 percent tax bracket (state and federal), that means about $400,000 in direct tax savings from the passive losses
On March 19, 1988, the Internal Revenue Service issued the first of several temporary regulations that address passive losses