Passive activity loss (PAL) rules have never been more important in Federal tax reporting. This course provides a comprehensive and complete review of the laws and regulations impacting PALs, including the rules governing rental real estate, grouping and the 3.8% net investment income tax. The IRS is actively auditing the failure to properly report passive losses. You and your clients can’t afford to be left behind.
Identify activities subject to the PAL rules and the exceptions to them, including those for certain real estate professionals.
Define a passive activity, rental and trade or business under IRC Sec. 469.
Outline seven ways to materially participate in an activity and six exceptions to the definition of a rental activity.
Calculate the passive activity income and losses allowed and the tax ramifications of passive activity dispositions.
Recognize what passive activity investments are potentially subject to the 3.8% net investment income tax under IRC Sec. 1411.
How the PAL rules apply to rental real estate activities and investments in S corporations and partnerships.
Definition of an activity and the activity grouping and disclosure rules.
Real estate professional exception to the PAL rules for investments in non-passive rentals.
Special $25,000 loss allowance for rental real estate with active participation.
Material participation safe harbor rules.
Events that trigger suspended PALs.
Limitations on tax credits generated by passive activities.
Special rules that re-characterize passive income to non-passive income.
General knowledge of individual/business income taxation and how they relate to passive activity laws.