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. Learn what qualifies as a passive activity and the rules governing its application by exploring several recent court cases and the existing regulations to know how the IRS views this critical area of the tax law. The IRS is actively auditing the failure to properly report passive losses. You and your clients can’t afford to be left behind.
Identify trade or business activities subject to the PAL rules Major Subjects:
Determine who qualifies as a real estate professional and impact from such a designation.
Define a passive activity.
Learn the seven material participation methods of qualifying for active status.
Learn the tax rules that govern whether a rental activity is subject to the PAL rules.
Learn when passive losses are permitted to be reported by an individual taxpayer.
Determine how to report and then utilize a tax credit subject to the PAL rules.
Understand how the PAL rules work in conjunction with the other three loss limitation rules.
Learn the six anti-abuse PAL rules that would re-characterize an otherwise passive gain as being active.
Level of Difficulty:
- Historical review of tax shelters and the governments reaction over two decades.
- Overview of the four loss limitation rules and how the PAL rules interact with the other limitations.
- Definition of a PAL including a detailed review of the 7 determining factors contained in the Treasury
- Regulations with a review of several recent court decisions that interpret this regulation.
- How PALs can be utilized by an individual taxpayer.
- How the activity grouping rules work including planning considerations on how to make the determination.
- Review of the “active” real estate rental loss provision.
- Determine how to qualify as a real estate professional and the ramifications that this status has on the ability of an individual to utilize losses.
- Learn the six Nonshelterable Passive Activity (NOPA) rules that act as anti-abuse rules to the PAL rules.
- Discuss how the PAL rules impact tax credits.
- Learn how the PAL rules impact other key tax provisions.
- Discuss tax elections and planning techniques associated with PALs.
General knowledge of individual/business income taxation and how they relate to passive activity laws.