Section 469 Passive Activity Loss Limitation Rules for Individual Taxpayers: Loss limitations, Ordering Rules and Utilizing Losses After Tax Reform

Substantiating Material Participation, Calculating Carryforwards, Reporting Dispositions, Qualifying as a Real Estate Professional

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, October 22, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

The webinar will provide tax advisers with a thorough and practical guide to navigating the passive activity loss (PAL) limitation rules, calculating PAL amounts and carryforwards, and the effect of tax reform on loss utilization. The panel will discuss the separate calculations required and describe the interrelationship between the at-risk rules and the PAL regulations, with a particular focus on real estate activities.

Description

The PAL limitations rules challenge and frustrate tax advisers and have since their adoption. Taxpayers generally may not use losses from activities in which they are passive investors to offset ordinary income earned in an active trade or business. Whether a taxpayer's involvement in an activity rises to the level of "active" confuses taxpayers and their advisers and is frequently subject to IRS examination and challenge.

Treatment of losses generated from the rental of real property is particularly complicated. The regulations specifically include rental real estate within the definition of "passive activities." However, numerous provisions provide both allowances for threshold loss amounts and differing standards as to the level of involvement and activity required of taxpayers to remove losses from these activities from PAL limitations.

Tax advisers must navigate the lengthy and challenging guidance on PALs to avoid expensive mistakes. Particularly when the taxpayer has significant real estate investments, incorrectly sorting out which losses can offset ordinary income from business activities can have costly tax consequences. The IRS continues to focus on passive income and losses since the imposition of the 3.8% Net Investment Income Tax.

Listen as our expert panel provides a thorough and practical guide to understanding the PAL rules, calculating what income and loss must be classified as passive, calculating PAL carryforwards, reporting PAL limitations on Form 8582, and identifying planning opportunities to minimize the impact of PAL limitations.

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Outline

  1. Passive activity rules of IRC Section 469 and regulations
  2. Material participation rules
  3. Real estate professional standards
  4. TCJA considerations
  5. Form 8582
  6. Disposition of passive activity investments

Benefits

The panel will discuss these and other important topics:

  • Activities that are primarily passive
  • Active vs. passive distinction in real estate activities
  • Material participation test
  • Real estate "active participation" test
  • Substantiating active participation under the tests

Faculty

Barnett, Robert
Robert S. Barnett

Partner
Capell Barnett Matalon & Schoenfeld

Mr. Barnett’s practice is highly concentrated in the areas of taxation, trusts, estates, corporate and...  |  Read More

Skarbnik, John
John H. Skarbnik

Professor of Taxation, Fairleigh Dickinson University; Tax Counsel
McCusker Anselmi Rosen & Carvelli

Mr. Skarbnik is full professor in the University’s Masters in Taxation Program. In his law practice, he...  |  Read More

Yablonicky, Elizabeth
Elizabeth Yablonicky

Senior Counsel
Johnson Moore

Ms. Yablonicky has over 15 years of experience in federal and international tax dispute resolution. She advocates for...  |  Read More

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