Chapter 11

Question 1

What are at risk rules?

Answer 1

Designed to prevent taxpayer for deduction losses in excess of economic interest in activity. - cash invested, amount borrowed you are personally liable for etc.

Question 2

What are the three categories of income?

Answer 2

active, portfolio, and passive

Question 3

Passive activity losses (PALs) can only offset what

Answer 3

Passive income/gains

Question 4

What are examples of portfolio income

Answer 4

Dividends, interest, gains on asset

Question 5

What is active income?

Answer 5

Includes wages and business activity in which the taxpayer “materially participates” aka participates >500 hours per year

Question 6

PALs can be carried forward for how many years?

Answer 6

Indefinitely. TVM and MTR implications

Question 7

What is the exception for passive losses in real estate?

Answer 7

You can deduct up to 25k in losses on RE rentals vs active/portfolio income. Benefit reduced as AGI rises = stealth tax