Income Tax: Chapter 9; Passive Activities Flashcards
Do you have to report income from publicly traded partnerships?
Yes, as portfolio income (like dividends shown on Schedule B) (PTP)
Are PIGs and PALs publicly traded?
No; It’s No Problem that PIGs are PALs; passive income generators; passive activity loss
What can offset non-publicly traded partnership income?
Non-publicly traded partnership losses (MUST be passive and non-public)
Is EE bond interest treated as phantom income?
Not unless the owner elected to have interest taxed each year
Examples of phantom income
Limited partnership income that arises from debt restructuring, creating taxability without generating cash flow
Imputed interest from zero bonds
A life policy, with a taxable gain and a maximum loan, which lapses
K-1 income from an S corporation with no corresponding check issued
Where are active/passive income/losses reported?
Schedule E
Which credit has a phaseout? Low-income Housing Credit or The Historical Rehabilitation Credit
The Historical Rehabilitation Credit ($200k)
When is rental income from your primary residence excludible from taxpayer’s gross income?
When the taxpayer rents his/her home for <15 days in a taxable year. No deductions attributable to the rental use will be allowed.
Losses from active participation in real estate are considered passive.
True. Active participation (requires bona fide involvement in management decisions) is an exception to passive loss rules.
Recapture Calculation - no alimony paid in the 3rd year
Add what was paid in the first 2 years and subtract $37,500
Recapture Calculation - alimony paid in the 3rd year
Double the 3rd year alimony payment then add it to $37,500
Add the first two years of alimony then subtract the “new” constant
Do you get a step up in basis in a divorce-related transfer?
No
What is the AGI phaseout for the $25,000 active participation loss?
$100k - $150k
Is divorce considered an unforseen circumstance to get the Section 121 $500k exclusion?
Yes
