Investment Loss Limitation Provisions Flashcards
At-risk rules
Losses in excess of the at-risk basis are not deducted in the current year. Losses not deducted are suspended and used in future years when the at-risk basis increases.
Capital losses
Individuals may offset capital gains by capital losses realized. Up to $3;000 of realized net capital losses may offset ordinary income. Remaining excess capital losses are carried over to future years.
Hobby losses
Losses from hobby activities may be deducted to the extent of income from hobby activities. Excess hobby losses are carried forward to future years.
Investment interest
The deduction of investment interest is limited to the taxpayer’s net investment income. Excess investment interest is deductible in following years.
Passive loss limitations
Generally; passive losses are deducted only to the extent of passive income. Excess passive losses are suspended and used in future years.
Small business (§ 1244) stock
Losses from the disposition of small business stock are given ordinary treatment up to a maximum of $100;000 per year.
Vacation homes
The deductibility of losses from vacation homes may be limited; depending on the relative number of rental use days and personal use days of the property.
Worthless securities
Losses arising from investment securities that become worthless are treated as occurring on the last day of the tax year