Investment Loss Limitation Provisions Flashcards

1
Q

At-risk rules

A

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.

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2
Q

Capital losses

A

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.

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3
Q

Hobby losses

A

Losses from hobby activities may be deducted to the extent of income from hobby activities. Excess hobby losses are carried forward to future years.

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4
Q

Investment interest

A

The deduction of investment interest is limited to the taxpayer’s net investment income. Excess investment interest is deductible in following years.

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5
Q

Passive loss limitations

A

Generally; passive losses are deducted only to the extent of passive income. Excess passive losses are suspended and used in future years.

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6
Q

Small business (§ 1244) stock

A

Losses from the disposition of small business stock are given ordinary treatment up to a maximum of $100;000 per year.

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7
Q

Vacation homes

A

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.

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8
Q

Worthless securities

A

Losses arising from investment securities that become worthless are treated as occurring on the last day of the tax year

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