R1 - Loss Limitations For Individuals

Question 1

Passive

Answer 1

DID NOT ACTIVELY PARTICIPATE

Question 2

Loss Limitations: PAL
TAPE
SPRE

Answer 2

1. Tax Basis (S Corp) = Losses are CF, lost when sold.
2. At-Risk Basis (Partnership) = Losses CF until more At-Risk Basis is generated or until activity is sold. Deductible against income when disposed of.
3. PALCO = DOES NOT MATERIALLY participate
4. Excess Business loss = Max allowed $518K/$259K and CF 80%

Question 3

PAL

Answer 3

• Net Rental Loss is not deductible; but CF or deduct in yr sold.
• If TP becomes material participant, can be used to offset net rental income.
• Always CF, never CB
• Allocate losses prorata to PA income.

Question 4

PAL Exceptions

Answer 4

1. Up to 25Kis deductible if you own >10% and are active. PHO: starts at $100K- ends at $150K = Excess * 50%
2. RE Agent: 50% and 750hrs svc

Question 5

Loss Limitations: Cap Loss

Answer 5

• Always CF, never CB
• Personal Bad Debt is STCL for Tax Year that becomes worthless.
• Worthless Stock and Sec treated as cap loss as if they sold 12/31.