Passive Loss and At-Risk Rules - Mini CourseCode: 25-PASSIVE2

Course Objectives:

After reading the materials, participants will be able to:

1. Determine affected taxpayers and calculate passive losses by categorizing income and loss, listing necessary calculation steps, applying the §469 & §1211 limits, and explaining the ordering and suspension of any disallowed losses.

2. Determine a taxpayer's material participation in an activity by:

a. Listing several material participation tests and demonstrating their application to entities such as partnerships and corporations;

b. Explaining the activity grouping rules noting exempt activities;

c. Defining passive activity particularly, the treatment of rental activity as passive; and

d. Locating "nested" activities.

3. Identify and apply special passive loss rules and calculations by:

a. Illustrating alternating use affects on amount realized and adjusted basis and listing additional loss limitations outside of 469;

b. Listing five requirements for the special $25,000 allowance; and

c. Describing recharacterization rules and their purpose.

4. Explain the passive activity audit guidelines identifying audit issues, apply the real estate rental activity credit exception, and clarify the at-risk limit rules as they relate to §469.