Highlights
• Detailed coverage of the passive activity rules under IRC 469 (and related regulations), how the 3.8% net investment income tax under 1411 and qualified business income (QBI) deduction under 199A applies to rentals and passive activities, and what is a trade or business rental is under 162
• How the PAL rules apply to rental real estate activities and investments in S corporations and partnerships
• Definition of activity and the activity grouping and disclosure rules
• Real estate professional exception to the PAL rules for investments in non-passive rentals
• Special $25,000 loss allowance for rental real estate with active participation
• Material participation safe harbor rules
• Events that trigger suspended PALs
• Limitations on tax credits generated by passive activities
• Special rules that re-characterize passive income to non-passive income
• What rentals are subject to self-employment tax under 1402
Objectives
• Identify what activities are subject to the PAL rules and the exceptions to them, including those for certain real estate professionals
• Define a passive activity, rental and trade or business under IRC 469
• List the seven ways to participate in an activity materially and the six exceptions to the definition of a rental activity
• Calculate the passive activity income and losses allowed and the tax ramifications of passive activity dispositions
• Recognize what passive activity investments are potentially subject to the 3.8% net investment income tax under IRC 1411