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| Author : | Danny C Santucci, JD |
| Course Length : | Pages: 87 ||| Word Count: 44,894 ||| Review Questions: 80 ||| Final Exam Questions: 48 |
| CPE Credits : | 9.5 |
| IRS Credits : | 9 |
| Price : | $85.45 |
| Passing Score : | 70% |
| Course Type: | NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents |
| Technical Designation: | Technical |
| Primary Subject-Field Of Study: | Taxes - Taxes for Course Id 2384 |
| Description : | This course addresses the practical aspects of §469 and the needed skills to handle pragmatic issues. Fundamentals are reviewed, planning opportunities identified, and creative strategies discussed and evaluated along with remaining traditional approaches. The goal of this instructive program is to understand and solve problems under §469, with an emphasis on tax savings ideas. Readers will overview the proper administration of this complex and often cumbersome provision. |
| Usage Rank : | 10000 |
| Release : | 2024 |
| Version : | 1.0 |
| Prerequisites : | General understanding of Federal income taxation. |
| Experience Level : | Overview |
| Additional Contents : | Complete, no additional material needed. |
| Additional Links : |
Passive Activity
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| Advance Preparation : | None. |
| Delivery Method : | QAS Self Study |
| Intended Participants : | Anyone needing Continuing Professional Education (CPE). |
| Revision Date : | 19-Oct-2024 |
| NASBA Course Declaration : | Participants must complete the final examination within one year of purchase and with a minimum passing grade of 70% or better to receive CPE credit unless otherwise noted on the Course History page (i.e. California Ethics must score 90% or better). After logging in click on the Course History links on your My Courses page for the Begin date and Expire date for the Final Exam. |
| Approved Audience : | NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 2384 |
| Keywords : | Taxes, Passive, Activity, Losses, from, Tax, Perspective, v14, cpe, cpa, online course |
| Learning Objectives : |
As a result of studying each assignment, you should be able to meet the objectives listed below each assignment. ASSIGNMENT SUBJECTChapter 1 Overview At the start of Chapter 1, participants should identify the following topics for study:
* Categories of income & loss * Fully taxable disposition * Entire interest * Other transfers * Ordering of losses * Regular & personal service corporations * Real estate professionals * Definition of pre-enactment interest * Increase or decrease in pre-enactment interests After reading Chapter 1, participants will be able to:
2. Specify the aggregate mechanics of the passive loss rules, identify what type of losses remain unaffected, and recognize passive and nonpassive (including portfolio) income sources. 3. Identify ways to ultimately "free up" passive losses, specify the treatment of passive credits on disposition, and determine limitations on related party transactions. 4. Determine the allowance of suspended losses upon nonrecognition transactions, specify the order of recognized tax attributes upon position, and recognize the allocation of losses from multiple passive activities. 5. Identify which taxpayers are or are not subject to the passive loss rules, specify the full-time real estate professional exception, and recall the original §469 phase-in provisions. Chapter 2 Material Participation At the start of Chapter 2, participants should identify the following topics for study:
* Definition of “trade or business” * TRA ’86 committee report guidelines * General rule for individuals * Record keeping regulations * Meaning of participation * Limited partnership interests presumption * Special rules for trusts & estates * Special rules for retired & disabled farmers * Special rules for corporations After reading Chapter 2, participants will be able to:
2. Recognize special applications of the material participation rule by recalling its application to trusts, estates, and affiliated group members. Chapter 3 Activity Definition At the start of Chapter 3, participants should identify the following topics for study:
* Undertakings of old temporary activity regulations * Aggregation of trade or business undertakings * Integrated businesses * Aggregation of professional service undertakings * Control by the same interests * Rental real property undertakings * Participation unaffected * Final simplified activity regulations * Passive activity audit guide After reading Chapter 3, participants will be able to:
2. Determine whether two or more trade or business undertakings could be a single integrated business. recognize the importance of the passive activity audit guide as a tool to avoid audits by specifying potential audit issues that the passive activity audit guide addresses. Chapter 4 Passive and Non-Passive Activities At the start of Chapter 4, participants should identify the following topics for study:
* Rental activity exemptions * Rental of a dwelling unit * Trading personal property * Working interests in oil & gas exemption * Entities that limit liability * Disqualified deductions * Activities within activities After reading Chapter 4, participants will be able to:
2. Recognize exceptions to passive activity status and their tax effect and specify the tax treatment of when activities are “nested” in each other. Chapter 5 Passive Activity Loss At the start of Chapter 5, participants should identify the following topics for study:
* Separate accounting of disallowed items for husband & wife * Net active income of closely held corporations * Affiliated groups filing consolidated returns * Treatment of carryover losses * Allocation process * Significant participation activities * Separate identification of deductions After reading Chapter 5, participants will be able to:
2. Specify reasons why disallowed passive activity losses must be allocated among all the taxpayer’s activities and determine how to allocate and carry over disallowed passive activity losses. Chapter 6 Passive Activity Gross Income At the start of Chapter 6, participants should identify the following topics for study:
* Disposition of appreciated property formerly used in a nonpassive activity * Rental activities * Income from §481 adjustment * Self-charged interest * Exclusion of portfolio income * Exclusion of personal service income * Exclusion of oil & gas incomev * Active business recharacterization * Portfolio income recharacterization rules After reading Chapter 6, participants will be able to:
2. Recognize the dangers of self-charged interest and what measures can be taken to avoid this item’s passive nature and determine a “publicly traded partnership” for taxation purposes and how net income from such entities is portfolio income. 3. Determine tax attributes and subsequent events that can cause a recalculation of gross passive income and recognize the recharacterization rules identifying whether certain transactions will be recharacterized based on the 12-month and 30% tests. Chapter 7 Passive Activity Deduction At the start of Chapter 7, participants should identify the following topics for study:
* Qualified residence interest deduction exclusion * Coordination with other deduction limitations * Effect of coordination * Losses on disposition * Negative §481 adjustment * Exceptions After reading Chapter 7, participants will be able to:
2. Recognize how to account for losses on disposition according to Reg. §1.469-2T(d)(5), cite instances that require such a loss to be allocated, and determine a negative §481 adjustment. Chapter 8 Passive Activity Credits At the start of Chapter 8, participants should identify the following topics for study:
* Exception for real estate rental activity credits * Net active income * Credits subject to passive activity limits * Allocation of disallowed credits * Separate identification of credits * Ordering of credit limitations * Special rule for partners & S corporation shareholders * Coordination with other limitations * Treatment of carryover credits After reading Chapter 8, participants will be able to:
2. Specify circumstances where separate identification of credits is required and the order of credit limitations. Chapter 9 Items Received from Pass-Through Entities At the start of Chapter 9, participants should identify the following topics for study:
* Payments to partners as outsiders * Payments to partners as partners * Special rules for partnership liquidations * Applicable valuation date for sale or exchange of interest * Gain and loss dispositions * Basis adjustments * Aggregation of portfolio assets & default rule * Tiered pass-through entities * Restriction on conversion of nonpassive income After reading Chapter 9, participants will be able to:
2. Recognize items and events that uniquely adjust or allocate passive losses for pass-through entities and their owners by determining gain or loss from a sale or exchange of an interest. Chapter 10 Interaction with Other Code Sections At the start of Chapter 10, participants should identify the following topics for study:
* At-risk rules * Investment interest * Characterization of passive activity income or deduction * Coordination with §1211 * Husband & wife rules * Corporations After reading Chapter 10, participants will be able to:
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| Course Contents : | Chapter 1 - Overview General Limitation Provision Prior Law Reasons for Change Restriction on Losses Harm Industries Economic Growth Investment Goals Non-tax Economic Motives Economic Decision Making Tax Shelter Inequity Real Economic Gain or Loss Analogy to Other Investments At-Risk Test Passive Loss Rules Application Active Losses & Credits Calculating Passive Loss Categories of Income & Loss Passive Portfolio Material Participation Special Circumstances Suspension of Disallowed Losses Fully Taxable Disposition Abandonment & Worthlessness Related Party Transactions Credits Disallowance Increase Basis Election Entire Interest Partnership Grantor Trust Other Transfers Transfer By Reason Of Death - §469(g)(2) Transfer By Gift - §469(j)(6) Installment Activity No Longer Treated As Passive Activity - §469(f)(1) Closely Held To Nonclosely Held Corporation - §469(f)(2) Nontaxable Transfer Ordering of Losses Capital Loss Limitation Carryforwards Allocation of Suspended Losses Taxpayers Affected Noncorporate Taxpayers Regular & Personal Service Corporations Definition - Temp. Reg. §1.469-1T(g)(2)(i) Personal Services Principal Activity Substantially Performed by Employee-Owners Real Estate Professionals Eligibility Standards Date of Enactment Phase-In (Some Ancient History) Definition of Pre-enactment Interest Qualified Interest Pre-Enactment Activity Pre-Enactment Passive Activity Loss Pre-Enactment Passive Activity Credit Increase or Decrease in Pre-Enactment Interests Section 708(b) Exception Regulations Effective Date Chapter 2 - Material Participation General Rule “Trade or Business” Definition Material Participation Standards Committee Report Guidelines Principal Business Knowledge, Experience & Expertise Involvement in Operations Integral Efforts Management Level Physical Presence Summary February 19, 1988 Regulations General Rule for Individuals Record Keeping Meaning of Participation Exceptions to Definition - The “Unwork” Rules Husband & Wife Counted as One Annual Test Pre-’87 Participation - 500 Hours Special Rules for Entities Limited Partnership Interests Presumption Exceptions to Presumption Trusts and Estates Retired & Disabled Farmers Corporations Affiliated Groups with Consolidated Returns Chapter 3 - Activity Definition History & Rationale Tax Reform Act of 1986 Section 183 At-Risk Definition of Activity Separating Activities Substantially Different Products or Services Economic Interrelationship Separate Projects Insufficient Integration Particular Undertaking vs. Entity Variance Notice 88-94 Reasonable Standard Old Temporary Activity Regulations - A Bad Start A Change in Direction from Legislative History Impact Importance Undertakings Separate Source of Income Types of Income Producing Operations Support Operations Allocation Fundamental Undertaking Rule Same Location Same Person Operations with No Fixed Location Oil & Gas Interests Exception Separate Activity Exception to Aggregation Rules Common Reservoir Rental Exception to Fundamental Undertaking Rule Rental Operations Short-term Use Real Property Property Available to Licensees Exception to Aggregation Rules Exception to the Rental Exception Aggregation of Trade or Business Undertakings Trade or Business Undertaking Definition Aggregation Limitation Significance Coordination Rule Common Control Similar Undertakings Line of Business Rule Revenue Procedure 89-38 Business Lines Vertical Integration Supplier Rule Similar Controlled Supplier/Recipient Undertakings Recipient Rule Employee Services Coordination Rule Integrated Businesses Trade or Business Activity Common Control Facts & Circumstances Test Aggregation of Professional Service Undertakings Professional Service Undertaking Professional Services Gross Income Yardstick Combined Professional Service Income Commonly Controlled Activities Similar or Related Services Same Field Services Significant Services Related Non-Simultaneous Holding Control by the Same Interests Control Common Ownership Group Presumption 50% Rule Special Aggregation Rule Determining Ownership Partnership S Corporation Trust or Estate Attribution Rules Rental Real Property Undertakings Flexible Rules Rationale 85/30 Tests Condo Rule Conveyance Test Rental Real Estate Undertaking Defined Personal Property Unadjusted Basis Real Property Substantially Nondepreciable Property Allowed Aggregation Allowed Fragmentation Consistency Rules Pass-Through Entity Year-to-Year Rule Election Method Vacation Homes Elective Treatment of Undertakings Other Than Rental Real Estate Participation Unaffected Election Rationale Consistency Rules Election Method Miscellaneous Entity Rules Corporations Filing Consolidated Returns Publicly Traded Partnerships Effective Date Unreasonable Methods Treatment of Disallowed Deductions in Succeeding Years Final Simplified Activity Regulations Facts & Circumstances Test Relevant Factors Rental Activities Limited Partnership Activities Partnership & S Corporation Activities Consistency Regrouping Partial Dispositions Passive Activity Audit Guide Indicators of Audit Issues Investment Interest Material Participation Significant Participation Activities Active Participation Net Lease Properties Vacation Rentals Self-Charged Expenses Rental & Nonrental Activity Grouping Divorce Chapter 4 - Passive & Nonpassive Activities Trade or Business Characterization Based on Participation Rental Activity Exceptions Exceptions to Passive Activity Status Rental of a Dwelling Unit Trading Personal Property Non-Passive Activities Working Interests in Oil & Gas Exemption IDC Deduction Entities That Limit Liability Limited Liability vs. Loss Protection Disqualified Deductions Rationale Activities within Activities Chapter 5 - Passive Activity Loss Passive Activity Loss Husband & Wife Working Interest Exception Separate Accounting of Disallowed Items Special Rule for Closely Held Corporations Net Active Income Affiliated Groups Filing Consolidated Returns Carryover of Disallowed Losses Treatment of Carryover Losses Allocation Process Significant Participation Activities Separate Identification of Deductions Chapter 6 - Passive Activity Gross Income Definition Income from Dispositions of Property Used in Passive Activities Mixed Use of Property Alternating Use De Minimis Use Rule - 10/10 Test Disposition of Appreciated Property Formerly Used in a Nonpassive Activity Installment Sales Rental Activities Special Rule for Rental Real Estate Five Conditions Active Participation Change in Participation Application of $25,000 Allowance Rule Aggregation & Ordering: Net Operating Loss Dealers Rental v. Real Estate Activity Net Leases Definition Income From §481 Adjustment Self-Charged Interest Passive Nature of Self-Charged Interest Proposed Regulations Exclusion of Portfolio Income Publicly Traded Partnerships Special Portfolio Treatment Internal Offsetting Notice 88-75 Exclusion of Personal Service Income Definition of Compensation Distributive Share as Personal Service Income Exclusion of Oil & Gas Income Continuing Exclusion after Initial Qualification Definition of Property Miscellaneous Exclusions Trade or Business Income Recharacterization of Passive Income Active Business Recharacterization Problem IRS Solution - Significant Participation Income Rules Ratable Portion of Income Formula Significant Participation Losses Rental of Property Developed by Taxpayer Self-Rented Property Portfolio Income Recharacterization Rules Rental of Nondepreciable Property Equity Financed Lending Activities Pass-through Entities Licensing Intangible Property Limitation on Recharacterization Chapter 7 - Passive Activity Deduction Definition Qualified Residence Interest Deduction Exclusion Definition Coordination with Other Deduction Limitations Effect of Coordination Losses on Disposition Negative §481 Adjustment Exceptions Chapter 8 - Passive Activity Credits Definition Regular Tax Liability Allocable to Passive Activities Formula Exception for Real Estate Rental Activity Credits Special Definition for Closely Held C Corporations Net Active Income Formula Application Credits Subject to Passive Activity Limits Allocation of Disallowed Credits Separate Identification of Credits Exceptions Ordering of Credit Limitations Special Rule for Partners & S Corporation Shareholders Coordination with Other Limitations Treatment of Carryover Credits Chapter 9 - Items Received From Pass-Through Entities Characterization Entity Tax Year Payments to Partners as Outsiders Payments to Partners as Partners Partnership Liquidations - Special Rules Section 736(a) Payment Section 736(b) Payment Applicable Valuation Date Allocation Process Gain Dispositions Loss Dispositions Basis Adjustments Aggregation of Portfolio Assets Default Rule Tiered Pass-through Entities Restriction on Conversion of Nonpassive Income Special Restriction Transitional Rule Chapter 10 - Interaction with Other Code Sections Application of Passive Loss Rules At-Risk Rules Reduction of At-Risk Amount & Basis Investment Interest Characterization of Passive Activity Income or Deduction Coordination with Section 1211 Husband & Wife Rules Corporations Glossary |
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