Chapter 5: Passive Activity & At-Risk Rules

In this section

• Material Participation & Passive vs. Active Income Definitions
  Explore the seven tests for material participation under IRC §469, distinguish active vs. passive income, and discover practical insights on short-term rentals, grouping rules, and borderline scenarios.
• Suspended Losses, Carryforward Mechanics & Special Real Estate Exceptions
  Explore the core principles of suspended passive losses, the indefinite carryforward provisions, and critical real estate professional exceptions under U.S. tax law. Understand when and how suspended losses can be released, as well as the AGI-based special allowances for real estate investments.
• Interplay Between Passive Losses & At-Risk Limitations
  Master the interplay between passive activity losses and at-risk limitations, covering ordering rules, real-world K-1 examples, and Form 8582 calculations.
• K-1 Allocations in Partnerships & S Corporations: Layering for Passive vs. Active Activities
  A comprehensive guide to how K-1 allocations in Partnerships and S Corporations are classified as passive or active, including detailed steps for verifying material participation in each entity type.