Passive Loss Rules


Definition of "Passive loss rules"

Robert  Smith III real estate agent
Robert Smith III, Real Estate Agent HALL & HUNTER-BIRMINGHAM

Rules passed as part of the tax reform act of 1986 that limit the amount of income investors can shelter from current tax. Losses can be deducted from passive activities only in the amount to which income results from passive activities. Furthermore, losses from one passive activity can be used only to offset the passive income earned from a similar passive activity. For example, losses from publicly traded partnerships can be applied only to offset passive income earned from publicly traded partnerships.

 

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