Chapter 11 - Chapter 11: Investor Losses Passive Loss...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 11: Investor Losses Passive Loss Rules: taxpayer must segregate all income and losses into 3 categories—active, passive, portfolio. AT-RISK LIMITS: limit the deductibility of losses from business and income-producing activities—intended to prevent taxpayers from deducting losses in excess of their actual economic investment in the activity Loss deduction limited to the amount the taxpayer has at risk. This is generally the sum of: o The adjusted basis of the property & amount of cash contributed to the activity o Any amount borrowed for use in the activity for which the taxpayer has a personal liability or has pledged as security property not used in the activity AND o The taxpayer’s share of income; taxpayer’s share of losses/withdrawals decreases the deduction amount Calculation of At-Risk Amount: Cash and adjusted basis of property contributed to activity + Amounts borrowed for use in activity + Taxpayer’s share of amounts borrowed for use in activity that are qualified nonrecourse financing + Taxpayer’s share of activity’s income Less: Withdrawals from the activity Less : taxpayer’s share of activity’s deductible loss Less: Taxpayer’s share of reductions of debt End of Year At-Risk Amount Taxpayer not considered at risk with respect to borrowed amounts if either of the following is true: o The taxpayer is not personally liable for repayment of the debt (e.g. non-recourse loans) o The lender has an interest (other than as a creditor) in the activity In case of an activity involving the holding of real property,
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This document was uploaded on 04/20/2010.

Page1 / 2

Chapter 11 - Chapter 11: Investor Losses Passive Loss...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online