The Real Estate Professional & Passive Activity Loss Limitations

Why Should You Learn About IRC §469 PAL Rules?

The Top Ten Reasons

1. You can’t retire this year!!
2. You can’t avoid it if you prepare 1065 or 1120S returns.
3. You will impress your clients.
4. You will be able to talk the talk and others will not understand you.
5. You only have so many sick days until you can retire.
6. You will awe your coworkers.
7. You can advise new clients with confidence.
8.You own rental property or may some day.
9. You understand that – Form 8582.
10. You want to increase your income for that trip you always wanted to take.

PAL Defined

A. Passive
1. Schedule C or F with NO Material Participation
2. Rentals even if there is active participation.
3. Limited Partnerships
B. Non Passive= Material Participation
1. Schedule C or F with Material Participation
2. Salaries
3. Portfolio Income
a. Interest & Dividends
b. Gain on Stocks & Bonds
c. Gain on Investment Property
4. Land rented or held for investment.
5. Self-Rental Income from property leased to a business where the client works.
6. Lottery winnings.