Passive Activity Loss
People also ask
What are the PAL rules for real estate rental property?
The PAL rules apply to all business activities, but are particularly strict for real estate rentals because they were the primary tax shelter. The passive activity loss rules created a special category of income and loss called passive income or loss. There are two types of passive income or loss. Passive income or loss comes from:
Are there any exemptions to the PAL rules?
The other exception to the PAL rules is the one for real estate professionals. Unlike the $25,000 exception described above, this is a complete exemption from the rules–that is, landlords who qualify as real estate professionals may deduct any amount of losses from their other non-passive income.
What is the PAL 469 rule?
(I.R.C. Section 469.) These rules were designed to limit a taxpayer’s ability to use real estate or business losses to offset other income. The PAL rules apply to all business activities, but are particularly strict for real estate rentals because they were the primary tax shelter.