Top Passive Loss Issues for the IRS - John R. Dundon II, Enrolled Agent
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Top Passive Loss Issues for the IRS

The Perturbing New Treatment of Patents Under the Tax Cut & Jobs Act (TCJA)

Top Passive Loss Issues for the IRS

The following are the top issues for the IRS regarding passive losses:

  1. Airplane Leasing
  2. Farm loss – particularly when the taxpayer lives out of state
  3. Rental Real Estate
  4. Real Estate Professionals demonstrating ‘material participation’
  5. Equipment leasing losses
  6. 1120S and 1065 losses on the Schedule ‘E’ in the non-passive column

Remember Passive Losses are only deductible against Passive Income reported on IRS form 8582 line 1b or 3b


Example: Taxpayer personally owns a small business.  Taxpayer also personally owns an industrial property that houses his small business.  Taxpayers small business pays rent to tax payer for occupying the building.  This rental income in this situation is not passive.



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