This document contains a summary of key concepts regarding deductions for business and investment losses and passive activity losses from Chapter 7. It includes 20 exhibits that cover topics such as abusive tax shelters, at-risk rules, passive activity loss rules, disposing of a passive activity interest, inheriting a passive activity, and material participation. The exhibits provide definitions and examples to explain these complex areas of tax law.
Agenda: Tax Updates for Individuals; Tax Update for Businesses; Fiscall Cliff; Disposition of Assets or Business Interests; Depreciation; Basis Issues; Business Income and Deductions; Estate Planning; Other Cases and Rulings.
Agenda: Tax Updates for Individuals; Tax Update for Businesses; Fiscall Cliff; Disposition of Assets or Business Interests; Depreciation; Basis Issues; Business Income and Deductions; Estate Planning; Other Cases and Rulings.
Emerginov, an open PHP PaaS for co-innovation, OW2con'12, ParisOW2
This platform is based on the smart integration of free software components and promote the massive usage of open technologies (LAMP, Asterisk, OpenSIPS) and open API. It has been deployed in Africa and used to stimulate open innovation in emerging countries. It allows rapid prototyping of “telco-web” micro-services on over the top of traditional operator networks using open APIs (SMS, vocal access). It aims to build a reference library of business applications under free licenses. The project has recently joined OW2 and aims to publish 2 versions of the solution: a standalone version and a Telco grade version.
Introducing Open Source School, the First Software Engineering School dedicat...OW2
In France alone, the IT industry is short of 40,000 engineers with appropriate open source skills, and over 3,000 are missing each year in the only field of open source.
This is one of the reasons why Smile decided to create a school entirely dedicated to the teaching of open source : Open Source School.
This unique school in France is divided into three mail activities :
First degree courses ((from Bac+3 to Bac+5)
In-service training
Occupational retraining
Come and learn about the Open Source School.
Planning to Avoid the New Medicare Tax & Other 2013 Tax IncreasesBruce Givner
Information on all of the new tax increases for 2013, including the new Medicare tax, and how it will affect you!
For more information, please visit us at www.givnerkaye.com
Maximizing Investor LossesAfter reviewing the scenario, compare .docxandreecapon
Maximizing Investor Losses
After reviewing the scenario, compare and contrast the at-risk rules and passive activity limits. Discuss the purpose for each, and suggest at least two (2) tax-planning strategies for ensuring that the IRS allows passive losses in order to reduce your tax liability. Provide support for your suggestion.
Imagine that you in the process of creating a new business structure and have to choose between a personal service corporation and one that is closely held. Consider the tax deductions, at-risk rules, and passive loss limitations, and recommend the type of structure that has the greatest potential to minimize your tax liability. Defend your positon.
ACC 307 Week 7 Scenario Script: Investor Losses
Slide #
Scene/Interaction
Narration
Slide 1
This is a scene that introduces the setting for the scenario.
It has a shot of the tax firm and a welcome message. There is a button to start labeled “Enter.”
Slide 2
Scene 1
Wade and Carmen inside the accounting firm, in a conference room.
Wade: Hi, Carmen. Great job in resolving the issues from last week with Jonathan Dixon.
As long as Jonathan uses over-the-counter holistic medicine and procedures not prescribed by his doctor, unfortunately, the medical expenses will not be deductible. Jonathan will be able to maximize his deductions by increasing his charitable contributions, especially considering that he is in a high tax bracket.
Carmen: He will also be able to increase his charitable deductions by either contributing cash or capital gain property. Although he cannot contribute more than fifty percent of his adjustable gross income, he can make cash and non-cash contributions.
Wade: We can also advise him to contribute capital gain property, although there is a thirty percent maximum contribution to tax-exempt organizations.
Carmen:Instead of trying to increase his spending for non-deductible medical expenses, he should increase his charitable contributions to reduce his tax liability.
Wade: Exactly! All right, Carmen, let’s get started with our work for this week, where our focus will be on Investor Losses.
Carmen: I’m ready to get started!
Slide 3
Scene 2
Wade and Carmen in his office
Wade: Jonathan Dixon called and said that he found more documents that might help reduce his tax liability. I’ll set up the meeting for this afternoon.
Carmen: All right! Thanks, Wade!
Slide 4
Scene 3
Wade, Carmen and Jonathan Dixon in the conference room.
Wade: Jonathan, welcome back. I’m going to sit back and let you two get to work.
Jonathon Dixon: Thanks, Wade.
Carmen, I forgot to bring my other tax documents with me the last time I was here.
I own several rental properties that are managed by a management company, but I’m considering managing them myself, if it will help.
I also have substantial investments and I’m considering selling some of them this year to invest in a closely held corporation.
How would you recommend that I handle these issues?
Carmen:Tha ...
Doing Business in Brazil: Common Pitfalls and How to Avoide Themhspblog
With a sophisticated technology sector, one of the largest workforces in the Americas, and one of the fastest growing economies in the world, it’s clear why Brazil is a popular choice for international expansion. But the labyrinthine Brazilian system can be confusing, and if your operations there are not set up optimally, you may face significant unexpected taxes or fines. Join us for this informative webinar to learn how to navigate it successfully.
soluiton manual for South-Western Federal Taxation 2022 Corporations, Partner...ssuserf63bd7
https://qidiantiku.com/soluiton-manual-for-south-western-federal-taxation-2022-corporations-partnerships-estates-and-trusts-45th-edition.shtml
Full download please contact u84757@protonmail.com or qidiantiku.com
Epistemic Interaction - tuning interfaces to provide information for AI supportAlan Dix
Paper presented at SYNERGY workshop at AVI 2024, Genoa, Italy. 3rd June 2024
https://alandix.com/academic/papers/synergy2024-epistemic/
As machine learning integrates deeper into human-computer interactions, the concept of epistemic interaction emerges, aiming to refine these interactions to enhance system adaptability. This approach encourages minor, intentional adjustments in user behaviour to enrich the data available for system learning. This paper introduces epistemic interaction within the context of human-system communication, illustrating how deliberate interaction design can improve system understanding and adaptation. Through concrete examples, we demonstrate the potential of epistemic interaction to significantly advance human-computer interaction by leveraging intuitive human communication strategies to inform system design and functionality, offering a novel pathway for enriching user-system engagements.
Smart TV Buyer Insights Survey 2024 by 91mobiles.pdf91mobiles
91mobiles recently conducted a Smart TV Buyer Insights Survey in which we asked over 3,000 respondents about the TV they own, aspects they look at on a new TV, and their TV buying preferences.
JMeter webinar - integration with InfluxDB and GrafanaRTTS
Watch this recorded webinar about real-time monitoring of application performance. See how to integrate Apache JMeter, the open-source leader in performance testing, with InfluxDB, the open-source time-series database, and Grafana, the open-source analytics and visualization application.
In this webinar, we will review the benefits of leveraging InfluxDB and Grafana when executing load tests and demonstrate how these tools are used to visualize performance metrics.
Length: 30 minutes
Session Overview
-------------------------------------------
During this webinar, we will cover the following topics while demonstrating the integrations of JMeter, InfluxDB and Grafana:
- What out-of-the-box solutions are available for real-time monitoring JMeter tests?
- What are the benefits of integrating InfluxDB and Grafana into the load testing stack?
- Which features are provided by Grafana?
- Demonstration of InfluxDB and Grafana using a practice web application
To view the webinar recording, go to:
https://www.rttsweb.com/jmeter-integration-webinar
Slack (or Teams) Automation for Bonterra Impact Management (fka Social Soluti...Jeffrey Haguewood
Sidekick Solutions uses Bonterra Impact Management (fka Social Solutions Apricot) and automation solutions to integrate data for business workflows.
We believe integration and automation are essential to user experience and the promise of efficient work through technology. Automation is the critical ingredient to realizing that full vision. We develop integration products and services for Bonterra Case Management software to support the deployment of automations for a variety of use cases.
This video focuses on the notifications, alerts, and approval requests using Slack for Bonterra Impact Management. The solutions covered in this webinar can also be deployed for Microsoft Teams.
Interested in deploying notification automations for Bonterra Impact Management? Contact us at sales@sidekicksolutionsllc.com to discuss next steps.
UiPath Test Automation using UiPath Test Suite series, part 3DianaGray10
Welcome to UiPath Test Automation using UiPath Test Suite series part 3. In this session, we will cover desktop automation along with UI automation.
Topics covered:
UI automation Introduction,
UI automation Sample
Desktop automation flow
Pradeep Chinnala, Senior Consultant Automation Developer @WonderBotz and UiPath MVP
Deepak Rai, Automation Practice Lead, Boundaryless Group and UiPath MVP
Neuro-symbolic is not enough, we need neuro-*semantic*Frank van Harmelen
Neuro-symbolic (NeSy) AI is on the rise. However, simply machine learning on just any symbolic structure is not sufficient to really harvest the gains of NeSy. These will only be gained when the symbolic structures have an actual semantics. I give an operational definition of semantics as “predictable inference”.
All of this illustrated with link prediction over knowledge graphs, but the argument is general.
Kubernetes & AI - Beauty and the Beast !?! @KCD Istanbul 2024Tobias Schneck
As AI technology is pushing into IT I was wondering myself, as an “infrastructure container kubernetes guy”, how get this fancy AI technology get managed from an infrastructure operational view? Is it possible to apply our lovely cloud native principals as well? What benefit’s both technologies could bring to each other?
Let me take this questions and provide you a short journey through existing deployment models and use cases for AI software. On practical examples, we discuss what cloud/on-premise strategy we may need for applying it to our own infrastructure to get it to work from an enterprise perspective. I want to give an overview about infrastructure requirements and technologies, what could be beneficial or limiting your AI use cases in an enterprise environment. An interactive Demo will give you some insides, what approaches I got already working for real.
Elevating Tactical DDD Patterns Through Object CalisthenicsDorra BARTAGUIZ
After immersing yourself in the blue book and its red counterpart, attending DDD-focused conferences, and applying tactical patterns, you're left with a crucial question: How do I ensure my design is effective? Tactical patterns within Domain-Driven Design (DDD) serve as guiding principles for creating clear and manageable domain models. However, achieving success with these patterns requires additional guidance. Interestingly, we've observed that a set of constraints initially designed for training purposes remarkably aligns with effective pattern implementation, offering a more ‘mechanical’ approach. Let's explore together how Object Calisthenics can elevate the design of your tactical DDD patterns, offering concrete help for those venturing into DDD for the first time!
Transcript: Selling digital books in 2024: Insights from industry leaders - T...BookNet Canada
The publishing industry has been selling digital audiobooks and ebooks for over a decade and has found its groove. What’s changed? What has stayed the same? Where do we go from here? Join a group of leading sales peers from across the industry for a conversation about the lessons learned since the popularization of digital books, best practices, digital book supply chain management, and more.
Link to video recording: https://bnctechforum.ca/sessions/selling-digital-books-in-2024-insights-from-industry-leaders/
Presented by BookNet Canada on May 28, 2024, with support from the Department of Canadian Heritage.
Connector Corner: Automate dynamic content and events by pushing a buttonDianaGray10
Here is something new! In our next Connector Corner webinar, we will demonstrate how you can use a single workflow to:
Create a campaign using Mailchimp with merge tags/fields
Send an interactive Slack channel message (using buttons)
Have the message received by managers and peers along with a test email for review
But there’s more:
In a second workflow supporting the same use case, you’ll see:
Your campaign sent to target colleagues for approval
If the “Approve” button is clicked, a Jira/Zendesk ticket is created for the marketing design team
But—if the “Reject” button is pushed, colleagues will be alerted via Slack message
Join us to learn more about this new, human-in-the-loop capability, brought to you by Integration Service connectors.
And...
Speakers:
Akshay Agnihotri, Product Manager
Charlie Greenberg, Host
GDG Cloud Southlake #33: Boule & Rebala: Effective AppSec in SDLC using Deplo...James Anderson
Effective Application Security in Software Delivery lifecycle using Deployment Firewall and DBOM
The modern software delivery process (or the CI/CD process) includes many tools, distributed teams, open-source code, and cloud platforms. Constant focus on speed to release software to market, along with the traditional slow and manual security checks has caused gaps in continuous security as an important piece in the software supply chain. Today organizations feel more susceptible to external and internal cyber threats due to the vast attack surface in their applications supply chain and the lack of end-to-end governance and risk management.
The software team must secure its software delivery process to avoid vulnerability and security breaches. This needs to be achieved with existing tool chains and without extensive rework of the delivery processes. This talk will present strategies and techniques for providing visibility into the true risk of the existing vulnerabilities, preventing the introduction of security issues in the software, resolving vulnerabilities in production environments quickly, and capturing the deployment bill of materials (DBOM).
Speakers:
Bob Boule
Robert Boule is a technology enthusiast with PASSION for technology and making things work along with a knack for helping others understand how things work. He comes with around 20 years of solution engineering experience in application security, software continuous delivery, and SaaS platforms. He is known for his dynamic presentations in CI/CD and application security integrated in software delivery lifecycle.
Gopinath Rebala
Gopinath Rebala is the CTO of OpsMx, where he has overall responsibility for the machine learning and data processing architectures for Secure Software Delivery. Gopi also has a strong connection with our customers, leading design and architecture for strategic implementations. Gopi is a frequent speaker and well-known leader in continuous delivery and integrating security into software delivery.
2. Chapter 7 Exhibits
1. Abusive Tax Shelters
2. At-Risk Rules
3. Determining the Amount at Risk
4. Additional Points on At-Risk Rules
5. Passive Activity Loss Rules
6. Applying the At-Risk and Passive Loss Rules
7. Disposing of an Entire Passive Activity Interest
8. Inheriting a Passive Activity
9. Receiving a Passive Activity as a Gift
10. Material Participation
Chapter 7, Exhibit Contents A CCH Federal Taxation Basic Principles 2 of 31
3. Chapter 7 Exhibits
11. Significant Participation
12. 6 Exceptions to Rental Activity Status
13. Special $25,000 Allowance
14. Real Estate Professionals
15. Computing Business Casualty and Theft Losses
16. Net Operating Losses—Rules for Individuals
17. Hobby Losses
18. Home Office Expenses
19. Vacation Home Expenses
20. Rented for More Than 14 Days
Chapter 7, Exhibit Contents B CCH Federal Taxation Basic Principles 3 of 31
4. Abusive Tax Shelters
Tax shelters provided deductions to investors in order to
reduce tax liabilities with respect to income from other
sources.
Almost all tax shelters were formed as limited partnerships,
which allowed losses to pass through to the individual’s tax
return. (A limited partner is not personally liable for the debts
of the partnership).
Typical tax shelters once provided high returns without
necessarily making a before-tax profit.
Chapter 7, Exhibit 1a CCH Federal Taxation Basic Principles 4 of 31
5. Abusive Tax Shelters
Example of Pre-1987 Tax Shelter
10 investors form "Pay-No-Tax," a limited partnership.
Each investor contributes $10,000, and the partnership
purchases an office building.
The building never exceeds 50% occupancy.
Chapter 7, Exhibit 1b CCH Federal Taxation Basic Principles 5 of 31
6. Abusive Tax Shelters
At 50% occupancy, the annual cash flows appear as follows:
Each of the 10 Partners
Description LP
Rental income $ 70,000 $ 7,000
Operating expenses (40,000) (4,000)
Interest payments (90,000) (9,000)
Negative cash flow (60,000) (6,000)
Depreciation (100,000) (10,000)
Tax loss (160,000) (16,000)
Tax benefit from loss (70% tax bracket
from 1965 – 1981) 112,000 11,200
Net cash [($60,000) + $112,000] $52,000 $ 5,200
Annual return on equity 52% 52%
($52,000/$100,000)
Chapter 7, Exhibit 1c CCH Federal Taxation Basic Principles 6 of 31
7. Abusive Tax Shelters
The partnership had a $160,000 tax loss, which provided
$112,000 of tax savings. ($160,000 * 70%)
The partnership only had a $60,000 cash loss.
Compared to the $112,000 tax savings, the partnership
actually had a positive cash flow of $52,000.
($112,000 - $60,000)
Chapter 7, Exhibit 1d CCH Federal Taxation Basic Principles 7 of 31
8. At-Risk Rules—Background
Congress passed the Code Sec. 465 at-risk rules in 1976.
However, the at-risk rules did very little to curb abusive tax
shelters.
The at-risk rules prevent taxpayers from deducting losses in
excess of basis (i.e., amount at-risk).
Chapter 7, Exhibit 2 CCH Federal Taxation Basic Principles 8 of 31
9. Determining the Amount at Risk
Cash investment in an activity
+ Basis of other property invested
+ The activity's borrowings with investor personal guarantees or
personal collateral.
+ Income allocation
– Loss allocation
– Withdrawals of cash or other property to investors at FMV
= Amount at risk
Chapter 7, Exhibit 3 CCH Federal Taxation Basic Principles 9 of 31
10. Additional Points on At-Risk Rules
Ordinarily, an investor is not at risk for nonrecourse loans
(loans secured by the property purchased, rather than the
personal assets of the borrower).
However, Congress permitted “qualified” nonrecourse loans
to be treated as “at-risk” if they were secured by their activity's
real property.
Generally, nonrecourse secured loans from S & Ls, banks,
insurance companies, and federal, state, and local governments
are considered to be at-risk.
Chapter 7, Exhibit 4 CCH Federal Taxation Basic Principles 10 of 31
11. Passive Activity Loss Rules
Effective January 1, 1987, passive activity loss rules were
enacted, which eliminated most tax shelters.
Generally, passive losses can only offset passive income. Any
disallowed losses are treated as a deduction to the activity
next year.
Suspended losses can be deducted against passive and
nonpassive income upon the fully taxable disposition of the
entire interest.
Chapter 7, Exhibit 5a CCH Federal Taxation Basic Principles 11 of 31
12. Passive Activity Loss Rules
The PAL rules generally provide that all income and loss must be
placed in one of three categories:
Active – income attributed to direct efforts of the taxpayer
(ex. salary, wages and commissions).
Passive – income derived from passive activities. Losses are
generally only deductible against passive income.
Portfolio - income from dividends, interest, royalties.
Chapter 7, Exhibit 5b CCH Federal Taxation Basic Principles 12 of 31
13. Applying the At-Risk and Passive Loss Rules
1. Determine the amount at-risk for each activity.
2. Determine the gain/loss for each activity for the year.
3. If gain, increase the amount at-risk.
4. If loss, decrease the amount at-risk, but not below zero.
Any excess losses are carried over.
Chapter 7, Exhibit 6a CCH Federal Taxation Basic Principles 13 of 31
14. Applying the At-Risk and Passive Loss Rules
5. Add up passive gains.
6. Add up passive losses (reduce by amounts carried over).
7. Reduce passive gains by passive losses. Include net passive
gain in gross income.
8. Any excess passive losses are suspended and can be used in
future years to offset passive income
Chapter 7, Exhibit 6b CCH Federal Taxation Basic Principles 14 of 31
15. Disposing of an Entire Passive
Activity Interest
Three rules apply:
1. Losses. Loss on an “entire” disposition of a passive activity and its
suspended losses can offset active and portfolio income from all
activities.
2. Gains. Gain on an “entire” disposition of a passive activity can be used
to offset suspended passive activity losses from other passive activities.
3. Unrelated parties. The disposition must be to an unrelated party (i.e., a
party other than half-blood relatives, lineal descendants, ancestors,
siblings, and spouses).
Chapter 7, Exhibit 7 CCH Federal Taxation Basic Principles 15 of 31
16. Inheriting a Passive Activity
Three rules apply:
1. Beneficiary's step-up basis. Beneficiary gets a step-up basis at fair
market value (FMV) on the date of benefactor's death (or, if elected by
executor, FMV six months after the date of death.)
2. Beneficiary's at-risk amount. The step-up basis becomes “at risk” to the
beneficiary.
3. Decedent's passive loss deduction. In the decedent's final income tax
return, suspended losses are deductible to the extent they exceed the
“step-up” amount i.e., to the extent they exceed (FMV at date of
death - Adjusted basis at date of death).
Chapter 7, Exhibit 8 CCH Federal Taxation Basic Principles 16 of 31
17. Receiving a Passive Activity as a Gift
Two rules apply:
1. Donee basis. Donee does not receive a step-up basis, but
the donee assumes the donor's basis (in most cases).
2. Donor's suspended losses. The donor's suspended losses
are not deductible; instead, they’re added to the donee's
basis.
Chapter 7, Exhibit 9 CCH Federal Taxation Basic Principles 17 of 31
18. Material Participation
An activity in which a taxpayer materially participates is not a
passive activity.
However, real estate rental activities are generally considered
passive regardless of the level of participation.
Material participation requires a taxpayer to be involved in
the operations of the activity on a regular, continuous and
substantial basis. Must meet 1 of 7 tests.
Chapter 7, Exhibit 10 CCH Federal Taxation Basic Principles 18 of 31
19. Significant Participation
Significant participation requires more than 100 hours of
participation.
If total participation in all significant participation activities
exceeds 500 hours, then the taxpayer is treated as having
materially participated in all such activities.
Chapter 7, Exhibit 11 CCH Federal Taxation Basic Principles 19 of 31
20. 6 Exceptions to Rental Activity Status
Generally, any rental activity is considered a passive activity, without
regard to material participation. However, if any of the following 6 tests
are met, the activity is not considered a rental activity.
1. Under 8-day average rental. Average customer use is 7 days or less (e.g.,
hotel rooms, movie rentals).
2. 8–30 days average rental plus significant services. Average customer use is
8 to 30 days and “significant” personal services are provided to the
customers (e.g., computer leasing, automobile leasing).
3. Over 30-day average rental and extraordinary services. Average customer
use is over 30 days and “extraordinary” personal services are provided to
customers (e.g., lengthy hospitals stays).
Chapter 7, Exhibit 12a CCH Federal Taxation Basic Principles 20 of 31
21. 6 Exceptions to Rental Activity Status
4. Insignificant rental. Gross rental income is less than 2% of the lesser
of (1) fair market value of the rental asset or (2) the adjusted basis of
the rental asset (e.g., renting a small portion of a vast timberland to a
farmer)
5. Property is available during defined business hours for nonexclusive
use by the general public (e.g., operating a golf course available
during prescribed business hours for nonexclusive use).
6. Property is rented to a non-rental activity owned by the lessor.
Chapter 7, Exhibit 12b CCH Federal Taxation Basic Principles 21 of 31
22. Special $25,000 Allowance
An taxpayer may deduct up to $25,000 in rental real estate
losses from non-passive income, as long as the taxpayer
actively participates and MAGI is less than $100,000.
As long as a taxpayer participates in management decisions,
he is considered to be actively participating. Additionally, the
taxpayer must own at least a 10% interest in the property and
not be a limited partner.
Chapter 7, Exhibit 13a CCH Federal Taxation Basic Principles 22 of 31
23. Special $25,000 Allowance
The $25,000 allowance is available for all filing statuses.
However, for married filing separately (and living apart), the
allowance is $12,500. Married individuals who file separately
and do not live apart cannot qualify for any of the $25,000
deduction.
There is a phaseout of 50% for every dollar of MAGI over
$100,000. The allowance is fully phased-out if MAGI is over
$150,000
Chapter 7, Exhibit 13b CCH Federal Taxation Basic Principles 23 of 31
24. Real Estate Professionals
Over 750 hours a year are devoted to a real estate business, AND
Over 50% of the taxpayer's personal services for the year are devoted to
a real estate business, AND
One of the 7 material participation tests is satisfied.
If all 3 of the above tests are met, losses from rental real estate
activities will not be subject to passive loss limitations.
Example: A full-time real estate agent owns and manages a rental
house. Any losses from the rental house are nonpassive losses.
Chapter 7, Exhibit 14 CCH Federal Taxation Basic Principles 24 of 31
25. Computing Business Casualty and Theft Losses
If total destruction
Adjusted Basis
or theft:
Lesser of
If partial destruction:
Adjusted Basis or Decline in Fair Market Value
Insurance reimbursement or compensation
Less
received
Result: = “Recognized” gain or loss FOR AGI
*Gain is recognized to the extent that insurance reimbursements exceed adjusted basis.
Chapter 7, Exhibit 15 CCH Federal Taxation Basic Principles 25 of 31
26. Net Operating Losses—Rules for Individuals
NOL = Bus. Income - Bus. Exp. - Personal Use Casualty Loss Deductions
Carryovers:
NOLs from tax years beginning on or 3 years back, 15 years forward
before 8/5/97:
NOLs other than from casualty deductions 2 years back, 20 years forward
from tax years beginning after 8/5/97:
NOLs attributable to personal-use casualty 3 years back, 15 years forward
and theft losses:
Chapter 7, Exhibit 16a CCH Federal Taxation Basic Principles 26 of 31
27. Net Operating Losses—Rules for Individuals
If carried back: The earliest year’s taxable income is recomputed,
and the taxpayer files for a refund with an
amended return.
If carried forward: Deduction for AGI in a subsequent year.
Election: May elect to forego carrybacks. This election
must be made when the return reporting an NOL
is timely made.
Chapter 7, Exhibit 16b CCH Federal Taxation Basic Principles 27 of 31
28. Hobby Losses
Hobby expenses are deductible only to the extent of hobby
income.
The deduction for hobby expenses is a miscellaneous
itemized deduction subject to the 2% of AGI floor.
Expenses that are otherwise deductible (such as taxes,
interest and casualty losses) are still deductible, regardless of
the amount of hobby income. However, such deductions
reduce the amount of hobby income available to offset other
hobby deductions.
Chapter 7, Exhibit 17 CCH Federal Taxation Basic Principles 28 of 31
29. Home Office Expenses
If a portion of a personal residence is used for business-
related activities, expenses allocable to the business-use
portion of the home may be deducted.
If a taxpayer is an employee, the home office must be for the
convenience of the employer.
Any excess expenses that are not deducted in the current
year may be carried forward.
If the taxpayer is an employee, the deduction is a
miscellaneous itemized deduction (except for mortgage
interest and property taxes, which are fully deductible).
Chapter 7, Exhibit 18 CCH Federal Taxation Basic Principles 29 of 31
30. Vacation Home Expenses
If property is rented for less than 15 days, then home is
treated as a personal residence. No rental income or expenses
are reported. Regular deductions for personal residences are
allowed (mortgage interest, property taxes).
If property is rented for more than 14 days, then the
property can be treated as either:
1. Personal residence ( if used excessively for personal
purposes)
2. Rental property (not used excessively for personal
purposes)
Chapter 7, Exhibit 19 CCH Federal Taxation Basic Principles 30 of 31
31. Rented for More Than 14 Days
Excessive personal use is measured by the greater of 14 days
or 10% of rental days.
If the taxpayer uses then property for excessive personal
purposes, then the property is considered personal use
property. Rental income and expenses are reportable.
However, loss deductions are not allowed.
If the taxpayer does not use the property for excessive
personal purposes, then the property is considered rental
property. Losses can be deducted for AGI (subject to passive
activity rules). If the taxpayer actively participates, the
$25,000 special allowance applies.
Chapter 7, Exhibit 20 CCH Federal Taxation Basic Principles 31 of 31