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:: Passive Activity Loss ATG - Exhibit 2.1: Rental Decision Tree
Exhibit 2.1:
Rental Decision Tree
Is the
Activity a True Rental?
Note: Losses
are nondeductible unless offset
by passive income. Refer to IRC
469(a) and 469(d).
Decision
Tree
Is the rental
owned in the same % as the
business entity or it
insubstantial in relation to the
business, and are the two
activities interrelated?
-
If yes,
loss may be okay. Refer to
Reg. Section 1.469-4(d)
-
If no, does
the activity fall within one
of the rental exceptions in
Reg. Section 1.469-1
T(e)(3)(ii)
Exceptions
-
Is the
average use less than 7
days?
-
Is the
average use less than 30
days with significant
personal services?
-
Are
extraordinary personal
services provided such that
rental is incidental to
services?
-
Is the
rental is incidental
to a non-rental activity?
-
Is the
property customarily
available to customers
during defined business
hours for nonexclusive use
by customers?
-
Is the
property provided to TP's
1120 or 1065?
-
If no,
activity is a rental.
Losses are reported on Form
8582 line 3b and are
nondeductible without
passive income.
Does the TP
materially participate in the
activity?
-
If no,
losses are reported on Form
8582 line 1b or 3b and are
not deducible without
passive income
-
If yes,
losses are fully
deductible.
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