Discharged debt can be passive activity income
Article Abstract:
Cancellation of debt (COD) income is considered a passive activity income under Revenue Ruling 92-92, RFB 1992-45, 21. This treatment, however, considers the extent to which the discharged debt had been allocated to passive activities when it was cancelled. The IRS defines a 'passive activity' as any activity involving a taxpayer who is not materially involved in the running of a trade or a business concern. Taxpayers are said to have incurred a passive activity loss (PAL) if their total losses arising from such an activity are more than their aggregate income for any given taxable year. Individuals, estates, trusts and some corporations are not permitted to claim PALs that go beyond their passive income under Section 469(a). Other Revenue Rulings relevant to COD income are discussed.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1993
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Final Regs. limit S corp. passive investment income
Article Abstract:
Income generated by an S corporation from the normal course of a trade or business is no longer considered passive investment income according to the final Regulations (TD 8449) on the election, termination and re-election of the S corporation status that were recently released by the IRS. The modification of the passive investment income definition has also caused the exclusion of rental income derived from the S corporation's active participation in the running of a trade or business in cases in which the corporation provides substantial services or are liable for considerable losses in the rental business. The election of the S status, the termination of the status and the treatment of the S termination year are discussed.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1993
User Contributions:
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