Passive Activity Loss

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Individual taxpayers must aggregate the income and loss from their passive activities each year to determine their net passive income or loss. A net passive loss for the year generally is nondeductible for that year but may be carried forward to reduce net passive income in future years.

NBAA Presents Oral Testimony at IRS Hearing on Passive Loss Rule Change
May 7, 2012
John Hoover, chair of the NBAA Tax Committee's Federal Tax Working Group, last week represented the Association at a public hearing on proposed Treasury regulations. The regulations, which would treat certain members of an LLC as limited partners for purposes of passive loss limitations, conflict with congressional intent to encourage investment in business assets, including aircraft, said Hoover, urging the IRS to reconsider elements of the proposed changes. In certain circumstances, these proposed regulations could require that an LLC's aircraft leasing operation be treated as a separate activity for passive loss purposes. The result would be that the LLC's losses, typically consisting primarily of depreciation, could be suspended indefinitely. Review NBAA's Written Comments.
New Resource Describes IRS 'Passive Activity' Grouping Rules
February 8, 2010
The Internal Revenue Service (IRS) has issued Revenue Procedure 2010-13 requiring taxpayers to file statements with their income tax returns if they want to group separate activities together for purposes of the passive-loss rules. Without such a statement, the IRS may assert that a company’s aircraft operations are a separate passive activity, with the result that tax losses incurred by operations could not be deducted against the operating income of the company’s business. An article detailing the new revenue procedure, and its impact on business aircraft has been developed. More.
NBAA Urges IRS To Set Aside Proposed Changes to Passive Activity Rules
November 17, 2008
The Internal Revenue Service (IRS) recently issued IRS Notice 2008-64, which outlines changes that the agency is considering for its reporting requirements, mandating that taxpayers file elections to group activities for purposes of “passive loss” rules. NBAA recently filed comments on the proposal, urging the IRS not to adopt the proposed changes, which could create a tax trap for unwary business aircraft owners that lease or share aircraft among multiple companies. Currently, the passive loss rules do not require taxpayers to file formal statements to group activities. The Association’s comments were prepared by Tax Committee Member and attorney John Hoover. More.

Recent IRS Ruling Applies Passive Loss Limitations to Dry Leases of Aircraft to C Corporations (But Not to Pass-Through Entities) by John B. Hoover, Dow, Lohnes & Albertson, PLLC

IRS Revenue Ruling 2005-64: provides information on the circumstances in which losses incurred by an individual who provides air transportation through a pass through entity can qualify as passive losses under IRC section 469.