Question

describe the two eligibility requirements to qualify for deducting losses generated from real estate activities.

Answer 1

Two exceptions to the special passive activity rule for real estate activities provide the whole or partial offset of real estate rental losses against active or portfolio income, even when the business is otherwise regarded as a passive activity.

Which rules regarding passive activities for rental revenue are exceptions?

• You have a stake in the yearly commerce or economic activities.
• During the current tax year or at least 2 of the 5 tax years prior, the rental property was utilized primarily in that trade or company.

Only real estate is subject to passive loss restrictions, right?

Generally speaking, the following actions can result in passive losses (and income): leasing of equipment. Rental property (though there are some exceptions) a farm or a sole proprietorship in which the taxpayer has no substantial interest.

How can passive income be balanced?

Selling off your rental properties will help you make up for your passive losses. You don't actually have to sell the property that's causing the losses to balance them effectively. Any passive income will be offset by losses.

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