Rental Activity Loss Rules for Real Estate

Link to IRS website - Tax Adviser -

Passive Activity Losses are not allowed - default since the 1980sActive Participation - $25,000 rental loss deduction. As long as a taxpayer has more than a 10% ownership interest in the property and participates in management decisions in a bona fide sense, she is considered to actively participate in the real estate rental activity. Material Participation - may deduct the full amount of loss.  Safe harbor requires 500 hours in the rental activity.  7 factor test.Real Estate professional - may deduct losses against active or non passive income.  High standards for qualifying including at least 750 hours.

Passive Activity Loss

Generally, the passive activity loss for the tax year isn’t allowed. However, there is a special allowance under which some or al…

Foreign Pensions of US Expats and Inbound Foreign Nationals: IRS Simplifies Reporting Rules For Certain Foreign Trusts

U.S. citizens and residents are generally required to file IRS Form 3520 to report their ownership of, or transactions with, foreign trusts. The potential penalty for noncompliance is the greater of US $10,000, 35% of the amount contributed to, or distributed from, the trust, or 5% of the gross value of the portion of the trust’s assets treated as owned by the U.S. citizen or resident. A separate Form 3520-A is required from the trustee, or, in its absence, a separate similar filing by the owner of the trust. The potential noncompliance penalty for Form 3520-A is similar to Form 3520.

This triggers troublesome reporting with respect to certain foreign pension plans, and certain foreign savings plans such as Canadian Registered Education Savings Plans (RESPs) and Registered Disability Savings Plans (RDSPs). A separate rule previously eliminated any required filing of Forms 3520 and 3520-A for certain Canadian retirement plans. The new rules issued in IRS Revenue Procedure 2020-17 now …

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