material participation

The Passive Loss Rules

In general, if a taxpayer’s aggregate losses from passive activities exceed the taxpayer’s aggregate income from passive activities for the taxable year, the excess losses may not be deducted against other income for that taxable year. Such excess losses are suspended and are carried forward, to be treated as deductions from

Passive Activity Losses

The “passive loss rules” are aimed at preventing individual taxpayers from using their losses from passive activities to offset their income from active businesses. The rules operate by “disallowing” the current deduction of passive losses – the excess of an individual taxpayer’s losses from passive activities for the year over his or

Planning for the Surtax

The best time to plan for any tax event is well before it occurs, and this also applies to the surtax.  The trustee of a trust will almost always want the business income of the trust to be characterized as active income. The surtax may be addressed, at least partially, in

The IRS’s Position on Material Participation by Trusts

According to the IRS, material participation for a non‑grantor trust should be determined solely by reference to the activities of the trustee acting as such; it should not include the trustee’s participation in any other capacity (e.g., as an employee of the corporation), nor should it consider