Can a loss generated from residential or commercial realty be used on the tax return of the investor?

Can a loss generated from residential or commercial realty be used on the tax return of the investor? This question is asked often because there is so much confusion as a result of the passive activity loss rules adopted by Congress in 1986. The answer is yes if the basic rules of the Tax Reform Act of 1986 are met. The tax law states that losses from real estate activities in which the investor does not materially participate can only be used to offset income from passive activities. In this unit we will investigate the concept of losses and the proper calculations for the transfer (sale) of property. At the conclusion of this unit the student will be able to; •restate the passive loss rules •discuss proper calculations for the transfer of property •identify IRS provisions affecting investor taxation debbiesmall.net