IRS has issued proposed regulations that would provide a new definition of limited partnership interest for purposes of Code Sec. 469(h)(2), which treats limited partnership interests as passive interests for passive activity loss (PAL) purposes except as regulations provide otherwise.
Observation: Under the new definition, more partnership interests could escape treatment as passive interests.
If a person owns rental properties, there’s a good chance at least one of them will generate a loss during ownership. But the passive activity loss (PAL) rules can make it difficult to deduct those losses. If rental real estate is a significant activity, it pays to review the situation to determine whether one meets the IRS’s definition of “real estate professional.” This article explains some of the circumstances in which one may qualify and how it might be possible to convert passive losses into non-passive losses, creating substantial tax benefits.