Passive Activity Losses and Net Investment Income & 3.8% Medicare Tax

Highlights

*  Taxpayers subject to the passive activity loss rules

*  Definition of an activity, including rental activities, aggregation rules, professional services, and rental real estate activities

*  Definition of a passive activity, including trade or business, and long-term and short-term rental activities for both real and nonreal property

*  Material and active participation, including participation by spouse, members of an LLC, shareholders of an S corporation, and limited partners

*  Real estate professionals and the aggregation rules, including common filing mistakes

*  Mechanics of the passive activity loss rules

*  Allocation of the passive losses, carryover of the passive activity loss, and designation of passive activities

*  Reporting requirements

*  Passive activity credits and limits on the use of the credits

*  Application of the passive activity loss rules to trusts and estates

*  Application of the passive activity loss rules to corporations

*  Tax planning opportunities for certain taxpayers, including individuals, real estate owners, real estate developers, service providers, manufacturers, and wholesalers and retailers.

*  Identifying taxpayers subject to the new Medicare tax

*  Identifying activities that are subject to the new 3.8% Medicare tax, including dividends, interest, rentals, stock sales, and many other activities

*  Rules that apply to self rental and self-charged interest

*  What types of interest are subject to the new tax

*  How to calculate net investment income

*  How the net investment income rules interact with the passive loss rules

*  Calculating net operating loss for net investment income

*  Application of the tax to individuals, partnerships, estates, and trusts

*  Tax planning opportunities to minimize the effect of the 3.8% Medicare tax

*  Applying the new 3.8% Medicare tax to real estate professionals

*  Applying the new investment income rules to the sale or exchange of an interest in a pass-through entity.

Objectives

The course will enable participants to evaluate and correctly apply the passive loss rules and the passive income regulations, including the computation of credit limitations and suspended loss carryovers, in order to survive the increased scrutiny of the IRS.  It will also enable participants to evaluate, identify, and correctly apply the new 3.8% Medicare tax on net investment income.