Timeshare rental not sheltered by PAL exception

Article Abstract:

TAM 9505002 holds that the short-term rental of a timeshare apartment is not included in the list of real estate activities exempted from the passive loss rules. Sec. 469 states that losses from passive activities can be offset against income of other passive loss activities. Surplus losses are reflected in the following years and may be deducted when there is disposal of property. An exception to this rule as indicated by Sec. 469(c)(7) is a taxpayer who materially participates in a real property business. Another exception, included in Sec. 469(i), is a taxpayer who holds 10% interest in a real property and who actively participates in a rental activity. Since the taxpayers involved in TAM 9505002 did not provide the services themselves and the customer used the property for less than seven days, they are not considered materially participating and do not actively participate in a rental activity. Losses, therefore, may not offset other income.

Evaluation, Real property tax, Real property taxes, Timesharing (Real estate), Timeshares (Real estate)

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Temp. Regs. offer timely relief for late elections

Article Abstract:

New IRS Temporary Regulations on extensions allow taxpayers that reasonably and in good faith were not able to make a timely election may get a second chance. Temp. Reg. 301.9100-1T holds that taxpayers are qualified for late elections if they can prove that they acted within reason and in good faith, and that relief will not prejudice government interests. Moreover, Temp. Reg. 301.9100-2T allows taxpayers that timely file a return for the year an election should have been made to enjoy six additional months from the due date of the return, excluding extensions, to make regulatory or statutory elections. Finally, Temp. Reg. 301.9100-3T provides that the interests of the government will be prejudiced if a relief grant results in a lower tax liability in the aggregate for all years to which the regulatory election is applicable than if the election had been made on time.

Laws, regulations and rules, United States. Internal Revenue Service, Tax extensions

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Proposed Regs. on bankruptcy exception to NOL liminitations

Article Abstract:

Proposed Regulations (CO-45-91, 5/10/93) were introduced to assist corporate taxpayers assess their eligibility for the special rules on ownership change consequent to a bankruptcy under Section 382(1)(5). This section sets a cap on the income earned by a business followinga change of ownership which can be balanced by the losses incurred prior to theownership change. Under Section 382(1)(5), a loss corporation that qualitifes for the bankruptcy exception is generally permited to apply loss-carryforwards against income after the change of ownership without being subject to the limitation set by Section 382. The Proposed Regulations include specials rules,including one that is applicable when a debt comprises a sizeable portion of the assets of a beneficial owner. They also include a special regulation for loss corporations that settle debt with new debt.

Bankruptcy

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