Answered: How to report Business Casualty Loss subject to Passive Activity Loss Limitation

rckcpa

Have completed 4684 worksheet showing casualty loss related to passive activity. The passive activity is residential real estate reported on Schedule E. The loss amount shows on Line 38a of Form 4684 Part II, with PAL printed beside the amount. But amount does not show on Form 8582, but rather the full amount shows on Line 4 of Schedule 1. Isn't the loss subject to PAL rules? If so, how enter properly in ProSeries? Thx.

BobKamman

I think they changed the Regulations back around 1990 to allow such losses. Do some research. This is from Pub 925:

"Exceptions. Passive activity deductions don’t include the following items. . . . Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity."

See also

https://www.taxnotes.com/research/federal/treasury-decisions/irs-amends-passive-loss-regs-casualty-a...

View solution in original post

BobKamman

I think they changed the Regulations back around 1990 to allow such losses. Do some research. This is from Pub 925:

"Exceptions. Passive activity deductions don’t include the following items. . . . Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity."

How to report Business Casualty Loss subject to Passive Activity Loss Limitation

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