Are you passive or non-passive in regards to the K-1 you receive? First of all, why is it important to know which you are? Making this determination can determine if a loss is allowed or if it is a suspended loss. It also determines if the income is subject to the Net Investment Income Tax. Depending on your tax situation this determination can change your tax due and you should prepare for the effect it has on your tax when you become involved in an entity that you receive a K-1 from. Now … [Read more...]
Do You Have a Hobby Loss?
If the IRS determines you have a hobby loss, they can disallow the losses on your return. In this case you would not only owe more taxes, but you would also owe penalties and interest. In addition, if you have taken these losses for more than one year, the IRS can review more than just one year and assess more taxes, penalties, and interest for each year that you took the loss. In determining if a loss is from an activity engaged in for profit or for hobby the IRS looks at the following … [Read more...]
