Get 1994 Inst 8810. Instructions For Form 8810

Passive activity loss rules can be applied to businesses and individuals, except C corporations. Leasing equipment, home rentals, and limited partnership are all considered examples of common passive activity.

Stated another way, a closely held C corporation (that is not a personal service corporation) may apply passive activity deductions against passive activity income and net active income, but not against portfolio income.

An S corporation with accumulated earnings and profits that also has passive investment income totaling more than 25 percent of gross receipts is subject to an income tax computed by multiplying excess net passive income by the highest corporate income tax rate ( Code Sec.

A closely held C corporation has a passive activity credit for the year if its credits from passive activities (including prior year unallowed credits) exceed the sum of the tax attributable to net passive income and the tax attributable to net active income. Form FTB 3802 closely follows federal Form 8810.

Under the passive activity rules you can deduct up to $25,000 in passive losses against your ordinary income (W-2 wages) if your modified adjusted gross income (MAGI) is $100,000 or less. This deduction phases out $1 for every $2 of MAGI above $100,000 until $150,000 when it is completely phased out.

Personal service corporations and closely held corporations use Form 8810 to figure the amount of any passive activity loss (PAL) or credit for the current tax year and the amount of losses and credits from passive activities allowed on the corporation's tax return.