Suspended Loss 2019-04-06 08:00:00

Suspended Loss

A capital loss that cannot be realized in a given tax year due to passive activity limitations. The losses are suspended until they can be netted against passive income in a future tax year. These suspended losses are a result of passive activities, and can only be carried forward. Suspended losses that are a result of the disposition of a passive interest are subject to an annual capital loss limit.

For example, if a taxpayer incurs a $10,000 suspended loss from a passive activity and participates in the activity in the following year and earns $20,000, then the suspended loss may be applied against $10,000 of the earned income, leaving the taxpayer with $10,000 of declarable income for the year.

 

 


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