Can I qualify for the exclusion of gain from the sale of a residence if my parents live there?

August 10, 2011

From:  Salvatore
Date:  19 Oct 2010

Has there been any change or update to the passive activity loss rules relating to the income limitation? (Phase out of $25,000 limit for passive activity losses from real estate in which a taxpayer actively participates when for 50% of adjusted gross income exceeding $100,000.) With most households having two breadwinners these days, hardly anyone seems to qualify for the deduction.

Please advise.

Answer

Date:  8 Nov 2010

Hello Salvatore,

The limitation is in Internal Revenue Code Section 469(i), and it has not been changed since 1986. There are no provisions for inflation adjustments.

There is no proposal that I am aware of for a change.

Write your representatives in Congress!

Good luck!
Mike Gray

We have more answers to frequently asked real estate tax questions! We also offer up-to-date information about new tax real estate tax developments in Michael Gray, CPA's Real Estate Tax Letter.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained on this website was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.