HRB-19 Passive Income
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Created by:
scsigirl Plus on November 10, 2010
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H&R Block Ch 19 Passive Income
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10 terms
Terms | Definitions |
|---|---|
 Active Income and Losses | Those for which the taxpayer perform services. Examples are wages, salaries, tips, bonuses and income and losses from business and partnership activities in which the taxpayer materially participates. |
| Passive Income and Losses | Those from business activities in which the taxpayer does not materially participate, and all rental activities (except those of qualified real estate professionals). |
| Portfolio Income and Losses | Those from such sources as dividends, interest, capital gains and losses, and royalties. |
| Rental Income (6) | • Reported on Schedule E, considered UNEARNED income. • No §179 deduction may be taken on Schedule E rental property. • Income received by the taxpayer for allowing another person's use of the taxpayer's property. • Rental income includes advance rental payments, late payments and current payments. • Payments received for lease cancellation and forfeited security deposits are rental income the year received or forfeited. • Rental income is considered passive income for purposes of the passive loss rules, except for qualified real estate professionals. |
| Royalty (2) | • A payment received for the right to exploit a taxpayer's ownership of natural resources or a taxpayer's literary, musical, or artistic creation. • An interest in the oil and gas in place that entitles the holder to a specified fraction, in kind or in value, of the total production from the property, free of any expense of development and operation. |
| S Corporation (2) | • A qualified small business corporation that has elected special tax treatment under sub-chapter S of the Internal Revenue Code. • Unlike most corporations, which are taxable entities themselves, S corporations pass income, losses and deductions through to shareholders to report on their individual returns. |
| Trust (3) | • A tax entity created by a trust agreement. • This entity distributes all or part of it's income to beneficiaries as instructed by the trust agreement. • This entity is required to pay taxes on undistributed income. |
| Vacation Home (3) | • The tax code places restrictions on taxpayers who rent their residences or vacation homes to others for part of the tax year. • The restrictions may result in scaling down of expense deductions for such taxpayers. • Considered a RESIDENCE if used for personal use more than 14 days or more than 10% of the days the house is rented. • Rental income must be reported if rented for 15 days or more. |
| Real Estate Professional (2) | • More than half the services performed in all trades or businesses were performed in real property trades. • Performed more than 750 hours of services in real property trades. |
| Non-Passive Income (3) | Includes: • Portfolio Income • Personal Service Income • Other Income |
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