Question

For passive activity loss limitation purposes, what have several court decisions clarified about a member of a multi member LLC who is an individual? a. The individual is treated as a limited partner when determining if the member can pass any of the material participation tests, b. The individual is treated as a general partner when determining if the member can pass any of the material participation tests, c. The individual can never pass any of the material participation tests, d. The individual is never subject to any of the PAL limitation rules.

Answer 1

For passive activity loss limitation purposes, court decisions clarified about a member of multi member LLC who is an individual is he can never pass any of the material participation tests, during the year

In case of rental activities, even if the taxpayer materially participate in them, unless the taxpayer is the real estate professional. If the taxpayer did materially participates in rental activity they are permitted to use a limited amount of any passive losses based on modified adjusted gross income of taxpayer. No passive loss will be allowed if taxpayer's modified adjusted gross income is $1,50,000 or more.