аЯрЁБс>ўџ BDўџџџAџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџьЅС%` №ПЄ,bjbj•й•й 86їГїГЄ$џџџџџџЄа а а а а а а ф ЬЬЬЬ иф оЖјјјјјгf9$]]______$”hќHƒа qггqqƒа а јјл˜555q.а ја ј]5q]55а а 5јь ŒЧЃv ЩЬŸ.5]Ў0о5DЭ^D5Dа 5(qq5qqqqqƒƒ+ qqqоqqqqф ф ф D(Єф ф ф (ф ф ф а а а а а а џџџџ Committee Report for the 1993 Revenue Reconciliation Act, 103-66 (8/10/93) This Act added the IRC Ї469(c)(7) special rule for real estate professionals Also see Reg. Ї1.469-9 – Rules for certain rental real estate activities (TD 8645, 12/21/95) 1993 Legislative History House Explanation * Present Law The passive loss rules limit deductions and credits from passive trade or business activities. Deductions attributable to passive activities, to the extent they exceed income from passive activities, generally may not be deducted against other income, such as wages, portfolio income, or business income that is not derived from a passive activity. Credits from passive activities may not reduce the taxpayer's tax liability, to the extent such credits exceed regular tax liability from passive activities. Deductions and credits that are suspended under these rules are carried forward and treated as deductions and credits from passive activities in the next year. The suspended losses from a passive activity are allowed in full when a taxpayer disposes of his entire interest in the passive activity to an unrelated person. The passive loss rules apply to individuals, estates and trusts, closely held C corporations, and personal service corporations. A special rule permits closely held C corporations to apply passive activity losses and credits against active business income (or tax liability allocable thereto) but not against portfolio income. Passive activities are defined to include trade or business activities in which the taxpayer does not materially participate. To materially participate in an activity, a taxpayer must be involved in the operations of the activity, on a regular, continuous, and substantial basis. Except as provided in regulations, a taxpayer is treated as not materially participating in an activity held through a limited partnership interest. *    * Reg. Ї 1.469-5T(e) provides exceptions to this general rule for limited partnership interests in certain circumstances, including the circumstance where an individual taxpayer is both a general and a limited partner or where the taxpayer meets certain of the material participation tests (including the 500 hour test) applicable to persons other than limited partners. Rental activities (including rental real estate activities) are also treated as passive activities, regardless of the level of taxpayer's participation. In general, rental activities cannot be treated as part of a larger activity that includes nonrental activities. A special rule permits the deduction of up to $25,000 of losses from rental real estate activities (even though they are considered passive), if the taxpayer actively participates in them. This $25,000 amount is allowed for taxpayers with adjusted gross incomes of $100,000 or less, and is phased out for taxpayers with adjusted gross incomes between $100,000 and $150,000. Active participation is a lesser standard of involvement than material participation. A taxpayer is treated as actively participating if, for example, he participates, in a significant and bona fide sense, in the making of management decisions or arranging for others to provide services (such as repairs). The active participation standard is not satisfied, however, if the taxpayer's interest is less than 10 percent (by value) of all interests in the activity. A taxpayer generally is deemed not to satisfy the active participation standard with respect to property he holds through a limited partnership interest. If the taxpayer has suspended losses from a former passive activity (an activity that is not a passive activity for the current taxable year but was a passive activity for the taxable year in which the loss arose), the losses are offset against the income from such activity for the taxable year, and any excess after the offset continues to be treated as a loss from a passive activity. Reasons for Change The committee considers it unfair that a person who performs personal services in a real estate trade or business in which he materially participates may not offset losses from rental real estate activities against income from nonrental real estate activities or against other types of income such as portfolio investment income. The committee bill modifies the passive loss rule to alleviate this unfairness. Explanation of Provision The provision treats a taxpayer's rental real estate activities in which he materially participates as not subject to limitation under the passive loss rule if the taxpayer meets eligibility requirements relating to real property trades or businesses in which the taxpayer performs services. Whether a taxpayer materially participates in his rental real estate activities is determined as if each interest of the taxpayer in rental real estate is a separate activity, unless the taxpayer elects to treat all interests in rental real estate as one activity. The provision applies to individuals and closely held C corporations. Real property trade or business means any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business. An individual taxpayer meets the eligibility requirements if more than half of the personal services the taxpayer performs in a trade or business are in real property trades or businesses in which he materially participates. In the case of a joint return, it is intended that each spouse's personal services are taken into account separately. In determining material participation, however, the provision does not change the present-law rule (sec. 469(h)(5)) that the participation of the spouse of the taxpayer is taken into account. Thus, for example, a husband and wife filing a joint return meet the eligibility requirements of the provision if during the taxable year one spouse performs at least half of his or her business services in a real estate trade or business in which either spouse materially participates. The couple does not fail the eligibility requirements if less than half of their business services, taken together, are performed in real estate trades or businesses in which either of them materially participates, provided that more than half of one spouse's business services qualify. Personal services performed as an employee are not treated as performed in a real estate trade or business unless the person performing services has more than a 5 percent ownership interest in the employer (within the meaning of sec. 416(i)(1)(B)). A closely held C corporation meets the eligibility requirements if more than 50 percent of its gross receipts for the taxable year are derived from real property trades or businesses in which the corporation materially participates (within the meaning of sec. 469(h)(4)). Material participation has the same meaning as under present law. Thus, as under present law, except as provided in regulations, no interest as a limited partner in a limited partnership is treated as an interest with respect to which the taxpayer materially participates. The election permitting a taxpayer to aggregate his rental real estate activities for purposes of determining whether such activities are treated as not passive under the provision is not intended to alter present law with respect to material participation through limited partnership interests. Suspended losses from any rental real property activity that is treated as not passive by reason of the provision are treated as losses from a former passive activity. Thus, such suspended losses are limited to income from the activity, and are not allowed to offset other income. When the taxpayer disposes of his entire interest in the activity in a fully taxable transaction with an unrelated party, any remaining suspended losses allocable to the activity are allowed in full. Modified adjusted gross income is determined without regard to any loss allowable by reason of this provision, for purposes of the present-law $25,000 allowance of losses and deduction-equivalent credits from certain rental activities. Effective Date The provision is effective with respect to taxable years beginning after December 31, 1993. Conference Report * The conference agreement follows the House bill, with a modification. Under the conference agreement, an individual taxpayer meets the eligibility requirements if (1) more than half of the personal services the taxpayer performs in trades or businesses during the taxable year are performed in real property trades or businesses in which the taxpayer materially participates, and (2) such taxpayer performs more than 750 hours of services during the taxable year in real property trades or businesses in which the taxpayer materially participates. In the case of a joint return, the eligibility requirements are met only if either spouse separately satisfies the requirements. Thus, one of the spouses separately must satisfy the requirement with respect to half of such spouse's personal services and the requirement with respect to 750 hours of services, without regard to services performed by the other spouse. In determining material participation, however, the conference agreement does not change the present-law rule that the participation of the spouse of the taxpayer is taken into account. "JK™šј  # + 6 ijkloqSeЭ'л'9(;(L(,Ѓ,Є,їяїяїфйЭТДТІТšŽйТйТІТІТІТƒДТйТhb3v0J6CJaJhb3vhЭtCJH*aJhb3vhћvCJH*aJhb3vhћv0J5CJaJhb3vhћv0J6CJaJhb3vhћvCJaJhb3vhЭt5CJaJhb3vhЭtCJaJhЭthЭtCJaJhЭthћv5hЭthЭt5K™šїј $ + 8 u Н lуЮSfŽbDЙ ѕѕююѕѕѕпггггУггггггггг„ДЄЄx[$\$^„ДgdЭt ЄЄx[$\$gdЭt$ЄЄx[$\$a$gdЭtЄxgdЭt $Єxa$gdЭtЄ,ўЙ Г!Ф"ў$р&Э'м'9(:(;(M(U(Є,ѓѓѓѓѓѓѓффффѓ$ЄЄx[$\$a$gdЭt ЄЄx[$\$gdЭt 61h/R :pЭtАа/ Ар=!А "А #€$€%ААаАа а† œ@@ёџ@ NormalCJ_HaJmH sH tH R@R Heading 1ЄdЄd@&[$\$5CJ&KH$\aJ&N@"N Heading 2ЄdЄd@&[$\$5CJ$\aJ$N@2N Heading 3ЄdЄd@&[$\$5CJ"\aJ"N@BN Heading 4ЄdЄd@&[$\$5CJ\aJF@RF Heading 5ЄdЄd@&[$\$5\N@bN Heading 6ЄdЄd@&[$\$5CJ\aJDA@ђџЁD Default Paragraph FontVi@ѓџГV  Table Normal :V і4ж4ж laі (k@єџС(No List 6U@Ђё6 Hyperlink >*B*phџFV@ЂF FollowedHyperlink >*B* phџ<ўO< pagebreakЄdЄd[$\$JўO"J fsnolinkЄdЄd[$\$5B*\phBўO2B textareaЄdЄd[$\$CJaJ2ўOЂA2 copyrightCJaJ2ўOЂQ2 sectionidCJaJNўOЂaN pagetitle$Є Є XDYD[$\$5CJ\aJDўOЂqD stateaffleglink qЪ џџџ2ўOЂ2 hit5\qЪ џќс(DўOЂ‘D Hyperlink15>*CJ\aJph1”TўOЂЁT FollowedHyperlink15>*CJ\aJph1”DўOЂБD Hyperlink25>*CJ\aJph1”TўOЂСT FollowedHyperlink25>*CJ\aJph1”B^@вB Normal (Web)ЄdЄd[$\$.X@Ђс. Emphasis6]*W@Ђё* Strong5\Є$ 6џџџџK™šїј$+8uНlуЮ SfŽbDЙГФўрЭм9 : ; M U І$˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€˜0€€K™šї$+8uНуЮ SfŽbDЙГФўрЭм9 M U І$H‘0€H‘0€H‘0€J‘0€J‘00€H‘00€J‘00€H‘00€H‘00€J‘00€H‘00€H‘00ЋJ‘00ЋH‘00ЋJ‘00ЋH‘00ЋH‘00ЋH‘00ЋH‘00ЋH‘00ЋH‘00ЋH‘00ЋH‘00ЋH‘00ЋJ‘00ЋH‘00ЋJ‘00ЋH‘00ЋJ‘00ЋЄ,Й Є,Є,№8№@ёџџџ€€€ї№’№№0№( № №№B №S №ПЫџ ?№џџ COMREPq2878z4 COMREPq2878z5SRC_1 COMREPq2878z6j„І$j„І$з р IRЇЈІ$hjзс(*І$333ј+8joSfЭм; M І$І$хћv0 Эtb3vџ@€; ; дzЉ; ; Є$а@џџUnknownџџџџџџџџџџџџG‡: џTimes New Roman5€Symbol3& ‡: џArial"qˆ№ащ§hФљШтљШx,Bx,B,№ЅРДД24d’$’$n2ƒ№мHX)№џ?фџџџџџџџџџџџџџџџџџџџџџћv2џџUntitledASPNET ўџр…ŸђљOhЋ‘+'Гй0p˜ЌИШдрє   , 8 DPX`hф UntitledASPNET Normal.dot 3Microsoft Office Word@zЅT@ШЂjr Щ@ќ„›v Щx,ўџеЭеœ.“—+,љЎ0є hp€ˆ˜  ЈАИ Р ефThomsonB’$'  Untitled Title ўџџџ !"#ўџџџ%&'()*+,-./0ўџџџ2345678ўџџџ:;<=>?@ўџџџ§џџџCўџџџўџџџўџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџRoot Entryџџџџџџџџ РFршмЃv ЩE€Data џџџџџџџџџџџџ1Tableџџџџ$DWordDocumentџџџџ86SummaryInformation(џџџџџџџџџџџџ1DocumentSummaryInformation8џџџџџџџџ9CompObjџџџџџџџџџџџџqџџџџџџџџџџџџўџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџўџ џџџџ РFMicrosoft Office Word Document MSWordDocWord.Document.8є9Вq