Fundamentals of Taxation

Answer:

Alternative minimum tax and Passive income/loss At-risk amount
AMT is applicable to individual corporation. It is a separate tax system which eliminates the tax escape. Passive activities are those where a taxpayer is not materially involved in the business activity. Income or losses from passive activities are not considered for AGI. At-risk amount is the amount invested or borrowed without any recourse.Discussion and analysis
Any amount which contributed by taxpayer's for business activity is borrowed on full recourse, this amount will be considered at-risk amount. To limit the deductible losses from taxpayer's income at-risk passive activity losses, where material participant of taxpayer's is not there those business activity losses is not considered.

Answer:

Alternative minimum tax and Passive income/loss At-risk amount
AMT is applicable to individual corporation. It is a separate tax system which eliminates the tax escape. Passive activities are those where a taxpayer is not materially involved in the business activity. Income or losses from passive activities are not considered for AGI. At-risk amount is the amount invested or borrowed without any recourse.Discussion and analysis
The activities which are not the taxpayer's income from primary sources, passive loss rule was in place to eliminate those tax losses created by it. The supplement of at-risk rules is PAL rule. To finally deduct losses form tax return, Firstly, loss should be allowed for deduction under at- risk and after that it should pass from passive activity loss.

Answer:

Introduction to Passive activity :
It is defined as the one in which the taxpayer is not completely involved.In other words, passive income are the ones in which individual is not occupied on a day to day basis.
Material Participation:
An individual has said to be materially participated in business or trade if he was completely involved in the business on a day-to- day basis and takes substantial decisions of the business.
It determines whether an activity is passive or active.Significant Participation
A taxpayer has said to be significantly participated if taxpayer's involvement is more than 100 Hours in all significant activities of the business.
Active Participation:
It considers regular occupancy to real estate properties.
This rule is less strict than material participation.