form 4835

[gman]

A loss from form 4835 is disallowed if the taxpayers income is to high. I have a taxpayer where he leases out the land to someone for hay. He lives along side the land and runs a couple horses on it during the winter, fixes fences and make any repairs needed. Could that make him active
and the loss possibly be deductible.

Thank you

[Snaggletooth]

According to your Post

...the loss was disallowed because your clients' income was too high. Losses begin to phase out when AGI exceeds $100,000.

Changing the character to "active participation" will not rescue this loss if it has been disallowed by virtue of excessive income.

[Roland Slugg]

Does it matter? If his income is too high, the loss will be suspended whether he actively participates or not. All "active" participation does is allow up to $25,000 of passive losses to be deducted currently. Since your client owns the land and approves the tenants who lease it, according to your OP, he does "actively" participate. This means that the loss from this activity goes on Worksheet 1 of F-8582 instead of Worksheet 3, and that, in turn, makes it eligible for the special allowance of up to $25,000. If his income is too high, as you said it is, it may not make any difference this year, but the carryover of the suspended loss will retain its character ... i.e. remain in the Worksheet 1 group. Then, if his income is lower in the future, he may be able to deduct some of the accumulated PALs from this activity even if it continues to generate net passive losses overall.

[FEDUKE404]

Another perspective

Just for the sake of discussion:

From the facts presented, how does this guy consistently show a loss?

Maybe he should consider charging more for use of the land....

And that "shared fence" issue might present some problems - business vs personal.

FE

[gman]

Second year

This is only his second year to lease the land and he has a small profit the first year. So he has not shown consistent losses.

[Snaggletooth]

You gotta be kidding

And that "shared fence" issue might present some problems - business vs personal.
FE

C'mon Mr. Federal Duke - the "shared fence?"

"Shared Fence?" Diggin' deep aren't we? As Charlie Brown would say, "Good Grief...."

[FEDUKE404]

In my D-fence

C'mon Mr. Federal Duke - the "shared fence?"

"Shared Fence?" Diggin' deep aren't we? As Charlie Brown would say, "Good Grief...."

No diggin' at all.

OP stated common fence, and my guess is client paid for the fence (installation and repair). Doubt if the hay requires any fences, but his horses on his land might have need of same when they scamper around.

Of course, he could be growin' some rambunctious hay that keeps knocking all those "business" fences down.

A reasonable person might seek further explanation, but then again we cannot "audit" our clients, n'est-ce pas?

(I'm still trying to figure out how he could have a loss, even with some pricey maybe cal-a-forn-e-ya type taxes.)

Have a good 'un.

FE