Passive Activity Loss

[geekgirldany]

Same customer as my previous customer. A Form 8582 Passive Activity Loss was completed by the previous CPA. There is a loss unallowed from the LLC he sold. THe loss is around 16,000. THis is listed on Worksheet 7 of Form 8582 on line 1a. He then has listed unallowed loss in column d of 15,000. So the allowed loss for that year is 1,000.

Now my questions are:
Isn't a Passive Activity Loss only generated when either the taxpayer is above a certain income level... I think it is 100,000 or there is no active participation, in this case the LLC partnership?

I asked my customer if he was actively working and running the partnership. He said yes. The customer did not make over 100,000. Was not even close. So I am wondering why a Form 8582 was filed? Any thoughts?

Thank you guys for helping me with this. I apologize if my questions may be confusing.

[OldJack]

It may be that although the partner is active in the partnership.. the activity in the partnership is one that is defined as a passive activity. Huh!

[geekgirldany]

Ah Ha! You are correct. I think my mind is going.

So now my job is to ask him what kind of activity/business was the partnership.

The new customers have said a couple of times that they don't know why have to deal with these items like the installment sale and passive loss because they happened in 2004. Why would they effect 2005