Is the recapture of net section 1231 losses considered passive income?
IRC requires that a taxpayer who has a net Section 1231 gain for the tax year review the five preceding tax years for possible recapture of net Section 1231 losses for the prior years. If there were any net Section 1231 losses during the period, the taxpayer must treat the current year’s net Section 1231 gain as ordinary income to the extent of the amount of unrecaptured net Section 1231 losses for the past period. As a result, the recapture is not considered passive income when computing the 90% test under TTC 171.0003(a)(2).
Related Questions
- Will I still benefit if I am subject to the passive loss rules (PAL), net operating losses (NOL), or the alternative minimum tax (AMT) or because I am a nonprofit entity that doesn pay income taxes?
- Can net operating losses and net capital losses be used to reduce my income on my Homestead claim?
- Is the recapture of net section 1231 losses considered passive income?
