Specify the mechanics of the passive loss rules, recognize the impact of §469 to appropriate deductions, identify what type of income may be offset by passive losses and then, determine a passive loss

Identify how to avoid the application of the passive loss rules through material participation, and factors under the TRA '86 that were considered in determining whether the taxpayer's involvement in the operation of the activity is regular, continuous and substantial

Recognize the history and rationale of the definition of "activity" by: Specifying the impact of TRA '86, §183, and the at-risk rules noting differences between the former complex definition and the final simplified regulations, Identifying why it is operationally important to separate activities and how activities were originally separated under the Committee Reports

Citing Notice 88-94's role in determining separate activities. Determine the differences between passive activities and non-passive activities under §469 by: Recognizing a "trade or business activity" and the effect of participation on that characterization

Specifying a "rental activity" identifying conditions for a rental activity to exist and the resulting passive presumption; and c. Identifying exceptions to the general rule that rental activities are presumed passive.

Specify reasons why disallowed passive activity losses must be allocated among all the taxpayer's activities producing a loss during the tax year, determine how to allocate disallowed passive activity losses and how it may be applied to multiple activities, identify the ratable portion of a loss and the ratable portion of a passive activity deduction under §469, and recognize significant participation activities noting how to determine loss, if any.

Identify passive activity gross income by: Determining "passive activity gross income" under §469, Specifying income from the disposition of property used in a passive activity including mixed or alternating use property,

Recognizing the general treatment of rental activity income and gain from the disposition of appreciated property formerly used in a non-passive activity.

Citing conditions that must be met to offset up to $25,000 per year of losses and credits related to a passive activity against nonpassive income.

Determine a "passive activity deduction," noting how it is processed under §469, and aggregate qualified residence interest using §469(j)(7), specify passive activity deductions with other deduction limitations and identify effects the coordination rule has on the determination of passive activity deductions.

Determine "passive activity credits" and the regular tax liability allocable to passive activities, cite the $25,000 allowance according to the regulations, identify a closely held corporation's passive activity credit net active income for the tax year and under §469, and determine how passive activity limitations apply to credits and how to allocate disallowed credits.

Identify items received from pass-through entities as passive or non-passive according to the passive loss rules, determine a taxpayer's participation and the application of §469 to payments to partners as outsiders and as partners, specify the tax consequences of cash payments in liquidation of a partner's interest, and identify categories of cash payments in such a liquidation.

Recognize the application and ordering interaction of §469 with other Code sections by: Specifying §469's restricted application to deductions from passive activities, Identifying whether or when net passive losses from an activity: are deductible against other sources of income, reduce a taxpayer's at-risk amount, or impact attributable interest deductions

Determining how passive activity income or deduction relate to §1211

Recognizing the impact of the husband and wife rules of §§469, 704(d), 465 and 1366(d)

Identifying corporate tax provisions