MLM Passive Income

What happens when a taxpayer generates both passive income and losses?

for homework prob, im stuck with a solution.sounds simple but i spent like an hour trying to find an answer. what happens when a taxpayer generates both passive income and losses ?

Public Comments

1. The passive gains and losses are neted together. If the result is positive it is reported as ordinary income. If the result is a loss, the remaining loss gets carried forward to a year when it can be offset aginst future passive income.
2. yes, just as the person above said, they are blended to result in either a gain or a loss
3. The PIGs offset the PALs. Therefore, always look for PIGs (Passive income generators) for your PALs (Passive activity losses) if that helps you remember it.