The Passive Activity Loss RulesThe Passive Activity Loss Rules
Estate planners often must make a decision whether to recommend a family limited partnership (FLP) or family limited liability company (FLLC) to achieve the best federal estate tax savings for a client.1 While many considerations impact the choice of an FLP versus an FLLC,2 one factor that probably escapes consideration by many practitioners is the impact of the passive activity loss (PAL) rules for
John M. Janiga & Louis S. Harrison
Estate planners often must make a decision whether to recommend a family limited partnership (FLP) or family limited liability company (FLLC) to achieve the best federal estate tax savings for a client.1 While many considerations impact the choice of an FLP versus an FLLC,2 one factor that probably escapes consideration by many practitioners is the impact of the passive activity loss (PAL) rules for federal income tax purposes on that choice.
As part of the decision whether to suggest an FLP or FLLC, it's necessary to determine if the entity is comprised of an operating business that may generate losses and if so, whether such losses will be deductible under the PAL rules. A limited partner in an FLP is u...
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