New material participation proposed regulations provide taxpayer-favorable guidance

Private Company Services Tax Insight

On November 25, 2011, the Treasury Department released proposed regulations (REG-109369-10) concerning the definition of an "interest in a limited partnership as a limited partner." The proposed regulations provide guidance that helps determine whether a taxpayer materially participates in an activity for purposes of the passive activity loss rules under section 469. The proposed regulations will potentially make it easier for limited partners and LLC members to qualify for the material participation test and thus exempt from the passive activity loss rules.

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