Final answer:
The answer to the student's question is true, as the excess business loss limitation is indeed applied before the § 469 passive activity loss rules. This limitation was introduced by the Tax Cuts and Jobs Act and affects how non-corporate taxpayers can use their business losses against other types of income.
Step-by-step explanation:
The student asked whether the excess business loss limitation was applied before the application of the § 469 passive activity loss rules. The correct answer is true. The Tax Cuts and Jobs Act (TCJA) introduced the concept of excess business losses, which applies to taxpayers other than corporations. This limitation must be applied before the passive activity loss rules. That is, if a taxpayer incurs a business loss that is considered to be an excess business loss, it must be limited before considering any limitations on passive activity losses.
Essentially, the excess business loss limitation caps the amount of loss that a non-corporate taxpayer can use to offset other non-business income. Any excess is carried forward as part of the taxpayer's net operating loss (NOL) carryforward. Once a taxpayer determines the allowable business loss after applying the excess business loss limitation, then the passive activity loss rules come into play to further limit losses that may be used from passive activities.