Question

Excess business loss limitation is applied before the application of the § 469 passive activity loss rules.

A. True
B. False

Answer 1

False. The excess business loss limitation is applied after the application of the § 469 passive activity loss rules.

Step-by-step explanation:

False

Excess business loss limitation is applied after the application of the § 469 passive activity loss rules. The excess business loss limitation was introduced by the Tax Cuts and Jobs Act in 2017, and it limits the amount of business losses that non-corporate taxpayers can deduct in a tax year.

Under the excess business loss limitation, non-corporate taxpayers can only deduct a maximum of $250,000 ($500,000 for joint filers) of excess business losses in a tax year. Any excess business losses that exceed this limit are carried forward as a net operating loss to future tax years.