Final answer:
The Passive Activity Loss limitations are tax hurdles that restrict the use of passive losses to offset other kinds of income, based on adjusted gross income and participation levels.
Step-by-step explanation:
The Passive Activity Loss (PAL) limitation hurdles refer to the tax regulations that restrict the ability to offset other income with losses from passive activities. These hurdles include the thresholds based on the taxpayer's adjusted gross income and whether they actively participate in the activity. Furthermore, the hurdles extend to the carryover of disallowed losses to future years, where they can only offset passive income, not active income.
To overcome these hurdles, taxpayers often need to engage in careful planning and strategic management of their investments and income. These limitations are designed to deter tax shelter arrangements that aim to misuse passive losses to reduce tax liabilities artificially.