ISC Study Guide 2025

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Unlock Tax Benefits: Disposing of a Passive Activity

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Understanding Utilization of Suspended Passive Losses on Disposition Understanding Utilization of Suspended Passive Losses on Disposition What are Suspended Passive Losses? As AICPA candidates know, the passive activity loss (PAL) rules, as governed by Internal Revenue Code Section 469, limit the ability of taxpayers to offset income from non-passive activities with losses generated from passive activities. A passive activity generally includes any trade or business in which the taxpayer does not materially participate, as well as rental activities (with some exceptions for real estate professionals). When total passive losses exceed total passive income for a tax year, the excess losses are not currently deductible. Instead, these suspended passive losses are carried forward indefinitely until the taxpayer has sufficient passive income to offset them or until a taxable disposition of the entire passive activity occurs. ...
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Special Purpose Financial Frameworks

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https://youtu.be/-OQpnzmRwPM ## 📘 Special Purpose Frameworks (SPFs) and Related Audit Requirements ### 🧾 What is a Special Purpose Framework (SPF)? A **Special Purpose Framework** is a financial reporting framework other than GAAP, used primarily by **nonissuers** (private companies). Unlike general-purpose frameworks like U.S. GAAP or IFRS, SPFs serve specific reporting needs. --- ### 📚 Types of Special Purpose Frameworks 1. **Cash Basis**: Records cash receipts and disbursements, with possible modifications like depreciation. 2. **Tax Basis**: Used for preparing financial statements aligned with income tax filings. 3. **Regulatory Basis**: Meets requirements of regulatory bodies (e.g., utility commissions). 4. **Contractual Basis**: Used to fulfill terms of a contract with specific third parties. 5. **Other Basis**: Any logical and reasonable framework applied consistently. 👉 Cash, Tax, and Regulatory bases are often called **OCBOA** (Other Comprehensive Bases of Accounting)....
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Understanding Utilization of Suspended Passive Losses on Disposition

Understanding Utilization of Suspended Passive Losses on Disposition Understanding Utilization of Suspended Passive Losses on Disposition Hey everyone! As fellow AICPA candidates navigate the complexities of tax law, a crucial area to grasp is the treatment of suspended passive losses, especially when a passive activity is disposed of. Let's break down how these losses can finally be utilized for tax purposes. What are Suspended Passive Losses? During your studies, you've likely encountered the Passive Activity Loss (PAL) rules under IRC Section 469. These rules generally limit the deduction of losses from passive activities to the extent of income from those same passive activities. If your total passive losses exceed your passive income, the excess losses are suspended . These suspended losses are carried forward indefinitely until you have sufficient passive income to offset them. The Game Changer:...
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