Limitation on Passive Activity Losses and Credits- Treatment on Self-Charged Items of Income and Expense

These previously approved regulations provide guidance on the treatment of self-charged items of income and expense under section 469. The regulations recharacterize a percentage of certain portfolio income and expense as passive income and expense (self-charged items) when a taxpayer engages in a lending transaction with a partnership or an S corporation (passthrough entity) in which the taxpayer owns a direct or indirect interest and the loan proceeds are used in a passive activity. Similar rules apply to lending transactions between two identically owned passthrough entities. These final regulations affect taxpayers subject to the limitations on passive activity losses and credits.

The latest form for Limitation on Passive Activity Losses and Credits- Treatment on Self-Charged Items of Income and Expense expires 2028-06-30 and is listed under ICR 202502-1545-013.