Passive activity losses generally are limited to the extent of passive activity income for the year. Losses in excess of this income are suspended and used in future years when there is passive income to offset it. However, when there is a complete disposition of an activity, all suspended losses are deductible, regardless of the amount of passive activity income.
A statutory term used to figure your profit or loss on a sale or exchange. Generally, it is sales proceeds plus mortgages assumed or taken subject to, less transaction expenses, such as commissions and legal costs.