Enactment of the passive activity loss rules in 1986 was motivated by a desire to curb tax shelter abuses and to correct the misallocation of resources caused by tax-induced investment in agriculture and elsewhere in the economy. Thus, it is not surprising that the provisions have caused economic pain. One provision, involving the deduction of up to $25,000 for losses attributable to "rental real estate activities," has led to taxpayer confusion and uncertainty for their tax advisors.
Harl, Neil E.
"Farm Leases and Passive Activity Losses,"
Agricultural Law Digest: Vol. 2
, Article 1.
Available at: https://lib.dr.iastate.edu/aglawdigest/vol2/iss2/1