7920. How are suspended passive losses treated when an activity ceases to be passive or if a closely held C corporation or personal service corporation changes status?Nuco Employeercline202014-07-07T22:40:00Z2014-07-07T22:40:00Z11791023Summit Business Media82120014Site Map/Investments/Special Rules/Limitation on Loss Deductions/Passive Loss RuleTaxFactsDefaultArticle123281298-00-tf2.xml1298.00;#1958;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 2How are suspended passive losses treated when an activity ceases to be passive or if a closely held C corporation or personal service corporation changes status?39400.0000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T22:53:53Z7920. How are suspended passive losses treated when an activity ceases to be passive or if a closely held C corporation or personal service corporation changes status?If an activity ceases to be passive (e.g., because the taxpayer begins to participate materially), its unused losses (or credits) from prior years continue to be passive, but may be used against the income (and tax liability) of that activity. If there is a change in the status of a closely held C corporation or personal service corporation, its suspended losses from prior years will continue to be treated as if the status of the corporation had not changed.IRC Sec. 469(f).Planning Point: As a general rule, an individual will be treated as materially participating in an activity for the taxable year if, and only if, he or she participates in the activity for more than 500 hours during the year. See Temporary Treasury Regulation Section 1.469-5T for further refinements in the definition of the term “materially participating” For an explanation of losses allowed upon disposition of an interest in a former passive activity, see Q 7919.