A Burned-Out Tax Shelter refers to a real estate investment that was once advantageous for providing large income tax deductions but has lost its tax-sheltering benefits over time due to the reduction and eventual nil in depreciation deductions and the decrease in interest deductions as mortgage payments increasingly cover the principal.
Passive activity income refers to profits derived from business activities in which the taxpayer does not materially participate or rental activities, which are typically deemed passive regardless of material participation.
A tax shelter is an investment strategy that provides tax advantages by generating more after-tax income compared to before-tax income. These investments can produce before-tax cash flow while creating tax losses that can shield income from other sources from taxation.
Tax-sheltered income refers to income received, particularly from rental property, that is not subject to taxation, creating a tax benefit for the property owner. It typically occurs when depreciation expense claimed for income tax purposes exceeds mortgage principal payments.
