PIG/PAL Investing Basics
$1 PIG + $1 PAL = $1 Non-Taxable Income
To realize these benefits, taxpayers with eligible passive activity losses (PALs) can pair those losses with a passive income generating (PIG) investment. This strategy is commonly referred to as “PIG/PAL” investing.
An investor’s passive income can be off-set by passive losses on a dollar-for-dollar basis. The passive losses shelter the passive income from taxation to produce tax-advantaged income. There is no limitation on the amount of passive income and passive losses that can be off-set annually.