passive income

(redirected from Passive Investment Income)

Passive income

Income (such as investment income) that does not come from active participation in a business. Specified by the U.S. tax code.

Passive Income

Income from a venture in which an individual does not directly participate. The most common types of passive income are rents and income from a limited partnership. Some analysts consider income derived from securities such as dividends and coupons to be passive income, while others put it into a separate category as portfolio income. Passive income is taxable, but it is often treated differently than active income.

passive income (loss)

A special category of income (loss) derived from passive activities, including real estate, limited partnerships, and other forms of tax-advantaged investments. Investors are limited in their deduction of passive losses against active sources of income, such as wages, salaries, and pension income.

Passive income.

You collect passive income from certain businesses in which you aren't an active participant.

They may include limited partnerships where you're a limited partner, rental real estate that you own but don't manage, and other operations in which you're an investor but have a hands-off relationship.

For example, if you invest as a limited partner, you realize passive income or passive losses because you don't participate in operating the partnership and have no voice in the decisions the general partner makes.

In some cases, income from renting real estate is also considered passive income. On the other hand, any money you earn or realize on your investment portfolio of stocks, bonds, and mutual funds is considered active income. That includes dividends, interest, annuity payments, capital gains, and royalties.

Any losses you realize from selling investments in your portfolio are similarly active losses.

Internal Revenue Service (IRS) regulations differentiate between passive and active income (and losses) and allow you to offset passive income only with passive losses and active income with active losses.

passive income

See passive activity income.

Passive Income

Passive income is income from business activities in which the taxpayer does not materially participate, and most rental activities. See also Material Participation and Portfolio Income.
References in periodicals archive ?
1375 tax on excess net passive investment income when their passive investment income exceeds 25% of gross receipts in a year.
8 percent XIII on passive investment income, is the new "estate tax" for many clients.
8 percent tax on the lesser of passive investment income or modified adjusted gross income in excess of the threshold.
However, certain caveats apply--one of the most important being that the new tax applies only to passive investment income.
Passive income exceeds the passive investment income limitation if the S corporation has accumulated earnings and profits at the close of each of three consecutive tax years (this would occur only if the corporation or its predecessor had been a C corporation) and has gross receipts for each of those tax years, more than 25% of which are passive investment income (Sec.
Examples of non-core assets owned by a manufacturing or service company might include: real estate that is lying idle, or generating passive investment income from third parties; shares or bonds that are not related to the company's main line of business; subsidiaries or investments in other companies unrelated to the company's core business.
For most of its existence, the I&D tax was narrowly focused on passive investment income It was not intended in 1923 or thereafter to tax income earned from the performance of services, or other forms of investment income, such as capital gains or rents.
The existence of earnings and profits exposes the S Corporation to a potential penalty tax if it has excessive passive investment income or could subject the corporation to the loss of its S election.
FAPI is defined in subsection 95(1) to include certain passive investment income, certain business income deemed to net be active (such as where certain connections to Canada exist), and capital gains arising on the disposition of certain passive assets.
The obstacles include limitations on the types of shareholders; on the number of shareholders; on the options for raising capital; uncertainty over the passive investment income tax; and uncertainty over the treatment of director's shares.
Alternatively, shareholders may terminate S corporation tax status by violating an S corporation requirement or paying tax on passive investment income for three consecutive years.
tax principles, is attributable to passive investment income, and substantially all of the entity's assets are held to produce such passive investment income; and (B) there is a foreign payment attributable to income of the entity.

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