passive income

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Passive income

Income (such as investment income) that does not come from active participation in a business. Specified by the U.S. tax code.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

passive income

See passive activity income.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.

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.
Copyright © 2008 H&R Block. All Rights Reserved. Reproduced with permission from H&R Block Glossary
References in periodicals archive ?
CFIB is urging the ministers to delay the planned CPP expansion and the federal carbon backstop as well as to reject adopting the new federal rules for passive investment income.
* Excess net passive income tax: Imposed if an S corporation has accumulated earnings and profits at the end of the tax year and its passive investment income exceeds 25% of the corporation's gross receipts.
The taxpayer represented that it was aware that having excess passive investment income could subject it to tax but was unaware that this could cause a termination of its S election.
Price would also resign from his managing partner position at the Georgia-based Chattahoochee Associates LP, a surgical group, but would still receive "passive investment income from it."
Nevertheless, Zucman reflects the common view that the so-called benefits principle still makes sense, because most active business income is earned by corporations and most passive investment income is earned by individuals.
It's been said that income tax, because of the new 3.8 percent XIII on passive investment income, is the new "estate tax" for many clients.
Secondly, if you have income over the $200,000/$250,000 threshold, you will be subject to an additional 3.8 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.--NAMC
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.
In addition, a tax is imposed at the corporate level on excess "net passive income" of an S corporation (passive investment income reduced by certain expenses connected with the production of such income) but only if the corporation, at the end of the tax year, has accumulated earnings and profits (either carried over from a year in which it was a nonelecting corporation or due to an acquisition of a C corporation), and if passive investment income exceeds 25% of gross receipts.
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.

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