passive income

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Related to passive income: Active income, Portfolio 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 ?
If the sale results in a gain, the gain is considered passive income and the losses are deducted against the gain, with any excess losses deductible against other income.
The passive loss can only be used to offset other passive income or be carried over.
The remaining $9,000 ($23,000--$14,000) suspended loss carries forward, and she can deduct it against passive income in subsequent years.
However, when taxpayers do not have any other passive income, an activity with a loss needs to be nonpassive to receive a current deduction.
Tax advisors of clients with substantial passive losses have been very creative in devising ways for their clients to generate passive income.
Once a passive loss has been disallowed under the phase-in provisions, it may only be deducted to the extent the taxpayer has passive income from other passive activities.
The $100 million invested in the fund will generate, assuming a 40% tax bracket, $40 million in passive income tax savings at the federal level and $12,000,000 in savings at the state level.
shareholders to include total passive income of $15 over years 2 and 3, that is, additional passive income of $5.
shareholders must independently include the CFCs' passive income in their taxable income under the rigorous rules of Subpart F.
The taxpayer will not receive any benefit from these losses until net passive income arises or the passive activity is disposed of.
Companies that have significant amounts of passive income can benefit from transferring investments generating such income to a separate investment subsidiary located in a state, such as Delaware, that gives favorable tax treatment to such entities.
An investor in one of our real estate funds will be able to shelter the profits by the deductions against passive income offered by an investment in the film fund.

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