Taxation discussion - What is meant by Active Participation with respect to the
ID: 2563841 • Letter: T
Question
Taxation discussion - What is meant by Active Participation with respect to the Passive Activity rules?Please answer this with at least one paragraph of explanation. Taxation discussion - What is meant by Active Participation with respect to the Passive Activity rules?
Please answer this with at least one paragraph of explanation. Taxation discussion - What is meant by Active Participation with respect to the Passive Activity rules?
Please answer this with at least one paragraph of explanation.
Explanation / Answer
With the adoption of passive activity rules in 1986 by Congress, the new category of income, passive income, was also introduced. It includes income generated from investments in real estate and income generated by businesses entities when the owner does not materially participate in the conduct of that business. According to passive activity rules, the active participation is defined as any interest in any rental real estate activity for any period if such interest (including any interest of the spouse of an individual) is greater than 10 percent of all interest in such activity. It involves the active conduct of a trade or business.
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