7911. Under the passive loss rules, what is a passive activity?Nuco Employeercline202014-07-07T22:35:00Z2014-07-07T22:35:00Z13421952Summit Business Media164229014Site Map/Investments/Special Rules/Limitation on Loss Deductions/Passive Loss RuleTaxFactsDefaultArticle123231293-00-tf2.xml1293.00;#1958;#0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900242457EFB8B24247815D688C526CD44D009C4E67E972694125ABDA91AC61F5E51FTax Facts 2Under the passive loss rule, what is a passive activity?44900.0000000000TaxFactsDefaultArticleSBMEDIA\moss-admin2010-01-14T23:01:08Z7911. Under the passive loss rules, what is a passive activity?A passive activity is any activity (see Q 7916 for rules defining an activity) that involves the conduct of a trade or business in which the taxpayer does not “materially participate.”IRC Sec. 469(c). The IRC indicates that regulations may define the term “trade or business” to include activities in connection with a trade or business or activities that are engaged in for the production of income under IRC Section 212. The Service has studied this matter.TD 8175(II)(A), 1988-1 CB 191. Regulations provide that the Service will treat real property held for the production of income under IRC Section 212 as a trade or business for purposes of the rental real estate with material participation exception (see Q 7921).The term “passive activity” does not include a working interest in an oil or gas property that the taxpayer holds directly or through an entity that does not limit the liability of the taxpayer with respect to the interest (see Q 7792).IRC Sec. 469(c)(3). It also does not include the activity of trading personal property (e.g., stocks or bonds) on behalf of the owners of interests in the activity.Temp. Treas. Reg. §1.469-1T(e)(6).Whether an activity is passive or not with regard to a partner or an S corporation shareholder is determined at the level of the partner or shareholder, not at the level of the entity. Such determination is made with regard to the entity’s taxable year (not the partner’s or shareholder’s taxable year).Temp. Treas. Regs. §§1.469-2T(e)(1), 1.469-3T(b)(3). However, if a publicly traded partnership is taxed as a corporation (see Q 7696), the partnership is the taxpayer, and apparently the partnership is not subject to the passive loss rule.See IRC Sec. 469(a). In the case of a limited partnership interest in an electing large partnership, all passive loss limitation activities of the partnership are treated as a single passive activity (see Q 7701).