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Discussion
Section 469(a) disallows the passive activity loss of an
individual taxpayer.3 The Internal Revenue Code defines “passive
activity” as an activity involving the conduct of a trade or
business in which the taxpayer does not materially participate.4
3SEC. 469. PASSIVE ACTIVITY LOSSES AND CREDITS LIMITED.
(a) Disallowance.--
(1) In general.--If for any taxable year the
taxpayer is described in paragraph (2), neither–-
(A) the passive activity loss, nor
(B) the passive activity credit,
for the taxable year shall be allowed.
(2) Persons described.-- The following are
described in this paragraph:
(A) any individual, estate, or trust, * * *.
4 SEC. 469(c). Passive Activity Defined.--For purposes
of this section–-
(1) In general.--The term “passive activity” means
any activity--
(A) which involves the conduct of any trade
or business, and
(B) in which the taxpayer does not materially
participate.
(2) Passive activity includes any rental activity.
* * * the term “passive activity” includes any
rental activity.
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Last modified: May 25, 2011