Given That Losses from Passive Activities Can Only Offset Income

question 26

Essay

Given that losses from passive activities can only offset income from passive activities unless the passive activity is sold, what types of activities are not considered to be passive? Name at least three ways a taxpayer may be treated as an active participant in an activity.

---

Definitions:

Process Innovation

The implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment, and/or software.

Reverse Innovation

An innovation seen first, or likely to be used first, in the developing world before spreading to industrialized nations.

Outsourced

The act of hiring external organizations or individuals to perform tasks, handle operations, or provide services that are either difficult to manage or are outside of the business's core competencies.

Sustainable Business

An enterprise that operates in a way that preserves or enhances economic opportunity, environmental health, and social equity for current and future generations.