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Generally, passive activities include:

  • Activities that involve the conduct of a trade or business if the shareholder does not materially participate in the activity, and
  • All rental activities regardless of the shareholder’s participation.

Activities that are not passive:

  • Trade or business activities in which the shareholder materially participated for the tax year.
  • Any rental real estate activity in which the shareholder materially participated if the partner met both of the following conditions for the tax year.
    • More than half of the personal services the shareholder performed in trades or businesses were performed in real property trades or businesses in which he or she materially participated, and
    • The shareholder performed more than 750 hours of services in real property trades or businesses in which he or she materially participated.

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