passive-activities

"Activity" is not strictly defined for passive loss rules, but....

1.

It must be a single trade or business activity in an accounting sense, meaning its records must be self-contained and separate from other activities' records.

2.

An activity must contain an "appropriate economic unit" for measuring gain or loss

3.

Which operations form an appropriate economic unit depends on the business factors, not tax considerations. Some of the factors that can be considered in combining operations:

Similarities and differences in the types of business activities of the various operations

The extent of common control

The exent of common ownership

The geographic location of the various operations

Interdependencies among the various operation

4.

The IRS can "regroup" a taxpayer's grouping if it determines that the grouping does not reflect an appropriate economic unit, or that the taxpayer's grouping was made to avoid passive loss limitation rules.

5.

Special rules relating to real estate rental activities:

A rental operation cannot be grouped with a trade or business operation unless one activity is insubstantial in relation to the other (e.g. a CPA firm owns a five-story building, occupies four floors, and rents the other floor to someone else).

A real estate rental activity may not (generally) be combined with a personal property rental activity.

1.	It must be a single trade or business activity in an accounting sense, meaning its records must be self-contained and separate from other activities' records.
2.	An activity must contain an "appropriate economic unit" for measuring gain or loss
3.	Which operations form an appropriate economic unit depends on the business factors, not tax considerations. Some of the factors that can be considered in combining operations:
	Similarities and differences in the types of business activities of the various operations The extent of common control The exent of common ownership The geographic location of the various operations Interdependencies among the various operation
4.	The IRS can "regroup" a taxpayer's grouping if it determines that the grouping does not reflect an appropriate economic unit, or that the taxpayer's grouping was made to avoid passive loss limitation rules.
5.	Special rules relating to real estate rental activities: A rental operation cannot be grouped with a trade or business operation unless one activity is insubstantial in relation to the other (e.g. a CPA firm owns a five-story building, occupies four floors, and rents the other floor to someone else). A real estate rental activity may not (generally) be combined with a personal property rental activity.