"Passive Activity"

A "rental activity" is always "passive".

A "working interest in an oil or gas deposit" is always "active".

An interest in a "low income housing project" is always active.

OTHERWISE:

Whether a particular activity is "active" or "passive" must be determined with respect to each taxpayer. A trade or business activity is "passive" if the taxpayer does not materially participate in that trade or business.

Any particular activity can be "active" with respect to one taxpayer and "passive" with respect to others. This is normally the case with limited partnerships.

Also, any particular activity can be "passive" with respect to a particular taxpayer in one year but "active" with respect to that taxpayer in another year. The "active" or "passive" determination must be made independently for each year. Special rules apply if suspended passive losses are carried forward to a material-participation ("active") year.