Question

When a taxpayer does not materially participate in the business activities of a trade or business (including rental activities) in which he is a partial owner, any loss that flows through to the taxpayer is subject to the______loss rules.

Answer 1

Passive activity

Step-by-step explanation:

Passive activities are those kind of activities which involve the business or the trade activities in which the person does not participate materially. And when the person participate materially in the activity, the person is involved in the operations of the company on a continuous, substantial as well as regular basis.

So, in this case, the taxpayer does not participate materially in the activities of the business and the taxpayer is the partial owner, any loss which flows through to the taxpayer will subject to the passive activity rules of loss.