Passive Activity Law & Legal Definition

“A passive activity is any activity which involves the conduct of any trade or business and in which the taxpayer does not materially participate. For this purpose, a "trade or business" is generally defined as any activity in connection with a trade or business or any activity for the production of income under I.R.C. § 212. I.R.C. § 469(c)(6). Hegarty v. Comm'r, T.C. Summary Opinion 2009-153 (T.C. 2009)