Passive Activity Law and 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)