Passive Loss


Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.

Passive Loss

What is ‘Passive Loss’

A financial loss within an investment in any trade or business enterprise in which the investor is not a material participant. Passive losses can stem from investments in rental properties or business partnerships. In order to be considered a non-material participant, the investor cannot be continuously and substantially active or involved in the business activity.

Explaining ‘Passive Loss’

Passive losses can be written off only against passive gains. When losses, which can include a loss from the sale of the passive business or property, exceed the income from passive activities, the rest of the loss can be carried forward to the next tax year, provided there is some passive income to write it off against.

Further Reading

  • A Policy Critique of the Section 469 Passive Loss Rules – [PDF]
  • The case against passive investments: A critical appraisal of the passive loss restrictions – [PDF]
  • Tax Policy and the Passive Loss Rules: Is Anybody Listening – [PDF]
  • Land markets and tax reform: the effects of passive loss limitations – [PDF]
  • Analyzing the influences of passive investment strategies on financial markets via agent-based modeling – [PDF]
  • Asymmetric learning from financial information – [PDF]
  • Co-location of passive gear fisheries in offshore wind farms in the German EEZ of the North Sea: A first socio-economic scoping – [PDF]
  • The new 'passive revolution'of the green economy and growth discourse: Maintaining the 'sustainable development'of neoliberal capitalism – [PDF]