Activities That Aren’t Passive Activities

The following aren’t passive activities.

1. Trade or business activities in which you materially participated for the tax year.

2. Any rental real estate activity in which you materially participated if you were a “real estate professional” for the tax year. If you were a real estate professional, then for purposes of determining your material participation in a rental real estate activity, each interest in rental real estate is generally a separate activity unless you elect to treat all interests in rental real estate as one activity. See Regulations section 1.469-9(g)(3) for details.

You were a real estate professional only if: a. More than half of the personal services you performed in trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated, and

b. You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated.

Different rules apply to your activities and the related credit, depending on the type of activity. Generally, passive activities include:

• Trade or business activities in which you didn’t materially participate for the tax year.

• Rental activities, regardless of your participation. See Trade or Business Activities and Rental Activities, later.

A real property trade or business is any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.

For more information, see Pub. 925, Passive Activity and At-Risk Rules.

Note: Corporations subject to the passive activity rules must use Form 8810, Corporate Passive Activity Loss and Credit Limitations.