Activities That Are Not Passive Activities

The following are not classified as passive activities. Generally, income, losses, and credits from these activities are not entered on Form 8810. However, losses and credits from these activities may be subject to limitations other than the passive activity loss and credit rules.

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

2. Any rental real estate activity in which the corporation materially participated if the corporation was a closely held corporation that derived more than 50% of its gross receipts from real property trades or businesses in which it materially participated. For these purposes, gross receipts do not include portfolio income, as defined later under Passive Activity Income .

For purposes of this rule, each interest in rental real estate is a separate activity, unless the corporation elects to treat all interests in rental real estate as one activity. The corporation makes the election by attaching a statement to its

original income tax return for the tax year. See Regulations section 1.469-9(g) for details on how to make or revoke this election. For information on making a late election, see Revenue Procedure 2011-34, 2011-24 I.R.B. 875, available at IRS.gov/irb/2011-24_IRB .

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.

Note. If an activity qualifies for the exception described above in 2025, but has a prior year unallowed PAL, the prior year unallowed loss is treated as a loss from a former passive activity. See Former Passive Activities , later.

3. A working interest in an oil or gas well held directly or through an entity that does not limit the corporation's liability (such as a general partner's interest in a partnership). In this case, it does not matter whether the corporation materially participated in the activity for the tax year.

If, however, the corporation's liability was limited for part of the year (for example, the corporation converted its general partnership interest to a limited partnership interest during the year), some of the corporation's income and losses from the working interest may be treated as passive activity gross income and passive activity deductions. See Temporary Regulations section 1.469-1T(e)(4) for more details. 4. An activity of trading personal property for the account of owners of interests in the activity. For purposes of this rule, personal property means property that is actively traded, such as stocks, bonds, and other securities. See Temporary Regulations section 1.469-1T(e)(6) for more details.