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You have passive losses from businesses in which you aren't an active participant. These include limited partnerships, such as real estate limited partnerships, and other types of activities that you don't help manage.
You can deduct losses from passive investments against income you earn on similar ventures. For example, you can use your losses from rental real estate to reduce gains from other limited partnerships.
Or you can deduct those losses from any profits you realize from selling a passive investment. However, you can't use passive losses to offset earned income, income from your actively managed businesses, or investment income.
- Browse Related Terms: Blind pool, Hard assets, Hedge fund, Limited partner, Limited partnership, Passive income, Passive losses, Private equity, Real Estate, Venture capital (VC)