What is a passive entity?
An entity is considered passive if it is a general, limited or limited liability partnership, or a non-business trust and the entity’s federal gross income during the period on which margin is based consists of at least 90% of the following income: • dividends, interest, foreign currency exchange gain, periodic and nonperiodic payments with respect to notational principal contracts, option premiums, cash settlement or termination payments with respect to a financial instrument, and income from a limited liability company; • distributive shares of partnership income to the extent that those distributive shares of income are greater than zero; • net capital gains from the sale of real property, net gains from the sale of commodities traded on a commodities exchange, and net gains from the sale of securities; and • royalties from mineral properties, bonuses from mineral properties, delay rental income from mineral properties and income from other non-operating mineral interests. TTC 171.0
An entity is considered passive if it is a general, limited or limited liability partnership, or a non-business trust and the entity’s federal gross income during the period on which margin is based consists of at least 90% of the following income: • dividends, interest, foreign currency exchange gain, periodic and nonperiodic payments with respect to notional principal contracts, option premiums, cash settlement or termination payments with respect to a financial instrument, and income from a limited liability company; • distributive shares of partnership income to the extent that those distributive shares of income are greater than zero; • net capital gains from the sale of real property, net gains from the sale of commodities traded on a commodities exchange, and net gains from the sale of securities; and • royalties from mineral properties, bonuses from mineral properties, delay rental income from mineral properties and income from other non-operating mineral interests. TTC 171.000
Related Questions
- My business entity (Corporation, LLC, Partnership, etc) is entirely passive and/or dormant and it is just paying a minimum tax to the Secretary of State. Is it required to get a license?
- For a taxable entity that owns an interest in a passive entity, is the taxable entitys share of net income of the passive entity excluded from total revenue?
- Can a limited liability company qualify as a passive entity?
