What is a Passive Loss?
Passive loss refers to financial losses that are incurred through business transactions that qualify as passive activity. In countries where passive loss is considered grounds for tax breaks of some type, there are normally rules that define the amount of the loss that can be used to offset gains or profits that are realized from other passive activity during the same tax period. Many countries also have regulations in place that clearly determine what is considered passive activity and what is not. For the most part, countries that recognize a passive loss as a legitimate tax break tend to define passive activity as any type of revenue generation that does not involve the direct participation of the investor. For example, salary or wages would not be classified as passive activity, since the investor would be actively engaged in the process of earning those forms of income. However, a silent partner that invests in a business but assumes no managerial control and does not participate
