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| | The Business Finance,Taxes and Business Operations Network is not currently active and cannot accept new posts | | Passive activity and PIGS | Views: 933 | | Jul 25, 2007 7:03 pm | | Passive activity and PIGS | # | 
Matthew Schaber | | Mention the term passive activity to an affluent taxpayer and they will usually have understanding of what a passive activity is. Many times their understanding is not correct or only partially correct.
Usually if someone says your business is a Pig it would not be taken as a compliment. If you have a business that producess passive income it is called a PIG, an acronym for Passive Income Generator. A PIG can be very useful to an investor or business owner. Generally (certainly not always) passive losses cannot offset earned income, portfolio income(even more often misunderstood than passive income), capital gain or business income. However if you have a PIG you can use passive losses to reduce your taxable income from the PIG. For example if you own a rental real estate investment that generates losses (generally, but not always passive) you cannot use those losses to reduce your wage or active business income. But, if you are a passive investor in a business that produces taxable income(a PIG) then the income you earn from that business may be reduced by rental real estate (passive) losses. Sounds simple, but before you go PIG shopping consult your tax advisor to make sure your strategy will work ( and remember the term, "publicly traded")
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