The organizing principle behind this grouping, appropriate economic units, is relatively simple: if the activities are located in the same geographic area; if the activities have similarities in the types of business; or if the activities are somehow interdependent, for instance, if they have the same customers, employees or use a single set of books for accounting.
Take for example a situation where a CCPC earns rental income from its real estate properties which for this example qualifies as passive investment income and provides, at the same time, property management services that are characterized as active income. Under the current regime, a portion of the high corporate income tax paid by the corporation of 50% on its rental operations is accumulated in its RDTOH and will be refunded by the government only upon the payment of a dividend by the corporation to its individual shareholder. Given that an Eligible Dividend paid out of the property management services are taxed at a lower rate than would be a dividend paid out of the rental income, being a dividend that is not an Eligible Dividend, the company would decide to pay the Eligible Dividend and recover the RDTOH generated from its passive income. The profits generated from the rental operations could be paid to the shareholder the following year or two for example as a dividend that is not an Eligible Dividend, thus providing for a deferral of that additional 4% personal income tax.
A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. See Real Estate Professional under Activities That Aren’t Passive Activities, later. An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. It doesn’t matter whether the use is under a lease, a service contract, or some other arrangement.
Deductions or losses from passive activities are limited. You generally can’t offset income, other than passive income, with losses from passive activities. Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Any excess loss or credit is carried forward to the next tax year. Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later.
You’ll also want to include some sort of “Rate Me” system. This is where after the user has used your app, you give them a popup to rate your app. This allows your app to generate more ratings and reviews which help with the app store algorithm (ASO) ranking. Another popular tactic is to funnel positive feedback to your ratings and negative feedback to emailing you directly. Not only does this improve your overall rating, but it gives you quicker and more direct feedback from emails. Allowing you to respond to them instantly and help them resolve their issues.
As interest rates have been going down over the past 30 years, bond prices have continued to go up. With the 10-year yield (risk free rate) at roughly 2.55%, and the Fed Funds rate at 1.5% (two more 0.25% hikes are expected in 2018), it’s hard to see interest rates declining much further. That said, long term interest rates can stay low for a long time. Just look at Japanese interest rates, which are negative (inflation is higher than nominal interest rate).
In terms of the returns, peer-to-peer lending can be profitable, particularly for investors who are willing to take on more risk. Loans pay a certain amount of interest to investors, with the highest rates associated with borrowers who are deemed the biggest credit risk. Returns typically range from 5% to 12%, and there's very little the investor has to do beyond funding the loan.
I am a Certified Financial Planner®¹ and am the founder of Intrepid Wealth Partners. I work with entrepreneurs from startup through exit on financial planning to realize their hopes, dreams & goals. I am an avid world traveler, certified as a Dive Master in SCUBA, have been skydiving, and love meeting new people. Follow us on Facebook, connect with me on LinkedIn.
Leveraging the internet to create, connect, and sell is something every creative person should attempt to do. The only risk is lost time and a wounded ego. You can start a site like mine for as little as $2.95 a month with Bluehost and go from there. They give you a free domain name for a year. Forget all the add-ons. Not a day goes by that I’m not grateful for my site.
Partnerships and S corporations aren’t subject to the rules for new grouping, addition to an existing grouping, or regrouping. Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U.S. Return of Partnership Income, or Form 1120S, U.S. Income Tax Return for an S Corporation, whichever is applicable.
Most people think about building a site to make money and passive income. But you actually can buy an existing website to make a passive income. I have many friends who don’t like to write and create content for their website, so they just pay people to do that for them. They only care about SEO, and they want it to be well ranked in Google. It’s entirely ok, but if you don’t want to be a website creator and entrepreneur, you can buy a website and manage it like a business.
To the uninformed, these varying tax rates initially look unfair. What many people don’t understand is the big difference between “ordinary income” (from wages, a salary, short-term capital gains and interest) and “passive income” (from stock dividends and long-term capital gains). The federal government taxes ordinary income at up to 35 percent and passive income at 15 percent.
P2P lending started in San Francisco with Lending Club in mid-2000. The idea of peer-to-peer lending is to disintermediate banks and help denied borrowers get loans at potentially lower rates compared to the rates of larger financial institutions. What was once a very nascent industry has now grown into a multi-billion dollar business with full regulation.
Part of providing value is building trust. Don’t link to things that aren’t of good quality or people won’t trust your recommendations. The other part of making an audience is consistency. It matters less how often you post than how consistently. If you only have time to do one post a month, that post should come out on the same date and time each month.
The appeal of these passive income sources is that you can diversify across many small investments, rather than in a handful of large ones. When you invest directly in real estate, you have to commit a lot of capital to individual projects. When you invest in these crowdfunded investments, you can spread your money across many uncorrelated real estate ventures so individual investments don't cause significant issues.

Hi there. I am new here, I live in Norway, and I am working my way to FI. I am 43 years now and started way to late….. It just came to my mind for real 2,5years ago after having read Mr Moneymoustache`s blog. Fortunately I have been good with money before also so my starting point has been good. I was smart enough to buy a rental apartment 18years ago, with only 12000$ in my pocket to invest which was 1/10 of the price of the property. I actually just sold it as the ROI (I think its the right word for it) was coming down to nothing really. If I took the rent, subtracted the monthly costs and also subtracted what a loan would cost me, and after that subtracted tax the following numbers appeared: The sales value of the apartment after tax was around 300000$ and the sum I would have left every year on the rent was 3750$……..Ok it was payed down so the real numbers were higher, but that is incredibly low returns. It was located in Oslo the capital of Norway, so the price rise have been tremendous the late 18 years. I am all for stocks now. I know they also are priced high at the moment which my 53% return since December 2016 also shows……..The only reason this apartment was the right decision 18 years ago, was the big leverage and the tremendous price growth. It was right then, but it does not have to be right now to do the same. For the stocks I run a very easy in / out of the marked rule, which would give you better sleep, and also historically better rates of return, but more important lower volatility on you portfolio. Try out for yourself the following: Sell the S&P 500 when it is performing under its 365days average, and buy when it crosses over. I do not use the s&P 500 but the obx index in Norway. Even if you calculate in the cost of selling and buying including the spread of the product I am using the results are amazing. I have run through all the data thoroughly since 1983, and the result was that the index gave 44x the investment and the investment in the index gives 77x the investment in this timeframe. The most important findings though is what it means to you when you start withdrawing principal, as you will not experience all the big dips and therefore do not destroy your principal withdrawing through those dips. I hav all the graphs and statistics for it and it really works. The “drawbacks” is that during good times like from 2009 til today you will fall a little short of the index because of some “false” out indications, but who cares when your portfolio return in 2008 was 0% instead of -55%…….To give a little during good times costs so little in comparison to the return you get in the bad times. All is of course done from an account where you do not get taxed for selling and buying as long as you dont withdraw anything.
There’s stock and then there’s blue-chip stock. In poker, the blue chips are the most expensive. In the stock market, blue-chip stocks are considered more valuable and less risky than lower-priced stocks. These stocks belong to well-known companies like Facebook, Google, Johnson & Johnson, and so on. Due to the massive success of these corporations, they pay shareholders lucrative dividends. A single blue-chip stock can cost well over $500. If you can find the money, the quarterly or annual dividend payments would amount to generous passive income you can rely on. Though these stocks are considered more lucrative, all investments involve risk. Lehman Brothers’ stock was solidly blue- chip until the financial crises tanked the company. Keep that in mind when investing in this type of stock.  There are no guarantees in the stock market – only educated guesses.
Most credit card companies offer sign-up bonuses to entice you to open a credit account with them. As long as you don’t spend money just to hit the minimum balance and always pay your balance on time, this can have a minimal impact on your credit score while earning you hundreds – or even thousands – of dollars a year. Some of the best travel credit cards offer 100,000 points to new accounts when you meet reasonable spending requirements.
If a closely held corporation is actively engaged in equipment leasing, the equipment leasing is treated as a separate activity not covered by the at-risk rules. A closely held corporation is actively engaged in equipment leasing if 50% or more of its gross receipts for the tax year are from equipment leasing. Equipment leasing means the leasing, purchasing, servicing, and selling of equipment that’s section 1245 property.

Investors turn to real estate as a way to build long-term wealth, earn additional income, and generate a tax shelter. Using real estate as a tax shelter that extends to other income can be a complicated process. Knowing how you can use any losses generated by your rental real estate starts with understanding how the IRS defines and treats passive and active income.
Passive income is earnings derived from a rental property, limited partnership or other enterprise in which a person is not actively involved. As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS). Portfolio income is considered passive income by some analysts, so dividends and interest would therefore be considered passive.
To the uninformed, these varying tax rates initially look unfair. What many people don’t understand is the big difference between “ordinary income” (from wages, a salary, short-term capital gains and interest) and “passive income” (from stock dividends and long-term capital gains). The federal government taxes ordinary income at up to 35 percent and passive income at 15 percent.

Passive income investments can make an investor's life easier in many ways, particularly when a hands-off approach is preferred. The four options outlined here represent differing levels of diversification and risk. As with any investment, it's important to weigh the anticipated returns associated with a passive income opportunity against the potential for loss.
That strategy seems waaaayyyy less risky than actively picking stocks of supposedly “reliable” stocks that issue dividends, which could be cut at any time due to shifting industry trends and company performance. Dividend investing feels like an overly complex old-school way of investing that doesn’t have a very strong intellectual basis compared to index investing.

This is certainly not in my wheelhouse, but time and again people have been able to make a lot of money from creating and selling an app.  You can offer the app for free to users, and if enough people use it you can then charge for businesses to advertise (just like #5) with you.  You can also offer a version of the app that has no advertisements, but the user must pay a nominal fee to have this version.  Either way once you have created the app and it is in the marketplace, it has a ton of potential to generate passive income.  Depending on the app, you could also be bought out by a larger company and given a lump sum to walk away.  This happened to Garret & Jessica Gee.  Garret developed an app that was eventually sold to Snapchat for $54 Million!


Any loss that’s allowable in a particular year reduces your at-risk investment (but not below zero) as of the beginning of the next tax year and in all succeeding tax years for that activity. If you have a loss that’s more than your at-risk amount, the loss disallowed won’t be allowed in later years unless you increase your at-risk amount. Losses that are suspended because they’re greater than your investment that’s at risk are treated as a deduction for the activity in the following year. Consequently, if your amount at risk increases in later years, you may deduct previously suspended losses to the extent that the increases in your amount at risk exceed your losses in later years. However, your deduction of suspended losses may be limited by the passive loss rules.
I actually spent a year and a half working as an affiliate marketer (mostly selling drumming related products – lessons, kits ect). 5 years on and one of my one page sites (which I’ve not touched) still nets me about $150 a month. I won’t be retiring off that but only really now appreciate the reverse pyramid approach to entrepreneurship (working for nothing initially but later being paid without effort!)
Say you’re always super busy, but you still need some ways to make passive income. You’re in luck! Starting with a fun option, you can buy a gumball machine! Once you buy one, set it up somewhere and wait for the coins to roll in. The same goes for a vending machine. You can up your earnings with a vending machine, too, by simply stocking whatever’s in high demand at its location. The key to earning a solid amount of passive income here is to choose the right location.
The K-1 stated that the income was from a trade or business and included self-employment tax. Dr. Hardy's ownership interest in MBJ was not grouped with his medical practice activity, and the grouping regulations were not considered. In 2008, their CPA determined that the income from MBJ was passive and started to report it accordingly. He determined this because he learned that Dr. Hardy was not involved in any management of MBJ and was not liable for the debts of the company. He did not amend the 2006 and 2007 returns because he believed the difference was immaterial. In 2008 through 2010 the Hardy’s reported the MBJ income as passive and claimed an allowed loss.
The reason I consider dividends artificial and believe they don’t matter is because you can just as easily reinvest your dividends. If a stock is worth $100/share, I don’t care if it issues a $1/share dividend or if the share price instead increases to $101/share – either way, I have the same amount of money, because there’s no difference to my net worth whether I take the dividend or sell part of a stock.
The biggest surprise is real estate being second to last on my Passive Income Ranking List because I’ve written that real estate is my favorite investment class to build wealth. Physical real estate doesn’t stack up well against the other passive income sources due to the lack of liquidity and constant maintenance of tenants and property. The returns can be huge due to rising rental income AND principal over time, much like dividend investing. If you are a “proactive passive income earner” like myself, then real estate is great.
This is why we can retire in our 40s. we currently have four streams of income (my salary, husband salary, husband pension and our passive portfolio income which is outside of all our employer retirement accounts). our passive portfolio income is surpassed what most people are aiming for their retirement portfolios. And we don’t sell anything…this is just our dividend income annually. Passive income is the key to flexibility. No employer necessary.

If the total is more than 500, don’t complete Worksheet A or B. None of the activities are passive activities because you satisfy test 4 for material participation. (See Material participation tests , earlier.) Report all the income and losses from these activities on the forms and schedules you normally use. Don’t include the income and losses on Form 8582.

I do agree that a few of these ideas are not bad, but for me the problem with some of these platforms has been that I’m not from the USA. So, I can’t operate there. It’s a really interesting possibility to get some extra bucks from doing what you would do either way, like shopping. One of the best projects so far that I have seen is FluzFluz. It’s simple and really easy to use for everyone who uses Uber, Amazo, or other apps. The best part of all is that you can get some passive income – not just from your own purchases, but from other people’s as well. I hope one day it will make it here to your list. I think it’s worth it to check out.
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