George4Tacks
Level 15
‎02-18-2023 10:39 AM

When all else fails - READ THE INSTRUCTIONS

https://www.irs.gov/instructions/i8960#en_US_2022_publink100012437

Note.

Income reported on Schedule 1 (Form 1040), line 3, and Schedule 1 (Form 1040), line 5, include both passive and nonpassive income, and are added to line 4a of Form 8960. Nonpassive income included on Schedule C (Form 1040) and Schedule E (Form 1040), Supplemental Income and Loss, is removed (as a negative) on line 4b, so that only passive income from Schedule C (Form 1040), and Schedule E (Form 1040) remain on line 4c.

 

A passive Schedule C trade or business is any business that you did not materially participate in (for income-producing actions), or any trade that you did not have involvement in on a regular, continuous, and substantial basis (for income-producing actions).

There are two kinds of passive activities.

  • Trade or business activities in which you don’t materially participate during the year.

  • Rental activities, even if you do materially participate in them, unless you’re a real estate professional.


Answers are easy. Questions are hard!
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