Code Sec. 469 limits the deductibility of losses for activities in which:

1. the taxpayer actively participates.
2. the taxpayer does not materially participate.
3. the taxpayer is an investor.
4. None of the above.

The general rule of Code Sec. 469 is that:

1. a taxpayer may deduct losses on passive activities only to the extent of income from passive activities and portfolio income.
2. a taxpayer may deduct losses from passive activities only to the extent he or she materially participates in the activity.
3. a taxpayer may deduct losses from passive activities only to the extent of passive income.
4. a taxpayer may deduct losses from passive activities only when the activity is disposed of in a taxable transaction.