Which of the following activities are considered passive for the year? Explain. Consider each situation independently.
a. Laura owns a rental unit that she rents out to students. The rental unit is Laura’s only business and she spends approximately 875 hours per year managing, collecting the rent, advertising, and performing minor repairs. At times she must hire professionals such as plumbers to do the maintenance. Is the rental unit a passive activity with respect to Laura?
b. Kami is a medical doctor who works four days a week in a medical practice that she and five other doctors formed. Last year she and her partners formed another partnership that owns and operates a medical lab. The lab employs ten technicians, one of whom also acts as manager. During the year Kami spent 120 hours in meetings, reviewing records, etc., for the lab. Is the lab a passive activity with respect to Kami?
c. Assume the same facts in part b. In addition, assume that the same group of doctors have formed two other partnerships. One is a medical supply partnership. Kami spent 150 hours working for this partnership. The medical supply partnership has five full-time employees. Kami also spent 250 hours during the year working for the other partnership. This partnership specializes in providing medical services to individuals from out of town who are staying at local hotels and motels. This partnership hires two full-time and six part-time nurses. Are the lab and the two other partnerships passive activities with respect to Kami?