income or loss from activities in which a taxpayer does not materially participate, such as limited partnership , as distinguished from (1) income from wages and active trade or business or (2) investment (or portfolio) income, such as dividends and interest. Starting with the tax reform act of 1986 , and after modification by the revenue reconciliation act of 1993 , losses and credits from passive activities are deductible only against income and tax from passive activities, although one passive activity can offset another and unused passive losses can be carried forward until the earlier of (1) your realization of passive income to offset such losses; or (2) your sale of your entire interest in the activity, at which time suspended losses from that activity can be used without limitation. Under the 1986 Act, real estate rental activities were considered passive regardless of material participation. The 1993 Act liberalized that provision for tax years after 1993 by making an exception for professionals spending at least half their time or at least 750 hours involved in real property trade or services or for anyone, apparently including a landlord, meeting the same tests of material participation. Regular corporations (as opposed to S corporations) are exempt from passive activity rules unless they are closely held.