investment or activity that generates passive income. The most common example is an incomeoriented real estate limited partnership. The income from a PIG may offset, for tax purposes, a Passive Activity Loss (PAL).
investment whose main attraction is passive income. The most common example is an incomeoriented real estate limited partnership, especially an unleveraged program. Since Tax Reform Passive Activity Losses (PALs) are deductible to the limit of passive activity income, so an investor with excess PALs might buy a PIG as a source of tax-sheltered income.
a business or investment that produces passive income that can be used to offset passive losses.
Example: Perry owns rental real estate that provides a tax loss. Under the 1986 tax act, the loss may be offset by passive income, but not by portfolio income or active income. Without a passive income generator to offset the loss, the loss will be carried forward in a suspense account.
