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?
This question was asked on Apr 26, 2010.
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