To be considered passive, the entity must be one of the following:
- a general partnership
- limited partnership
- limited liability partnership, or
- trust (excluding business trusts)
Ninety percent (90%) of the entity’s federal gross income for the period must consist of the following sources of income:
- Dividends, interest, foreign currency exchange gain, periodic and non-periodic payments with respect to notional principal contracts, option premiums, cash settlements or termination payments with respect to a financial instrument, and income from a limited liability company
- Distributive shares of partnership income to the extent that those distributive shares of income are greater than zero
- Net capital gains from the sale of real property, net gains from the sale of commodities traded on a commodities exchange, and net gains from the sale of securities
- Royalties from mineral properties, bonuses from mineral properties, delay rental income from mineral properties and income from non-operating mineral interests (excluding the items described next)