100 STAT. 2234
PUBLIC LAW 99-514—OCT. 22, 1986
'i^'* ^ which does not limit the liability of the taxpayer with l^K ' ' respect to such interest. "(B) INCOME IN SUBSEQUENT YEARS.—If any taxpayer has
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any loss for any taxable year from a working interest in any oil or gas property which is treated as a loss which is not from a passive activity, then any net income from such property (or any property the basis of which is determined in whole or in part by reference to the basis of such property) for any succeeding taxable year shall be treated as income of the taxpayer which is not from a passive activity. "(4) MATERIAL PARTICIPATION NOT REQUIRED FOR PARAGRAPHS
(2) AND (3).—Paragraphs (2) and (3) shall be applied without regard to whether or not the taxpayer materially participates in the activity. "(5) TRADE OR BUSINESS INCLUDES RESEARCH AND EXPERIMENTATION ACTIVITY.—For purposes of paragraph (I)(A), the term
'trade or business' includes any activity involving research or experimentation (within the meaning of section 174). "(6)
ACTIVITY IN CONNECTION WITH TRADE OR BUSINESS OR
PRODUCTION OF INCOME.—To the extent provided in regulations, for purposes of paragraph (I)(A), the term 'trade or business' includes— "(A) any activity in connection with a trade or business, or "(B) any activity with respect to which expenses are allowable as a deduction under section 212. "(d) PASSIVE ACTIVITY Loss AND CREDIT DEFINED.—For purposes of this section— "(1) PASSIVE ACTIVITY LOSS.—The term 'passive activity loss' means the amount (if any) by which— "(A) the aggregate losses from all passive activities for the taxable year, exceed «! It "(B) ^j^e aggregate income from all psissive activities for such year. "(2) PASSIVE ACTIVITY CREDIT.—The term 'passive activity credit' means the amount (if any) by which—^ "(A) the sum of the credits from all passive activities allowable for the taxable year under— "(i) subpart D of part IV of subchapter A, or ' > "(ii) subpart B (other than section 27(a)) of such part IV, exceeds
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"(B) the regular tax liability of the taxpayer for the taxable year allocable to all passive activities. "(e) SPECIAL RULES FOR DETERMINING INCOME OR LOSS FROM A PASSIVE ACTIVITY.—For purposes of this section— "(1) CERTAIN INCOME NOT TREATED AS INCOME FROM PASSIVE
ACTIVITY.—In determining the income or loss from any activity»iyll "(A) IN GENERAL.—There shall not be taken into account— . "(i) any— ,, \. ', "(I) gross income from interest, dividends, annuities, or royalties not derived in the ordinary .:J 5; ^, course of a trade or business.
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