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I'm also concerned about how arbitrary the line is between passive and active income. Let's say I rent out a lot of properties. I have legal obligations to main

I'm also concerned about how arbitrary the line is between passive and active income. Let's say I rent out a lot of properties. I have legal obligations to maintain those properties. That might be a lot of work. A full-time job, even. Let's say I make a lot of money on investments. I might be ensuring the success of those investments by advising and doing research on / for the companies I'm investing in. Both of those things get called passive income, but they very well might not be in reality.

skewart 10y ago
Me too. Distinguishing between passive and non-passive income seems in any kind of technical, legal seems incredibly difficult. It reminds me of the old "I know it when I see it" definifinition of pornography, which is a terrible definition for a law. I'm actually really curious about the law now. Stock dividends must be considered passive income. So would interest from your local bank savings account. So would a SaaS app that you set up and basically runs itself with minimal maintenance.
sdenton4 10y ago
The term rent selling stats with 'rent' for a reason. The maintenance on any single property is miniscule compared with the rent extracted. Added over many properties, sure, might be a lot of work. But you're also getting a lot of rent. The bigger part of the problem is the tendency to pass on the tax on passive income to the tenant.
- will_hughes 10y ago
  This is also why when someone has enough capital to buy enough properties to extract a full-time wage out of the rent, you can be sure they're also not going to be doing the work themselves. They'll offload it to a property manager/real estate agent to do all that work.
SilasX 10y ago
Very true! Given a sharp enough tax rate difference between two kinds of income (or two activities), you just generate a ton of socially-useless work aimed at blurring one into the other.

skewart 10y ago

Me too. Distinguishing between passive and non-passive income seems in any kind of technical, legal seems incredibly difficult. It reminds me of the old "I know it when I see it" definifinition of pornography, which is a terrible definition for a law. I'm actually really curious about the law now. Stock dividends must be considered passive income. So would interest from your local bank savings account. So would a SaaS app that you set up and basically runs itself with minimal maintenance.

sdenton4 10y ago

The term rent selling stats with 'rent' for a reason. The maintenance on any single property is miniscule compared with the rent extracted. Added over many properties, sure, might be a lot of work. But you're also getting a lot of rent. The bigger part of the problem is the tendency to pass on the tax on passive income to the tenant.

will_hughes 10y ago
This is also why when someone has enough capital to buy enough properties to extract a full-time wage out of the rent, you can be sure they're also not going to be doing the work themselves. They'll offload it to a property manager/real estate agent to do all that work.

SilasX 10y ago

Very true! Given a sharp enough tax rate difference between two kinds of income (or two activities), you just generate a ton of socially-useless work aimed at blurring one into the other.