A person is considered to be an employee-owner if the person is an employee of the corporation on any day of the testing period, and owns any outstanding stock of the corporation on any day of the testing period. For more information about personal service corporations, see Temporary Regulations section 1.441-4T. Closely held corporation. Certain organizations are treated as individuals for this test. Other Passive Activity Terms Net income means the excess of current year income over current year deductions from the activity. This includes any current year gains or losses from the disposition of assets or an interest in the activity.
Net loss means the excess of current year deductions over current year income from the activity.
This includes any current year gains or losses from the disposition of assets or an interest in the activity. Overall gain means the excess of the net income from the activity over the prior year unallowed losses from the activity. Overall loss means the excess of the prior year unallowed losses from the activity over the net income from the activity or the prior year unallowed losses from the activity plus the net loss from the activity. Once a loss becomes allowable under these other limitations, the corporation must determine whether the loss is limited under the passive loss rules. For purposes of this rule, each interest in rental real estate is a separate activity, unless the corporation elects to treat all interests in rental real estate as one activity.