That works out to approximately 15 hours a week. In a nutshell, a taxpayer that spends less than 750 hours in an activity has passive income or loss. The rules on how to determine a passive activity are pretty straight forward. I thought that it might be a good opportunity to explain the passive activity rules. Not to mention, that he had two W-2 forms where he made $200,000 each. When I bring it up to the client, he is incredulous, stating the insurance reimbursements are so good, that he doesn’t care. As you can see this makes absolutely no sense. However, there is the same amount of income in Box 1 of the K-1 that is in the earnings for self-employment.Īs odd as that was, my client received a 1099 to his corporation from the same partnership, and a 1099 to him personally. The K-1 lists him as a limited partner, meaning the income is passive. At the end of the year, my client gets a K-1 form from the partnership. He is a partner in a partnership, because the bigger the group of physicians, the larger the insurance payouts. In all of my 24 years in practice, I have never seen what I am about to tell you.