### Question
How does the law define passive activity?


### Answer
Under *26 U.S.C. § 469*, **passive activity** is defined as:

> any activity—


(A) which involves the conduct of any trade or business, and


(B) in which the taxpayer does not materially participate

#### Citation:
  - *26 U.S.C. § 469*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter E-Accounting Periods and Methods of Accounting > PART II-METHODS OF ACCOUNTING > Subpart C-Taxable Year for Which Deductions Taken**

