Passive investment.

[Martin C.]

Does any body knows, What is a passive investment opportunities?

[Landon Elscott]

Well, to extend beyond other people's answers, how about we take a look at it from the IRS stand point?  You might be surprised to learn that some investments we might consider passive, the IRS does not - even things like stocks and bonds.  Essentially, the IRS considers passive activities to be any rental activity or business activity in which the taxpayer (i.e. the passive investor) does not materially participate - yet some of which they consider to nonpassive seems contradictory.  So of course, things like salaries, wages, 1099s, or any other income you receive from "work" is not passive.  However, interestingly enough, according to the IRS, stocks and bonds, interest and dividends, guaranteed payments, sale of undeveloped land, and even royalties are not considered passive investments by the IRS, despite the fact that they seem to be so from the definition of passive.

Now, passive investments (in terms of that of which doesn't require much involvement or labor) are great, because you're essentially using existing money to create new money with very little to no actual participation on your part besides the financial investment - capitalism at its finest.  But from a tax and IRS standpoint, it's important to learn what they do and don't consider to be passive and how passive investments will differ from other income and understand that typically, passive activity losses - that is financial losses as a result of passive investments - can only be deducted against passive income, with some exceptions.  So unless you meet the following requirements, unfortunately you probably can't offset dividend income with rental losses according to the IRS, even though you'd think they're both equally passive.

Fortunately, if your AGI is below $100,000 you can actually deduct passive activity losses up to $25,000.  Unfortunately, if you make over $150,000, you can only deduct passive activity losses against passive activity income.  And if you your AGI falls somewhere in between $100,000 and $150,000 then the deductions against wages are phased out $0.50 per $1.

Hope that makes some sense.  Here's some more information:  http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Passive-Activity-Losses-Real-Estate-Tax-Tips