MaggieD
DP Veteran
- Joined
- Jul 9, 2010
- Messages
- 43,244
- Reaction score
- 44,664
- Location
- Chicago Area
- Gender
- Female
- Political Leaning
- Moderate
If you purchased 100 shares of an unincorporated business, on same facts as your describe, you would be legally liable. Your distinction between "investors" and "passive investors" does not exist under the law, nor should it. If you engage in an activity you ought to be personally accountable for the consequences of the activity, just as the law is applied to everyone else.
From irs.gov:
Passive Activity Losses - Real Estate Tax TipsThere Are Two Kinds of Passive Activities:
Rentals, including both equipment and rental real estate, regardless of the level of participation
Businesses in which the taxpayer does not materially participate on a regular, continuous, and substantial basis