For individuals and partnerships, tax losses from passive activities can offset positive taxable income from which of the following?

Passive activity losses, as defined by tax regulations, can only offset income generated from other passive activities. This is due to the nature of how these activities are classified for tax purposes. Passive activities are typically businesses in which the taxpayer does not materially participate, such as rental properties or limited partnerships.

When a taxpayer has a loss from one passive activity, they can use that loss to offset income from another passive activity. For example, if a person has a rental property that generates a loss, they can apply that loss against profits from another rental property or similar passive investment, reducing their overall taxable income from passive sources.

This restriction is in place to limit the ability to use passive losses to reduce active income or ordinary income, which are generally taxed differently. Therefore, individuals and partnerships are limited to offsetting only income that is derived from similar passive activities, making the connection between different types of income crucial in understanding the implications of passive losses.