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Both income and loss from passive activities are passive income and loss.
There is no different tax rate for passive activities - so they are taxed at your regular (ordinary) tax rate.
There are limitation for deducting passive losses - passive losses may fully offset passive income, but if you have net passive loss - the deduction is a subject of special rules.
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Yes - that is correct.
If the person has another passive income - that income might be fully offset by passive losses.
Use Form 8582 , Passive Activity Loss Limitations, to summarize income and losses from passive activities and to compute the deductible losses. Use Form 8582CR to report passive activity credit limitations.
Generally, you may deduct in full any previously disallowed passive activity loss in the year you dispose of your entire interest in the activity. In contrast, you may not claim unused passive activity credits upon disposition of your entire interest in the activity. However, you may elect to increase the basis of the credit property in an amount equal to the portion of the unused credit that previously reduced the basis of the credit property.
Please be aware that losses from S-corporation are deductible only to the extend of the basis the shareholder has and loans he/she provided to S-corporation.