What is Passive Income?

According to voices.yahoo.com, "passive income has a legal definition according to the U.S. Internal Revenue Service (IRS). You are not going to be earning passive income unless you are making money by renting things (including real estate) or by being a non-participating partner in a business."

Many people would say that residual income and passive income are the same.  Often, these terms are used interchangeably.  The great thing about the article from voices.yahoo.com is that the author uses the IRS rules to distinguish between passive income and residual income.

There are 3 common types of passive income that come to mind in relation to the IRS rules:

1. Renting equipment or machinery
2. Renting commercial or residential property
3. Limited partner in a general partnership

This post was reposted from http://finlit.biz/retirement-2/what-is-passive-income/, originally written on February 12th, 2013.