Passive income, in federal income tax terms, is, in broad terms, income that is derived from a passive activity, as set forth in Section 469.
See https://www.law.cornell.edu/uscode/text/26/469
"Passive income", as a generally accepted lay term, connotes income for which you do not have to do anything (like work or run a business). However, that is not what is meant by passive income or loss for federal income tax purposes.
