One more item. The less-than-7-day-average-rental-period and some other tests do not determine whether the activity is passive or non-passive. Rental activity is passive by definition. Passing the 7-day test simply means the activity is not considered a rental activity, but not being a rental activity does not necessarily mean it is not passive. It could still be passive if one fails the second tier of tests such as the 100 hour or 500 hour tests. Including the yacht income on line 1 or box 1 only means I believe the activity is not rental and, therefore, not passive by definition. Once the K-1 is issued, I must have material participation in the non-rental activity to avoid being passive. That is done when the K-1 is incorporated into the 1040 individual tax return.
