The definition of passive income is different for different people. The layman may consider it a monetary earning for the least amount of work provided. Many examples can be found from dividend stock purchases, where the dividend received is the passive income. To networking where you get paid when people purchase / click thing from your site and the merchandiser pays you percentage accordingly.
The IRS has a different and precise definition for what passive income is. This is the direct wording from their website*, "Passive income can be generated only by a rental or a business in which the taxpayer does not materially participate." So by this definition one can only consider something passive if it fits the rental aspect (residential / commercial / storage) or if they are not an active participant which consists of being a limited partner in some type of business venture.
I make this distinction now just to limit any future confusion as I discuss various types of passive income / wealth building techniques. For the most part when I discuss passive income I will be talking about the layman's definition. This will help me try to maximize my time and my investment returns accordingly.
*http://www.irs.gov/businesses/small/article/0,,id=146833,00.html
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