The hybrid nature of limited liability companies (and limited liability partnerships)¹ has contributed to uncertainty as to how the passive activity loss rules² are to be applied to LLCs and LLPs as well as other hybrid-type organizational structures. Limited liability companies, in particular, have become a highly popular choice for organizing farm and ranch businesses and for holding real estate leased to farm and ranch businesses. A 2005 Tax Court case³ has cast some light on how the passive activity loss rules are to be applied to such hybrid entities.