George and Judy Cash own a 30-foot yacht that is moored at Oregon Inlet on the Outer Banks of North Carolina. The yacht is offered for rent to tourists during March through November every year. George and Judy live too far away to be involved in the yacht’s routine operation and maintenance. They are, however, able to perform certain periodic tasks, such as cleaning and winterizing it. Routine daily management, operating, and chartering responsibilities have been contracted to “Captain Mac.” George and Judy are able to document spending 120 hours on the yacht chartering activities during the year. Determine how any losses resulting from the activity are treated under the passive activity loss rules