"but it seems to me that the grant portion of the income is passive income, subject to regular business tax but not self employment tax"

Who gave the grant? Why did they apply for it? What is on their application? What type of activity are they involved with?

You didn't state this as PPP, or EIDL, or any specific Grant. I gave a link that explains what a business grant would be treated as, when it isn't one of the incentive grants, not one of the replacement grants, and not one of the retention grants.

You stated this would be passive, but you never stated which specific grant this is or what this partnership does. I gave a link to business grants that would come through from the State, County, local grant, or from an Agency.

Example:

The business is now expected to incur extraordinary expense as a result of responding to the covid-19 conditions and the grant is supposed to help offset this unexpected expense.

"The recipient of the grant did nothing to generate that income in his/her line of business. "

But did they incur something out of the ordinary? Example: Health Care Partnership has new PPE expense. Dentist office needs plexiglass shields.

More details always helps.