Instructions For Form 8810 (2015) (Page 2 of 14) in pdf

Special Rules for

income and losses from the working interest

Extraordinary personal services are

may be treated as passive activity gross

services provided in making rental property

Consolidated Group

income and passive activity deductions.

available for customer use only if they are

The passive activity loss and passive activity

performed by individuals and the customers'

4. An activity of trading personal

credit of an affiliated group of corporations

use of the property is incidental to their

property for the account of owners of

filing a consolidated return for the tax year (a

receipt of the services.

interests in the activity. For purposes of this

consolidated group) are determined by

rule, personal property means property that

3. Rental of the property is incidental to

taking into account the following items of

is actively traded, such as stocks, bonds,

a nonrental activity.

each member of the group.

and other securities.

The rental of property is incidental to an

Passive activity gross income and

activity of holding property for investment if

Rental Activities

deductions.

the main purpose for holding the property is

Gain or loss on dispositions.

to realize a gain from its appreciation and the

A rental activity is a passive activity even if

Net active income (for a consolidated

gross rental income is less than 2% of the

the corporation materially participated in the

group treated as a closely held corporation).

smaller of the unadjusted basis or the FMV

activity unless it meets the requirements

Credits from passive activities.

of the property.

described in item 2 in Activities That Are Not

Passive Activities above. In addition, if the

Activities That Are Not

Unadjusted basis is the cost of the

corporation meets any of the five exceptions

property without regard to depreciation

Passive Activities

listed below, the rental of the property is not

deductions or any other basis adjustment

treated as a rental activity. See Reporting

described in section 1016.

The following are not classified as passive

Income, Deductions, Losses, and Credits

activities. Generally, income, losses, and

The rental of property is incidental to a

From Rental Activities below, if the

credits from these activities are not entered

trade or business activity if:

corporation meets any of the exceptions.

on Form 8810. However, losses and credits

a. The corporation owned an interest in

from these activities may be subject to

An activity is a rental activity if tangible

the trade or business activity during the tax

limitations other than the passive activity loss

property (real or personal) is used by

year,

and credit rules.

customers or held for use by customers and

b. The rental property was mainly used

1. Trade or business activities in which

the gross income (or expected gross

in the trade or business activity during the tax

the corporation materially participated for the

income) from the activity represents amounts

year or during at least 2 of the 5 preceding

tax year.

paid (or to be paid) mainly for the use of the

tax years, and

property. It does not matter whether the use

2. Any rental real estate activity in which

c. The gross rental income from the

of the property is under a lease, a service

the corporation materially participated if the

property is less than 2% of the smaller of the

contract, or some other arrangement.

corporation was a closely held corporation

unadjusted basis or the FMV of the property.

Exceptions

that derived more than 50% of its gross

Lodging provided for the employer's

receipts from real property trades or

convenience to an employee or the

An activity is not a rental activity if any of the

businesses in which it materially participated.

employee's spouse or dependents is

following apply.

For purposes of this rule, each interest in

incidental to the activity or activities in which

1. The average period of customer use

rental real estate is a separate activity,

the employee performs services.

(see below) of the rental property is:

unless the corporation elects to treat all

4. The corporation customarily makes

a. 7 days or less, or

interests in rental real estate as one activity.

the rental property available during defined

The corporation makes the election by

b. 30 days or less and significant

business hours for nonexclusive use by

attaching a statement to its original income

personal services (see below) were provided

various customers.

tax return for the tax year. See Regulations

in making the rental property available for

5. The corporation provides property for

section 1.469-9(g) for details on how to

customer use.

use in a nonrental activity of a partnership or

make or revoke this election. For information

Figure the average period of customer

joint venture in its capacity as an owner of an

on making a late election, see Rev. Proc.

use for a class of property by dividing the

interest in the partnership or joint venture.

2011-34, 2011-24 I.R.B. 875, available at

total number of days in all rental periods by

If a partner contributes the use of property

the number of rentals during the tax year. If

to a partnership, none of the partner's

A real property trade or business is any

the activity involves renting more than one

distributive share of partnership income is

real property development, redevelopment,

class of property, multiply the average period

income from a rental activity unless the

construction, reconstruction, acquisition,

of customer use of each class by the ratio of

partnership is engaged in a rental activity.

conversion, rental, operation, management,

the gross rental income from that class to the

leasing, or brokerage trade or business.

Also, a partner's gross income

activity's total gross rental income. The

attributable to a guaranteed payment under

activity's average period of customer use

Note. If an activity qualifies for the exception

section 707(c) is not income from a rental

equals the sum of these class-by-class

described above in 2015, but has a prior

activity. The determination of whether the

average periods weighted by gross income.

year unallowed PAL, the prior year

property used in the activity is provided in the

See Regulations section 1.469-1(e)(3)(iii) for

unallowed loss is treated as a loss from a

partner's capacity as an owner of an interest

more details.

former passive activity. See Former Passive

in the partnership is made on the basis of all

Significant personal services include only

Activities, later.

the facts and circumstances.

services performed by individuals. To

3. A working interest in an oil or gas well

Reporting Income, Deductions,

determine if personal services are

held directly or through an entity that does

significant, all the relevant facts and

Losses, and Credits From

not limit the corporation's liability (such as a

circumstances are taken into consideration,

general partner's interest in a partnership). In

Rental Activities

including the frequency of the services, the

this case, it does not matter whether the

type and amount of labor required to perform

If the corporation meets any of the five

corporation materially participated in the

the services, and the value of the services

exceptions listed above, the corporation's

activity for the tax year.

relative to the amount charged for the use of

rental of the property is not a rental activity.

If, however, the corporation's liability was

the property. Significant personal services

The corporation then must determine:

limited for part of the year (for example, the

do not include excluded services.

1. Whether the rental of the property is a

corporation converted its general partnership

2. Extraordinary personal services were

trade or business activity (see Trade or

interest to a limited partnership interest

provided in making the rental property

Business Activities, later) and, if so,

during the year), some of the corporation's

available for customer use.

Instructions for Form 8810 (2015)

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Instructions For Form 8810 (2015) Page 2

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