Instructions For Form 8582-Cr (Rev. December 2009) (Page 4 of 15) in pdf

A significant participation activity

finances or operations of the activity

2. The extent of common control,

is any trade or business activity in

for your own use, and

3. The extent of common

which you participated for more than

3. Monitoring the finances or

ownership,

100 hours during the year and in

operations of the activity in a

4. Geographical location, and

which you did not materially

nonmanagerial capacity.

5. Interdependencies between or

participate under any of the material

among the activities.

Special rules for limited partners.

participation tests (other than this

Example. You have a significant

If you were a limited partner in an

fourth test).

activity, you generally did not

ownership interest in a bakery and a

5. You materially participated in

movie theater in Baltimore and in a

materially participate in the activity.

the activity for any 5 (whether or not

bakery and a movie theater in

You did materially participate in the

consecutive) of the 10 immediately

activity, however, if you met material

Philadelphia. Depending on all the

preceding tax years.

relevant facts and circumstances,

participation test 1, 5, or 6 (see Tests

6. The activity is a personal

there may be more than one

for individuals beginning on page 3)

service activity in which you

reasonable method for grouping your

for the tax year.

materially participated for any 3

activities. For instance, the following

(whether or not consecutive)

However, for purposes of the

groupings may or may not be

preceding tax years.

material participation tests, you are

permissible.

not treated as a limited partner if you

An activity is a personal service

•

A single activity.

also were a general partner in the

activity if it involves the performance

•

A movie theater activity and a

partnership at all times during the

of personal services in the fields of

bakery activity.

partnership’s tax year ending with or

health, law, engineering, architecture,

•

A Baltimore activity and a

within your tax year (or, if shorter,

accounting, actuarial science,

Philadelphia activity.

during the portion of the partnership’s

performing arts, consulting, or in any

•

Four separate activities.

tax year in which you directly or

other trade or business in which

Once you choose a grouping

indirectly owned your limited partner

capital is not a material income-

under these rules, you must continue

interest).

producing factor.

using that grouping in later tax years

7. Based on all the facts and

A limited partner’s share of an

unless a material change in the facts

circumstances, you participated in the

electing large partnership’s taxable

and circumstances makes it clearly

activity on a regular, continuous, and

income or loss from all trade or

inappropriate.

substantial basis during the tax year.

business and rental activities is

The IRS may regroup your

You did not materially participate in

treated as income or loss from the

activities if your grouping fails to

the activity under this seventh test,

conduct of a single passive trade or

reflect one or more appropriate

however, if you participated in the

business activity.

economic units and one of the

activity for 100 hours or less during

Special rules for certain retired or

primary purposes of your grouping is

the tax year.

disabled farmers and surviving

to avoid the passive activity

Your participation in managing the

spouses of farmers. Certain

limitations.

activity does not count in determining

retired or disabled farmers and

Limitation on grouping certain

whether you materially participated

surviving spouses of farmers are

activities. The following activities

under this test if:

treated as materially participating in a

may not be grouped together.

farming activity if the real property

a. Any person (except you)

used in the activity meets the estate

1. A rental activity with a trade or

received compensation for performing

tax rules for special valuation of farm

business activity unless the activities

services in the management of the

property passed from a qualifying

being grouped together make up an

activity, or

decedent. See Temporary

appropriate economic unit and:

b. Any individual spent more

Regulations section 1.469-5T(h)(2).

hours during the tax year performing

a. The rental activity is

services in the management of the

insubstantial relative to the trade or

Estates and trusts. The PAC

activity than you did (regardless of

limitations apply to an estate or trust.

business activity or vice versa, or

whether the individual was

b. Each owner of the trade or

See Temporary Regulations sections

compensated for the management

business activity has the same

1.469-1T(b)(2) and (3). The rules for

services).

proportionate ownership interest in

determining material participation for

this purpose have not yet been

the rental activity. If so, the portion of

Test for a spouse. Participation by

the rental activity involving the rental

issued.

your spouse during the tax year in an

of property used in the trade or

activity you own may be counted as

Grouping of Activities

business activity may be grouped

your participation in the activity, even

with the trade or business activity.

Generally, one or more trade or

if your spouse did not own an interest

2. An activity involving the rental

business activities or rental activities

in the activity and whether or not you

of real property with an activity

may be treated as a single activity if

and your spouse file a joint return for

involving the rental of personal

the activities make up an appropriate

the tax year.

property (except personal property

economic unit for the measurement of

Test for investors. Work done as

provided in connection with the real

gain or loss under the passive activity

an investor in an activity is not treated

property or vice versa).

rules.

as participation unless you were

3. Any activity with another activity

directly involved in the day-to-day

Whether activities make up an

in a different type of business and in

management or operations of the

appropriate economic unit depends

which you hold an interest as a

activity. For purposes of this test,

on all the relevant facts and

limited partner or as a limited

work done as an investor includes:

circumstances. The factors given the

entrepreneur (as defined in section

greatest weight in determining

1. Studying and reviewing

464(e)(2)), if that other activity

whether activities make up an

financial statements or reports on

engages in holding, producing, or

appropriate economic unit are:

operations of the activity,

distributing motion picture films or

2. Preparing or compiling

1. Similarities and differences in

videotapes; farming; leasing section

summaries or analyses of the

types of trades or businesses,

1245 property; or exploring for (or

-4-

Instructions for Form 8582-CR (2009)

Instructions For Form 8582-Cr (Rev. December 2009) Page 4

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