# Instructions For Form 8582 - 2010 Page 11

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Example. You enter a prior year
schedules and are not shown on any
(b), and (c) of Worksheets 1 and 3 and
unallowed loss from Form 4797, Part I,
other worksheet.
deductions in columns (a) and (b) of
on line 1a. If the activity has a current
Worksheet 2 on the forms and
Worksheet 5
year Form 4797, Part I, gain, enter the
schedules normally used.
Activity I has an unallowed loss of
gain on line 1b, column (a). If the
Columns (a) and (c) of Worksheet 4
\$3,130 (line 4 of Form 8582 (\$3,130)
activity does not have a Form 4797,
are the same amount. In this case, all
less the sum of lines 10 and 14 of Form
Part I, gain, enter -0- on line 1b, column
the losses in columns (b) and (c) of
8582 (-0-) x 100%).
(a).
Worksheet 1 and all the deductions in
Worksheet 7
columns (a) and (b) of Worksheet 2 are
Line 1c, column (b). Subtract line 1b,
This worksheet is used to figure the
allowed in full. Report the income and
column (a), from line 1a, column (a),
portion of the unallowed loss
losses in columns (a), (b), and (c) of
and enter the result in column (b). If line
attributable to the 28% rate loss and
Worksheet 1 and the deductions in
1b, column (a), is more than line 1a,
the portion attributable to the
columns (a) and (b) of Worksheet 2 on
column (a), enter -0- in column (b).
non-28%-rate loss.
the forms and schedules normally used.
Column (c). Divide each of the losses
The loss attributable to the 28% rate
Losses allowed in column (c) of
entered in column (b) by the total of
loss (\$1,000) and the loss attributable
Worksheet 6. The amounts in column
column (b) and enter the ratio in
to the non-28%-rate loss (\$3,000) are
(c) of Worksheet 6 are the losses or
column (c). The total of this column
separate entries in Worksheet 7. The
deductions allowed for 2010 for the
must be 1.00.
ratio of each loss to the total of the two
activities listed in that worksheet.
Column (d). Multiply the unallowed
losses is figured as follows. \$1,000/
Report the loss allowed from column (c)
loss for this activity, found in Worksheet
\$4,000 = .25. \$3,000/\$4,000 = .75.
of Worksheet 6 and the income, if any,
5, column (c), by each ratio in column
Each of these ratios is multiplied by the
for that activity from column (a) of
(c) of Worksheet 7. If -0- is entered in
unallowed loss for Activity I, shown in
Worksheet 1 or 3, on the form or
column (b) of Worksheet 7, also enter
column (c) of Worksheet 5 (\$3,130).
schedule normally used.
-0- for that form or schedule in column
Unallowed losses for Activity I:
Losses allowed in column (e) of
(d).
28% rate loss: .25 x \$3,130 =
Worksheet 7. The amounts in column
The amount in column (d) is the
\$782.50.
(e) of Worksheet 7 are the losses or
unallowed loss for 2010. Keep a record
Non-28%-rate loss: .75 x \$3,130 =
deductions allowed for 2010 for the
of this worksheet so you can use the
\$2,347.50.
activity listed on that worksheet. Report
losses to figure your PAL next year.
the losses allowed from column (e) of
Allowed losses for Activity I:
Worksheet 7 and the income, if any, for
Column (e). Subtract the amount in
28% rate loss: \$1,000 − \$782.50 =
that activity from column (a) of
column (d) from the loss entered on line
\$217.50.
Worksheet 1 or 3, on the forms or
1a, column (a). This is the allowed loss
Non-28%-rate loss: \$3,000 −
schedules normally used.
for 2010 to enter on the forms or
\$2,347.50 = \$652.50.
schedules. The forms and schedules
Schedules C and F, and Form 4835.
The total loss allowed for Activity I
you use must show the losses from this
Enter on the net profit or loss line of
(\$870) is entered in Part II of Schedule
column and the income, if any, for that
your schedule or form the allowed
D (Form 1040). The 28% rate loss
activity from column (a) of Worksheet 1
passive loss from the worksheet. To the
(\$217.50) is entered on the 28% Rate
or Worksheet 3.
left of the entry space, enter “PAL.”
Gain Worksheet (see Schedule D
Example of Schedule D (Form
instructions for line 18). Keep a record
If the net profit or loss line on your
1040) transactions. The taxpayer had
of the unallowed 28% rate and
form or schedule shows net profit for
the following Schedule D (Form 1040)
non-28%-rate losses to figure the PAL
the year, reduce the net profit by the
transactions from passive activities in
for these transactions next year.
allowed loss from Worksheet 6 or 7,
2010.
and enter the result on the net profit or
See the forms and schedules listed
loss line.
under How To Report Allowed Losses
Activity I
below. Also, see Pub. 925 for an
Example. Schedule C shows net
A passive activity prior year
extensive example of how to report
profit for the year of \$5,000 from a
unallowed long-term capital loss (a 28%
passive income and losses on the
passive activity. The activity also has a
rate loss) of \$1,000 and a current year
forms and schedules.
Form 4797 gain of \$2,500 and a prior
long-term capital loss (a non-28%-rate
year unallowed Schedule C loss of
loss) of \$3,000.
How To Report
\$6,000. The loss allowed for 2010 is
Activity II
\$6,000. You enter a net loss of \$1,000
Allowed Losses
on line 31 of Schedule C (the \$5,000
A current year collectibles loss (a
net profit for the year less the \$6,000
Line 4 is income. If line 4 of Form
28% rate loss) of \$230 and net income
loss allowed for the year). To the left of
8582 shows net income or zero, all the
of \$1,100 from Schedule E (Form
the entry space, you enter “PAL.”
losses in columns (b) and (c) of
1040).
See Schedule D and Form 4797
Worksheets 1 and 3 and all the
Worksheet 3
deductions in columns (a) and (b) of
instructions on page 12 if you also had
Activity I has an overall loss of
passive gains and losses from the sale
Worksheet 2 are allowed in full. Report
\$4,000 (current year long-term capital
the income and losses in columns (a),
of assets or of an interest in a passive
loss of \$3,000 and a prior year
(b), and (c) of Worksheets 1 and 3 and
activity.
unallowed long-term capital loss of
deductions in columns (a) and (b) of
Schedule E, Part I. Enter the allowed
\$1,000). Activity II has an overall gain
Worksheet 2 on the forms and
loss from the worksheet on line 23 of
of \$870 (current year net income of
schedules normally used.
Schedule E. An activity that has net
\$1,100 less a current year long-term
Line 16 is the same as the total of
profit for the year and prior year
capital loss of \$230). Line 16 of Form
lines 1b, 1c, 2a, 2b, 3b, and 3c. In
unallowed losses will have net profit on
8582 shows an allowed loss of \$1,100.
this case, all the losses in columns (b)
line 22 and the allowed loss on line 23.
Since Activity II has an overall gain,
and (c) of Worksheets 1 and 3 and all
The allowed loss on line 23 will include
the amounts shown in columns (a) and
the deductions in columns (a) and (b) of
the loss allowed to the extent of the net
(b) of Worksheet 3 for that activity are
Worksheet 2 are allowed in full. Report
profit. Line 24 of Schedule E will show
reported on the proper forms and
the income and losses in columns (a),
total profit and line 25 will show total
-11-
Instructions for Form 8582 (2010)

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