Instructions For Form 8582 - 2010 Page 12


Publicly Traded
losses allowed (both passive and
It is important to figure the
nonpassive). Line 26 will show the total
nonpassive income because it must be
Partnerships (PTPs)
included in modified adjusted gross
net profit or loss.
income to figure the special allowance
A PTP is a partnership whose interests
Schedule E, Parts II and III. Any net
for active participation in a non-PTP
are traded on an established securities
income shown on your Schedule K-1
rental real estate activity on Form 8582.
market or are readily tradable on a
that is passive income must be entered
Also, you may be able to include the
secondary market (or its substantial
as passive income in the appropriate
nonpassive income in investment
column of Schedule E, Part II or III.
income when figuring your investment
An established securities market
Enter the passive loss allowed from
interest expense deduction. See Form
includes any national securities
Worksheet 6 or 7 in the appropriate
4952, Investment Interest Expense
exchange and any local exchange
column for passive losses. The passive
registered under the Securities
losses allowed include the loss allowed
Report all gains and allowed losses
Exchange Act of 1934 or exempted
to the extent of any net income from the
from the activity on the forms or
from registration because of the limited
activity. Passive net income or loss
schedules normally used, and to the left
volume of transactions. It also includes
reportable on Schedule E, Part II,
of each entry space, enter “From PTP.”
any over-the-counter market.
includes any self-charged interest
A secondary market generally exists
Example. You have Schedule E
income and deductions treated as
if a person stands ready to make a
income of $8,000 and a Form 4797
passive activity income and deductions.
market in the interest. An interest is
prior year unallowed loss of $3,500
See Self-Charged Interest on page 6.
treated as readily tradable if the interest
from the passive activities of a PTP.
is regularly quoted by persons, such as
See Schedule D and Form 4797
You have a $4,500 overall gain ($8,000
brokers or dealers, who are making a
− $3,500) that is nonpassive income.
instructions on this page if you also had
market in the interest.
passive gains or losses from the sale of
On Schedule E, Part II, you report the
assets or of an interest in a passive
$4,500 net gain as nonpassive income
The substantial equivalent of a
in column (j). In column (g), you report
secondary market exists if there is no
the remaining Schedule E gain of
identifiable market maker, but holders
Form 4684, Section B. Any passive
$3,500 ($8,000 − $4,500) as passive
of interests have a readily available,
activity gain from Form 4684 is
income. On the appropriate line of Form
regular, and ongoing opportunity to sell
unchanged. It was used on Form 8582
4797, you report the prior year
or exchange interests through a public
to determine allowable PALs. If you do
unallowed loss of $3,500. You enter
means of obtaining or providing
not have passive losses on Form 4684,
“From PTP” to the left of each entry
information on offers to buy, sell, or
complete Form 4684 and follow the
exchange interests. Similarly, the
instructions for that form for where to
3. If you have an overall loss (but
substantial equivalent of a secondary
report the gain.
did not dispose of your entire interest in
market exists if prospective buyers and
the PTP to an unrelated person in a
sellers have the opportunity to buy, sell,
If you have passive losses on Form
fully taxable transaction during the
or exchange interests in a timeframe
4684, cross through the amount you
year), the losses are allowed only to the
and with the regularity and continuity
first entered on line 34, 35, 41a, 41b, or
extent of the income, and the excess
that the existence of a market maker
42 of that form, and enter the allowed
loss is carried forward to use in a future
would provide.
loss from the worksheet. To the left of
year if you have income to offset it.
Special Instructions for PTPs
the entry space, enter “PAL.”
Report as a passive loss on the
schedule or form you normally use the
Section 469(k) provides that the
Schedule D and Form 4797. If you
portion of the loss equal to the income.
passive activity limitations must be
sold assets from a passive activity or
Report the income as passive income
applied separately to items from each
you sold an interest in your passive
on the form or schedule you normally
PTP. PALs from a PTP generally may
activity, all gains from the activity must
be used only to offset income or gain
be entered on the appropriate line of
from passive activities of the same
Schedule D or Form 4797. Identify the
Example. You have a Schedule E
PTP. The special allowance (including
gain as “FPA.” Enter any allowed
loss of $12,000 (current year losses
CRDs) for rental real estate activities
losses for Schedule D or Form 4797 on
plus prior year unallowed losses) and
does not apply to PALs from a PTP.
the appropriate line, and to the left of
Form 4797 gain of $7,200 from the
Passive activity loss rules for
the entry space, enter “PAL.”
passive activities of a PTP. You report
partners in PTPs. Do not report
the $7,200 gain on the appropriate line
passive income, gains, or losses from a
Entire disposition with an overall
of Form 4797. On Schedule E, Part II,
PTP on Form 8582. Instead, use the
loss. If you made an entire disposition
you report $7,200 of the losses as a
following rules to figure and report your
of your interest in a passive activity and
passive loss in column (f). You carry
income, gains, and losses from passive
that activity had an overall loss, none of
forward the unallowed loss of $4,800
activities you held through each PTP
the gains, if any, or losses were
($12,000 − $7,200).
you owned during the tax year.
entered on Form 8582 or the
If you have unallowed losses from
worksheets. However, all the gains and
1. Combine any current year
more than one activity of the PTP or
losses must be reported on the forms
income, gains and losses, and any prior
from the same activity of the PTP that
year unallowed losses to see if you
or schedules normally used. To the left
must be reported on different forms or
of the entry space, enter “EDPA.”
have an overall loss from the PTP.
schedules, allocate the unallowed
Include only the same types of income
losses on a pro rata basis to figure the
Entire disposition with an overall
and losses you would include to figure
amount allowed for each activity or on
gain. Gains and losses from this
your net income or loss from a
each form or schedule.
activity were included on Form 8582 so
non-PTP passive activity. See Passive
that the gains might offset other PALs.
Activity Income and Deductions
Report all the gains and losses on the
beginning on page 5.
To allocate and keep a record of
forms and schedules normally used,
2. If you have an overall gain, the
the unallowed losses, use
and to the left of the entry space, enter
net gain portion (total gain minus total
Worksheets 5, 6, and 7 of Form
losses) is nonpassive income.
Instructions for Form 8582 (2010)


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