Instructions For Form 8582 - 2010 (Page 12 of 13) in pdf

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

equivalent).

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

Deduction.

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

activity.

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

space.

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

use.

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

TIP

and to the left of the entry space, enter

net gain portion (total gain minus total

Worksheets 5, 6, and 7 of Form

“EDPA.”

losses) is nonpassive income.

8582.

-12-

Instructions for Form 8582 (2010)

Instructions For Form 8582 - 2010 Page 12

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