Instructions For Form 8582 - 2010 Page 2

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Rental Activities
To find out how to treat income and
one activity. For details on making this
deductions from your activity, read
election, see page E-2 of the
A rental activity is a passive activity
Passive Activity Income and
instructions for Schedule E (Form
even if you materially participated in the
Deductions, Former Passive Activities,
1040).
activity (unless it is a rental real estate
and Dispositions (pages 5 through 8).
If you are married filing jointly, one
activity in which you materially
To find out how to enter income and
spouse must separately meet both
participated and you were a real estate
losses on Form 8582, read the
(2)(a) and (2)(b), without taking into
professional).
instructions for Worksheets 1, 2, and 3
account services performed by the
However, if you meet any of the five
(on page 8).
other spouse.
exceptions beginning below, the rental
A real property trade or business is
Definitions
of the property is not treated as a rental
any real property development,
activity. See Reporting Income and
Except as otherwise indicated, the
redevelopment, construction,
Losses From the Activities on page 3 if
following terms in these instructions are
reconstruction, acquisition, conversion,
you meet any of the exceptions.
defined as shown below.
rental, operation, management, leasing,
or brokerage trade or business.
An activity is a rental activity if
Net income. This is the excess of
tangible property (real or personal) is
current year income over current year
Services you performed as an
used by customers or held for use by
deductions from the activity. This
employee are not treated as performed
customers and the gross income (or
includes any current year gains or
in a real property trade or business
expected gross income) from the
losses from the disposition of assets or
unless you owned more than 5% of the
activity represents amounts paid (or to
an interest in the activity.
stock (or more than 5% of the capital or
be paid) mainly for the use of the
Net loss. This is the excess of current
profits interest) in the employer.
property. It does not matter whether the
year deductions over current year
use is under a lease, a service contract,
Note. If a rental real estate activity is
income from the activity. This includes
or some other arrangement.
not a passive activity for the current
any current year gains or losses from
year, any prior year unallowed loss is
the disposition of assets or an interest
Exceptions
treated as a loss from a former passive
in the activity.
activity. See Former Passive Activities
An activity is not a rental activity if:
Overall gain. This is the excess of the
on page 7.
1. The average period of customer
“net income” from the activity over the
3. A working interest in an oil or gas
prior year unallowed losses from the
use is:
well. Your working interest must be held
activity.
a. 7 days or less, or
directly or through an entity that does
b. 30 days or less and significant
Overall loss. This is (a) the excess of
not limit your liability (such as a general
personal services were provided in
the prior year unallowed losses from
partner interest in a partnership). In this
making the rental property available for
the activity over the “net income” from
case, it does not matter whether you
customer use.
the activity or (b) the prior year
materially participated in the activity for
unallowed losses from the activity plus
Figure the average period of
the tax year.
the “net loss” from the activity.
customer use for a class of property by
If, however, your liability was limited
dividing the total number of days in all
Prior year unallowed losses. These
for part of the year (for example, you
rental periods by the number of rentals
are the losses from an activity that were
converted your general partner interest
during the tax year. If the activity
disallowed under the PAL limitations in
to a limited partner interest during the
involves renting more than one class of
a prior year and carried forward to the
property, multiply the average period of
tax year under section 469(b). See
year), some of your income and losses
customer use of each class by the ratio
Regulations section 1.469-1(f)(4) and
from the working interest may be
Pub. 925.
of the gross rental income from that
treated as passive activity gross income
class to the activity’s total gross rental
and passive activity deductions. See
Activities That Are Not
income. The activity’s average period of
Temporary Regulations section
customer use equals the sum of these
1.469-1T(e)(4)(ii).
Passive Activities
class-by-class average periods
4. The rental of a dwelling unit you
weighted by gross income. See
The following are not passive activities.
used as a residence if section
Regulations section 1.469-1(e)(3)(iii).
1. Trade or business activities in
280A(c)(5) applies. This section applies
Significant personal services include
which you materially participated for the
if you rented out a dwelling unit that you
only services performed by individuals.
tax year.
also used as a home during the year for
To determine if personal services are
2. Any rental real estate activity in
a number of days that exceeds the
which you materially participated if you
significant, all relevant facts and
greater of 14 days or 10% of the
circumstances are taken into
were a “real estate professional” for the
number of days during the year that the
tax year. You were a real estate
consideration, including the frequency
home was rented at a fair rental.
of the services, the type and amount of
professional only if:
5. An activity of trading personal
a. More than half of the personal
labor required to perform the services,
property for the account of owners of
and the value of the services relative to
services you performed in trades or
interests in the activity. For purposes of
businesses during the tax year were
the amount charged for use of the
this rule, personal property means
performed in real property trades or
property.
property that is actively traded, such as
businesses in which you materially
2. Extraordinary personal services
stocks, bonds, and other securities.
participated, and
were provided in making the rental
See Temporary Regulations section
b. You performed more than 750
property available for customer use.
1.469-1T(e)(6) for more details.
hours of services during the tax year in
This applies only if the services are
real property trades or businesses in
performed by individuals and the
which you materially participated.
Generally, income and losses from
customers’ use of the property is
incidental to their receipt of the
these activities are not entered on Form
For purposes of item (2), each
services.
8582. However, losses from these
interest in rental real estate is a
activities may be subject to limitations
3. Rental of the property is
separate activity, unless you elect to
treat all interests in rental real estate as
other than the passive loss rules.
incidental to a nonrental activity.
-2-
Instructions for Form 8582 (2010)

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