Instructions For Form 8582 - 2010 Page 5


during the portion of the partnership’s
Once you choose a grouping under
tax year to the IRS. If you fail to report
tax year in which you directly or
these rules, you must continue using
these changes, each trade or business
indirectly owned your limited partner
that grouping in later tax years unless a
activity or rental activity will be treated
material change in the facts and
as a separate activity. You will be
circumstances makes it clearly
considered to have made a timely
A limited partner’s share of an
disclosure if you filed all affected
electing large partnership’s taxable
income tax returns consistent with the
The IRS may regroup your activities
income or loss from all trade or
claimed grouping and make the
if your grouping fails to reflect one or
business and rental activities is treated
required disclosure on the income tax
more appropriate economic units and
as income or loss from the conduct of a
return for the year in which you first
one of the primary purposes of your
single passive trade or business
discovered the failure to disclose. If the
grouping is to avoid the passive activity
IRS discovered the failure to disclose,
Special rules for certain retired or
you must have reasonable cause for
Limitation on grouping certain
disabled farmers and surviving
not making the required disclosure. For
activities. The following activities may
spouses of farmers. Certain retired
more information on disclosure
not be grouped together.
requirements, see Revenue Procedure
or disabled farmers and surviving
1. A rental activity with a trade or
spouses of farmers are treated as
2010-13 available at
business activity unless the activities
materially participating in a farming
being grouped together make up an
activity if the real property used in the
New grouping. You must file a written
appropriate economic unit and:
activity would meet the estate tax rules
statement with your original income tax
a. The rental activity is insubstantial
for special valuation of farm property
return for the first tax year in which two
relative to the trade or business activity
passed from a qualifying decedent. See
or more activities are originally grouped
or vice versa, or
Temporary Regulations section
into a single activity. The statement
b. Each owner of the trade or
must provide the names, addresses,
business activity has the same
Estates and trusts. The PAL
and employer identification numbers
proportionate ownership interest in the
limitations apply in figuring the
(EIN), if applicable, for the activities
rental activity. If so, the portion of the
distributable net income and taxable
being grouped as a single activity. In
rental activity involving the rental of
income of an estate or trust. The rules
addition, the statement must contain a
property used in the trade or business
for determining material participation for
declaration that the grouped activities
activity may be grouped with the trade
this purpose have not yet been issued.
make up an appropriate economic unit
or business activity.
for the measurement of gain or loss
2. An activity involving the rental of
Grouping of Activities
under the passive activity rules.
real property with an activity involving
the rental of personal property (except
Addition to an existing grouping.
Generally, one or more trade or
personal property provided in
You must file a written statement with
business activities or rental activities
connection with the real property or vice
your original income tax return for the
may be treated as a single activity if the
tax year in which you add a new activity
activities make up an appropriate
3. Any activity with another activity
to an existing group. The statement
economic unit for the measurement of
in a different type of business and in
must provide the name, address, and
gain or loss under the passive activity
which you hold an interest as a limited
EIN, if applicable, for the activity that is
partner or as a limited entrepreneur (as
being added and for the activities in the
Whether activities make up an
defined in section 464(e)(2)) if that
existing group. In addition, the
appropriate economic unit depends on
other activity engages in holding,
statement must contain a declaration
all the relevant facts and
producing, or distributing motion picture
that the activities make up an
circumstances. The factors given the
films or videotapes; farming; leasing
appropriate economic unit for the
greatest weight in determining whether
section 1245 property; or exploring for
measurement of gain or loss under the
activities make up an appropriate
or exploiting oil and gas resources or
passive activity rules.
economic unit are:
geothermal deposits.
Regrouping. You must file a written
1. Similarities and differences in
statement with your original income tax
Activities conducted through
types of trades or businesses,
return for the tax year in which you
partnerships, S corporations, and C
2. The extent of common control,
regroup the activities. The statement
corporations subject to section 469.
3. The extent of common
must provide the names, addresses,
Once a partnership or corporation
and EINs, if applicable, for the activities
determines its activities under these
4. Geographical location, and
that are being regrouped. If two or more
rules, a partner or shareholder may use
5. Interdependencies between or
activities are being regrouped into a
these rules to group those activities
among the activities.
single activity, the statement must
contain a declaration that the
Each other,
Example. You have a significant
regrouped activities make up an
Activities conducted directly by the
ownership interest in a bakery and a
appropriate economic unit for the
partner or shareholder, or
movie theater in Baltimore and in a
measurement of gain or loss under the
Activities conducted through other
bakery and a movie theater in
passive activity rules. In addition, the
partnerships and corporations.
Philadelphia. Depending on all the
statement must contain an explanation
relevant facts and circumstances, there
A partner or shareholder may not
of the material change in the facts and
may be more than one reasonable
treat as separate activities those
circumstances that made the original
method for grouping your activities. For
activities grouped together by the
grouping clearly inappropriate.
instance, the following groupings may
partnership or corporation.
or may not be permissible:
Disclosure Requirement
Passive Activity Income
A single activity,
A movie theater activity and a bakery
For tax years beginning after January
and Deductions
24, 2010, the following disclosure
A Baltimore activity and a
requirements for groupings apply. You
Take into account only passive activity
Philadelphia activity, or
are required to report certain changes
income and passive activity deductions
Four separate activities.
to your groupings that occur during the
to figure your net income or net loss
Instructions for Form 8582 (2010)


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