Instructions For Form 8582 Passive Activity Loss Limitations

Line 11. Enter $12,500 (reduced by

If the loss from an activity is reported in

Worksheet 2 if you did not have to

the amount, if any, on line 10) on line

more than one place, identify both

complete Worksheet 4).

11 if you are married filing a separate

locations in the second column (for

On Worksheet 5, enter the name of

return and you and your spouse lived

example, Sch E, line 28A/Form 4797,

each activity and the form or schedule

apart at all times during the year.

line 2). If you need additional space,

and line number on which the loss will

show this information on an attached

be reported. See the example for

statement.

Part IV—Total Losses

Worksheet 4. Identify any deduction

Enter all activities with overall losses

from Worksheet 2 on a separate line

Allowed

from Worksheets 1 and 2 as follows.

(even if the amount is from an activity

•

Use Part IV to figure the amount of the

If you entered an amount on line 10,

also shown on Worksheet 1 or 3) and

PAL (as determined in Part I) allowed

list on Worksheet 4 all activities with an

add “CRD” after the name of the

for 2006 from all passive activities.

overall loss in column (e) of

activity.

Worksheet 1.

Column (a). Enter the amounts, if any,

Line 16. Use the worksheets on Form

•

If you entered an amount on line 14,

8582 and the following instructions for

from column (d) of Worksheet 4 (from

list on Worksheet 4 all activities with an

column (e) of Worksheet 1 or column

those worksheets to figure the

overall loss in column (c) of

unallowed loss to be carried forward

Worksheet 2.

to complete Worksheet 4). Also enter

and the allowed loss to report on your

•

If you entered amounts on both lines

the losses, if any, from column (e) of

forms and schedules for 2006.

10 and 14 of Form 8582, you must

Worksheet 3.

complete two separate Worksheets 4.

Worksheets 1, 2, and 3

Column (b). Divide each of the

For the second worksheet, you either

Worksheets 1 and 3, columns (d) and

individual losses shown in column (a)

may attach an extra copy of page 2 of

(e), show whether an activity had an

by the total of all the losses in column

Form 8582 or your own schedule in the

overall gain or loss. Worksheet 2,

(a) and enter this ratio for each activity

same format as Worksheet 4. On the

column (c), shows the overall loss for

in column (b). The total of all the ratios

first Worksheet 4, list all activities with

CRDs from rental real estate activities.

must equal 1.00.

an overall loss in column (e) of

If you have activities that show overall

Worksheet 1. On the second

Column (c). Complete the following

gain in column (d) of Worksheet 1 or 3,

Worksheet 4, list all activities with an

computation.

report all the income and losses listed

overall loss in column (c) of

in columns (a), (b), and (c) for those

Worksheet 2.

A. Enter as a positive amount

activities on the proper forms and

Column (a). Enter the overall loss from

line 4 of Form 8582 . . . . . . .

schedules.

column (e) of Worksheet 1 or column

B. Add lines 10 and 14 of

If you have activities that show an

Form 8582 . . . . . . . . . . . . .

overall loss in column (e) of Worksheet

Column (b). Divide each of the

C. Subtract line B from line A . .

1 or 3 or column (c) of Worksheet 2,

individual losses shown in column (a)

you must allocate your allowed loss on

by the total of all the losses in column

line 16 of Form 8582 to those activities

Multiply each ratio in column (b) by

(a) and enter this ratio for each activity

by completing Worksheets 4, 5, and 6

the amount on line C above, and enter

in column (b). The total of all the ratios

or 7.

the result in column (c).

in column (b) must equal 1.00.

Complete Worksheet 4 only if you

Column (c). Multiply each ratio in

Worksheets 6 and 7

entered an amount (other than zero) on

column (b) by the amount on line 10 or

These worksheets allocate your

line 10 or 14 of Form 8582. Otherwise,

line 14 of Form 8582, and enter the

unallowed and allowed losses for each

skip Worksheet 4 and complete

results in column (c). The total of

activity.

Worksheet 5 for all activities in

column (c) must be the same as line 10

Worksheets 1 or 3 that have overall

or line 14 of Form 8582.

If you have losses from any activity

losses in column (e) and all activities in

that are reported on two or more

Column (c) total is the same as

Worksheet 2.

different forms or schedules, use

column (a) total. If the total losses in

Worksheet 7 instead of Worksheet 6 for

column (c) are the same as those in

Worksheet 4

that activity.

column (a), the losses in Worksheets 1

Use Worksheet 4 to allocate the special

and 2 are allowed in full and are not

Also use Worksheet 7 instead of

allowance on line 10 or line 14 of Form

carried over to Worksheet 5. Report all

Worksheet 6 for any activity with two or

8582 among your rental real estate

amounts in columns (a), (b), and (c) of

more transactions that are reported on

activities.

Worksheet 1 and columns (a) and (b) of

the same form or schedule but must be

Worksheet 2 on the proper forms and

separately identified for tax purposes.

In the first column of Worksheet 4,

schedules.

Transactions that must be separately

enter the name of each activity. In the

identified include capital losses that are

Column (c) total is less than

second column, enter the form or

28% rate losses and those that are not.

column (a) total. If the total losses in

schedule and line number on which the

column (c) are less than the total losses

loss will be reported.

Note. 28% rate gain or loss includes all

in column (a), complete column (d).

collectibles gains and deductible

Example. You receive a Schedule

Column (d). Subtract column (c) from

long-term losses and section 1202 gain

K-1 from partnership P that reports

column (a) and enter the results in

on the sale of qualified small business

losses from two rental real estate

column (d). Also enter the amounts

stock. See the instructions for Schedule

activities, Activity X and Activity Y. The

from column (d) of Worksheet 4 in

D (Form 1040) for details, including the

losses from partnership P are reported

column (a) of Worksheet 5.

definitions of “collectibles gains and

on line 28A of Schedule E. In the first

losses” and “section 1202 gain.”

two columns of Worksheet 4, enter:

Worksheet 5

Worksheet 6

Complete Worksheet 5 if any activities

Name of Activity

Form or Schedule

have an overall loss in column (e) of

Use Worksheet 6 for any activity listed

Activity X

Sch E, line 28A

Worksheet 3 or losses in column (d) of

in Worksheet 5 if all the loss from that

Worksheet 4 (in column (e) of

activity is reported on one form or

Activity Y

Sch E, line 28A

Worksheet 1 or column (c) of

schedule and no transactions need to

-9-

Instructions For Form 8582 Passive Activity Loss Limitations - 2006 Page 9

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