Instructions For Form 8582 - Passive Activity Loss Limitations - 2003 Page 6
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materially participated for the tax year,
Rental of property if less than 30% of
severity do not recur regularly in the
deferred compensation, taxable social
the unadjusted basis of the property is
activity.
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security and other retirement benefits,
subject to depreciation.
The deduction allowed for one-half of
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and payments from partnerships to
Passive equity-financed lending
self-employment taxes.
partners for personal services. See
activities.
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Temporary Regulations section
Rental of property incidental to a
Former Passive
1.469-2T(c)(4).
development activity.
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Activities
Income from positive section 481
Rental of property to a nonpassive
adjustments allocated to activities other
activity.
A former passive activity is any activity
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than passive activities. See Temporary
Acquisition of an interest in a
that was a passive activity in a prior tax
Regulations section 1.469-2T(c)(5).
pass-through entity that licenses
year but is not a passive activity in the
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Income or gain from investments of
intangible property.
current tax year. A prior year unallowed
working capital.
loss from a former passive activity is
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Income from an oil or gas property if
Passive Activity Deductions
allowed to the extent of current year
you treated any loss from a working
income from the activity.
To figure your overall gain or overall
interest in the property for any tax year
loss from all passive activities or any
If current year net income from
beginning after 1986 as a nonpassive
passive activity, take into account only
the activity is less than the prior year
loss under the rule excluding working
passive activity deductions.
unallowed loss, enter the prior year
interests in oil and gas wells from
unallowed loss and any current year
passive activities (see item 3 under
Passive activity deductions include
net income from the activity on Form
Activities That Are Not Passive
all deductions from activities that are
8582 and the applicable worksheets.
Activities on page 2). See Regulations
passive activities for the current tax
section 1.469-2(c)(6).
year and all deductions from passive
If current year net income from
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Any income from intangible property
activities that were disallowed under the
the activity is more than or equal to
if your personal efforts significantly
PAL rules in prior tax years and carried
the prior year unallowed loss from
contributed to the creation of the
forward to the current tax year. See
the activity, report the income and
property.
Regulations section 1.469-1(f)(4).
loss on the forms and schedules
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Any income treated as not from a
normally used; do not enter the
Passive activity deductions include
passive activity under Temporary
amounts on Form 8582.
losses from a disposition of property
Regulations section 1.469-2T(f) and
If the activity has a net loss for the
used in a passive activity at the time of
Regulations section 1.469-2(f). See
current year, enter the prior year
the disposition and losses from a
Recharacterization of Passive
unallowed loss (but not the current year
disposition of less than your entire
Income on this page.
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loss) on Form 8582 and the applicable
interest in a passive activity. See
Overall gain from any interest in a
worksheets.
Dispositions on this page for the
PTP (see item 2 under Special
treatment of losses upon disposition of
Instructions for PTPs on page 12).
To report a disposition of a former
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your entire interest in an activity.
State, local, and foreign income tax
passive activity, follow the rules below
refunds.
under Dispositions.
Passive activity deductions do not
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Income from a covenant not to
include the following.
compete.
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Dispositions
Deductions for expenses (other than
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Any reimbursement of a casualty or
interest expense) that are clearly and
theft loss included in income as
directly allocable to portfolio income.
Disposition of an Entire
recovery of all or part of a prior year
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Qualified home mortgage interest,
Interest
loss deduction if the deduction for the
capitalized interest expenses, and other
loss was not treated as a passive
If you disposed of your entire interest in
interest expenses (except self-charged
activity deduction.
a passive activity or a former passive
interest treated as a passive activity
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Cancellation of debt income to the
activity to an unrelated person in a fully
deduction (discussed on page 5) and
extent that at the time the debt was
taxable transaction during the tax
interest expenses properly allocable to
discharged the debt was not properly
year, your losses allocable to the
passive activities).
allocable under Temporary Regulations
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activity for the year are not limited by
Losses from dispositions of property
section 1.163-8T to passive activities.
the PAL rules.
that produce portfolio income or
property held for investment.
Recharacterization of
A fully taxable transaction is a
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State, local, and foreign income
transaction in which you recognize all
Passive Income
taxes.
realized gain or loss.
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Certain income from passive activities
Miscellaneous itemized deductions
If you are using the installment
must be recharacterized and excluded
that may be disallowed under section
method to report this kind of
from passive activity income. The
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disposition, figure the loss for the
amount of income recharacterized
Charitable contribution deductions.
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current year that is not limited by the
equals the net income from the sources
Net operating loss deductions,
PAL rules by multiplying your overall
given below. If during the tax year you
percentage depletion carryovers under
loss (which does not include losses
received net income from any of these
section 613A(d), and capital loss
allowed in prior years) by the following
sources (either directly or through a
carryovers.
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fraction:
partnership or an S corporation), see
Deductions and losses that would
Pub. 925 to find out how to report net
have been allowed for tax years
Gain recognized in the current year
income or loss from these sources. For
beginning before 1987, but for basis or
more information, see Temporary
at-risk limitations.
Unrecognized gain as of the
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Regulations section 1.469-2T(f) and
Net negative section 481
beginning of the current year
Regulations section 1.469-2(f).
adjustments allocated to activities other
than passive activities. See Temporary
Income from the following sources
A partner in a PTP is not treated as
Regulations section 1.469-2T(d)(7).
may be subject to the net income
having disposed of an entire interest in
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Deductions for losses from fire,
recharacterization rules.
an activity of a PTP until there is an
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storm, shipwreck, or other casualty or
Significant participation passive
entire disposition of the partner’s
activities defined on page 4.
from theft if losses similar in cause and
interest in the PTP.
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