Instructions For Form 8582 - Passive Activity Loss Limitations

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in column (e). Do not enter amounts

The tuition and fees deduction.

Worksheet 2

from columns (d) and (e) on Form

Include in modified adjusted gross

Use Worksheet 2 to figure the amounts

8582. These amounts will be used

income any portfolio income and

to enter on lines 2a and 2b for

when Form 8582 is completed to figure

expenses that are clearly and directly

commercial revitalization deductions

the loss allowed for the current year.

allocable to portfolio income. Also

(CRD) from rental real estate activities

include any income that is treated as

(see Commercial revitalization

Part II—Special

nonpassive income, such as overall

deduction (CRD) on page 4). Do not

Allowance for Rental

gain from a PTP and net income from

include:

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an activity or item of property subject to

Income or other deductions from the

Real Estate With Active

the recharacterization of passive

same activity. Instead, report any net

income rules. When figuring modified

income or net loss from the activity,

Participation

adjusted gross income, include any

except for the CRD, in Worksheet 1 if

Use Part II to figure the maximum

overall loss from the entire disposition

you actively participated in the activity

amount of rental loss allowed if you

of a passive activity (considered a

or in Worksheet 3 if you did not actively

have a net loss from a rental real estate

nonpassive loss).

participate.

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activity with active participation.

CRDs from passive activities other

Example. Your adjusted gross

than rental real estate activities.

Enter all numbers in Part II as

income on line 34 of Form 1040 is

Instead, report these deductions as part

positive amounts (that is, greater than

$92,000, and you have taxable social

of the net income or loss from the

zero).

security benefits of $5,500 on line 20b.

passive activity in Worksheet 3.

Example. Line 5 has a loss of

Your modified adjusted gross income is

$42,000 (reported as a positive

Column (a). Enter the current year

$86,500 ($92,000 – $5,500).

amount) and line 9 is $25,000. You

CRD from each rental real estate

Line 9. Do not enter more than

enter $25,000 on line 10 (the smaller of

activity. Enter the total of column (a) on

$12,500 on line 9 if you are married

line 5 or line 9, both treated as positive

line 2a of Form 8582.

filing a separate return and you and

amounts).

Column (b). Enter the unallowed

your spouse lived apart at all times

Line 5. Enter on line 5 the smaller of

CRDs from the prior year for each

during the year. Married persons filing

the loss on line 1d or the loss on line 4.

rental real estate activity. Enter the total

separate returns who lived with their

of column (b) on line 2b of Form 8582.

Example. Line 1d has a loss of

spouses at any time during the year are

$3,000, line 2c is zero, and line 3d has

not eligible for the special allowance.

Column (c). Combine the amounts in

a gain of $100. The combined loss on

They must enter zero (-0-) on line 10

columns (a) and (b) for each activity

line 4 is $2,900. You enter $2,900 as a

and go to line 15.

and enter the overall loss for the activity

positive number on line 5 (the smaller

in column (c). Do not enter amounts

of the loss on line 1d or the loss on

Part III—Special

from column (c) on Form 8582. These

line 4).

amounts will be used when Form 8582

Allowance for

Line 6. Married persons filing separate

is completed to figure the loss allowed

returns who lived apart from their

for the current year.

Commercial

spouses at all times during the year

Worksheet 3

Revitalization

must enter $75,000 on line 6 instead of

$150,000. Married persons filing

Use Worksheet 3 to figure the amounts

Deductions From Rental

separate returns who lived with their

to enter on lines 3a through 3c for:

spouses at any time during the year are

Real Estate Activities

1. Passive trade or business

not eligible for the special allowance.

activities,

Use Part III to figure the maximum

They must enter zero (-0-) on line 10

2. Passive rental real estate

amount of commercial revitalization

and go to line 15.

activities that do not qualify for the

deductions allowed if you have a

Line 7. To figure modified adjusted

special allowance (but do not include

commercial revitalization deduction

gross income, combine all the

CRDs reported in Worksheet 2), and

from a rental real estate activity.

amounts used to figure adjusted gross

3. Rental activities other than rental

income except do not take into

Enter all numbers in Part III as

real estate activities.

positive amounts (that is, greater than

account:

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Passive income or loss included on

zero.)

Column (a). Enter the current year net

income for each activity. Enter the total

Form 8582,

Line 11. Enter $12,500 (reduced by

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Any rental real estate loss allowed to

of column (a) on line 3a of Form 8582.

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

real estate professionals (defined under

(See the example under Column (a) for

11 if you are married filing a separate

Activities That Are Not Passive

Worksheet 1, on page 7.)

return and you and your spouse lived

Activities on page 2),

Column (b). Enter the current year net

apart at all times during the year.

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Any overall loss from a PTP,

loss for each activity. Enter the total of

Married persons filing separate returns

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The taxable amount of social security

column (b) on line 3b of Form 8582.

who lived with their spouses at any time

and tier 1 railroad retirement benefits,

(See the example under Column (b) of

during the year are not eligible for the

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The deduction allowed under section

Worksheet 1, on page 7.)

special allowance. They must enter

219 for contributions to IRAs and

zero (-0-) on line 14 and go to line 15.

Column (c). Enter the unallowed

certain other qualified retirement plans,

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losses for the prior years for each

The deduction allowed for one-half of

Part IV—Total Losses

activity. You find these amounts on

self-employment taxes,

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Worksheet 5, column (c), of your 2002

The exclusion from income of interest

Allowed

Form 8582. Enter the total of column

from series EE and I U.S. savings

Use Part IV to figure the amount of the

bonds used to pay higher education

PAL (as determined in Part I) allowed

line 3c of Form 8582.

expenses,

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for 2003 from all passive activities.

Columns (d) and (e). Combine income

The exclusion of amounts received

and losses in columns (a) through (c)

under an employer’s adoption

Line 16. Use the worksheets on Form

for each activity, and either enter the

assistance program,

8582 and the following instructions for

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overall gain for the activity in column (d)

The student loan interest deduction,

those worksheets to figure the

or enter the overall loss for the activity

unallowed loss to be carried forward

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Instructions For Form 8582 - Passive Activity Loss Limitations - 2003 Page 8

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