Instructions For Form 8582 Draft - 2011 (Page 12 of 13) in pdf

nonpassive). Line 26 will show the total

market or are readily tradable on a

Also, you may be able to include the

net profit or loss.

secondary market (or its substantial

nonpassive income in investment

equivalent).

income when figuring your investment

Schedule E, Parts II and III. Any net

interest expense deduction. See Form

income shown on your Schedule K-1

An established securities market

4952, Investment Interest Expense

that is passive income must be entered

includes any national securities

Deduction.

as passive income in the appropriate

exchange and any local exchange

column of Schedule E, Part II or III.

Report all gains and allowed losses

registered under the Securities

Enter the passive loss allowed from

from the activity on the forms or

Exchange Act of 1934 or exempted

Worksheet 6 or 7 in the appropriate

schedules normally used, and to the left

from registration because of the limited

column for passive losses. The passive

of each entry space, enter “From PTP.”

volume of transactions. It also includes

losses allowed include the loss allowed

any over-the-counter market.

Example. You have Schedule E

to the extent of any net income from the

A secondary market generally exists

income of $8,000 and a Form 4797

activity. Passive net income or loss

if a person stands ready to make a

prior year unallowed loss of $3,500

reportable on Schedule E, Part II,

market in the interest. An interest is

from the passive activities of a PTP.

includes any self-charged interest

treated as readily tradable if the interest

You have a $4,500 overall gain ($8,000

income and deductions treated as

is regularly quoted by persons, such as

− $3,500) that is nonpassive income.

passive activity income and deductions.

brokers or dealers, who are making a

On Schedule E, Part II, you report the

See Self-Charged Interest, earlier.

market in the interest.

$4,500 net gain as nonpassive income

See Form 4797 and Form 8949

in column (j). In column (g), you report

The substantial equivalent of a

instructions, later, if you also had

the remaining Schedule E gain of

secondary market exists if there is no

passive gains or losses from the sale of

$3,500 ($8,000 − $4,500) as passive

identifiable market maker, but holders

assets or of an interest in a passive

income. On the appropriate line of Form

of interests have a readily available,

activity.

4797, you report the prior year

regular, and ongoing opportunity to sell

Form 4684, Section B. Any passive

unallowed loss of $3,500. You enter

or exchange interests through a public

activity gain from Form 4684 is

“From PTP” to the left of each entry

means of obtaining or providing

unchanged. It was used on Form 8582

space.

information on offers to buy, sell, or

to determine allowable PALs. If you do

3. If you have an overall loss (but

exchange interests. Similarly, the

not have passive losses on Form 4684,

did not dispose of your entire interest in

substantial equivalent of a secondary

complete Form 4684 and follow the

the PTP to an unrelated person in a

market exists if prospective buyers and

instructions for that form for where to

fully taxable transaction during the

sellers have the opportunity to buy, sell,

report the gain.

year), the losses are allowed only to the

or exchange interests in a timeframe

extent of the income, and the excess

and with the regularity and continuity

If you have passive losses on Form

loss is carried forward to use in a future

that the existence of a market maker

4684, cross through the amount you

year if you have income to offset it.

would provide.

first entered on line 31, 32, 38a, 38b, or

Report as a passive loss on the

39 of that form, and enter the allowed

Special Instructions for PTPs

schedule or form you normally use the

loss from the worksheet. To the left of

portion of the loss equal to the income.

the entry space, enter “PAL.”

Section 469(k) provides that the

Report the income as passive income

passive activity limitations must be

Form 4797 and Form 8949. If you

on the form or schedule you normally

applied separately to items from each

sold assets from a passive activity or

use.

PTP. PALs from a PTP generally may

you sold an interest in your passive

be used only to offset income or gain

activity, all gains from the activity must

Example. You have a Schedule E

from passive activities of the same

be entered on the appropriate line of

loss of $12,000 (current year losses

PTP. The special allowance (including

Form 4797 or Form 8949. Identify the

plus prior year unallowed losses) and

CRDs) for rental real estate activities

gain as “FPA.” Enter any allowed

Form 4797 gain of $7,200 from the

does not apply to PALs from a PTP.

losses for Form 4797 or Form 8949 on

passive activities of a PTP. You report

the appropriate line and to the left of

Passive activity loss rules for

the $7,200 gain on the appropriate line

the entry space, enter “PAL.”.

partners in PTPs. Do not report

of Form 4797. On Schedule E, Part II,

passive income, gains, or losses from a

Entire disposition with an overall

you report $7,200 of the losses as a

PTP on Form 8582. Instead, use the

loss. If you made an entire disposition

passive loss in column (f). You carry

following rules to figure and report your

forward the unallowed loss of $4,800

of your interest in a passive activity and

income, gains, and losses from passive

($12,000 − $7,200).

that activity had an overall loss, none of

activities you held through each PTP

the gains, if any, or losses were

If you have unallowed losses from

you owned during the tax year.

entered on Form 8582 or the

more than one activity of the PTP or

worksheets. However, all the gains and

1. Combine any current year

from the same activity of the PTP that

losses must be reported on the forms

income, gains and losses, and any prior

must be reported on different forms or

or schedules normally used. To the left

year unallowed losses to see if you

schedules, allocate the unallowed

of the entry space, enter “EDPA.”

have an overall loss from the PTP.

losses on a pro rata basis to figure the

Include only the same types of income

Entire disposition with an overall

amount allowed for each activity or on

and losses you would include to figure

gain. Gains and losses from this

each form or schedule.

your net income or loss from a

activity were included on Form 8582 so

non-PTP passive activity. See Passive

that the gains might offset other PALs.

To allocate and keep a record of

Activity Income and Deductions, earlier.

Report all the gains and losses on the

the unallowed losses, use

TIP

2. If you have an overall gain, the

forms and schedules normally used,

Worksheets 5, 6, and 7 of Form

net gain portion (total gain minus total

and to the left of the entry space, enter

8582.

losses) is nonpassive income.

“EDPA.”

It is important to figure the

List each activity of the PTP in

Publicly Traded

nonpassive income because it must be

Worksheet 5. Enter the overall loss

included in modified adjusted gross

from each activity in column (a).

Partnerships (PTPs)

income to figure the special allowance

Complete column (b) of Worksheet 5

A PTP is a partnership whose interests

for active participation in a non-PTP

according to its instructions. Multiply the

are traded on an established securities

rental real estate activity on Form 8582.

total unallowed loss from the PTP by

-12-

Instructions for Form 8582 (2011)

Instructions For Form 8582 Draft - 2011 Page 12

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