Instructions For Form 8582 - Department Of The Treasury

2 0

Department of the Treasury

Internal Revenue Service

Instructions for Form 8582

Passive Activity Loss Limitations

Section references are to the Internal Revenue Code, unless otherwise noted.

Contents

Page

even if the losses exceed passive

Dispositions on page 7 for more

income.

information.

General Instructions . . . . . . . . . . . 1

Purpose of Form . . . . . . . . . . . . . . . 1

PALs that are not allowed in the

Exception 2

Who Must File . . . . . . . . . . . . . . . . 1

current year are carried forward until

Coordination With Other

they are allowed either against

You actively participated in rental

passive activity income, against the

Limitations . . . . . . . . . . . . . . . . . . 2

real estate activities (see Active

special allowance, if applicable, or

Before Completing Form

Participation in a Rental Real

when you sell or exchange your

8582 . . . . . . . . . . . . . . . . . . . . . . 2

Estate Activity on page 3), and you

entire interest in the activity in a fully

meet all of the following conditions:

Definitions . . . . . . . . . . . . . . . . . . . 2

•

taxable transaction to an unrelated

Rental real estate activities with

Activities That Are Not

party.

active participation were your only

Passive Activities . . . . . . . . . . . . 2

passive activities.

For more information, see Pub.

Rental Activities . . . . . . . . . . . . . . . 2

•

You have no prior year unallowed

925, Passive Activity and At-Risk

Trade or Business Activities

. . . . . 3

losses from these activities.

Rules, which contains a filled-in

Material Participation . . . . . . . . . . . 4

•

Your total loss from the rental real

example of Form 8582 with

Grouping of Activities . . . . . . . . . . . 5

estate activities was not more than

step-by-step instructions for reporting

Passive Activity Income and

$25,000 ($12,500 if married filing

losses from passive activities.

Deductions . . . . . . . . . . . . . . . . . 6

separately and you lived apart from

Note: Corporations subject to the

Former Passive Activities . . . . . . . . 7

your spouse all year).

passive activity rules must use Form

Dispositions . . . . . . . . . . . . . . . . . . 7

•

If you are married filing separately,

8810, Corporate Passive Activity

Specific Instructions . . . . . . . . . . 8

you lived apart from your spouse all

Loss and Credit Limitations.

Part I . . . . . . . . . . . . . . . . . . . . . . . 8

year.

•

Part II . . . . . . . . . . . . . . . . . . . . . . . 8

You have no current or prior year

Who Must File

Part III . . . . . . . . . . . . . . . . . . . . . . 9

unallowed credits from a passive

Form 8582 is filed by individuals,

How to Report Allowed

activity.

•

estates, and trusts who have losses

Losses . . . . . . . . . . . . . . . . . . . 11

Your modified adjusted gross

(including prior year unallowed

Publicly Traded Partnerships

income was not more than $100,000

losses) from passive activities. You

(PTPs) . . . . . . . . . . . . . . . . . . . 11

(not more than $50,000 if married

do not have to file Form 8582 if you

filing separately and you lived apart

meet Exception 1 or 2 below.

General Instructions

from your spouse all year).

•

You do not hold any interest in a

Exception 1

rental real estate activity as a limited

You do not have an overall loss

Purpose of Form

partner or as a beneficiary of an

when you combine all your net

estate or a trust.

Form 8582 is used by noncorporate

income and net losses (including any

For the definition of modified

taxpayers to figure the amount of any

prior year unallowed losses) from

adjusted gross income, see the

passive activity loss (PAL) for the

business or rental passive activities.

instructions for line 6 on page 8.

current tax year and the total losses

Overall loss is defined under

If all the above conditions are met,

allowed from passive activities.

Definitions on page 2.

your rental real estate losses are not

A PAL occurs when total losses

In figuring your overall gain or loss

limited, and you do not need to

(including prior year unallowed

from all passive activities for the year,

complete Form 8582. For losses

losses) from all your passive activities

do not include the following:

reported on line 22, Part I, of

exceed the total income from all your

1. Net income that is not passive

Schedule E (Form 1040), enter the

passive activities.

activity income. See Passive Activity

amount of the loss from line 22 on

Generally, passive activities

Income on page 6.

line 23 of Schedule E. For losses

include:

2. Net losses that are not passive

from a partnership or an S

•

Trade or business activities in

activity net losses. See Activities

corporation, enter the amount of the

which you did not materially

That Are Not Passive Activities on

allowable loss from Schedule K-1 in

participate for the tax year.

page 2.

Part II, column (g), of Schedule E. For

•

Rental activities, regardless of your

3. Net income or net loss from

losses reported on line 32 of Form

participation.

your interest in any publicly traded

4835, Farm Rental Income and

PALs cannot be used to offset

partnership (PTP). See Publicly

Expenses, enter the amount of the

income from nonpassive activities.

Traded Partnerships (PTPs) on

allowable loss from line 32 on line

However, a special allowance for

page 11.

33c of Form 4835.

rental real estate activities with active

4. Any overall loss from an entire

participation may allow some losses

disposition of a passive activity. See

Cat. No. 64294A

Instructions For Form 8582 - Department Of The Treasury - 2001

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