Instructions For Form 8582 - Department Of The Treasury

See the forms and schedules listed

Example. Schedule C shows net

Identify the gain as “From passive

under How To Report Allowed

profit for the year of $5,000 from a

activity.” Enter any allowed losses for

Losses below. Also, see Pub. 925 for

passive activity. The activity also has

Schedule D or Form 4797 on the

an extensive example of how to

a Form 4797 gain of $2,500 and a

appropriate line, and to the left of the

report passive income and losses on

prior year unallowed Schedule C loss

entry space, enter “PAL.”

the forms and schedules.

of $6,000. The loss allowed for 2001

Entire disposition with an overall

is $6,000. You enter a net loss of

loss. If you made an entire

How To Report Allowed

$1,000 on line 31 of Schedule C (the

disposition of your interest in a

$5,000 net profit for the year less the

passive activity and that activity had

Losses

$6,000 loss allowed for the year). To

an overall loss, none of the gains, if

the left of the entry space, you enter

Line 3 is income. If line 3 of Form

any, or losses were entered on Form

“PAL.”

8582 shows net income or zero, all

8582 or the worksheets. However, all

the losses in columns (b) and (c) of

See Schedule D and Form 4797

the gains and losses must be

Worksheets 1 and 2 are allowed in

instructions on this page if you also

reported on the forms or schedules

full. Report the income and losses in

had passive gains and losses from

normally used. To the left of each

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

the sale of assets or of an interest in

entry space, enter “Entire disposition

Worksheets 1 and 2 on the forms and

a passive activity.

of passive activity.”

schedules normally used.

Schedule E, Part I. Enter the

Entire disposition with an overall

allowed loss from the worksheet on

Line 11 is the same as the total of

gain. Gains and losses from this

line 23 of Schedule E. An activity that

activity were included on Form 8582

lines 1b, 1c, 2b, and 2c. In this case

has net profit for the year and prior

so that the gains might offset other

also, all the losses in columns (b) and

year unallowed losses will have net

PALs. Report all the gains and losses

profit on line 22 and the allowed loss

on the forms and schedules normally

allowed in full. Report the income and

on line 23. The allowed loss on line

used, and to the left of each entry

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

23 will include the loss allowed to the

space, enter “Entire disposition of

Worksheets 1 and 2 on the forms and

extent of the net profit. Line 24 of

passive activity.”

schedules normally used.

Schedule E will show total net profit

Columns (a) and (c) of Worksheet 3

Publicly Traded

and line 25 will show total losses

are the same amount. In this case,

allowed (both passive and

all the losses in columns (b) and (c)

Partnerships (PTPs)

nonpassive). Line 26 will show the

of Worksheet 1 are allowed in full.

A PTP is a partnership whose

total net profit or loss.

Report the income and losses in

interests are traded on an established

Schedule E, Parts II and III. Any net

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

securities market or are readily

income shown on your Schedule K-1

Worksheet 1 on the forms and

tradable on a secondary market (or

that is passive income must be

schedules normally used.

its substantial equivalent).

entered as passive income in the

Losses allowed in column (c) of

appropriate column of Schedule E,

An established securities market

Worksheet 5. The amounts in

Part II or III. Enter the passive loss

includes any national securities

column (c) of Worksheet 5 are the

allowed from Worksheet 5 or 6 in the

exchange and any local exchange

losses allowed for 2001 for the

appropriate column for passive

registered under the Securities

activities listed in that worksheet.

losses. The passive losses allowed

Exchange Act of 1934 or exempted

Report the loss allowed from column

include the loss allowed to the extent

from registration because of the

of any net income from the activity.

limited volume of transactions. It also

any, for that activity, from column (a)

See Schedule D and Form 4797

includes any over-the-counter market.

of Worksheet 1 or 2, on the form or

instructions on this page if you also

A secondary market generally

schedule normally used.

had passive gains or losses from the

exists if a person stands ready to

Losses allowed in column (e) of

sale of assets or of an interest in a

make a market in the interest. An

Worksheet 6. The amounts in

passive activity.

interest is treated as readily tradable

column (e) of Worksheet 6 are the

Form 4684, Section B. Any passive

if the interest is regularly quoted by

losses allowed for 2001 for the

activity gain from Form 4684 is

persons, such as brokers or dealers,

activity listed in that worksheet.

unchanged. It was used on Form

who are making a market in the

Report the losses allowed from

8582 to determine allowable PALs. If

interest.

column (e) of Worksheet 6 and the

you do not have passive losses on

The substantial equivalent of a

income, if any, for that activity, from

Form 4684, complete Form 4684 and

secondary market exists if there is no

column (a) of Worksheet 1 or 2, on

follow the instructions for that form for

identifiable market maker, but holders

the forms or schedules normally

where to report the gain.

of interests have a readily available,

used.

If you have passive losses on

regular, and ongoing opportunity to

Schedules C and F, and Form

Form 4684, cross through the amount

sell or exchange interests through a

4835. Enter on the net profit or loss

you first entered on line 31, 32, 38a,

public means of obtaining or

line of your schedule or form the

38b, or 39 of that form, and enter the

providing information on offers to buy,

allowed passive loss from the

allowed loss from the worksheet. To

sell, or exchange interests. Similarly,

worksheet. To the left of the entry

the left of the entry space, enter

the substantial equivalent of a

space enter “PAL.”

“PAL.”

secondary market exists if

If the net profit or loss line on your

Schedule D and Form 4797. If you

prospective buyers and sellers have

form or schedule shows net profit for

sold assets from a passive activity or

the opportunity to buy, sell, or

the year, reduce the net profit by the

you sold an interest in your passive

exchange interests in a timeframe

allowed loss from Worksheet 5 or 6,

activity, all gains from the activity

and with the regularity and continuity

and enter the result on the net profit

must be entered on the appropriate

that the existence of a market maker

or loss line.

line of Schedule D or Form 4797.

would provide.

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Instructions For Form 8582 - Department Of The Treasury - 2001 Page 11

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