Instructions For Form 8582 - Department Of The Treasury

in the PTP to an unrelated person in

4. If you have an overall loss and

Special Instructions for PTPs

a fully taxable transaction during the

you disposed of your entire interest in

Section 469(k) provides that the

year), the losses are allowed only to

the PTP to an unrelated person in a

passive activity limitations must be

the extent of the income, and the

fully taxable transaction during the

applied separately to items from each

excess loss is carried forward to use

year, your losses (including prior year

PTP. PALs from a PTP generally may

in a future year if you have income to

unallowed losses) allocable to the

be used only to offset income or gain

offset it. Report as a passive loss on

activity for the year are not limited by

from passive activities of the same

the schedule or form you normally

the passive loss rules. A fully taxable

PTP.

use the portion of the loss equal to

transaction is one in which you

Passive activity loss rules for

the income. Report the income as

recognize all your realized gain or

partners in PTPs. Do not report

passive income on the form or

loss. Report the income and losses

passive income, gains, or losses from

schedule you normally use.

on the forms and schedules normally

a PTP on Form 8582. Instead, use

used.

Example. You have a

the following rules to figure and report

Note: For rules on the disposition of

Schedule E loss of $12,000 (current

your income, gains, and losses from

an entire interest reported using the

year losses plus prior year unallowed

passive activities you held through

installment method, see Disposition

losses) and Form 4797 gain of

each PTP you owned during the tax

of an Entire Interest on page 7.

$7,200 from the passive activities of a

year:

PTP. You report the $7,200 gain on

1. Combine any current year

the appropriate line of Form 4797. On

Paperwork Reduction Act Notice.

income, gains and losses, and any

Schedule E, Part II, you report $7,200

We ask for the information on this

prior year unallowed losses to see if

of the losses as a passive loss in

form to carry out the Internal

you have an overall loss from the

column (g). You carry forward to 2002

Revenue laws of the United States.

PTP. Include only the same types of

the unallowed loss of $4,800

You are required to give us the

income and losses you would include

($12,000 – $7,200).

information. We need it to ensure that

to figure your net income or loss from

If you have unallowed losses from

you are complying with these laws

a non-PTP passive activity. See

more than one activity of the PTP or

and to allow us to figure and collect

Passive Activity Income and

from the same activity of the PTP that

the right amount of tax.

Deductions on page 6.

must be reported on different forms or

2. If you have an overall gain, the

You are not required to provide the

schedules, allocate the unallowed

net gain portion (total gain minus total

information requested on a form that

losses on a pro rata basis to figure

losses) is nonpassive income.

is subject to the Paperwork Reduction

the amount allowed for each activity

Act unless the form displays a valid

It is important to figure the

or on each form or schedule.

OMB control number. Books or

nonpassive income because it must

records relating to a form or its

be included in modified adjusted

To allocate and keep a record

instructions must be retained as long

gross income to figure the special

TIP

of the unallowed losses, use

as their contents may become

allowance for active participation in a

Worksheets 4, 5, and 6 of

material in the administration of any

non-PTP rental real estate activity on

Form 8582.

Internal Revenue law. Generally, tax

Form 8582. Also, you may be able to

returns and return information are

include the nonpassive income in

List each activity of the PTP in

confidential, as required by section

investment income when figuring your

Worksheet 4. Enter the overall loss

6103.

investment interest expense

from each activity in column (a).

deduction. See Form 4952,

The time needed to complete and

Complete column (b) of Worksheet 4

Investment Interest Expense

file this form will vary depending on

according to its instructions. Multiply

Deduction.

individual circumstances. The

the total unallowed loss from the PTP

estimated average time is:

Report all gains and allowed

by each ratio in column (b) and enter

losses from the activity on the forms

the result in column (c) of Worksheet

Recordkeeping . . . . . . . .

1 hr., 5 min.

or schedules normally used, and to

the left of each entry space, enter

Learning about the law or

Next, complete Worksheet 5 for

“From PTP.”

the form . . . . . . . . . . . . . 1 hr., 43 min.

each activity listed in Worksheet 4 if

Example. You have Schedule

all the loss from that activity is

Preparing the form . . . . . 1 hr., 31 min.

E income of $8,000 and a Form 4797

reported on one form or schedule.

Copying, assembling,

prior year unallowed loss of $3,500

Use Worksheet 6 instead of

and sending the form to

from the passive activities of a PTP.

Worksheet 5 for each activity with

the IRS . . . . . . . . . . . . . .

20 min.

You have a $4,500 overall gain

losses reported on two or more

($8,000 – $3,500) that is nonpassive

different forms or schedules. Enter

If you have comments concerning

income. On Schedule E, Part II, you

the net loss plus any prior year

the accuracy of these time estimates

report the $4,500 net gain as

unallowed losses in column (a) of

or suggestions for making this form

nonpassive income in column (k). In

Worksheet 5 (or Worksheet 6 if

simpler, we would be happy to hear

column (h), you report the remaining

applicable). The losses in column (c)

from you. See the instructions for the

Schedule E gain of $3,500 ($8,000 –

of Worksheet 5 (column (e) of

tax return with which this form is filed.

$4,500). On the appropriate line of

Worksheet 6) are the allowed losses

Form 4797, you report the prior year

to report on your forms or schedules.

unallowed loss of $3,500. You enter

Report these losses and any income

“From PTP” to the left of each entry

from the PTP on the forms and

space.

schedules normally used.

3. If you have an overall loss (but

did not dispose of your entire interest

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Instructions For Form 8582 - Department Of The Treasury - 2001 Page 12

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