Instructions For Form 8582 - Department Of The Treasury

If you do not qualify for Exception

Overall gain means the excess of

but has a prior year unallowed

1 or 2, you must complete Form

the “net income” from the activity over

passive loss, the prior year unallowed

8582.

the prior year unallowed losses from

loss is treated as a loss from a former

the activity.

passive activity. See Former Passive

Activities on page 7.

Coordination With Other

Overall loss means the excess of

3. A working interest in an oil or

the prior year unallowed losses from

Limitations

gas well. Your working interest must

the activity over the “net income” from

be held directly or through an entity

Generally, PALs are subject to other

the activity or the prior year

that does not limit your liability (such

limitations (for example, basis and

unallowed losses from the activity

as a general partner interest in a

at-risk limitations) before they are

plus the “net loss” from the activity.

partnership). In this case, it does not

subject to the passive loss limitations.

Prior year unallowed losses means

matter whether you materially

Once a loss becomes allowable

the losses from an activity that were

participated in the activity for the tax

under these other limitations, you

disallowed under the PAL limitations

year.

must determine whether the loss is

in a prior year and carried forward to

limited under the passive loss rules.

If, however, your liability was

the tax year under section 469(b).

See Form 6198, At-Risk Limitations,

limited for part of the year (for

See Regulations section 1.469-1(f)(4)

for details on the at-risk rules. Also,

example, you converted your general

and Pub. 925.

capital losses that are allowable

partner interest to a limited partner

under the passive loss rules may be

interest during the year), some of

Activities That Are Not

limited under the capital loss

your income and losses from the

limitations of section 1211.

working interest may be treated as

Passive Activities

Percentage depletion deductions that

passive activity gross income and

The following are not passive

are allowable under the passive loss

passive activity deductions. See

activities:

rules may be limited under section

Temporary Regulations section

613A(d).

1. Trade or business activities in

1.469-1T(e)(4)(ii).

which you materially participated for

4. The rental of a dwelling unit you

the tax year.

Before Completing Form

used as a residence if section

2. Any rental real estate activity in

280A(c)(5) applies. This section

8582

which you materially participated if

applies if you rented out a dwelling

you were a “real estate professional”

To find out if your activity is treated as

unit that you also used as a home

for the tax year. You were a real

a passive activity, read:

during the year for a number of days

•

estate professional only if:

Trade or Business Activities if

that exceeds the greater of 14 days

your activity is a trade or business

a. More than half of the personal

or 10% of the number of days during

activity (page 3).

the year that the home was rented at

services you performed in trades or

•

Rental Activities if your activity is

a fair rental.

businesses were performed in real

the renting of tangible property (on

5. An activity of trading personal

property trades or businesses in

this page).

which you materially participated and

property for the account of owners of

•

interests in the activity. For purposes

Material Participation (page 4).

b. You performed more than 750

•

Grouping of Activities (page 5).

of this rule, personal property means

hours of services in real property

property that is actively traded, such

trades or businesses in which you

To find out how to treat income

materially participated.

as stocks, bonds, and other

and deductions from your activity,

securities. See Temporary

For purposes of this rule, each

read:

•

Regulations section 1.469-1T(e)(6)

interest in rental real estate is a

Passive Activity Income and

for more details.

separate activity, unless you elect to

Deductions, Former Passive

treat all interests in rental real estate

Activities, and Dispositions (pages

Generally, income and losses from

as one activity. For details on making

6 and 7).

these activities are not entered on

this election, see the instructions for

To find out how to enter income

Form 8582. However, losses from

Schedule E (Form 1040).

these activities may be subject to

and losses on Form 8582, read the

instructions for Worksheets 1 and 2

limitations other than the passive loss

If you are married filing jointly, one

(page 8).

rules.

spouse must separately meet both of

the above conditions, without taking

into account services performed by

Definitions

Rental Activities

the other spouse.

Except as otherwise indicated, the

A rental activity is a passive activity

A real property trade or business is

following terms in these instructions

even if you materially participated in

any real property development,

are defined as shown below.

the activity (unless it is a rental real

redevelopment, construction,

estate activity in which you materially

Net income means the excess of

reconstruction, acquisition,

participated and you were a real

current year income over current year

conversion, rental, operation,

estate professional).

deductions from the activity. This

management, leasing, or brokerage

includes any current year gains or

trade or business. Services you

However, if you meet any of the

losses from the disposition of assets

performed as an employee are not

five exceptions listed on page 3, the

or an interest in the activity.

treated as performed in a real

rental of the property is not treated as

property trade or business unless you

a rental activity. See Reporting

Net loss means the excess of

owned more than 5% of the stock (or

Income and Losses From the

current year deductions over current

more than 5% of the capital or profits

Activities on page 3 if you meet any

year income from the activity. This

interest) in the employer.

of the exceptions.

includes any current year gains or

losses from the disposition of assets

Note: If an activity qualifies for the

An activity is a rental activity if

or an interest in the activity.

exception described above in 2001,

tangible property (real or personal) is

-2-

Instructions For Form 8582 - Department Of The Treasury - 2001 Page 2

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