Instructions For Form 8582 - Department Of The Treasury

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loss from the activity. This special

$25,000 for single individuals and

Proof of participation. You may

allowance is an exception to the

married individuals filing a joint return

prove your participation in an activity

general rule disallowing losses in

for the tax year.

by any reasonable means. You do

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excess of income from passive

$12,500 for married individuals

not have to maintain

activities.

who file separate returns for the tax

contemporaneous daily time reports,

year and lived apart from their

logs, or similar documents if you can

The special allowance is not

spouses at all times during the tax

establish your participation by other

available if you were married, are

year.

reasonable means. For this purpose,

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filing a separate return for the year,

$25,000 for a qualifying estate

reasonable means include, but are

and lived with your spouse at any

reduced by the special allowance for

not limited to, identifying services

time during the year.

which the surviving spouse qualified.

performed over a period of time and

If your modified adjusted gross

the approximate number of hours

Only an individual, a qualifying

income (defined on page 8) is

spent performing the services during

estate, or a qualified revocable

$100,000 or less ($50,000 or less if

that period, based on appointment

trust that made an election to treat

married filing separately), your loss is

books, calendars, or narrative

the trust as part of the decedent’s

deductible up to the amount of the

summaries.

estate may actively participate in a

maximum special allowance referred

rental real estate activity. Limited

Tests for investors. Work done as

to in the preceding paragraph.

partners may not actively participate

an investor in an activity is not treated

unless future regulations provide an

If your modified adjusted gross

as participation unless you were

exception.

income is more than $100,000

directly involved in the day-to-day

($50,000 if married filing separately),

management or operations of the

A qualifying estate is the estate of

your special allowance is limited to

activity. For purposes of this test,

a decedent for tax years ending less

50% of the difference between

work done as an investor includes:

than 2 years after the date of the

$150,000 ($75,000 if married filing

1. Studying and reviewing

decedent’s death if the decedent

separately) and your modified

financial statements or reports on

would have satisfied the active

adjusted gross income.

operations of the activity.

participation requirements for the

If your modified adjusted gross

rental real estate activity for the tax

2. Preparing or compiling

income is $150,000 or more ($75,000

year the decedent died.

summaries or analyses of the

or more if married filing separately),

finances or operations of the activity

A qualified revocable trust may

there is no special allowance.

for your own use.

elect to be treated as part of a

If you qualify under the active

3. Monitoring the finances or

decedent’s estate for purposes of the

participation rules, use Worksheet 1

operations of the activity in a

special allowance for active

and see page 8 of the instructions.

nonmanagerial capacity.

participation in rental real estate

Commercial revitalization

activities. The election must be made

deduction. The 2001 Form 8582

Test for a spouse. Participation by

by both the executor (if any) of the

does not reflect the computation of

your spouse during the tax year in an

decedent’s estate and the trustee of

the $25,000 special allowance for

activity you own may be counted as

the revocable trust. This rule is

fiscal year taxpayers claiming a

your participation in the activity even

effective for estates of decedents who

commercial revitalization deduction

if your spouse did not own an interest

died after August 5, 1997. For details,

from a passive rental real estate

in the activity and whether or not you

see section 645.

activity. However, if you have a

and your spouse file a joint return for

passive rental real estate activity with

You are not considered to actively

the tax year.

a commercial revitalization deduction,

participate in a rental real estate

Tests for individuals. You

see section 469(i) for special rules in

activity if at any time during the tax

materially participated for the tax year

computing the $25,000 allowance.

year your interest (including your

in an activity if you satisfy at least one

You can either use the 2002 version

spouse’s interest) in the activity was

of the following tests:

of Form 8582 to compute total losses

less than 10% (by value) of all

1. You participated in the activity

allowed (if it is available when you file

interests in the activity. Active

for more than 500 hours.

your return) or you can attach your

participation is a less stringent

own computation.

2. Your participation in the activity

requirement than material

for the tax year was substantially all

participation (see Material

Material Participation

of the participation in the activity of all

Participation on this page).

individuals (including individuals who

For the material participation tests

You may be treated as actively

did not own any interest in the

listed below, participation generally

participating if, for example, you

activity) for the year.

includes any work done in connection

participated in making management

3. You participated in the activity

with an activity if you owned an

decisions or arranged for others to

for more than 100 hours during the

interest in the activity at the time you

provide services (such as repairs) in

tax year, and you participated at least

did the work. The capacity in which

a significant and bona fide sense.

as much as any other individual

you did the work does not matter.

Management decisions that may

(including individuals who did not own

However, work is not participation if:

count as active participation include:

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any interest in the activity) for the

It is not work that an owner would

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Approving new tenants,

year.

customarily do in the same type of

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Deciding on rental terms,

activity and

4. The activity is a significant

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Approving capital or repair

One of your main reasons for doing

participation activity for the tax

expenditures, and

the work was to avoid the

year, and you participated in all

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Other similar decisions.

disallowance of losses or credits from

significant participation activities

The maximum special allowance

the activity under the passive activity

during the year for more than 500

is:

rules.

hours.

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Instructions For Form 8582 - Department Of The Treasury - 2001 Page 4

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