Instructions For Form 8582 - Department Of The Treasury

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activities grouped together by the

Income from an activity that is not a

Recharacterization of

partnership or corporation.

passive activity.

Passive Income

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Portfolio income, including interest,

Certain income from passive activities

Passive Activity Income

dividends, annuities, and royalties not

must be recharacterized and

derived in the ordinary course of a

and Deductions

excluded from passive activity

trade or business and gain or loss

income. The amount of income

Take into account only passive

from the disposition of property that

recharacterized equals the net

activity income and passive activity

produces portfolio income or is held

income from the sources below. If

deductions to figure your net income

for investment (see section

during the tax year you received net

or net loss from all passive activities

163(d)(5)). See Temporary

income from any sources described

or any passive activity.

Regulations section 1.469-2T(c)(3).

below (either directly or through a

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Example. If your passive activity

Alaska Permanent Fund dividends.

partnership or an S corporation), see

is reported on Schedule C, C-EZ, E,

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Personal service income, including

Pub. 925 to find out how to report net

or F, and the activity has no prior year

salaries, wages, commissions,

income or loss from these sources.

unallowed losses or any gain or loss

For more information, see Temporary

self-employment income from trade

from the disposition of assets or an

Regulations section 1.469-2T(f) and

or business activities in which you

interest in the activity, take into

Regulations section 1.469-2(f).

materially participated for the tax

account only the passive activity

year, deferred compensation, taxable

Income from the following sources

income and passive activity

social security and other retirement

deductions from the activity to figure

may be subject to the net income

benefits, and payments from

recharacterization rules.

the amount to enter on Form 8582

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partnerships to partners for personal

Significant participation passive

and the worksheets.

services. See Temporary Regulations

activities defined on page 4.

If you own an interest in a passive

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section 1.469-2T(c)(4).

Rental of property if less than 30%

activity through a partnership or an S

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of the unadjusted basis of the

Income from positive section 481

corporation, the partnership or S

property is subject to depreciation.

adjustments allocated to activities

corporation will generally provide you

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Passive equity-financed lending

other than passive activities. See

with the net income or net loss from

activities.

Temporary Regulations section

the passive activity. If, however, the

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Rental of property incidental to a

1.469-2T(c)(5).

partnership or S corporation must

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development activity.

Income or gain from investments of

state an item of gross income or

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Rental of property to a nonpassive

working capital.

deduction separately to you, and the

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activity.

gross income or deduction is passive

Income from an oil or gas property

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Acquisition of an interest in a

activity gross income or a passive

if you treated any loss from a working

pass-through entity that licenses

activity deduction (respectively),

interest in the property for any tax

intangible property.

include that amount in the net income

year beginning after 1986 as a

or net loss entered on Form 8582 and

nonpassive loss under the rule

Passive Activity Deductions

the worksheets.

excluding working interests in oil and

To figure your overall gain or overall

The partnership or S

gas wells from passive activities. See

loss from all passive activities or any

corporation does not have a

Regulations section 1.469-2(c)(6).

passive activity, take into account

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record of any prior year

Any income from intangible

CAUTION

only passive activity deductions.

unallowed losses from the passive

property if your personal efforts

Passive activity deductions include

activities of the partnership or S

significantly contributed to the

all deductions from activities that are

corporation. If you had prior year

creation of the property.

passive activities for the current tax

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unallowed losses from these

Any income treated as not from a

year and all deductions from passive

activities, they can be found in

passive activity under Temporary

activities that were disallowed under

column (c) of your 2000 Worksheet 4.

Regulations section 1.469-2T(f) and

the PAL rules in prior tax years and

Regulations section 1.469-2(f). See

carried forward to the current tax year

Recharacterization of Passive

Passive Activity Income

under section 469(b). See

Income on this page.

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

To figure your overall gain or loss

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Overall gain from any interest in a

from all passive activities or any

Passive activity deductions include

PTP.

passive activity, take into account

losses from a disposition of property

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State, local, and foreign income tax

only passive activity income. Do not

used in a passive activity at the time

refunds.

enter income that is not passive

of the disposition and losses from a

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activity income on Form 8582 or the

Income from a covenant not to

disposition of less than your entire

worksheets.

compete.

interest in a passive activity. See

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Any reimbursement of a casualty or

Dispositions on page 7 for the

Passive activity income includes all

theft loss included in income as

treatment of losses upon disposition

income from passive activities,

of your entire interest in an activity.

recovery of all or part of a prior year

including (with certain exceptions

described in Temporary Regulations

loss deduction if the deduction for the

Passive activity deductions do not

loss was not treated as a passive

section 1.469-2T(c)(2) and

include the following:

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Regulations section 1.469-2(c)(2))

activity deduction.

Deductions for expenses (other

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gain from the disposition of an

Cancellation of debt income to the

than interest expense) that are clearly

interest in a passive activity or of

extent that at the time the debt was

and directly allocable to portfolio

property used in a passive activity at

discharged the debt was not properly

income.

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the time of the disposition.

allocable under Temporary

Interest expense, other than

Regulations section 1.163-8T to

Passive activity income does not

interest expense properly allocable

passive activities.

include the following:

under Temporary Regulations section

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Instructions For Form 8582 - Department Of The Treasury - 2001 Page 6

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