Instructions For Form 8582 - Department Of The Treasury

1.163-8T to passive activities (for

To report a disposition of a former

If you have an overall loss when

example, qualified home mortgage

passive activity, follow the rules under

you combine the income and losses,

interest and capitalized interest

Dispositions below.

do not use the worksheets or Form

expense are not passive activity

8582 for the activity. All losses

Dispositions

deductions).

(including prior year unallowed

•

losses) are allowed in full. Report the

Losses from dispositions of

Disposition of an Entire

income and losses on the forms and

property that produce portfolio

schedules normally used.

income or property held for

Interest

investment.

An overall loss from an entire

•

If you disposed of your entire interest

State, local, and foreign income

disposition of a passive activity is a

in a passive activity or a former

taxes.

nonpassive loss if you have an

•

passive activity to an unrelated

Miscellaneous itemized deductions

aggregate loss from all other passive

person in a fully taxable transaction

that may be disallowed under section

activities. When figuring your

during the tax year, your losses

67.

modified adjusted gross income for

allocable to the activity for the year

•

Charitable contribution deductions.

line 6 of Form 8582, be sure to take

are not limited by the PAL rules.

•

Net operating loss deductions,

into account the overall loss from the

A fully taxable transaction is a

percentage depletion carryovers

disposition of the activity.

transaction in which you recognize all

under section 613A(d), and capital

Example 1. Activity with

realized gain or loss.

loss carryovers.

•

overall gain. You sell your entire

If you are using the installment

Deductions and losses that would

interest in a rental property in which

method to report this kind of

have been allowed for tax years

you actively participated for a gain of

disposition, figure the loss for the

beginning before 1987, but for basis

$15,525. $7,300 of the gain is section

current year that is not limited by the

or at-risk limitations.

•

1231 gain reported on Form 4797,

PAL rules by multiplying your overall

Net negative section 481

Part I, and $8,225 is ordinary

loss (which does not include losses

adjustments allocated to activities

recapture income reported on Form

allowed in prior years) by the

other than passive activities. See

4797, Part II. On line 23 of Schedule

following fraction:

Temporary Regulations section

E (Form 1040), you report a total loss

1.469-2T(d)(7).

of $15,450, which includes a current

•

Gain recognized in the current year

Deductions for losses from fire,

year $2,800 net loss and a $12,650

storm, shipwreck, or other casualty or

Unrecognized gain as of the beginning

prior year unallowed loss. You have

from theft if losses similar in cause

of the current year

an overall gain from the disposition

and severity do not recur regularly in

($15,525 – $15,450 = $75).

A partner in a PTP is not treated

the activity.

•

Because you had other passive

as having disposed of an entire

The deduction allowed under

activities reportable on Form 8582,

interest in an activity of a PTP until

section 164(f) for one-half of

you make the following entries on

there is an entire disposition of the

self-employment taxes.

Worksheet 1. You enter the $15,525

partner’s interest in the PTP.

gain on the disposition in column (a),

Former Passive

Reporting an Entire

the current year loss of $2,800 in

Disposition on Schedule D or

Activities

column (b), and the prior year

unallowed loss of $12,650 in column

Form 4797

A former passive activity is any

(c).

activity that was a passive activity in a

If you completely dispose of your

prior tax year but is not a passive

entire interest in a passive activity or

Example 2. Activity with

activity in the current tax year. A prior

a former passive activity, you may

overall loss. You sell your entire

year unallowed loss from a former

interest in a limited partnership that

have to report net income or loss and

passive activity is allowed to the

prior year unallowed losses from the

was your only passive activity for a

extent of current year income from

activity. All the net income and losses

gain of $2,000. You have a current

the activity.

are reported on the forms and

year Schedule E loss of $3,330 and a

Schedule E prior year unallowed loss

schedules normally used.

If current year net income from

of $1,115.

Combine all income and losses

the activity is less than the prior

(including any prior year unallowed

Because you have an overall loss

year unallowed loss, enter the prior

losses) from the activity for the tax

of $2,445 after combining the gain

year unallowed loss and any current

year to see if you have an overall

and losses, none of the amounts are

year net income from the activity on

gain or loss.

entered on Worksheet 2 or on Form

Form 8582 and the applicable

8582.

If you have an overall gain from a

worksheets.

passive activity and you have other

You enter the net loss plus the

If current year net income from

passive activities to report on Form

prior year unallowed loss ($3,330 +

the activity is more than or equal

8582, include the income, losses, and

$1,115 = $4,445) on Schedule E, Part

to the prior year unallowed loss

prior year unallowed losses on

II, column (i), and the $2,000 gain on

from the activity, report the income

Worksheet 1 or 2.

the sale on Schedule D, in either Part

and loss on the forms and schedules

I or Part II, depending on how long

If this is your only passive activity

normally used; do not enter the

you held the partnership interest.

or a former passive activity, report all

amounts on Form 8582.

income and losses (including any

Disposition of Less Than an

If the activity has a net loss for

prior year unallowed losses) on the

Entire Interest

the current year, enter the prior

forms and schedules normally used

year unallowed loss (but not the

and do not include the income or

Gains and losses from the disposition

current year loss) on Form 8582 and

losses on the worksheets or Form

of less than an entire interest in an

the applicable worksheets.

8582.

activity are treated as part of the net

-7-

Instructions For Form 8582 - Department Of The Treasury - 2001 Page 7

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