Instructions For Form 8582 - Passive Activity Loss Limitations - 2006 Page 6
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12business activities in which you
Income from the following sources
than passive activities. See Temporary
materially participated for the tax year,
may be subject to the net income
Regulations section 1.469-2T(d)(7).
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deferred compensation, taxable social
recharacterization rules.
Deductions for losses from fire,
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security and other retirement benefits,
Significant participation passive
storm, shipwreck, or other casualty or
activities defined on page 4.
from theft if losses similar in cause and
and payments from partnerships to
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Rental of property if less than 30% of
severity do not recur regularly in the
partners for personal services. See
the unadjusted basis of the property is
activity.
Temporary Regulations section
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subject to depreciation.
The deduction allowed for one-half of
1.469-2T(c)(4).
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Passive equity-financed lending
self-employment taxes.
Income from positive section 481
activities.
adjustments allocated to activities other
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Rental of property incidental to a
Former Passive
than passive activities. See Temporary
development activity.
Regulations section 1.469-2T(c)(5).
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Activities
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Rental of property to a nonpassive
Income or gain from investments of
activity.
A former passive activity is any activity
working capital.
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Acquisition of an interest in a
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that was a passive activity in a prior tax
Income from an oil or gas property if
pass-through entity that licenses
year but is not a passive activity in the
you treated any loss from a working
intangible property.
current tax year. A prior year unallowed
interest in the property for any tax year
loss from a former passive activity is
beginning after 1986 as a nonpassive
Passive Activity Deductions
allowed to the extent of current year
loss under the rule excluding working
To figure your overall gain or overall
income from the activity.
interests in oil and gas wells from
loss from all passive activities or any
passive activities (see item 3 under
If current year net income from the
passive activity, take into account only
Activities That Are Not Passive
activity is less than the prior year
passive activity deductions.
Activities on page 2). See Regulations
unallowed loss, enter the prior year
section 1.469-2(c)(6).
Passive activity deductions include
unallowed loss and any current year
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Any income from intangible property
all deductions from activities that are
net income from the activity on Form
if your personal efforts significantly
passive activities for the current tax
8582 and the applicable worksheets.
year and all deductions from passive
contributed to the creation of the
If current year net income from the
property.
activities that were disallowed under the
activity is more than or equal to the
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PAL rules in prior tax years and carried
Any income treated as not from a
prior year unallowed loss from the
forward to the current tax year. See
passive activity under Temporary
activity, report the income and loss on
Regulations section 1.469-1(f)(4).
Regulations section 1.469-2T(f) and
the forms and schedules normally used;
Regulations section 1.469-2(f). See
do not enter the amounts on Form
Passive activity deductions include
Recharacterization of Passive Income
losses from a disposition of property
8582.
on this page.
used in a passive activity at the time of
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If the activity has a net loss for the
Overall gain from any interest in a
the disposition and losses from a
current year, enter the prior year
PTP (see item 2 under Special
disposition of less than your entire
unallowed loss (but not the current year
Instructions for PTPs beginning on
interest in a passive activity. See
loss) on Form 8582 and the applicable
page 11).
Dispositions on this page for the
worksheets.
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treatment of losses upon disposition of
State, local, and foreign income tax
your entire interest in an activity.
To report a disposition of a former
refunds.
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passive activity, follow the rules below
Income from a covenant not to
Passive activity deductions do not
under Dispositions.
compete.
include the following.
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Any reimbursement of a casualty or
Deductions for expenses (other than
Dispositions
theft loss included in income as
interest expense) that are clearly and
recovery of all or part of a prior year
directly allocable to portfolio income.
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Disposition of an Entire
loss deduction if the deduction for the
Qualified home mortgage interest,
loss was not treated as a passive
capitalized interest expenses, and other
Interest
activity deduction.
interest expenses (except self-charged
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If you disposed of your entire interest in
interest treated as a passive activity
Cancellation of debt income to the
a passive activity or a former passive
extent that at the time the debt was
deduction (discussed on page 5) and
activity to an unrelated person in a fully
discharged the debt was not properly
interest expenses properly allocable to
taxable transaction during the tax year,
passive activities).
allocable under Temporary Regulations
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your losses allocable to the activity for
section 1.163-8T to passive activities.
Losses from dispositions of property
the year are not limited by the PAL
that produce portfolio income or
rules.
property held for investment.
Recharacterization of
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State, local, and foreign income
A fully taxable transaction is a
Passive Income
taxes.
transaction in which you recognize all
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Certain income from passive activities
Miscellaneous itemized deductions
realized gain or loss.
must be recharacterized and excluded
that may be disallowed under
If you are using the installment
from passive activity income. The
section 67.
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method to report this kind of
amount of income recharacterized
Charitable contribution deductions.
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disposition, figure the loss for the
equals the net income from the sources
Net operating loss deductions,
current year that is not limited by the
given below. If during the tax year you
percentage depletion carryovers under
PAL rules by multiplying your overall
received net income from any of these
section 613A(d), and capital loss
loss (which does not include losses
sources (either directly or through a
carryovers.
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allowed in prior years) by the following
partnership or an S corporation), see
Deductions and losses that would
fraction:
Pub. 925 to find out how to report net
have been allowed for tax years
income or loss from these sources. For
beginning before 1987, but for basis or
Gain recognized in the current year
more information, see Temporary
at-risk limitations.
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Regulations section 1.469-2T(f) and
Net negative section 481
Unrecognized gain as of the
Regulations section 1.469-2(f).
adjustments allocated to activities other
beginning of the current year
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