Instructions For Form 8582 - Passive Activity Loss Limitations

To determine if personal services are

Also, a partner's gross income from a

Only an individual, a qualifying

significant, all relevant facts and

guaranteed payment under section

estate, or a qualified revocable trust that

circumstances are taken into

707(c) isn’t income from a rental activity.

made an election to treat the trust as

consideration, including the frequency

The determination of whether the

part of the decedent's estate may

of the services, the type and amount of

property used in the activity is provided

actively participate in a rental real estate

labor required to perform the services,

in the partner's capacity as an owner of

activity. Unless future regulations

and the value of the services relative to

an interest in the partnership is made on

provide an exception, limited partners

the amount charged for use of the

the basis of all the facts and

are not treated as actively participating

property.

circumstances.

in a partnership's rental real estate

activity.

2. Extraordinary personal services

Reporting Income and Losses

were provided in making the rental

A qualifying estate is the estate of a

From the Activities

property available for customer use.

decedent for tax years ending less than

If an activity meets any of the five

This applies only if the services are

2 years after the date of the decedent's

exceptions listed above, it’s not a rental

performed by individuals and the

death if the decedent would’ve satisfied

activity. You must then determine:

customers' use of the property is

the active participation requirements for

incidental to their receipt of the services.

1. Whether your rental of the

the rental real estate activity for the tax

property is a trade or business activity

year the decedent died.

3. Rental of the property is

(see

Trade or Business

Activities,

incidental to a nonrental activity.

A qualified revocable trust may elect

earlier), and, if so,

The rental of property is incidental to

to be treated as part of a decedent's

2. Whether you materially

an activity of holding property for

estate for purposes of the special

participated in the activity for the tax

investment if the main purpose of

allowance for active participation in

year (see

Material

Participation, later).

holding the property is to realize a gain

rental real estate activities. The election

from its appreciation and the gross

must be made by both the executor (if

If the activity is a trade or business

rental income is less than 2% of the

any) of the decedent's estate and the

activity in which you didn’t materially

smaller of the unadjusted basis or the

trustee of the revocable trust. For

participate, enter the income and losses

fair market value (FMV) of the property.

details, see Regulations section

from the activity on

Worksheet

1.645-1.

Unadjusted basis is the cost of the

If the activity is a trade or business

property without regard to depreciation

You aren’t considered to actively

activity in which you did materially

deductions or any other basis

participate in a rental real estate activity

participate, report any income or loss

adjustment described in section 1016.

if at any time during the tax year your

from the activity on the forms or

The rental of property is incidental to

interest (including your spouse's

schedules normally used.

a trade or business activity if:

interest) in the activity was less than

10% (by value) of all interests in the

a. You own an interest in the trade

If the rental activity didn’t meet any of

activity.

or business activity during the tax year,

the five exceptions, it’s generally a

passive activity. However, special rules

Active participation is a less stringent

b. The rental property was mainly

apply if you conduct the rental activity

requirement than material participation

used in the trade or business activity

through a publicly traded partnership

(see

Material

Participation, later). You

during the tax year or during at least 2 of

(PTP) or if any of the rules described

may be treated as actively participating

the 5 preceding tax years, and

under

Recharacterization of Passive

if, for example, you participated in

c. The gross rental income from the

Income, later, apply. Also, see the

PTP

making management decisions or

property is less than 2% of the smaller

rules, later.

arranged for others to provide services

of the unadjusted basis or the FMV of

(such as repairs) in a significant and

the property.

If none of the special rules apply,

bona fide sense. Management

enter the income and losses from the

Lodging provided for the employer's

decisions that may count as active

passive rental activity on Worksheet 1,

convenience to an employee or the

participation include:

2, or 3. See the instructions for

employee's spouse or dependents is

Approving new tenants,

Worksheets 1, 2, and 3

for details.

incidental to the activity or activities in

Deciding on rental terms,

which the employee performs services.

Approving capital or repair

Special Allowance for

expenditures, and

4. You customarily make the rental

Rental Real Estate

Other similar decisions.

property available during defined

Activities

business hours for nonexclusive use by

The maximum special allowance is:

various customers.

$25,000 for single individuals and

Active participation. If you actively

5. You provide property for use in a

married individuals filing a joint return for

participated in a passive rental real

nonrental activity of a partnership,

the tax year.

estate activity, you may be able to

S corporation, or a joint venture in your

$12,500 for married individuals who

deduct up to $25,000 of loss from the

capacity as an owner of an interest in

file separate returns for the tax year and

activity from your nonpassive income.

the partnership, S corporation, or joint

lived apart from their spouses at all

This special allowance is an exception

venture.

times during the tax year.

to the general rule disallowing losses in

$25,000 for a qualifying estate

Example. If a partner contributes the

excess of income from passive

reduced by the special allowance for

use of property to a partnership, none of

activities.

which the surviving spouse qualified.

the partner's distributive share of

The special allowance isn’t available

partnership income is income from a

if you were married, are filing a separate

Modified adjusted gross income lim-

rental activity unless the partnership is

return for the year, and lived with your

itation. If your modified adjusted gross

engaged in a rental activity.

spouse at any time during the year.

income (see the instructions for

line

Instructions for Form 8582 (2017)

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Instructions For Form 8582 - Passive Activity Loss Limitations - 2017 Page 3

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