Instructions For Form 8582 - Passive Activity Loss Limitations

later) is $100,000 or less ($50,000 or

of losses or credits from the activity

7. Based on all the facts and

less if married filing separately), your

under the passive activity rules.

circumstances, you participated in the

loss is deductible up to the amount of

activity on a regular, continuous, and

Proof of participation. You may prove

the maximum special allowance

substantial basis during the tax year.

your participation in an activity by any

referred to in the preceding paragraph.

You didn’t materially participate in the

reasonable means. You don’t have to

If your modified adjusted gross

activity under this seventh test,

maintain contemporaneous daily time

income is more than $100,000 ($50,000

however, if you participated in the

reports, logs, or similar documents if

if married filing separately) but less than

activity for 100 hours or less during the

you can establish your participation by

tax year.

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

other reasonable means. For this

separately), your special allowance is

purpose, reasonable means include, but

Your participation in managing the

limited to 50% of the difference between

are not limited to, identifying services

activity doesn’t count in determining

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

performed over a period of time and the

whether you materially participated

separately) and your modified adjusted

approximate number of hours spent

under this test if:

gross income.

performing the services during that

a. Any person (except you) received

period, based on appointment books,

Generally, if your modified adjusted

compensation for performing services in

calendars, or narrative summaries.

gross income is $150,000 or more

the management of the activity, or

($75,000 or more if married filing

Tests for individuals. You materially

b. Any individual spent more hours

separately), there is no special

participated for the tax year in an activity

during the tax year performing services

allowance.

if you satisfy at least one of the following

in the management of the activity than

If you qualify under the active

tests.

you did (regardless of whether the

participation rules, use Worksheet 1.

individual was compensated for the

1. You participated in the activity for

See the instructions for

Worksheet

management services).

more than 500 hours.

later.

2. Your participation in the activity

Test for a spouse. Participation by

Commercial revitalization deduction

for the tax year was substantially all of

your spouse during the tax year in an

(CRD). The special $25,000 allowance

the participation in the activity of all

activity you own may be counted as

for the CRD from rental real estate

individuals (including individuals who

your participation in the activity even if

activities isn’t subject to the active

didn’t own any interest in the activity) for

your spouse didn’t own an interest in the

participation rules or modified adjusted

the year.

activity and whether or not you and your

gross income limits just discussed. The

3. You participated in the activity for

spouse file a joint return for the tax year.

$25,000 allowance must first be applied

more than 100 hours during the tax

to losses from rental real estate

Tests for investors. Work done as an

year, and you participated at least as

activities with active participation,

investor in an activity isn’t treated as

much as any other individual (including

figured without regard to the CRD (see

participation unless you were directly

individuals who didn’t own any interest

Part

II, later). Any remaining portion of

involved in the day-to-day management

in the activity) for the year.

the $25,000 allowance is available for

or operations of the activity. For

4. The activity is a significant

the CRD from rental real estate activities

purposes of this test, work done as an

participation activity for the tax year, and

(see

Part

III, later). See the instructions

investor includes the following.

you participated in all significant

for

Worksheet

1. Studying and reviewing financial

participation activities during the year for

Generally, you can claim a current

statements or reports on operations of

more than 500 hours.

year CRD for 2017, only if you, or a

the activity.

A significant participation activity is

pass-through entity in which you were a

2. Preparing or compiling

any trade or business activity in which

partner or shareholder, had a CRD for a

summaries or analyses of the finances

you participated for more than 100

building placed in service before 2010

or operations of the activity for your own

hours during the year and in which you

and elected to ratably claim a deduction

use.

didn’t materially participate under any of

for the CRD over a period of 120

3. Monitoring the finances or

the material participation tests (other

months that included all or part of 2017.

operations of the activity in a

than this fourth test).

You can’t claim a CRD for a

nonmanagerial capacity.

5. You materially participated in the

building placed in service after

activity (other than by meeting this fifth

Special rules for limited partners. If

December 31, 2009.

test) for any 5 (whether or not

CAUTION

you were a limited partner in an activity,

consecutive) of the 10 immediately

you generally didn’t materially

Material Participation

preceding tax years.

participate in the activity. You did

For the material participation tests listed

6. The activity is a personal service

materially participate in the activity,

below, participation generally includes

activity in which you materially

however, if you met material

any work done in connection with an

participated for any 3 (whether or not

participation test 1, 5, or 6 under

Tests

activity if you owned an interest in the

consecutive) preceding tax years.

for

individuals, earlier, for the tax year.

activity at the time you did the work. The

An activity is a personal service

However, for purposes of the

capacity in which you did the work

activity if it involves the performance of

material participation tests, you aren’t

doesn’t matter. However, work isn’t

personal services in the fields of health,

treated as a limited partner if you also

participation if:

law, engineering, architecture,

were a general partner in the

It isn’t work that an owner would

accounting, actuarial science,

partnership at all times during the

customarily do in the same type of

performing arts, consulting, or in any

partnership's tax year ending with or

activity, and

other trade or business in which capital

within your tax year (or, if shorter, during

One of your main reasons for doing

isn’t a material income-producing factor.

the portion of the partnership's tax year

the work was to avoid the disallowance

-4-

Instructions for Form 8582 (2017)

Instructions For Form 8582 - Passive Activity Loss Limitations - 2017 Page 4

Related Articles

Related forms

Related Categories