Instructions For Form 8582 - Passive Activity Loss Limitations

in which you directly or indirectly owned

Four separate activities.

activities grouped together by the

your limited partner interest).

partnership or corporation.

Once you choose a grouping under

A limited partner's share of an

these rules, you must continue using

Regrouping Due to Net

electing large partnership's taxable

that grouping in later tax years unless

Investment Income Tax

income or loss from all trade or business

it‘s determined that the original grouping

You may be able to regroup your

and rental activities is treated as income

was clearly inappropriate or a material

activities, as described below, if you’re

or loss from the conduct of a single

change in the facts and circumstances

subject to the Net Investment Income

passive trade or business activity.

makes it clearly inappropriate.

Tax (NIIT) for the first time. For detailed

The IRS may regroup your activities if

Special rules for certain retired or

information, see Regulations section

your grouping fails to reflect one or more

disabled farmers and surviving

1.469-11(b)(3)(iv).

appropriate economic units and one of

spouses of farmers. Certain retired or

the primary purposes of your grouping is

Regrouping on an original return.

disabled farmers and surviving spouses

to avoid the passive activity limitations.

Under the NIIT fresh start election, you

of farmers are treated as materially

may regroup for the first tax year you’re

participating in a farming activity if the

Limitation on grouping certain activi-

subject to the NIIT (without regard to the

real property used in the activity would

ties. The following activities may not be

effect of regrouping). You may regroup

meet the estate tax rules for special

grouped together.

only once under this election and that

valuation of farm property passed from

1. A rental activity with a trade or

regrouping will apply to the tax year for

a qualifying decedent. See Temporary

business activity unless the activities

which you regroup and all future tax

Regulations section 1.469-5T(h)(2).

being grouped together make up an

years. You’re eligible to regroup if:

Estates and trusts. The PAL

appropriate economic unit and:

1. You weren’t previously subject to

limitations apply in figuring the

a. The rental activity is insubstantial

the Net Investment Income Tax;

distributable net income and taxable

relative to the trade or business activity

2. The amount you would have

income of an estate or trust. The rules

or vice versa, or

entered on Form 8960, line 12, without

for determining material participation for

b. Each owner of the trade or

the regrouping, would have been

this purpose haven’t yet been issued.

business activity has the same

greater than zero; and

Grouping of Activities

proportionate ownership interest in the

3. The amount you would have

rental activity. If so, the portion of the

entered on Form 8960, line 13, without

Generally, one or more trade or

rental activity involving the rental of

the regrouping, would have been

business activities or rental activities

property used in the trade or business

greater than the amount you would have

may be treated as a single activity if the

activity may be grouped with the trade

entered on Form 8960, line 14, without

activities make up an appropriate

or business activity.

the regrouping.

economic unit for the measurement of

2. An activity involving the rental of

gain or loss under the passive activity

real property with an activity involving

Regrouping on an amended return.

rules.

the rental of personal property (except

You may regroup your activities on an

Whether activities make up an

personal property provided in

amended tax return, but only if you

appropriate economic unit depends on

connection with the real property or vice

weren’t subject to the Net Investment

all the relevant facts and circumstances.

versa).

Income Tax on your original return (or

The factors given the greatest weight in

previously amended return). You’re

3. Any activity with another activity

determining whether activities make up

eligible if:

in a different type of business and in

an appropriate economic unit are:

which you hold an interest as a limited

1. You weren’t previously subject to

1. Similarities and differences in

partner or as a limited entrepreneur (as

the Net Investment Income Tax for the

types of trades or businesses,

defined in section 464(e)(2)) if that other

tax year for which you’re filing an

2. The extent of common control,

activity engages in holding, producing,

amended return or any prior tax year;

or distributing motion picture films or

3. The extent of common

2. The changes on the amended

videotapes; farming; leasing section

ownership,

return cause you to be subject to the

1245 property; or exploring for or

NIIT for the first time beginning in the

4. Geographical location, and

exploiting oil and gas resources or

taxable year for which you’re amending

5. Interdependencies between or

geothermal deposits.

the return;

among the activities.

3. The limitation period for

Activities conducted through part-

Example. You have a significant

assessments under Code section 6501

nerships, S corporations, and C cor-

ownership interest in a bakery and a

hasn’t ended;

porations subject to section 469.

movie theater in Baltimore and in a

Once a partnership or corporation

4. The changes on your amended

bakery and a movie theater in

determines its activities under these

return cause the amount on Form 8960,

Philadelphia. Depending on all the

rules, a partner or shareholder may use

line 12, of your amended return to be

relevant facts and circumstances, there

these rules to group those activities

greater than zero; and

may be more than one reasonable

with:

5. The changes on your amended

method for grouping your activities. For

Each other,

return cause the amount on Form 8960,

instance, the following groupings may or

Activities conducted directly by the

line 13, of your amended return to be

may not be permissible.

partner or shareholder, or

greater than the amount entered on

A single activity.

Activities conducted through other

Form 8960, line 14.

A movie theater activity and a bakery

partnerships and corporations.

activity.

This rule applies equally to changes

A partner or shareholder may not

A Baltimore activity and a

to modified adjusted gross income or

treat as separate activities those

Philadelphia activity.

Instructions for Form 8582 (2017)

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Instructions For Form 8582 - Passive Activity Loss Limitations - 2017 Page 5

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