Instructions For Form 8582 - Passive Activity Loss Limitations

State, local, and foreign income tax

used in a passive activity at the time of

borrowing entity has the same

refunds.

the disposition and any loss from a

proportional ownership interest in the

Income from a covenant not to

disposition of less than your entire

lending entity.

compete.

interest in a passive activity. See

The self-charged interest rules don’t

Any reimbursement of a casualty or

Dispositions, later, for the treatment of

apply to your interest in a partnership or

theft loss included in income as

losses upon disposition of your entire

S corporation if the entity made an

recovery of all or part of a prior year loss

interest in an activity.

election under Regulations section

deduction if the deduction for the loss

1.469-7(g) to avoid the application of

Passive activity deductions don’t

wasn’t treated as a passive activity

these rules. For more details on the

include the following.

deduction.

self-charged interest rules, see

Deductions for expenses (other than

Cancellation of debt income to the

Regulations section 1.469-7.

interest expense) that are clearly and

extent that at the time the debt was

directly allocable to portfolio income.

discharged, the debt wasn’t properly

Former Passive Activities

Qualified home mortgage interest,

allocable under Temporary Regulations

capitalized interest expenses, and other

A former passive activity is any activity

section 1.163-8T to passive activities.

interest expenses (except self-charged

that was a passive activity in a prior tax

Recharacterization of Passive

interest treated as a passive activity

year but is not a passive activity in the

Income

deduction (discussed next) and interest

current tax year. A prior year unallowed

expenses properly allocable to passive

loss from a former passive activity is

Certain income from passive activities

activities).

allowed to the extent of current year

must be recharacterized and excluded

Losses from dispositions of property

income from the activity.

from passive activity income. The

that produce portfolio income or

amount of income recharacterized

If current year net income from the

property held for investment.

equals the net income from the sources

activity is less than or equal to the prior

State, local, and foreign income

given below. If during the tax year you

year unallowed loss, enter the prior year

taxes.

received net income from any of these

unallowed loss and any current year net

Miscellaneous itemized deductions

sources (either directly or through a

income from the activity on Form 8582

that may be disallowed under

partnership or an S corporation), see

and the applicable worksheets.

section 67.

Pub. 925 to find out how to report net

Charitable contribution deductions.

income or loss from these sources. For

If current year net income from the

Net operating loss deductions,

more information, see Temporary

activity is more than the prior year

percentage depletion carryovers under

Regulations section 1.469-2T(f) and

unallowed loss from the activity, enter

section 613A(d), and capital loss

Regulations section 1.469-2(f).

the prior year unallowed loss and the

carryovers.

current year net income up to the

Income from the following sources

Deductions and losses that would’ve

amount of prior year unallowed loss on

may be subject to the net income

been allowed for tax years beginning

Form 8582 and the applicable

recharacterization rules.

before 1987, but for basis or at-risk

worksheets.

Significant participation passive

limitations.

activities defined in item 4 under

Tests

Net negative section 481 adjustments

If the activity has a net loss for the

for

individuals, earlier.

allocated to activities other than passive

current year, enter the prior year

Rental of property if less than 30% of

activities. See Temporary Regulations

unallowed loss (but not the current year

the unadjusted basis of the property is

section 1.469-2T(d)(7).

loss) on Form 8582 and the applicable

subject to depreciation.

Deductions for losses from fire,

worksheets.

Passive equity-financed lending

storm, shipwreck, or other casualty or

activities.

To report a disposition of a former

from theft if losses similar in cause and

Rental of property incidental to a

passive activity, follow the rules under

severity don’t recur regularly in the

development activity.

Dispositions

next.

activity.

Rental of property to a nonpassive

The deduction allowed for the

Dispositions

activity.

deductible part of self-employment

Acquisition of an interest in a

taxes.

Disposition of an Entire Interest

pass-through entity that licenses

Self-Charged Interest

intangible property.

If you disposed of your entire interest in

a passive activity or a former passive

Certain self-charged interest income or

Passive Activity Deductions

activity to an unrelated person in a fully

deductions may be treated as passive

To figure your overall gain or overall loss

taxable transaction during the tax year,

activity gross income or passive activity

from all passive activities or any passive

your losses allocable to the activity for

deductions if the loan proceeds are

activity, take into account only passive

the year aren’t limited by the PAL rules.

used in a passive activity. Generally,

activity deductions.

self-charged interest income and

A fully taxable transaction is a

Passive activity deductions include

deductions result from loans between

disposition in which you recognize all

all deductions from activities that are

you and a partnership or S corporation

realized gain or loss.

passive activities for the current tax year

in which you had a direct or indirect

and all deductions from passive

ownership interest. This includes both

If you’re using the installment method

activities that were disallowed under the

loans you made to the partnership or

to report this kind of disposition, figure

PAL rules in prior tax years and carried

S corporation and loans the partnership

the loss for the current year that isn’t

forward to the current tax year. See

or S corporation made to you. It also

limited by the PAL rules by multiplying

Regulations section 1.469-1(f)(4).

includes loans from one partnership or

your overall loss (which doesn’t include

S corporation to another partnership or

Passive activity deductions include

losses allowed in prior years) by the

S corporation if each owner in the

any loss from a disposition of property

following fraction:

Instructions for Form 8582 (2017)

-7-

Instructions For Form 8582 - Passive Activity Loss Limitations - 2017 Page 7

Related Articles

Related forms

Related Categories