Instructions For Form 8582 - 2016

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2016
Department of the Treasury
Internal Revenue Service
Instructions for Form 8582
Passive Activity Loss Limitations
PALs cannot be used to offset
You don’t hold any interest in a rental
Section references are to the Internal Revenue
Code unless otherwise noted.
income from nonpassive activities.
real estate activity as a limited partner or
However, a special allowance for rental
as a beneficiary of an estate or a trust.
Future Developments
real estate activities may allow some
If all the above conditions are met,
For the latest developments related to
losses even if the losses exceed
your rental real estate losses aren’t
Form 8582 and its instructions, such as
passive income.
limited, and you don’t need to complete
legislation enacted after they were
PALs not allowed in the current year
Form 8582. Enter losses reported on
published, go to
are carried forward until they are
Schedule E (Form 1040), Supplemental
allowed either against passive activity
Income and Loss, Part I, line 21, on
General Instructions
income, against the special allowance, if
Schedule E (Form 1040), Part l, line 22.
applicable, or when you sell or
For losses from a partnership or an S
Reminders
exchange your entire interest in the
corporation, enter the amount of the
activity in a fully taxable transaction to
allowable loss from Schedule K-1 in
Reporting prior year unallowed los­
an unrelated party.
Schedule E (Form 1040), Part II, column
ses. Beginning in 2011, Form 8582
(f). Enter losses reported on line 32 of
must generally be filed by taxpayers
For more information, see Pub. 925,
Form 4835, Farm Rental Income and
who have an overall gain (including any
Passive Activity and At-Risk Rules.
Expenses, on Form 4835, line 34c.
prior year unallowed losses) from
Note. Corporations subject to the
business or rental passive activities.
Coordination With Other
passive activity rules must use Form
See
Exception
under
Who Must
File,
Limitations
8810, Corporate Passive Activity Loss
later.
and Credit Limitations.
Generally, PALs are subject to other
Regrouping due to Net Investment
limitations (for example, basis and
Income Tax. You may be able to
Who Must File
at-risk limitations) before they are
regroup your activities if you are subject
subject to the passive loss limitations.
Form 8582 is filed by individuals,
to the Net Investment Income Tax. See
estates, and trusts who have passive
Once a loss becomes allowable under
Regrouping Due to Net Investment
these other limitations, you must
activity deductions (including prior year
Income Tax
under
Grouping of
determine whether the loss is limited
unallowed losses). However, you don’t
Activities, later, for more information.
have to file Form 8582 if you meet the
under the passive loss rules. See Form
Commercial revitalization deduction
6198, At-Risk Limitations, for details on
following exception.
(CRD). CRDs for rental real estate
the at-risk rules. Also, capital losses that
Exception
activities are not allowed for buildings
are allowable under the passive loss
placed in service after December 31,
You actively participated in rental real
rules may be limited under the capital
2009. However, deductions may
estate activities (see
Special Allowance
loss limitations of section 1211.
continue to be ratably taken in 2016 for
for Rental Real Estate
Activities, later),
Percentage depletion deductions that
buildings placed in service before
and you meet all of the following
are allowable under the passive loss
January 1, 2010. See
Commercial
conditions.
rules may be limited under section
revitalization deduction
(CRD), later.
Rental real estate activities with
613A(d).
active participation were your only
Purpose of Form
Definitions
passive activities.
You have no prior year unallowed
Form 8582 is used by noncorporate
Except as otherwise indicated, the
losses from these (or any other passive)
taxpayers to figure the amount of any
following terms in these instructions are
activities.
passive activity loss (PAL) for the
defined as shown below.
Your total loss from the rental real
current tax year and to report the
Net income. This is the excess of
estate activities was not more than
application of prior year unallowed
current year income over current year
$25,000 ($12,500 if married filing
PALs.
deductions from the activity. This
separately).
includes any current year gains or
A PAL occurs when total losses
If you are married filing separately,
losses from the disposition of assets or
(including prior year unallowed losses)
you lived apart from your spouse all
an interest in the activity.
from all your passive activities exceed
year.
the total income from all your passive
You have no current or prior year
Net loss. This is the excess of current
activities.
unallowed credits from a passive
year deductions over current year
activity.
income from the activity. This includes
Generally, passive activities include:
Your modified adjusted gross income
any current year gains or losses from
Trade or business activities in which
(see the instructions for
line
7, later) was
the disposition of assets or an interest in
you did not materially participate for the
not more than $100,000 (not more than
the activity.
tax year.
$50,000 if married filing separately).
Rental activities, regardless of your
Overall gain. This is the excess of the
participation.
“net income” from the activity over the
Mar 09, 2017
Cat. No. 64294A

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