Instructions For Form 8582 - 2016 (Page 4 of 14) in pdf

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

of losses or credits from the activity

is not a material income-producing

less if married filing separately), your

under the passive activity rules.

factor.

loss is deductible up to the amount of

7. Based on all the facts and

Proof of participation. You may prove

the maximum special allowance

circumstances, you participated in the

your participation in an activity by any

referred to in the preceding paragraph.

activity on a regular, continuous, and

reasonable means. You don’t have to

If your modified adjusted gross

substantial basis during the tax year.

maintain contemporaneous daily time

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

reports, logs, or similar documents if

You didn’t materially participate in the

if married filing separately) but less than

you can establish your participation by

activity under this seventh test,

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

other reasonable means. For this

however, if you participated in the

separately), your special allowance is

purpose, reasonable means include, but

activity for 100 hours or less during the

limited to 50% of the difference between

aren’t limited to, identifying services

tax year.

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

performed over a period of time and the

Your participation in managing the

separately) and your modified adjusted

approximate number of hours spent

activity doesn’t count in determining

gross income.

performing the services during that

whether you materially participated

period, based on appointment books,

Generally, if your modified adjusted

under this test if:

calendars, or narrative summaries.

gross income is $150,000 or more

a. Any person (except you) received

($75,000 or more if married filing

Tests for individuals. You materially

compensation for performing services in

separately), there is no special

participated for the tax year in an activity

the management of the activity, or

allowance.

if you satisfy at least one of the following

b. Any individual spent more hours

If you qualify under the active

tests.

during the tax year performing services

participation rules, use Worksheet 1.

1. You participated in the activity for

in the management of the activity than

See the instructions for

Worksheet

more than 500 hours.

you did (regardless of whether the

later.

individual was compensated for the

2. Your participation in the activity

Commercial revitalization deduction

management services).

for the tax year was substantially all of

(CRD). The special $25,000 allowance

the participation in the activity of all

Test for a spouse. Participation by

for the CRD from rental real estate

individuals (including individuals who

your spouse during the tax year in an

activities isn’t subject to the active

didn’t own any interest in the activity) for

activity you own may be counted as

participation rules or modified adjusted

the year.

your participation in the activity even if

gross income limits just discussed. The

3. You participated in the activity for

your spouse didn’t own an interest in the

$25,000 allowance must first be applied

more than 100 hours during the tax

activity and whether or not you and your

to losses from rental real estate

year, and you participated at least as

spouse file a joint return for the tax year.

activities with active participation,

much as any other individual (including

figured without regard to the CRD (see

Tests for investors. Work done as an

individuals who didn’t own any interest

Part

II). Any remaining portion of the

investor in an activity isn’t treated as

in the activity) for the year.

$25,000 allowance is available for the

participation unless you were directly

4. The activity is a significant

CRD from rental real estate activities

involved in the day-to-day management

participation activity for the tax year, and

(see

Part

III). See the instructions for

or operations of the activity. For

you participated in all significant

Worksheet

purposes of this test, work done as an

participation activities during the year for

Generally, you can claim a current

investor includes:

more than 500 hours.

year CRD for 2016, only if you, or a

1. Studying and reviewing financial

A significant participation activity is

pass-through entity in which you were a

statements or reports on operations of

any trade or business activity in which

partner or shareholder, had a CRD for a

the activity.

you participated for more than 100

building placed in service before 2010

2. Preparing or compiling

hours during the year and in which you

and elected to ratably claim a deduction

summaries or analyses of the finances

did not materially participate under any

for the CRD over a period of 120

or operations of the activity for your own

of the material participation tests (other

months that included all or part of 2016.

use.

than this fourth test).

You cannot claim a CRD for a

3. Monitoring the finances or

5. You materially participated in the

building placed in service after

operations of the activity in a

activity (other than by meeting this fifth

December 31, 2009.

nonmanagerial capacity.

test) for any 5 (whether or not

CAUTION

consecutive) of the 10 immediately

Material Participation

Special rules for limited partners. If

preceding tax years.

you were a limited partner in an activity,

For the material participation tests listed

6. The activity is a personal service

you generally didn’t materially

below, participation generally includes

activity in which you materially

participate in the activity. You did

any work done in connection with an

participated for any 3 (whether or not

materially participate in the activity,

activity if you owned an interest in the

consecutive) preceding tax years.

however, if you met material

activity at the time you did the work. The

An activity is a personal service

participation test 1, 5, or 6 under

Tests

capacity in which you did the work

activity if it involves the performance of

for

individuals, earlier, for the tax year.

doesn’t matter. However, work isn’t

personal services in the fields of health,

However, for purposes of the

participation if:

law, engineering, architecture,

material participation tests, you aren’t

It is not work that an owner would

accounting, actuarial science,

treated as a limited partner if you also

customarily do in the same type of

performing arts, consulting, or in any

were a general partner in the

activity, and

other trade or business in which capital

partnership at all times during the

One of your main reasons for doing

partnership's tax year ending with or

the work was to avoid the disallowance

Instructions for Form 8582 (2016)

Instructions For Form 8582 - 2016 Page 4

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