Instructions For Form 8582 - 2016 (Page 7 of 14) in pdf

Overall gain from any interest in a

forward to the current tax year. See

S corporation and loans the partnership

PTP (see item 2 under

Passive activity

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

or S corporation made to you. It also

loss rules for partners in

PTPs, later).

includes loans from one partnership or

Passive activity deductions include

State, local, and foreign income tax

S corporation to another partnership or

any loss from a disposition of property

refunds.

S corporation if each owner in the

used in a passive activity at the time of

Income from a covenant not to

borrowing entity has the same

the disposition and any loss from a

compete.

proportional ownership interest in the

disposition of less than your entire

Any reimbursement of a casualty or

lending entity.

interest in a passive activity. See

theft loss included in income as

The self-charged interest rules don’t

Dispositions, later, for the treatment of

recovery of all or part of a prior year loss

apply to your interest in a partnership or

losses upon disposition of your entire

deduction if the deduction for the loss

S corporation if the entity made an

interest in an activity.

was not treated as a passive activity

election under Regulations section

deduction.

1.469-7(g) to avoid the application of

Passive activity deductions don’t

Cancellation of debt income to the

these rules. For more details on the

include the following.

extent that at the time the debt was

self-charged interest rules, see

Deductions for expenses (other than

discharged, the debt wasn’t properly

Regulations section 1.469-7.

interest expense) that are clearly and

allocable under Temporary Regulations

directly allocable to portfolio income.

section 1.163-8T to passive activities.

Former Passive Activities

Qualified home mortgage interest,

Recharacterization of Passive

capitalized interest expenses, and other

A former passive activity is any activity

Income

interest expenses (except self-charged

that was a passive activity in a prior tax

interest treated as a passive activity

year but isn’t a passive activity in the

Certain income from passive activities

deduction (discussed next) and interest

current tax year. A prior year unallowed

must be recharacterized and excluded

expenses properly allocable to passive

loss from a former passive activity is

from passive activity income. The

activities).

allowed to the extent of current year

amount of income recharacterized

Losses from dispositions of property

income from the activity.

equals the net income from the sources

that produce portfolio income or

given below. If during the tax year you

If current year net income from the

property held for investment.

received net income from any of these

activity is less than or equal to the prior

State, local, and foreign income

sources (either directly or through a

year unallowed loss, enter the prior year

taxes.

partnership or an S corporation), see

unallowed loss and any current year net

Miscellaneous itemized deductions

Pub. 925 to find out how to report net

income from the activity on Form 8582

that may be disallowed under

income or loss from these sources. For

and the applicable worksheets.

section 67.

more information, see Temporary

Charitable contribution deductions.

If current year net income from the

Regulations section 1.469-2T(f) and

Net operating loss deductions,

activity is more than the prior year

Regulations section 1.469-2(f).

percentage depletion carryovers under

unallowed loss from the activity, enter

section 613A(d), and capital loss

the prior year unallowed loss and the

Income from the following sources

carryovers.

current year net income up to the

may be subject to the net income

Deductions and losses that would

amount of prior year unallowed loss on

recharacterization rules.

have been allowed for tax years

Form 8582 and the applicable

Significant participation passive

beginning before 1987, but for basis or

worksheets.

activities defined in item 4 under

Tests

at-risk limitations.

for

individuals, earlier.

If the activity has a net loss for the

Net negative section 481 adjustments

Rental of property if less than 30% of

current year, enter the prior year

allocated to activities other than passive

the unadjusted basis of the property is

unallowed loss (but not the current year

activities. See Temporary Regulations

subject to depreciation.

loss) on Form 8582 and the applicable

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

Passive equity-financed lending

worksheets.

Deductions for losses from fire,

activities.

storm, shipwreck, or other casualty or

To report a disposition of a former

Rental of property incidental to a

from theft if losses similar in cause and

passive activity, follow the rules under

development activity.

severity do not recur regularly in the

Dispositions, next.

Rental of property to a nonpassive

activity.

Dispositions

The deduction allowed for the

Acquisition of an interest in a

deductible part of self-employment

pass-through entity that licenses

Disposition of an Entire Interest

taxes.

intangible property.

If you disposed of your entire interest in

SelfCharged Interest

Passive Activity Deductions

a passive activity or a former passive

Certain self-charged interest income or

To figure your overall gain or overall loss

activity to an unrelated person in a fully

deductions may be treated as passive

from all passive activities or any passive

taxable transaction during the tax year,

activity gross income or passive activity

activity, take into account only passive

your losses allocable to the activity for

deductions if the loan proceeds are

activity deductions.

the year are not limited by the PAL

used in a passive activity. Generally,

rules.

self-charged interest income and

Passive activity deductions include

A fully taxable transaction is a

deductions result from loans between

all deductions from activities that are

disposition in which you recognize all

you and a partnership or S corporation

passive activities for the current tax year

realized gain or loss.

in which you had a direct or indirect

and all deductions from passive

ownership interest. This includes both

activities that were disallowed under the

If you are using the installment

loans you made to the partnership or

PAL rules in prior tax years and carried

method to report this kind of disposition,

Instructions for Form 8582 (2016)

Instructions For Form 8582 - 2016 Page 7

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