Passive Activity Loss ATG - Exhibit 1.2: FORM 8582 – Line by Line Comments (Tax year 2003 and subsequent years)
Publication Date - December 2004
NOTE: This guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date.
Exhibit 1.2: FORM 8582 – Line by Line Comments (Tax year 2003 and subsequent years)
Rental Real Estate With Active Participation
1a Net rental real estate income, but no interest, dividends, gains on stocks & bonds. Gain on disposition of rental property generally is also passive income. While interest income generally is not passive income, self-charged interest income may be passive income (Reg. § 1.469-7).
1b Net rental real estate losses.
Exception: No limited partners or Schedule K-1s, Partner’s Shares of Income, Credits, Deductions, etc., with less than 10 percent ownership.
1c Prior year rental real estate losses from last year’s Form 8582 W/S 6.
1d Sum of lines 1a, 1b and 1c.
Commercial Revitalization Deduction
2a Commercial revitalization deductions (generally from Schedule K-1s)
2b Prior year unallowed commercial revitalization deductions
2c Sum of 2a and 2b
All Other Passive Activities
3a Net income/gain from all other passive activities, but no interest, dividends, gains on stocks and bonds.
3b Includes equipment leases, Form 1065, U.S. Return of Partnership Income and Form 1120S, U.S. Income Tax Return for an S Corporation, businesses in which Taxpayer does not materially participate, and many vacation condos.
3c Prior year losses from all other passive activities form last year’s Form 8582 W/S 5.
3d Sum of line 3a, 3b and 3c.
Special Allowance (Commonly called the $25,000 offset)
7 MAGI: If no loss on line 1d OR MAGI is over $150,000 enter $150,000 here.
Total Losses Allowed
15 Sum of income on line 1a and 3a.
16 Sum of all passive losses allowed in the current year.
Passive losses are allowed only to the extent of passive income (line 15) and
$25,000 special allowance (lines 10 and 14).Line 16 is most commonly reported in two places: Rental losses on the front of Schedule E and Form 1065 & Form 1120S losses on the back of Schedule E in the passive loss column.
Passive losses from trusts are also reflected on the back of Schedule E.
Allowable passive losses from a sole proprietorship are entered on Schedule C.
Allowable losses from a farm are entered on Schedule F.
Losses which are disallowed for the current year are not reflected on the face of Form 8582. They are found on Worksheet 6.