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Department of the Treasury
Internal Revenue Service
2022

Instructions for Form 8582

Passive Activity Loss Limitations

Section references are to the Internal Revenue Regulations section 1.469-1T(e)(6) • Rental activities, regardless of your
Code unless otherwise noted. subject to section 163(d)(5)(A)(ii) participation.
involving a non-passive trade or
Future Developments business in which the taxpayer does not PALs can’t be used to offset income
For the latest developments related to materially participate, with any other from nonpassive activities. However, a
Form 8582 and its instructions, such as activity or activities of the taxpayer. See special allowance for rental real estate
legislation enacted after they were Regulations section 1.469-4(d)(6) for activities may allow some losses even if
published, go to IRS.gov/Form8582. more details. the losses exceed passive income.
Definition of real property trade or PALs not allowed in the current year
General Instructions business. T.D. 9905 and 9943 are carried forward until they’re allowed
expanded Regulations section either against passive activity income;
What’s New 1.469-9(b)(2) to define several terms against the special allowance, if
used in determining whether a trade or applicable; or when you sell or
Prior year unallowed commercial re-
business is a real property trade or exchange your entire interest in the
vitalization deduction (CRD). If you
business for purposes of section 469(c) activity in a fully taxable transaction to
have prior year unallowed CRDs limited
(7)(C). T.D. 9905 added Regulations an unrelated party.
by the passive loss rules, you may
sections 1.469-9(b)(2)(ii)(H) and (I)
continue to include them in the For more information, see Pub. 925,
defining real property operations and
calculations as shown in the Specific Passive Activity and At-Risk Rules.
real property management,
Instructions, beginning with Part
respectively. T.D. 9943 added
I—2022 Passive Activity Loss, later. Note. Corporations subject to the
Regulations sections 1.469-9(b)(2)(ii)
(A) and (B) defining real property passive activity rules must use Form
Reminders development and real property 8810, Corporate Passive Activity Loss
Excess business loss limitation. If redevelopment, respectively. and Credit Limitations.

you are a noncorporate taxpayer and Reporting prior year unallowed los- Who Must File
have allowable business losses after ses. Form 8582 must generally be filed
Form 8582 is filed by individuals,
taking into account first the at-risk by taxpayers who have an overall gain
estates, and trusts who have passive
limitations and then the passive loss (including any prior year unallowed
activity deductions (including prior year
limitations (this form), your losses may losses) from business or rental passive
unallowed losses). However, you don’t
be subject to the excess business loss activities. See Exception under Who
have to file Form 8582 if you meet the
limitation. After taking into account all Must File, later.
the other loss limitations, complete following exception.
Form 461, Limitation on Business Regrouping due to Net Investment
Losses, to figure the amount of your Income Tax. You may be able to Exception
excess business loss. See Form 461 regroup your activities if you’re subject You actively participated in rental real
and its instructions for details on the to the Net Investment Income Tax. See estate activities (see Special Allowance
excess business loss limitation. Regrouping Due to Net Investment for Rental Real Estate Activities, later),
Income Tax under Grouping of and you meet all of the following
Changes in rules on grouping and Activities, later, for more information. conditions.
definition of real property trade or • Rental real estate activities with
business. Treasury Decision (T.D.) active participation were your only
Purpose of Form
9943 revised certain rules in the passive activities.
regulations under section 469. Form 8582 is used by noncorporate
taxpayers to figure the amount of any • You have no prior year unallowed
Applicable date. The new rules passive activity loss (PAL) for the losses from these (or any other passive)
apply to tax years beginning on or after current tax year and to report the activities.
March 22, 2021, but taxpayers may application of prior year unallowed • Your total loss from the rental real
choose to adopt these rules earlier. See PALs. estate activities wasn’t more than
$25,000 ($12,500 if married filing
Regulations section 1.469-11(a)(1) and A PAL occurs when total losses separately).
(4) for additional information on (including prior year unallowed losses) • If you’re married filing separately, you
applicability dates and early adoption. If from all your passive activities exceed lived apart from your spouse all year.
you are a calendar year taxpayer, the the total income from all your passive • You have no current or prior year
new provisions apply to you in calendar activities. unallowed credits from a passive
year 2022.
Generally, passive activities include activity.
Grouping rules. T.D. 9943 added the following. • Your modified adjusted gross income
Regulations section 1.469-4(d)(6), • Trade or business activities in which (see the instructions for line 6, later) was
which prohibits grouping of trading you did not materially participate for the not more than $100,000 (not more than
activities described in Temporary tax year. $50,000 if married filing separately).

Oct 06, 2022 Cat. No. 64294A

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• You don’t hold any interest in a rental income from the activity. This includes Real property includes land,
real estate activity as a limited partner or any current year gains or losses from buildings, and other inherently
as a beneficiary of an estate or a trust. the disposition of assets or an interest in permanent structures permanently
the activity. affixed to land. Any interest in real
If all the above conditions are met, property, including fee ownership,
your rental real estate losses are not Overall gain. This is the excess of the
co-ownership, leasehold, option, or
limited, and you don’t need to complete “net income” from the activity over the
similar interest is real property. Tenant
Form 8582. Enter losses reported on prior year unallowed losses from the
improvements to land, buildings, or
Schedule E (Form 1040), Supplemental activity.
other structures that are inherently
Income and Loss, Part I, line 21, on Overall loss. This is (a) the excess of permanent or otherwise classified as
Schedule E (Form 1040), Part l, line 22. the prior year unallowed losses from the real property are real property for this
For losses from a partnership or an S activity over the “net income” from the purpose. See Regulations section
corporation, enter the amount of the activity, or (b) the prior year unallowed 1.469-9(b)(2) for more definitions and
allowable loss from Schedule K-1 on losses from the activity plus the “net information about determining whether
Schedule E (Form 1040), Part II, column loss” from the activity. a trade or business is a real property
(g). Enter losses reported on line 32 of trade or business.
Form 4835, Farm Rental Income and Prior year unallowed losses. These
Expenses, on Form 4835, line 34c. are the losses from an activity that were For examples of the determination of
disallowed under the PAL limitations in whether a trade or business is a real
Coordination With Other a prior year and carried forward to the property trade or business, see
tax year under section 469(b). See Regulations section 1.469-9(b)(2)(iii).
Limitations Regulations section 1.469-1(f)(4) and Services you performed as an
Generally, PALs are subject to other Pub. 925. employee aren’t treated as performed in
limitations (for example, basis and a real property trade or business unless
at-risk limitations) before they’re subject Activities That Are Not you owned more than 5% of the stock
to the passive loss limitations. Once a (or more than 5% of the capital or profits
loss becomes allowable under these Passive Activities
other limitations, you must determine The following aren’t passive activities. interest) in the employer.
whether the loss is limited under the 1. Trade or business activities in Note. If a rental real estate activity isn’t
passive loss rules. See Form 6198, which you materially participated for the a passive activity for the current year,
At-Risk Limitations, for details on the tax year. any prior year unallowed loss is treated
at-risk rules. Also, capital losses that are 2. Any rental real estate activity in as a loss from a former passive activity.
allowable under the passive loss rules which you materially participated if you See Former Passive Activities, later.
may be limited under the capital loss were a “real estate professional” for the 3. A working interest in an oil or gas
limitations of section 1211. Percentage tax year. You were a real estate well. Your working interest must be held
depletion deductions that are allowable professional only if: directly or through an entity that doesn’t
under the passive loss rules may be
limited under section 613A(d). a. More than half of the personal limit your liability (such as a general
services you performed in trades or partner interest in a partnership). In this
If you have allowable business businesses during the tax year were case, it doesn’t matter whether you
losses after taking into account the loss performed in real property trades or materially participated in the activity for
limitations discussed above and businesses in which you materially the tax year.
computing the allowable passive losses participated, and If, however, your liability was limited
on this form, your losses may be subject b. You performed more than 750 for part of the year (for example, you
to the excess business loss limitation. hours of services during the tax year in converted your general partner interest
Complete Form 461 to figure the real property trades or businesses in to a limited partner interest during the
amount of your excess business loss. which you materially participated. year), some of your income and losses
Any disallowed loss resulting from this from the working interest may be treated
limitation will be treated as a net For purposes of whether you as passive activity gross income and
operating loss (NOL) that must be materially participated under item (2), passive activity deductions. See
carried forward and deducted in a each interest in rental real estate is a Temporary Regulations section
subsequent year. See Form 461 and its separate activity, unless you elect to 1.469-1T(e)(4)(ii).
instructions for details on the excess treat all interests in rental real estate as
business loss limitation. one activity. For details on making this 4. The rental of a dwelling unit you
election, see the Instructions for used as a residence if section 280A(c)
Definitions Schedule E (Form 1040). (5) applies. This section applies if you
rented out a dwelling unit that you also
Except as otherwise indicated, the If you’re married filing jointly, one used as a home during the year for a
following terms in these instructions are spouse must separately meet both number of days that exceeds the
defined as shown below. (2)(a) and (2)(b) without taking into greater of 14 days or 10% of the number
Net income. This is the excess of account services performed by the other of days during the year that the home
current year income over current year spouse. was rented at a fair rental.
deductions from the activity. This A real property trade or business is 5. An activity of trading personal
includes any current year gains or any real property development, property for the account of owners of
losses from the disposition of assets or redevelopment, construction, interests in the activity. For purposes of
an interest in the activity. reconstruction, acquisition, conversion, this rule, personal property means
rental, operation, management, leasing, property that’s actively traded, such as
Net loss. This is the excess of current or brokerage trade or business. stocks, bonds, and other securities. See
year deductions over current year

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Temporary Regulations section a. 7 days or less, or of the unadjusted basis or the FMV of
1.469-1T(e)(6) for more details. b. 30 days or less and significant the property.
Generally, income and losses from personal services were provided in Lodging provided for the employer's
these activities aren’t entered on Form making the rental property available for convenience to an employee or the
8582. However, losses from these customer use. employee's spouse or dependents is
activities may be subject to limitations Figure the average period of incidental to the activity or activities in
other than the passive loss rules. customer use for a class of property by which the employee performs services.
dividing the total number of days in all 4. You customarily make the rental
Trade or Business rental periods by the number of rentals property available during defined
Activities during the tax year. If the activity business hours for nonexclusive use by
A trade or business activity is an activity involves renting more than one class of various customers.
(other than a rental activity or an activity property, multiply the average period of 5. You provide property for use in a
treated as incidental to an activity of customer use of each class by the ratio nonrental activity of a partnership,
holding property for investment) that: of the gross rental income from that S corporation, or a joint venture in your
class to the activity's total gross rental capacity as an owner of an interest in
1. Involves the conduct of a trade or income. The activity's average period of the partnership, S corporation, or joint
business (within the meaning of section customer use equals the sum of these venture.
162), class-by-class average periods
2. Is conducted in anticipation of weighted by gross income. See Example. If a partner contributes the
starting a trade or business, or Regulations section 1.469-1(e)(3)(iii). use of property to a partnership, none of
the partner's distributive share of
3. Involves research or experimental Significant personal services include partnership income is income from a
expenditures deductible under section only services performed by individuals. rental activity unless the partnership is
174. To determine if personal services are engaged in a rental activity.
Trade or business activities are significant, all relevant facts and
generally reported on Schedule C (Form circumstances are taken into Also, a partner's gross income from a
1040), Profit or Loss From Business consideration, including the frequency guaranteed payment under section
(Sole Proprietorship); Schedule F (Form of the services, the type and amount of 707(c) isn’t income from a rental activity.
1040), Profit or Loss From Farming; or labor required to perform the services, The determination of whether the
in Part II or III of Schedule E (Form and the value of the services relative to property used in the activity is provided
1040). For trade or business activities the amount charged for use of the in the partner's capacity as an owner of
that are significant participation passive property. an interest in the partnership is made on
activities (defined in item 4 under Tests 2. Extraordinary personal services the basis of all the facts and
for individuals, later), see Pub. 925 for were provided in making the rental circumstances.
how to report their income or losses. property available for customer use. Reporting Income and Losses
This applies only if the services are
From the Activities
Rental Activities performed by individuals and the
A rental activity is a passive activity customers' use of the property is If an activity meets any of the five
even if you materially participated in the incidental to their receipt of the services. exceptions listed above, it’s not a rental
activity. You must then determine:
activity (unless it’s a rental real estate 3. Rental of the property is
activity in which you materially incidental to a nonrental activity. 1. Whether your rental of the
property is a trade or business activity
participated and you were a real estate The rental of property is incidental to (see Trade or Business Activities,
professional). an activity of holding property for earlier), and, if so,
An activity is a rental activity if investment if the main purpose of
tangible property (real or personal) is holding the property is to realize a gain 2. Whether you materially
used by customers or held for use by from its appreciation and the gross participated in the activity for the tax
customers and the gross income (or rental income is less than 2% of the year (see Material Participation, later).
expected gross income) from the smaller of the unadjusted basis or the If the activity is a trade or business
activity represents amounts paid (or to fair market value (FMV) of the property. activity in which you didn’t materially
be paid) mainly for the use of the Unadjusted basis is the cost of the participate, enter the income and losses
property. It doesn’t matter whether the property without regard to depreciation from the activity on Part V.
use is under a lease, a service contract, deductions or any other basis If the activity is a trade or business
or some other arrangement. adjustment described in section 1016. activity in which you did materially
However, if you meet any of the five The rental of property is incidental to participate, report any income or loss
exceptions below, the rental of the a trade or business activity if: from the activity on the forms or
property isn’t treated as a rental activity. a. You own an interest in the trade schedules normally used.
See Reporting Income and Losses or business activity during the tax year, If the rental activity didn’t meet any of
From the Activities, later, if you meet b. The rental property was mainly the five exceptions, it’s generally a
any of the exceptions. used in the trade or business activity passive activity. However, special rules
Exceptions during the tax year or during at least 2 of apply if you conduct the rental activity
An activity is not a rental activity if any of the 5 preceding tax years, and through a publicly traded partnership
(PTP) or if any of the rules described
the following apply. c. The gross rental income from the under Recharacterization of Passive
1. The average period of customer property is less than 2% of the smaller Income, later, apply. Also see the PTP
use is: rules, later.

Instructions for Form 8582 (2022) -3-

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If none of the special rules apply,          if, for example, you participated in          of losses or credits from the activity 
enter the income and losses from the         making management decisions or                under the passive activity rules.
passive rental activity on Parts IV or V.    arranged for others to provide services 
                                                                                           Proof of participation. You may prove 
See the instructions for Parts IV and V      (such as repairs) in a significant and 
                                                                                           your participation in an activity by any 
for details.                                 bona fide sense. Management 
                                                                                           reasonable means. You don’t have to 
                                             decisions that may count as active 
                                                                                           maintain contemporaneous daily time 
Special Allowance for                        participation include:
                                                                                           reports, logs, or similar documents if 
Rental Real Estate                           • Approving new tenants,
                                                                                           you can establish your participation by 
                                             • Deciding on rental terms,
                                                                                           other reasonable means. For this 
Activities                                   • Approving capital or repair 
                                                                                           purpose, reasonable means include, but 
Active participation. If you actively        expenditures, and
                                                                                           are not limited to, identifying services 
participated in a passive rental real        • Other similar decisions.
                                                                                           performed over a period of time and the 
estate activity, you may be able to                                                        approximate number of hours spent 
deduct up to $25,000 of loss from the          The maximum special allowance is:
activity from your nonpassive income.        • $25,000 for single individuals and          performing the services during that 
This special allowance is an exception       married individuals filing a joint return for period, based on appointment books, 
to the general rule disallowing losses in    the tax year.                                 calendars, or narrative summaries.
excess of income from passive                • $12,500 for married individuals who         Tests for individuals. You materially 
activities.                                  file separate returns for the tax year and    participated for the tax year in an activity 
                                             lived apart from their spouses at all         if you satisfy at least one of the following 
The special allowance isn’t available        times during the tax year.                    tests.
return for the year, and lived with your     •
if you were married, are filing a separate     $25,000 for a qualifying estate,            1. You participated in the activity for 
                                             reduced by the special allowance for          more than 500 hours.
spouse at any time during the year.          which the surviving spouse qualified.
                                                                                           2. Your participation in the activity 
Only an individual, a qualifying             Modified adjusted gross income lim-           for the tax year was substantially all of 
estate, or a qualified revocable trust that  itation. If your modified adjusted gross      the participation in the activity of all 
made an election to treat the trust as       income (see the instructions for line 6,      individuals (including individuals who 
part of the decedent's estate may            later) is $100,000 or less ($50,000 or        didn’t own any interest in the activity) for 
actively participate in a rental real estate less if married filing separately), your      the year.
activity. Unless future regulations          loss is deductible up to the amount of 
                                                                                           3. You participated in the activity for 
provide an exception, limited partners       the maximum special allowance 
                                                                                           more than 100 hours during the tax 
are not treated as actively participating    referred to in the preceding paragraph.
in a partnership's rental real estate                                                      year, and you participated at least as 
activity.                                      If your modified adjusted gross             much as any other individual (including 
A qualifying estate is the estate of a       income is more than $100,000 ($50,000         individuals who didn’t own any interest 
decedent for tax years ending less than      if married filing separately) but less than   in the activity) for the year.
2 years after the date of the decedent's     $150,000 ($75,000 if married filing           4. The activity is a significant 
death if the decedent would’ve satisfied     separately), your special allowance is        participation activity for the tax year, and 
the active participation requirements for    limited to 50% of the difference between      you participated in all significant 
the rental real estate activity for the tax  $150,000 ($75,000 if married filing           participation activities during the year for 
year the decedent died.                      separately) and your modified adjusted        more than 500 hours.
                                             gross income.                                 A significant participation activity is 
A qualified revocable trust may elect 
to be treated as part of a decedent's          Generally, if your modified adjusted        any trade or business activity in which 
estate for purposes of the special           gross income is $150,000 or more              you participated for more than 100 
allowance for active participation in        ($75,000 or more if married filing            hours during the year and in which you 
rental real estate activities. The election  separately), there is no special              didn’t materially participate under any of 
must be made by both the executor (if        allowance.                                    the material participation tests (other 
                                                                                           than this fourth test).
any) of the decedent's estate and the 
trustee of the revocable trust. For            If you qualify under the active             5. You materially participated in the 
details, see Regulations section             participation rules, use Part IV. See the     activity (other than by meeting this fifth 
1.645-1. To make this election, see the      instructions for Part IV, later.              test) for any 5 (whether or not 
instructions on Form 8855, Election To                                                     consecutive) of the 10 immediately 
Treat a Qualified Revocable Trust as         Material Participation                        preceding tax years.
Part of an Estate.                           For the material participation tests listed   6. The activity is a personal service 
                                             below, participation generally includes 
You aren’t considered to actively                                                          activity in which you materially 
                                             any work done in connection with an 
participate in a rental real estate activity                                               participated for any 3 (whether or not 
                                             activity if you owned an interest in the 
if at any time during the tax year your                                                    consecutive) preceding tax years.
                                             activity at the time you did the work. The 
interest (including your spouse's                                                          An activity is a personal service 
                                             capacity in which you did the work 
interest) in the activity was less than                                                    activity if it involves the performance of 
                                             doesn’t matter. However, work isn’t 
10% (by value) of all interests in the                                                     personal services in the fields of health, 
                                             participation if:
activity.                                                                                  law, engineering, architecture, 
                                             • It isn’t work that an owner would           accounting, actuarial science, 
Active participation is a less stringent     customarily do in the same type of            performing arts, consulting, or in any 
requirement than material participation      activity, and                                 other trade or business in which capital 
(see Material Participation, later). You     • One of your main reasons for doing          isn’t a material income-producing factor.
may be treated as actively participating     the work was to avoid the disallowance 

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7. Based on all the facts and in which you directly or indirectly owned change in the facts and circumstances
circumstances, you participated in the your limited partner interest). makes it clearly inappropriate.
activity on a regular, continuous, and The IRS may regroup your activities if
Special rules for certain retired or
substantial basis during the tax year. your grouping fails to reflect one or more
disabled farmers and surviving
You didn’t materially participate in the spouses of farmers. Certain retired or appropriate economic units and one of
activity under this seventh test, disabled farmers and surviving spouses the primary purposes of your grouping is
however, if you participated in the of farmers are treated as materially to avoid the passive activity limitations.
activity for 100 hours or less during the participating in a farming activity if the Limitation on grouping certain activi-
tax year. real property used in the activity would ties. The following activities may not be
Your participation in managing the meet the estate tax rules for special grouped together.
activity doesn’t count in determining valuation of farm property passed from
whether you materially participated a qualifying decedent. See Temporary 1. A rental activity with a trade or
under this test if: Regulations section 1.469-5T(h)(2). business activity unless the activities
being grouped together make up an
a. Any person (except you) received Estates and trusts. The PAL appropriate economic unit and:
compensation for performing services in limitations apply in figuring the a. The rental activity is insubstantial
the management of the activity, or distributable net income and taxable relative to the trade or business activity
b. Any individual spent more hours income of an estate or trust. The rules or vice versa, or
during the tax year performing services for determining material participation for
in the management of the activity than this purpose haven’t yet been issued. b. Each owner of the trade or
business activity has the same
you did (regardless of whether the
proportionate ownership interest in the
individual was compensated for the Grouping of Activities
rental activity. If so, the portion of the
management services). Generally, one or more trade or rental activity involving the rental of
business activities or rental activities property used in the trade or business
Test for a spouse. Participation by may be treated as a single activity if the activity may be grouped with the trade
your spouse during the tax year in an activities make up an appropriate or business activity.
activity you own may be counted as economic unit for the measurement of
your participation in the activity even if gain or loss under the passive activity 2. An activity involving the rental of
your spouse didn’t own an interest in the rules. real property with an activity involving
activity and whether or not you and your the rental of personal property (except
spouse file a joint return for the tax year. Whether activities make up an personal property provided in
appropriate economic unit depends on connection with the real property or vice
Tests for investors. Work done as an all the relevant facts and circumstances. versa).
investor in an activity isn’t treated as The factors given the greatest weight in
participation unless you were directly determining whether activities make up 3. Any activity with another activity
involved in the day-to-day management an appropriate economic unit are: in a different type of business and in
which you hold an interest as a limited
or operations of the activity. For 1. Similarities and differences in partner if that other activity engages in
purposes of this test, work done as an types of trades or businesses, holding, producing, or distributing
investor includes the following.
2. The extent of common control, motion picture films or videotapes;
1. Studying and reviewing financial farming; leasing section 1245 property;
statements or reports on operations of 3. The extent of common
the activity. ownership, or exploring for or exploiting oil and gas
resources or geothermal deposits.
2. Preparing or compiling 4. Geographical location, and
4. Any trading activities in which you
summaries or analyses of the finances 5. Interdependencies between or don't materially participate. A trading
or operations of the activity for your own among the activities. activity is an activity of trading in
use. personal property. For this purpose,
Example. You have a significant
3. Monitoring the finances or ownership interest in a bakery and a personal property is any personal
operations of the activity in a movie theater in Baltimore and in a property that is actively traded, for
nonmanagerial capacity. bakery and a movie theater in example, financial securities. A taxpayer
Philadelphia. Depending on all the who does not materially participate in a
Special rules for limited partners. If relevant facts and circumstances, there trading activity is prohibited from
you were a limited partner in an activity, may be more than one reasonable grouping the activity with any other
you generally didn’t materially method for grouping your activities. For activity, including any other trading
participate in the activity. You did instance, the following groupings may or activity. The prohibition on grouping is
materially participate in the activity, may not be permissible. effective for taxable years beginning on
however, if you met material A single activity. or after March 22, 2021. If you are a
•
participation test 1, 5, or 6 under Tests A movie theater activity and a bakery calendar year taxpayer, the new
•
for individuals, earlier, for the tax year. activity. provisions apply to you in calendar year
However, for purposes of the • A Baltimore activity and a 2022.
material participation tests, you aren’t Philadelphia activity.
treated as a limited partner if you also • Four separate activities. Activities conducted through part-
nerships, S corporations, and C cor-
were a general partner in the Once you choose a grouping under porations subject to section 469.
partnership at all times during the these rules, you must continue using Once a partnership or corporation
partnership's tax year ending with or that grouping in later tax years unless determines its activities under these
within your tax year (or, if shorter, during it’s determined that the original grouping rules, a partner or shareholder may use
the portion of the partnership's tax year was clearly inappropriate or a material

Instructions for Form 8582 (2022) -5-

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these rules to group those activities       5. The changes on your amended               that the activities make up an 
with:                                       return cause the amount on Form 8960,        appropriate economic unit for the 
• Each other,                               line 13, of your amended return to be        measurement of gain or loss under the 
• Activities conducted directly by the      greater than the amount entered on           passive activity rules.
partner or shareholder, or                  Form 8960, line 14.
                                                                                         Regrouping.   You must file a written 
• Activities conducted through other 
partnerships and corporations.              This rule applies equally to changes         statement with your original income tax 
                                            to modified adjusted gross income or         return for the tax year in which you 
  A partner or shareholder may not          net investment income upon an IRS            regroup the activities. The statement 
treat as separate activities those          examination.                                 must provide the names, addresses, 
activities grouped together by the                                                       and EINs, if applicable, for the activities 
partnership or corporation.                 Manner of regrouping. If you regroup         that are being regrouped. If two or more 
                                            your activities under this rule, you must    activities are being regrouped into a 
Regrouping Due to Net                       attach to your original or amended           single activity, the statement must 
Investment Income Tax                       return, as applicable, a statement that      contain a declaration that the regrouped 
You may be able to regroup your             satisfies the requirements described in      activities make up an appropriate 
activities, as described below, if you’re   Regrouping under Disclosure                  economic unit for the measurement of 
subject to the Net Investment Income        Requirement next.                            gain or loss under the passive activity 
Tax (NIIT) for the first time. For detailed Disclosure Requirement                       rules. In addition, the statement must 
information, see Regulations section                                                     contain an explanation of the material 
1.469-11(b)(3)(iv).                         For tax years beginning after January 
                                            24, 2010, the following disclosure           change in the facts and circumstances 
Regrouping on an original return.           requirements for groupings apply.            that made the original grouping clearly 
Under the NIIT fresh start election, you    You’re required to report certain            inappropriate.
may regroup for the first tax year you’re   changes to your groupings that occur 
subject to the NIIT (without regard to the  during the tax year to the IRS. If you fail  Passive Activity Income 
effect of regrouping). You may regroup      to report these changes, each trade or       and Deductions
only once under this election and that      business activity or rental activity will be Take into account only passive activity 
regrouping will apply to the tax year for   treated as a separate activity. You’ll be    income and passive activity deductions 
which you regroup and all future tax        considered to have made a timely             to figure your net income or net loss 
years. You’re eligible to regroup if:       disclosure if you filed all affected         from all passive activities or any passive 
  1. You weren’t previously subject to      income tax returns consistent with the       activity.
the NIIT;                                   claimed grouping and make the 
                                            required disclosure on the income tax        If your passive activity is reported on 
  2. The amount you would have                                                           Schedule C, E, or F, and the activity has 
                                            return for the year in which you first 
entered on Form 8960, line 12, without                                                   no prior year unallowed losses or any 
                                            discovered the failure to disclose. If the 
the regrouping, would have been                                                          gain or loss from the disposition of 
                                            IRS discovered the failure to disclose, 
greater than zero; and                                                                   assets or an interest in the activity, take 
                                            you must have reasonable cause for not 
  3. The amount you would have              making the required disclosure. For          into account only the passive activity 
entered on Form 8960, line 13, without      more information on disclosure               income and passive activity deductions 
the regrouping, would have been             requirements, see Revenue Procedure          from the activity to figure the amount to 
greater than the amount you would have      2010-13, available at IRS.gov/irb/           enter on Form 8582, including all 
entered on Form 8960, line 14, without      2010-04_IRB#RP-2010-13.                      applicable Parts IV through IX.
the regrouping.
                                            New grouping. You must file a written        If you own an interest in a passive 
Regrouping on an amended return.            statement with your original income tax      activity through a partnership or an
You may regroup your activities on an       return for the first tax year in which two   S corporation, the partnership or
amended tax return, but only if you         or more activities are originally grouped    S corporation will generally provide you 
weren’t subject to the NIIT on your         into a single activity. The statement        with the net income or net loss from the 
original return (or previously amended      must provide the names, addresses,           passive activity. If, however, the 
return). You’re eligible if:                and employer identification numbers          partnership or S corporation must state 
  1. You weren’t previously subject to      (EINs), if applicable, for the activities    an item of gross income or deduction 
the NIIT for the tax year for which you’re  being grouped as a single activity. In       separately to you, and the gross income 
filing an amended return or any prior tax   addition, the statement must contain a       or deduction is passive activity gross 
year;                                       declaration that the grouped activities      income or a passive activity deduction 
                                            make up an appropriate economic unit         (respectively), include that amount in 
  2. The changes on the amended             for the measurement of gain or loss          the net income or net loss entered on 
return cause you to be subject to the       under the passive activity rules.            Form 8582, including all applicable 
NIIT for the first time beginning in the                                                 Parts IV through IX.
taxable year for which you’re amending      Addition to an existing grouping. 
the return;                                 You must file a written statement with                The partnership or S 
                                            your original income tax return for the               corporation doesn’t have a 
  3. The limitation period for                                                           CAUTION! record of your prior year 
                                            tax year in which you add a new activity 
assessments under section 6501 hasn’t                                                    unallowed losses from the passive 
                                            to an existing group. The statement 
ended;                                                                                   activities of the partnership or S 
                                            must provide the name, address, and 
  4. The changes on your amended            EIN, if applicable, for the activity that’s  corporation. If you had prior year 
return cause the amount on Form 8960,       being added and for the activities in the    unallowed losses from these activities, 
line 12, of your amended return to be       existing group. In addition, the 
greater than zero; and                      statement must contain a declaration 

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they can be found in column (c) of your contributed to the creation of the activity, take into account only passive
2021 Part VIII. property. activity deductions.
• Any income treated as not from a
Passive Activity Income passive activity under Temporary Passive activity deductions include
To figure your overall gain or loss from Regulations section 1.469-2T(f) and all deductions from activities that are
all passive activities or any passive Regulations section 1.469-2(f). See passive activities for the current tax year
activity, take into account only passive Recharacterization of Passive Income, and all deductions from passive
activity income. Don’t enter income that later. activities that were disallowed under the
isn’t passive activity income on Form • Overall gain from any interest in a PAL rules in prior tax years and carried
8582. PTP (see item 2 under Passive activity forward to the current tax year. See
loss rules for partners in PTPs, later). Regulations section 1.469-1(f)(4).
Passive activity income includes all • State, local, and foreign income tax Passive activity deductions include
income from passive activities (with refunds. any loss from a disposition of property
certain exceptions described in • Income from a covenant not to used in a passive activity at the time of
Temporary Regulations section compete. the disposition and any loss from a
1.469-2T(c)(2) and Regulations section • Any reimbursement of a casualty or disposition of less than your entire
1.469-2(c)(2)), including gain from the theft loss included in income as interest in a passive activity. See
disposition of an interest in a passive recovery of all or part of a prior year loss Dispositions, later, for the treatment of
activity and from the disposition of deduction if the deduction for the loss losses upon disposition of your entire
property used in a passive activity at the wasn’t treated as a passive activity interest in an activity.
time of the disposition. deduction.
• Cancellation of debt income to the Passive activity deductions don’t
Passive activity income doesn’t extent that at the time the debt was include the following.
include the following. discharged, the debt wasn’t properly • Deductions for expenses (other than
• Income from an activity that isn’t a allocable under Temporary Regulations interest expense) that are clearly and
passive activity. section 1.163-8T to passive activities. directly allocable to portfolio income.
• Portfolio income, including interest • Qualified home mortgage interest,
(other than self-charged interest treated Recharacterization of Passive capitalized interest expenses, and other
as passive activity income, discussed Income interest expenses (except self-charged
later), dividends, annuities, and royalties Certain income from passive activities interest treated as a passive activity
not derived in the ordinary course of a must be recharacterized and excluded deduction (discussed next) and interest
trade or business, and gain or loss from from passive activity income. The expenses properly allocable to passive
the disposition of property that produces amount of income recharacterized activities).
portfolio income or is held for equals the net income from the sources • Losses from dispositions of property
investment (see section 163(d)(5)). See given below. If during the tax year you that produce portfolio income or
Temporary Regulations section received net income from any of these property held for investment.
1.469-2T(c)(3). sources (either directly or through a • State, local, and foreign income
• Alaska Permanent Fund dividends. partnership or an S corporation), see taxes.
• Personal service income, including Pub. 925 to find out how to report net • Charitable contribution deductions.
salaries, wages, commissions, income or loss from these sources. For • Net operating loss deductions,
self-employment income from trade or more information, see Temporary percentage depletion carryovers under
business activities in which you Regulations section 1.469-2T(f) and section 613A(d), and capital loss
materially participated for the tax year, Regulations section 1.469-2(f). carryovers.
deferred compensation, taxable social • Deductions and losses that would’ve
security and other retirement benefits, Income from the following sources been allowed for tax years beginning
and payments from partnerships to may be subject to the net income before 1987, but for basis or at-risk
partners for personal services. See recharacterization rules. limitations.
Temporary Regulations section • Significant participation passive • Net negative section 481 adjustments
1.469-2T(c)(4). activities defined in item 4 under Tests allocated to activities other than passive
• Income from positive section 481 for individuals, earlier. activities. See Temporary Regulations
adjustments allocated to activities other • Rental of property if less than 30% of section 1.469-2T(d)(7).
than passive activities. See Temporary the unadjusted basis of the property is • Deductions for losses attributable to a
Regulations section 1.469-2T(c)(5). subject to depreciation. federally declared disaster.
• Income or gain from investments of • Passive equity-financed lending • The deduction allowed for the
working capital. activities. deductible part of self-employment
• Income from an oil or gas property if • Rental of property incidental to a taxes.
you treated any loss from a working development activity.
interest in the property for any tax year • Rental of property to a nonpassive Self-Charged Interest
beginning after 1986 as a nonpassive activity. Certain self-charged interest income or
loss under the rule excluding working • Acquisition of an interest in a deductions may be treated as passive
interests in oil and gas wells from pass-through entity that licenses activity gross income or passive activity
passive activities (see item 3 under intangible property. deductions if the loan proceeds are
Activities That Are Not Passive Passive Activity Deductions used in a passive activity. Generally,
Activities, earlier). See Regulations self-charged interest income and
section 1.469-2(c)(6). To figure your overall gain or overall loss deductions result from loans between
• Any income from intangible property from all passive activities or any passive you and a partnership or S corporation
if your personal efforts significantly in which you had a direct or indirect

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ownership interest. This includes both If you’re using the installment method $15,525. $7,300 of the gain is section
loans you made to the partnership or to report this kind of disposition, figure 1231 gain reported on Form 4797,
S corporation and loans the partnership the loss for the current year that isn’t Part I, and $8,225 is ordinary recapture
or S corporation made to you. It also limited by the PAL rules by multiplying income reported on Form 4797, Part II.
includes loans from one partnership or your overall loss (which doesn’t include On line 22 of Schedule E (Form 1040),
S corporation to another partnership or losses allowed in prior years) by the you report a total loss of $15,450, which
S corporation if each owner in the following fraction: includes a current year $2,800 net loss
borrowing entity has the same and a $12,650 prior year unallowed
proportional ownership interest in the Gain recognized in the current year loss. You have an overall gain from the
lending entity. disposition ($15,525 – $15,450 = $75).
Unrecognized gain as of the
The self-charged interest rules don’t beginning of the current year Because you had an overall gain, you
apply to your interest in a partnership or make the following entries on Part IV.
S corporation if the entity made an You enter the $15,525 gain on the
election under Regulations section A partner in a PTP isn’t treated as disposition in column (a), the current
1.469-7(g) to avoid the application of having disposed of an entire interest in year loss of $2,800 in column (b), and
these rules. For more details on the an activity of a PTP until there’s an the prior year unallowed loss of $12,650
self-charged interest rules, see entire disposition of the partner's in column (c).
Regulations section 1.469-7. interest in the PTP. Example 2. Activity with overall
loss. You sell your entire interest in an
Former Passive Activities Reporting an Entire Disposition oil and gas limited partnership that was
A former passive activity is any activity on Form 4797 or Form 8949 your only passive activity for a gain of
that was a passive activity in a prior tax If you completely dispose of your entire $2,000. You have a current year
year but is not a passive activity in the interest in a passive activity or a former Schedule E loss of $3,330 and a
current tax year. A prior year unallowed passive activity, you may have to report Schedule E prior year unallowed loss of
loss from a former passive activity is net income or loss and prior year $1,115.
allowed to the extent of current year unallowed losses from the activity. All Because you have an overall loss of
income from the activity. the net income and losses are reported $2,445 after combining the gain and
on the forms and schedules normally losses, none of the amounts are entered
If current year net income from the used. on Form 8582.
activity is less than or equal to the prior
year unallowed loss, enter the prior year Combine all income and losses You enter the net loss plus the prior
unallowed loss and any current year net (including any prior year unallowed year unallowed loss ($3,330 + $1,115 =
income from the activity on Form 8582, losses) from the activity for the tax year $4,445) on Schedule E, Part II, column
including all applicable Parts IV through to see if you have an overall gain or (i), and the $2,000 gain on the sale on
IX. loss. Form 8949, in either Part I or Part II,
depending on how long you held the
If current year net income from the If you have an overall gain, report the partnership interest.
activity is more than the prior year income, losses, and prior year
unallowed loss from the activity, enter unallowed losses on Part IV or V. Disposition of Less Than an
the prior year unallowed loss and the If you have an overall gain and this is Entire Interest
current year net income up to the a former passive activity, report all Gains and losses from the disposition of
amount of prior year unallowed loss on income and losses (including any prior less than an entire interest in an activity
Form 8582, including all applicable year unallowed losses) on the forms are treated as part of the net income or
Parts IV through IX. and schedules normally used and don’t net loss from the activity for the current
If the activity has a net loss for the use Form 8582. year.
current year, enter the prior year If you have an overall loss when you A disposition of less than
unallowed loss (but not the current year combine the income and losses, don’t ! substantially all of an entire
loss) on Form 8582, including all use Form 8582 for the activity. All losses CAUTION interest doesn’t trigger the
applicable Parts IV through IX. (including prior year unallowed losses) allowance of prior year unallowed
To report a disposition of a former are allowed in full. Report the income losses.
passive activity, follow the rules under and losses on the forms and schedules
Dispositions next. normally used. Disposition of Substantially All
An overall loss from an entire of an Activity
Dispositions disposition of a passive activity is a You may treat the disposition of
nonpassive loss if you have an substantially all of an activity as a
Disposition of an Entire Interest aggregate loss from all other passive separate activity if you can prove with
If you disposed of your entire interest in activities. When figuring your modified reasonable certainty:
a passive activity or a former passive adjusted gross income for Part II, line 6, 1. The prior year unallowed losses,
activity to an unrelated person in a fully of Form 8582, be sure to take into if any, allocable to the part of the activity
taxable transaction during the tax year, account the overall loss from the disposed of; and
your losses allocable to the activity for disposition of the activity. 2. The net income or loss for the
the year aren’t limited by the PAL rules.
Example 1. Activity with overall year of disposition allocable to the part
A fully taxable transaction is a gain. You sell your entire interest in a of the activity disposed of.
disposition in which you recognize all rental real estate activity in which you
realized gain or loss. actively participated for a gain of

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and a Form 4797 gain of $2,000. You VII, column (c), of your 2021 Form 8582.
Specific Instructions enter $7,000 in column (a). Enter the total of column (c) from your
2022 Part V on Part I, line 2c, of Form
Column (b). Enter the current year net
8582.
Part I—2022 Passive loss for each activity. Don’t enter any
Activity Loss prior year unallowed losses in this Columns (d) and (e). Combine
Use Part I to combine the net income column. Enter the total of column (b) on income and losses in columns (a)
and net loss from all passive activities to Part I, line 1b, of Form 8582. through (c) for each activity, and either
determine if you have a passive activity If an activity has net income on one enter the overall gain for the activity in
loss (PAL) for 2022. Use Parts IV and V form or schedule and a net loss on column (d) or enter the overall loss for
first to determine the entries for lines 1 another form or schedule, report the net the activity in column (e). Don’t enter
and 2 of Part I, as follows. amounts separately in columns (a) and amounts from columns (d) and (e) on
• Use Part IV for rental real estate (b) of Part IV. Parts I, II, or III of Form 8582. These
activities with active participation. amounts will be used when the rest of
• Use Part V for all other passive Example. A Schedule E rental Form 8582 is completed to figure the
activities. activity has current year income of loss allowed for the current year.
$1,000 on line 21 of Schedule E and a
Line 3. If you have prior year unallowed current year Form 4797 loss of $4,500.
Part II—Special Allowance
CRD from rental real estate activities, You enter $1,000 in column (a) and
treat that dollar amount as negative and $4,500 in column (b). for Rental Real Estate
combine with lines 1d and 2d. Enter the Activities With Active
combined amount on line 3 and enter Column (c). Enter the prior year
“CRD” and the dollar amount of the unallowed losses for each activity. You Participation
CRD (as a negative) on the dotted line. find these amounts on Part VII, column If your filing status is married
(c), of your 2021 Form 8582. Enter the filing separately and you lived
Note. If you included prior year total of column (c) from your 2022 Part CAUTION! with your spouse at any time
unallowed CRD from rental real estate IV on Part I, line 1c, of Form 8582. during the year, you are not eligible for
activities in line 3, and line 3 is a loss Columns (d) and (e). Combine the special allowances in Part II. Do not
and line 1d is zero or more, go to the income and losses in columns (a) complete Part II. Instead, go to Part III of
instructions for Part II, line 9, later. through (c) for each activity, and either Form 8582. See the instructions for Part
If you need additional lines for enter the overall gain for the activity in III—Total Losses Allowed, later.
TIP any of the Parts IV through IX, column (d) or enter the overall loss for
Use Part II to figure the maximum
you can either attach copies of the activity in column (e). Don’t enter
amount of rental loss allowed if you
the applicable pages of Form 8582, or amounts from columns (d) and (e) on
have an overall loss on Part I, line 1d,
your own schedule that’s in the same Parts I, II, or III of Form 8582. These
from your rental real estate activities you
format as the applicable part(s). amounts will be used when the rest of
actively participated in during 2022.
Form 8582 is completed to figure the
Part IV loss allowed for the current year. Note. If you included prior year
Individuals and qualifying estates who Part V unallowed CRD from rental real estate
activities in line 3, first figure the special
actively participated in rental real estate Use Part V to figure the amounts to
$25,000 allowance for losses from
activities must include the income or enter on Part I, lines 2a through 2c, for:
rental real estate activities with active
loss from those activities in Part IV to • Passive trade or business activities,
participation from Part I, line 1d, if any,
figure the amounts to enter on Part I, • Passive rental real estate activities
without regard to the CRD, by
lines 1a through 1c, of Form 8582. that don’t qualify for the special
completing lines 4 through 8. To apply
Don’t enter a prior year unallowed allowance, and
any remaining portion of the $25,000
loss in column (c) of Part IV unless you • Rental activities other than rental real
allowance to prior year unallowed CRD
actively participated in the activity in estate activities.
from rental real estate activities, see the
both the year the loss arose and the If you have prior year unallowed CRD instructions for line 9.
current tax year. If you didn’t actively from passive activities other than rental If you’re claiming both the
participate in both years, enter the prior real estate activities, include that ! premium tax credit (PTC) and
year unallowed loss in column (c) of amount in Part V. Add "CRD" after the CAUTION self-employed health insurance
Part V. name of the activity. deduction (SEHID) and Part I, lines 1d
Married individuals who file Column (a). Enter the current year net and 3, of Form 8582 are both losses,
! separate returns and lived with income for each activity. Enter the total see Self-Employed Health Insurance
CAUTION their spouses at any time during
of column (a) on Part I, line 2a, of Form Deduction and PTC in Pub. 974. You’ll
the tax year don’t qualify under the 8582. (See the example under Column have to complete worksheets in Pub.
active participation rule and must use (a) for Part IV, earlier.) 974 before you complete Part II of Form
Part V instead of Part IV. 8582.
Column (b). Enter the current year net
Column (a). Enter the current year net loss for each activity. Enter the total of
Enter all numbers in Part II as
income from each activity. Enter the column (b) on Part I, line 2b, of Form
positive amounts (that is, greater than
total of column (a) on Part I, line 1a, of 8582. (See the example under Column
zero).
Form 8582. (b) for Part IV, earlier.)
Example. Part II, line 4, has a loss of
Example. A Schedule E rental Column (c). Enter the unallowed $42,000 (reported as a positive amount)
activity has current year profit of $5,000 losses for the prior years for each and line 8 is $25,000. You enter
activity. You find these amounts on Part

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$25,000 on line 9 (the smaller of line 4 activity or item of property subject to the Worksheet for Special Allowance
or line 8, both treated as positive recharacterization of passive income for Prior Unallowed Commercial
amounts). rules.
Revitalization Deductions From
When figuring modified adjusted
Rental Real Estate
Note. If you included prior year gross income, include any overall loss
unallowed CRD from rental real estate from the entire disposition of a passive Enter all numbers in this calculation as positive
activities in line 3, and line 3 is a loss activity (considered a nonpassive loss). amounts (greater than zero)
and line 1d is a loss, complete lines 4 A. Enter $25,000* reduced by the
through 8, then see the instructions for Example. Your adjusted gross
line 9 below. If line 1d of Part I is zero or income on line 11 of Form 1040 or Form amount, if any, of the smaller of Part II,
line 4 or line 8 . . . . . . . . . . . . . . . . . $
more, and line 3 is a loss, go directly to 1040-SR is $92,000 and you have
the instructions for line 9 below. taxable social security benefits of B. Enter the loss from Part I,
$5,500 on line 6b. Your modified line 3 . . . . . . . . . . . . . . . . . . . . . . . $
Line 4. Enter on line 4 the smaller of adjusted gross income is $86,500 C. Reduce line B by the amount of the
the loss on Part I, line 1d, or the loss on ($92,000 – $5,500). smaller of Part II, line 4 or
line 3. line 8 . . . . . . . . . . . . . . . . . . . . . . . $
Line 8. Don’t enter more than $12,500
Example. Part I, line 1d, has a loss on line 8 if you’re married filing a D. Enter the smallest of the amount of
of $3,000 and line 2d has a gain of separate return and you and your the prior unallowed CRD (as a positive
$100. The combined loss on line 3 is spouse lived apart at all times during the amount), the amount on line A, or the
amount on line C . . . . . . . . . . . . . . . $
$2,900. You enter $2,900 as a positive year.
number on Part II, line 4 (the smaller of * Enter $12,500 (reduced by the amount, if any, of
the loss on Part I, line 1d, or the loss on Line 9. If you do not have prior year the smaller of Part II, line 4 or line 8) on line A if
line 3). unallowed CRD from rental real estate you’re married but filing a separate return and you
activities, enter the smaller of line 4 or and your spouse lived apart at all times during the
Line 5. Married persons filing separate line 8 on line 9. year.
returns who lived apart from their
spouses at all times during the year If you have prior year unallowed CRD
must enter $75,000 on line 5 instead of from rental real estate activities included
$150,000. on line 3 of Part I, and you have a loss Combine line D with the smaller of
on line 1d and line 3 of Part I, first figure line 4 or line 8 and enter the combined
Line 6. To figure modified adjusted the special $25,000 special allowance amount on line 9. Enter “CRD” and the
gross income, combine all the amounts for losses from rental real estate dollar amount of the special allowance
used to figure adjusted gross income activities with active participation, for CRD on the dotted line.
except don’t take into account: without regard to the CRD, by
• Passive income or loss included on completing lines 4 through 8, then go to Part III—Total Losses
Form 8582, the Worksheet below. If line 1d of Part I
• Any rental real estate loss allowed to is zero or more, and line 3 is a loss, Allowed
real estate professionals (defined under complete the Worksheet below and Use Part III to figure the amount of the
Activities That Are Not Passive enter the result on line 9 as described losses from all passive activities (as
Activities, earlier), below. determined in Part I) allowed for 2022.
• Any overall loss from a PTP, Line 11. Use Parts IV through IX of
The remaining portion of the $25,000
• The taxable amount of social security Form 8582 and the related instructions
allowance, if any, is available for the
and tier 1 railroad retirement benefits, to figure the unallowed loss to be
prior year unallowed CRD from rental
• Deductible contributions to traditional carried forward and the allowed loss to
real estate activities. Use the Worksheet
individual retirement accounts (IRAs) report on your forms and schedules for
to figure the maximum amount of prior
and section 501(c)(18) pension plans, 2022.
year unallowed CRD allowed from rental
• The deduction allowed for the
real estate activities.
deductible part of self-employment Parts IV and V
taxes, Parts IV and V, columns (d) and (e),
• The exclusion from income of interest show whether an activity had an overall
from series EE and I U.S. savings bonds gain or loss. If you have activities that
used to pay higher education expenses, show overall gain in column (d) of Parts
• The exclusion of amounts received IV or V, report all the income and losses
under an employer's adoption listed in columns (a), (b), and (c) for
assistance program, those activities on the proper forms and
• The student loan interest deduction, schedules, including Form 8582.
or
• The deduction allowed for If you have activities that show an
foreign-derived intangible income and overall loss in column (e) of Parts IV or
global intangible low-taxed income. V, you must allocate your allowed loss
on Part III, line 11, of Form 8582 to
Include in modified adjusted gross those activities by completing Parts VI,
income any portfolio income and VII, plus VIII and/or IX.
expenses that are clearly and directly
allocable to portfolio income. Also Complete Part VI only if you entered
include any income that’s treated as an amount (other than zero) on Part II,
nonpassive income, such as overall line 9, of Form 8582. Otherwise, skip
gain from a PTP and net income from an Part VI and complete Part VII for all
activities in Part IV or V that have overall

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losses in column (e) and any amount of the total of all the losses in column (a), reported. See the Example for Part VI. If
prior year unallowed CRD included in and enter this ratio for each activity in you have prior year unallowed CRD
line 3. column (b). The total of all the ratios in from a passive activity other than rental
column (b) must equal 1.00. real estate in Part V, and/or unallowed
Part VI losses for prior year CRD from a rental
Use Part VI to allocate the special Column (c). Multiply each ratio in
real estate activity on Part VI, column
allowance on Part II, line 9, of Form column (b) by the amount on Part II,
(d), add “CRD” after the name of each of
8582 among your rental real estate line 9, of Form 8582, if there is no prior
the activities.
activities. year unallowed CRD from rental real
estate activities, and enter the results in Column (a). Enter the amounts, if any,
If you used the Worksheet in the column (c). The total of column (c) must from column (d) of Part VI (from column
instructions for line 9 to apply any be the same as Part II, line 9, of Form (e) of Part IV and any prior year
remaining special allowance to prior 8582. unallowed CRD included in Part I, line 3,
year unallowed CRD from one or more If there is prior year unallowed CRD if you didn’t have to complete Part VI).
rental real estate activities, complete a included in Part II, line 9, Also enter the losses, if any, from
separate Part VI to allocate that portion column (e) of Part V.
1. For the Part VI for rental real
of the special allowance to those CRD Column (b). Divide each of the
estate activities with active participation,
activities. individual losses shown in column (a) by
multiply each ratio in column (b) by the
In the first column of Part VI, enter lesser of line 4 or line 8; and the total of all the losses in column (a)
the name of each activity. In the second 2. For the Part VI for prior year and enter this ratio for each activity in
column, enter the form or schedule and unallowed CRD, multiply each ratio in column (b). The total of all the ratios
line number on which the loss will be column (b) by the amount from line D of must equal 1.00.
reported. the Worksheet in the instructions for Column (c). Complete the following
Example. You receive a line 9 above. computation.
Schedule K-1 from partnership P that The total of column (c) for the Part VI for
reports losses from two rental real rental real estate activities with active A. Enter as a positive amount
estate activities, Activity X and Activity participation should be the same as the Part I, line 3, of Form
Y. The losses from partnership P are lesser of line 4 or line 8, Part II, and the 8582 . . . . . . . . . . . . .
reported on line 28A of Schedule E. In total of column (c) for the second Part VI B. Enter Part II, line 9, of
the first two columns of Part VI, enter: for prior year unallowed CRD should be Form 8582 . . . . . . . . .
the amount from line D of the C. Subtract line from B
Name of Activity Form or Schedule Worksheet. line A . . . . . . . . . . . .
Activity X Sch E, line 28A Column (c) total is the same as
Activity Y Sch E, line 28A column (a) total. If the total losses in
Multiply each ratio in column (b) by
column (c) are the same as those in
the amount on line C above, and enter
column (a), the losses in Part IV (or, in
the result in column (c).
If the loss from an activity is reported in the case of the second Part VI for prior
more than one place, identify both unallowed CRD, the additional amount Parts VIII and IX
locations in the second column (for listed in Part I, line 3) are allowed in full Parts VIII and IX figure your unallowed
example, Sch E, line 28A/Form 4797, and aren’t carried over to Part VII. and allowed losses for each activity.
line 2). If you need additional space, Report all amounts in columns (a), (b),
show this information on an attached and (c) of Part IV on the proper forms If you have losses from any activity
statement. and schedules. that are reported on two or more
different forms or schedules, use Part IX
If you entered an amount on Part II, Column (c) total is less than instead of Part VIII for that activity.
line 9, and there is no amount included column (a) total. If the total losses in
on line 9 from prior year disallowed column (c) are less than the total losses Also use Part IX instead of Part VIII
CRD, list on Part VI all activities with an in column (a), complete column (d). for any activity with two or more
transactions that are reported on the
overall loss in column (e) of Part IV. Column (d). Subtract column (c) from same form or schedule but must be
If you also included an amount for column (a) and enter the results in separately identified for tax purposes.
prior year unallowed CRD from rental column (d). Also enter the amounts from Transactions that must be separately
real estate activities on line 9, complete column (d) of Part VI in column (a) of identified include capital losses that are
another Part IV for these CRD activities. Part VII. 28% rate losses and those that aren’t.
You can use another Part IV, or your Part VII—Allocation of
Note. 28% rate gain or loss includes all
own schedule in the same format as Unallowed Losses collectibles gains and deductible
Part IV. Enter the prior year unallowed
CRD for each activity in column (a) of Complete Part VII if any activities have long-term losses and section 1202 gain
the second Part IV. Then follow the an overall loss in column (e) of Part V or on the sale of qualified small business
instructions for column (b) and column losses in column (d) of Part VI (in stock. See the Instructions for
(c) below for each Part IV. column (e) of Part IV and any prior year Schedule D for details.
unallowed CRD included in Part I, line 3,
Column (a). Enter the overall loss from if you didn’t have to complete Part VI). Part VIII—Allowed Losses
column (e) of Part IV for each activity.
On Part VII, enter the name of each
Column (b). Divide each of the activity and the form or schedule and Use Part VIII for any activity listed in Part
individual losses shown in column (a) by line number on which the loss will be VII if all the loss from that activity is

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reported on one form or schedule and identified separately on the same form column (b) and enter the ratio in column
no transactions need to be identified or schedule) used to report the losses. (c). The total of this column must be
separately (as discussed in Part IX , 1.00.
later). Also see Identification of Only losses that would cause a Column (d). Multiply the unallowed
Disallowed Passive Activity Deductions difference in tax liability if they were loss for this activity, found in Part VII,
in Pub. 925 for more information. reported on a different form or schedule column (c), by each ratio in column (c)
Example. You will report all the or are identified separately on the same of Part IX. If -0- is entered in column (b)
allowed loss from an activity listed in form or schedule are kept separate. of Part IX, also enter -0- for that form or
Part VII on Schedule E. Use Part VIII to Those forms, schedules, and parts are schedule in column (d).
determine the allowed loss, even if part the following.
of the loss is a current year Schedule E • Schedules C, E, and F. The amount in column (d) is the
loss and part of it is a prior year • Form 8949 (Parts I and II (28% rate unallowed loss for 2022. Keep a record
unallowed Schedule E loss. losses and non-28%-rate losses)). of Part IX so you can use the losses to
figure your PAL next year.
On Part VIII, enter the name of each Note. You must generally make a Column (e). Subtract the amount in
activity and the form or schedule and separate entry in Form 8949, Part I or column (d) from the loss entered on
line number on which the loss is Part II, for each transaction reported. line 1a, column (a). This amount is the
reported. Identify each CRD from Part See the Instructions for Form 8949. loss allowed for 2022 under the passive
VII on a separate line of Part VIII and • Forms 4684 (Section B), 4797 loss rules. Report the amounts in this
add "CRD" after the name of the activity. (Parts I and II), and 4835. column on the forms or schedules
See the Example for Part VI. normally used, subject to any further
Use a separate copy of Part IX for limitations described in Coordination
Column (a). For each activity entered each activity for which you have losses With Other Limitations, earlier. The
in Part VIII, enter the net loss plus the reported on two or more different forms forms and schedules you use must
prior year unallowed loss for the activity. or schedules or which are identified show the losses from this column and
Figure this amount by adding the losses separately on the same form or the income, if any, for that activity from
in columns (b) and (c) of Parts IV and V schedule. column (a) of Part IV or Part V.
and any prior year unallowed CRD
included in Part I, line 3. Example of Form 8949
On Part IX, enter the form or
Column (b). For each activity entered schedule and line number on the dotted transactions. The taxpayer had the
in Part VIII, enter the amount from line above each line 1a (for example, following Form 8949 transactions from
column (c) of Part VII for the activity. Schedule D, line 12, to report a passive activities in 2022.
These are your unallowed losses for long-term capital loss from a Activity I
2022. Keep a record of these amounts partnership). A passive activity prior year
so the losses can be used to figure your unallowed long-term capital loss (a 28%
Line 1a, column (a). Enter the net loss
PAL next year. rate loss) of $1,000 and a current year
plus any prior year unallowed loss from
Column (c). Subtract column (b) from the activity that’s reported on the same long-term capital loss (a non-28%-rate
column (a). These amounts are the form or, in the case of Form 4797 and loss) of $3,000.
losses allowed for 2022 under the Form 8949, the same part. Activity II
passive loss rules. Report the amounts If you have a Form 8949 28% rate A current year collectibles loss (a
in this column on the forms and loss and a Form 8949 non-28%-rate 28% rate loss) of $230 and net income
schedules normally used, subject to any loss, see Example of Form 8949 of $1,100 from Schedule E (Form 1040).
further limitations described in transactions, later, before completing Part V
Coordination With Other Limitations, Part IX.
earlier. Activity I has an overall loss of
Line 1b, column (a). Enter any net
See the forms and schedules listed $4,000 (current year long-term capital
income from the activity that’s reported
under How To Report Allowed Losses, loss of $3,000 and a prior year
on the same form or schedule (or on the
later. unallowed long-term capital loss of
same part of the same form or $1,000). Activity II has an overall gain of
schedule) as the loss on line 1a, column $870 (current year net income of $1,100
Part IX—Activities With Losses (a). less a current year long-term capital
Reported on Two or More Forms or Example. You enter a prior year loss of $230). Part III, line 11, of Form
Schedules unallowed loss from Form 4797, Part I, 8582 shows an allowed loss of $1,100.
on line 1a. If the activity has a current Since Activity II has an overall gain,
Use Part IX for any activity listed in Part year Form 4797, Part I, gain, enter the the amounts shown in columns (a) and
VII that has losses that are reported on gain on line 1b, column (a). If the activity (b) of Part V for that activity are reported
two or more different forms and doesn’t have a Form 4797, Part I, gain, on the proper forms and schedules and
schedules or are identified separately enter -0- on line 1b, column (a). aren’t shown on any other part.
on the same form or schedule (for
example, 28% rate and non-28%-rate Column (b). Subtract line 1b, column Part VII
capital losses reported on Form 8949). (a), from line 1a, column (a), and enter Activity I has an unallowed loss of
Part IX allocates the allowed and the result in column (b). If line 1b, $3,130 (Part I, line 3, of Form 8582
unallowed loss for the activity and column (a), is more than line 1a, column ($3,130) less the sum of Part II, line 9, of
allocates the allowed loss to the (a), enter -0- in column (b). Form 8582 (-0-) x 100%).
different forms or schedules (or where Column (c). Divide each of the losses Part IX
entered in column (b) by the total of

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Part IX is used to figure the portion of Columns (a) and (c) of Part VI are profit. Line 24 of Schedule E will show
the unallowed loss attributable to the the same amount. In this case, all the total profit and line 25 will show total
28% rate loss and the portion losses in columns (b) and (c) of Part IV losses allowed (both passive and
attributable to the non-28%-rate loss. and any prior year unallowed CRD nonpassive). Line 26 will show the total
The loss attributable to the 28% rate included on line 3 are allowed in full net profit or loss.
loss ($1,000) and the loss attributable to under the passive loss rules. Report the Schedule E, Parts II and III. Any item
the non-28%-rate loss ($3,000) are income and losses in columns (a), (b), of income shown on your Schedule K-1
separate entries in Part IX. The ratio of and (c) of Part IV and any prior year that’s passive income must be entered
each loss to the total of the two losses is unallowed CRD included on line 3 on as passive income in the appropriate
figured as follows. $1,000/$4,000 = 0.25 the forms and schedules normally used. column of Schedule E, Part II or III.
and $3,000/$4,000 = 0.75. Each of Enter the passive loss allowed from Part
Losses allowed in column (c) of Part
these ratios is multiplied by the VIII or IX of Form 8582 in the
VIII. The amounts in column (c) of Part
unallowed loss for Activity I, shown in appropriate column for passive losses.
VIII are the losses or deductions allowed
column (c) of Part VII ($3,130). The passive losses allowed include the
for 2022 for the activities listed in that
Unallowed losses for Activity I are the part. Report the loss allowed from loss allowed to the extent of any net
following. column (c) of Part VIII and the income, if income from the activity. Passive net
• 28% rate loss: 0.25 x $3,130 = any, for that activity from column (a) of income or loss reportable on
$782.50. Part IV or V, on the form or schedule Schedule E, Part II, includes any
• Non-28%-rate loss: 0.75 x $3,130 = normally used. self-charged interest income and
$2,347.50. deductions treated as passive activity
Losses allowed in column (e) of Part income and deductions. See
Allowed losses for Activity I are the IX. The amounts in column (e) of Part Self-Charged Interest, earlier.
following. IX are the losses or deductions allowed
See Form 4797 and Form 8949,
• 28% rate loss: $1,000 − $782.50 = for 2022 for the activity listed on that
later, if you also had passive gains or
$217.50. part. Report the losses allowed from
losses from the sale of assets or of an
• Non-28%-rate loss: $3,000 − column (e) of Part IX and the income, if
interest in a passive activity.
$2,347.50 = $652.50. any, for that activity from column (a) of
The total loss allowed for Activity I Part IV or V, on the forms or schedules Form 4684, Section B. Any passive
($870) is entered in Part II of Form normally used. activity gain from Form 4684 is
8949. The allowed 28% rate loss unchanged. It was used on Form 8582
($217.50) is entered on the 28% Rate Schedules C and F, and Form 4835.
to determine allowable PALs. If you
Gain Worksheet (see the instructions for Enter on the net profit or loss line of your
don’t have passive losses on Form
Schedule D, line 18). Keep a record of Schedule C or F, or line 34c of Form
4684, complete Form 4684 and follow
the unallowed 28% rate and 4835, the allowed passive loss from the
the instructions for that form for where to
non-28%-rate losses to figure the PAL part. To the left of the entry space, enter
report the gain.
for next year. “PAL.”
If you have passive losses on Form
See the forms and schedules listed If the net profit or loss line on your
4684, cross through the amount you first
under How To Report Allowed Losses form or schedule shows net profit for the
entered on line 31, 32, 38a, 38b, or 39
next. year, reduce the net profit by the
of that form, and enter the allowed loss
allowed loss from Part VIII or IX, and
from the part. To the left of the entry
enter the result on the net profit or loss
space, enter “PAL.”
How To Report line.
Allowed Losses Form 4797 and Form 8949. If you
Example. Schedule C shows net
Line 3 is income. If Part I, line 3, of profit for the year of $5,000 from a sold assets from a passive activity or
Form 8582 shows net income or zero, passive activity. The activity also has a you sold an interest in your passive
all the losses in columns (b) and (c) of Form 4797 gain of $2,500 and a prior activity, all gains from the activity must
Parts IV and V and any prior year year unallowed Schedule C loss of be entered on the appropriate line of
unallowed CRD included on line 3 are $6,000. The loss allowed for 2021 is Form 4797 or Form 8949. Identify the
allowed in full under the passive loss $6,000. You enter a net loss of $1,000 gain as “FPA.” Enter any allowed losses
rules. Report the income and losses in on line 31 of Schedule C (the $5,000 net for Form 4797 or Form 8949 on the
columns (a), (b), and (c) of Parts IV and profit for the year less the $6,000 loss appropriate line. On Form 8949, include
V and any prior year unallowed CRD allowed for the year). To the left of the “PAL” in the description of the property
included on line 3 on the forms and entry space, you enter “PAL.” in column (a). On Form 4797, enter
“PAL” to the left of the entry space (for
schedules normally used. See Form 4797 and Form 8949, example, line 2 or line 10).
Line 11 is the same as the total of later, if you also had passive gains and
Part I, lines 1b, 1c, 2b, 2c, and CRD losses from the sale of assets or of an Entire disposition with an overall
on line 3. In this case, all the losses in interest in a passive activity. loss. If you made an entire disposition
of your interest in a passive activity and
columns (b) and (c) of Parts IV and V Schedule E, Part I. Enter the allowed that activity had an overall loss, none of
and any prior year unallowed CRD loss from the part on line 22 of the gains, if any, or losses were entered
included on line 3 are allowed in full Schedule E. An activity that has net on Form 8582. However, all the gains
under the passive loss rules. Report the profit for the year and prior year and losses must be reported on the
income and losses in columns (a), (b), unallowed losses will have net profit on forms or schedules normally used. To
and (c) of Parts IV and V on the forms line 21 and the allowed loss on line 22. the left of the entry space, enter
and schedules normally used. The allowed loss on line 22 will include “EDPA.”
the loss allowed to the extent of the net

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Entire disposition with an overall you held through each PTP you owned of Form 4797. On Schedule E, Part II,
gain. Gains and losses from this during the tax year. you report $7,200 of the losses as a
activity were included on Form 8582 so 1. Combine any current year passive loss in column (g). You carry
that the gains might offset other PALs. income, gains and losses, and any prior forward the unallowed loss of $4,800
Report all the gains and losses on the year unallowed losses to see if you have ($12,000 − $7,200).
forms and schedules normally used, an overall loss from the PTP. Include If you have unallowed losses from
and to the left of the entry space, enter only the same types of income and more than one activity of the PTP or
“EDPA.” losses you would include to figure your from the same activity of the PTP that
net income or loss from a non-PTP must be reported on different forms or
Publicly Traded passive activity. See Passive Activity schedules, allocate the unallowed
Partnerships (PTPs) Income and Deductions, earlier. losses on a pro rata basis to figure the
A PTP is a partnership whose interests 2. If you have an overall gain, the amount allowed for each activity or on
are traded on an established securities net gain portion (total gain minus total each form or schedule.
market or are readily tradable on a losses) is nonpassive income. To allocate and keep a record of
secondary market (or its substantial It’s important to figure the nonpassive TIP the unallowed losses, use Parts
equivalent). income because it must be included in VII, VIII, and IX of Form 8582.
modified adjusted gross income to
An established securities market figure the special allowance for active List each activity of the PTP in Part
includes any national securities participation in a non-PTP rental real VII. Enter the overall loss from each
exchange and any local exchange estate activity on Form 8582. Also, you activity in column (a). Complete column
registered under the Securities may be able to include the nonpassive (b) of Part VII according to its
Exchange Act of 1934 or exempted income in investment income when instructions. Multiply the total unallowed
from registration because of the limited figuring your investment interest loss from the PTP by each ratio in
volume of transactions. It also includes expense deduction. See Form 4952, column (b) and enter the result in
any over-the-counter market. Investment Interest Expense Deduction. column (c) of Part VII.
A secondary market generally exists Report all gains and allowed losses Next, complete Part VIII for each
if a person stands ready to make a from the activity on the forms or activity listed in Part VII if all the loss
market in the interest. An interest is schedules normally used, and to the left from that activity is reported on one form
treated as readily tradable if the interest of each entry space, enter “From PTP.” or schedule. Use Part IX instead of Part
is regularly quoted by persons, such as
brokers or dealers, who are making a Example. You have Schedule E VIII for each activity with losses reported
market in the interest. income of $8,000 and a Form 4797 prior on two or more different forms or
year unallowed loss of $3,500 from the schedules (or are identified separately
The substantial equivalent of a passive activities of a PTP. You have a on the same form or schedule). Enter
secondary market exists if there’s no $4,500 overall gain ($8,000 − $3,500) the net loss plus any prior year
identifiable market maker, but holders of that’s nonpassive income. On unallowed losses in column (a) of Part
interests have a readily available, Schedule E, Part II, you report the VIII (or line 1a, column (a), of Part IX, if
regular, and ongoing opportunity to sell $4,500 net gain as nonpassive income applicable). The losses in column (c) of
or exchange interests through a public in column (k). In column (h), you report Part VIII (column (e) of Part IX) are the
means of obtaining or providing the remaining Schedule E gain of allowed losses to report on your forms
information on offers to buy, sell, or $3,500 ($8,000 − $4,500) as passive or schedules. Report these losses and
exchange interests. Similarly, the income. On the appropriate line of Form any income from the PTP on the forms
substantial equivalent of a secondary 4797, you report the prior year and schedules normally used.
market exists if prospective buyers and unallowed loss of $3,500. You enter
sellers have the opportunity to buy, sell, “From PTP” to the left of each entry 4. If you have an overall loss and you
or exchange interests in a timeframe space. disposed of your entire interest in the
PTP to an unrelated person in a fully
and with the regularity and continuity 3. If you have an overall loss (but taxable transaction during the year, your
that the existence of a market maker didn’t dispose of your entire interest in losses (including prior year unallowed
would provide. the PTP to an unrelated person in a fully losses) allocable to the activity for the
Special Instructions for PTPs taxable transaction during the year), the year aren’t limited by the passive loss
losses are allowed only to the extent of rules. A fully taxable transaction is one
Section 469(k) provides that the passive the income, and the excess loss is in which you recognize all your realized
activity limitations must be applied carried forward to use in a future year if gain or loss. Report the income and
separately to items from each PTP. you have income to offset it. Report as a losses on the forms and schedules
PALs from a PTP may generally be passive loss on the schedule or form normally used.
used only to offset income or gain from you normally use the portion of the loss
passive activities of the same PTP. The equal to the income. Report the income For rules on the disposition of an
special allowance for rental real estate as passive income on the form or entire interest reported using the
activities (including CRDs) doesn’t schedule you normally use. installment method, see Disposition of
apply to PALs from a PTP.
Example. You have a Schedule E an Entire Interest, earlier.
Passive activity loss rules for part- loss of $12,000 (current year losses
ners in PTPs. Don’t report passive plus prior year unallowed losses) and Paperwork Reduction Act Notice.
income, gains, or losses from a PTP on Form 4797 gain of $7,200 from the We ask for the information on this form
Form 8582. Instead, use the following passive activities of a PTP. You report to carry out the Internal Revenue laws of
rules to figure and report your income, the $7,200 gain on the appropriate line the United States. You are required to
gains, and losses from passive activities give us the information. We need it to

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ensure that you are complying with The time needed to complete and file If you have comments concerning the
these laws and to allow us to figure and this form will vary depending on accuracy of these time estimates or
collect the right amount of tax. individual circumstances. The estimated suggestions for making this form
burden for individual taxpayers filing this simpler, we would be happy to hear
You are not required to provide the form is approved under OMB control from you. See the instructions for the tax
information requested on a form that is number 1545-0074 and is included in return with which this form is filed.
subject to the Paperwork Reduction Act the estimates shown in the instructions
unless the form displays a valid OMB for their individual income tax return.
control number. Books or records The estimated burden for all other
relating to a form or its instructions must taxpayers who file this form is shown
be retained as long as their contents below.
may become material in the
administration of any Internal Revenue
law. Generally, tax returns and return Recordkeeping. . . . . . . 26 min.
information are confidential, as required Learning about the law
by section 6103. or the form. . . . . . . . . . 22 min.
Preparing the form. . . . 1 hr., 52
min.
Copying, assembling,
and sending the form
to the IRS. . . . . . . . . . . 48 min.

Instructions for Form 8582 (2022) -15-

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