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Department of the Treasury
Internal Revenue Service
2023

Instructions for Form 8582

Passive Activity Loss Limitations

Section references are to the Internal Revenue Code PALs can’t be used to offset income from nonpassive
unless otherwise noted. activities. However, a special allowance for rental real
estate activities may allow some losses even if the losses
Future Developments exceed passive income.
For the latest information about developments related to
Form 8582 and its instructions, such as legislation PALs not allowed in the current year are carried
enacted after they were published, go to IRS.gov/ forward until they’re allowed either against passive activity
Form8582. income; against the special allowance, if applicable; or
when you sell or exchange your entire interest in the
activity in a fully taxable transaction to an unrelated party.
General Instructions
For more information, see Pub. 925, Passive Activity
Reminders and At-Risk Rules.

Prior year unallowed commercial revitalization de- Note. Corporations subject to the passive activity rules
duction (CRD). If you have prior year unallowed CRDs must use Form 8810, Corporate Passive Activity Loss and
limited by the passive loss rules, you may continue to Credit Limitations.
include them in the calculations as shown in the Specific
Instructions, beginning with Part I—2023 Passive Activity Who Must File
Loss, later. Form 8582 is filed by individuals, estates, and trusts who
Excess business loss limitation. If you are a have passive activity deductions (including prior year
noncorporate taxpayer and have allowable business unallowed losses). However, you don’t have to file Form
losses after taking into account first the at-risk limitations 8582 if you meet the following exception.
and then the passive loss limitations (this form), your
losses may be subject to the excess business loss Exception
limitation. After taking into account all the other loss You actively participated in rental real estate activities
limitations, complete Form 461, Limitation on Business (see Special Allowance for Rental Real Estate Activities,
Losses, to figure the amount of your excess business later), and you meet all of the following conditions.
loss. See Form 461 and its instructions for details on the • Rental real estate activities with active participation
excess business loss limitation. were your only passive activities.
Reporting prior year unallowed losses. Form 8582 • You have no prior year unallowed losses from these (or
any other passive) activities.
must generally be filed by taxpayers who have an overall
gain (including any prior year unallowed losses) from • Your total loss from the rental real estate activities
wasn’t more than $25,000 ($12,500 if married filing
business or rental passive activities. See Exception under
separately).
Who Must File, later.
• If you’re married filing separately, you lived apart from
Regrouping due to Net Investment Income Tax. You your spouse all year.
may be able to regroup your activities if you’re subject to • You have no current or prior year unallowed credits
the Net Investment Income Tax. See Regrouping Due to from a passive activity.
Net Investment Income Tax under Grouping of Activities, • Your modified adjusted gross income (see the
later, for more information. instructions for line 6, later) was not more than $100,000
(not more than $50,000 if married filing separately).
Purpose of Form • You don’t hold any interest in a rental real estate activity
Form 8582 is used by noncorporate taxpayers to figure as a limited partner or as a beneficiary of an estate or a
the amount of any passive activity loss (PAL) for the trust.
current tax year and to report the application of prior year
unallowed PALs. If all the above conditions are met, your rental real
estate losses are not limited, and you don’t need to
A PAL occurs when total losses (including prior year complete Form 8582. Enter losses reported on
unallowed losses) from all your passive activities exceed Schedule E (Form 1040), Supplemental Income and Loss,
the total income from all your passive activities. Part I, line 21, on Schedule E (Form 1040), Part l, line 22.
Generally, passive activities include the following. For losses from a partnership or an S corporation, enter
• Trade or business activities in which you did not the amount of the allowable loss from Schedule K-1 on
materially participate for the tax year. Schedule E (Form 1040), Part II, column (g). Enter losses
• Rental activities, regardless of your participation. reported on line 32 of Form 4835, Farm Rental Income
and Expenses, on Form 4835, line 34c.

Jun 23, 2023 Cat. No. 64294A

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

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

Instructions for Form 8582 (2023) -3-

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owner of an interest in the partnership is made on the Form 8855, Election To Treat a Qualified Revocable Trust
basis of all the facts and circumstances. as Part of an Estate.
Reporting Income and Losses From the You aren’t considered to actively participate in a rental
real estate activity if at any time during the tax year your
Activities
interest (including your spouse's interest) in the activity
If an activity meets any of the five exceptions listed above, was less than 10% (by value) of all interests in the activity.
it’s not a rental activity. You must then determine:
Active participation is a less stringent requirement than
1. Whether your rental of the property is a trade or
material participation (see Material Participation, later).
business activity (see Trade or Business Activities,
You may be treated as actively participating if, for
earlier), and, if so,
example, you participated in making management
2. Whether you materially participated in the activity decisions or arranged for others to provide services (such
for the tax year (see Material Participation, later). as repairs) in a significant and bona fide sense.
If the activity is a trade or business activity in which you Management decisions that may count as active
didn’t materially participate, enter the income and losses participation include:
from the activity in Part V. • Approving new tenants,
• Deciding on rental terms,
If the activity is a trade or business activity in which you • Approving capital or repair expenditures, and
did materially participate, report any income or loss from • Other similar decisions.
the activity on the forms or schedules normally used.
The maximum special allowance is:
If the rental activity didn’t meet any of the five • $25,000 for single individuals and married individuals
exceptions, it’s generally a passive activity. However, filing a joint return for the tax year.
special rules apply if you conduct the rental activity • $12,500 for married individuals who file separate
through a publicly traded partnership (PTP) or if any of the returns for the tax year and lived apart from their spouses
rules described under Recharacterization of Passive at all times during the tax year.
Income, later, apply. Also see the PTP rules, later. • $25,000 for a qualifying estate, reduced by the special
allowance for which the surviving spouse qualified.
If none of the special rules apply, enter the income and
losses from the passive rental activity in Parts IV or V. See Modified adjusted gross income limitation. If your
the instructions for Parts IV and V for details. modified adjusted gross income (see the instructions for
line 6, later) is $100,000 or less ($50,000 or less if married
Special Allowance for Rental Real filing separately), your loss is deductible up to the amount
of the maximum special allowance referred to in the
Estate Activities
preceding paragraph.
Active participation. If you actively participated in a
If your modified adjusted gross income is more than
passive rental real estate activity, you may be able to
$100,000 ($50,000 if married filing separately) but less
deduct up to $25,000 of loss from the activity from your
than $150,000 ($75,000 if married filing separately), your
nonpassive income. This special allowance is an
special allowance is limited to 50% of the difference
exception to the general rule disallowing losses in excess
between $150,000 ($75,000 if married filing separately)
of income from passive activities.
and your modified adjusted gross income.
The special allowance isn’t available if you were
married, are filing a separate return for the year, and lived Generally, if your modified adjusted gross income is
with your spouse at any time during the year. $150,000 or more ($75,000 or more if married filing
separately), there is no special allowance.
Only an individual, a qualifying estate, or a qualified
revocable trust that made an election to treat the trust as If you qualify under the active participation rules, use
part of the decedent's estate may actively participate in a Part IV. See the instructions for Part IV, later.
rental real estate activity. Unless future regulations
provide an exception, limited partners are not treated as Material Participation
actively participating in a partnership's rental real estate For the material participation tests listed below,
activity. participation generally includes any work done in
connection with an activity if you owned an interest in the
A qualifying estate is the estate of a decedent for tax activity at the time you did the work. The capacity in which
years ending less than 2 years after the date of the you did the work doesn’t matter. However, work isn’t
decedent's death if the decedent would’ve satisfied the participation if:
active participation requirements for the rental real estate • It isn’t work that an owner would customarily do in the
activity for the tax year the decedent died. same type of activity, and
A qualified revocable trust may elect to be treated as • One of your main reasons for doing the work was to
avoid the disallowance of losses or credits from the
part of a decedent's estate for purposes of the special
activity under the passive activity rules.
allowance for active participation in rental real estate
activities. The election must be made by both the executor Proof of participation. You may prove your participation
(if any) of the decedent's estate and the trustee of the in an activity by any reasonable means. You don’t have to
revocable trust. For details, see Regulations section maintain contemporaneous daily time reports, logs, or
1.645-1. To make this election, see the instructions on similar documents if you can establish your participation

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by other reasonable means. For this purpose, reasonable an interest in the activity and whether or not you and your
means include, but are not limited to, identifying services spouse file a joint return for the tax year.
performed over a period of time and the approximate
Tests for investors. Work done as an investor in an
number of hours spent performing the services during that
activity isn’t treated as participation unless you were
period, based on appointment books, calendars, or
directly involved in the day-to-day management or
narrative summaries.
operations of the activity. For purposes of this test, work
Tests for individuals. You materially participated for the done as an investor includes the following.
tax year in an activity if you satisfy at least one of the 1. Studying and reviewing financial statements or
following tests. reports on operations of the activity.
1. You participated in the activity for more than 500 2. Preparing or compiling summaries or analyses of
hours. the finances or operations of the activity for your own use.
2. Your participation in the activity for the tax year was 3. Monitoring the finances or operations of the activity
substantially all of the participation in the activity of all in a nonmanagerial capacity.
individuals (including individuals who didn’t own any
interest in the activity) for the year. Special rules for limited partners. If you were a limited
3. You participated in the activity for more than 100 partner in an activity, you generally didn’t materially
hours during the tax year, and you participated at least as participate in the activity. You did materially participate in
much as any other individual (including individuals who the activity, however, if you met material participation test
didn’t own any interest in the activity) for the year. 1, 5, or 6 under Tests for individuals, earlier, for the tax
year.
4. The activity is a significant participation activity for
the tax year, and you participated in all significant However, for purposes of the material participation
participation activities during the year for more than 500 tests, you aren’t treated as a limited partner if you also
hours. were a general partner in the partnership at all times
during the partnership's tax year ending with or within your
A significant participation activity is any trade or
tax year (or, if shorter, during the portion of the
business activity in which you participated for more than
partnership's tax year in which you directly or indirectly
100 hours during the year and in which you didn’t
owned your limited partner interest).
materially participate under any of the material
participation tests (other than this fourth test). Special rules for certain retired or disabled farmers
5. You materially participated in the activity (other than and surviving spouses of farmers. Certain retired or
by meeting this fifth test) for any 5 (whether or not disabled farmers and surviving spouses of farmers are
consecutive) of the 10 immediately preceding tax years. treated as materially participating in a farming activity if
the real property used in the activity would meet the estate
6. The activity is a personal service activity in which
tax rules for special valuation of farm property passed
you materially participated for any 3 (whether or not
from a qualifying decedent. See Temporary Regulations
consecutive) preceding tax years.
section 1.469-5T(h)(2).
An activity is a personal service activity if it involves the
performance of personal services in the fields of health, Estates and trusts. The PAL limitations apply in figuring
law, engineering, architecture, accounting, actuarial the distributable net income and taxable income of an
science, performing arts, consulting, or in any other trade estate or trust. The rules for determining material
or business in which capital isn’t a material participation for this purpose haven’t yet been issued.

income-producing factor. Grouping of Activities
7. Based on all the facts and circumstances, you Generally, one or more trade or business activities or
participated in the activity on a regular, continuous, and rental activities may be treated as a single activity if the
substantial basis during the tax year. activities make up an appropriate economic unit for the
You didn’t materially participate in the activity under this measurement of gain or loss under the passive activity
seventh test, however, if you participated in the activity for rules.
100 hours or less during the tax year.
Your participation in managing the activity doesn’t Whether activities make up an appropriate economic
count in determining whether you materially participated unit depends on all the relevant facts and circumstances.
under this test if: The factors given the greatest weight in determining
whether activities make up an appropriate economic unit
a. Any person (except you) received compensation for are:
performing services in the management of the activity, or
1. Similarities and differences in types of trades or
b. Any individual spent more hours during the tax year businesses,
performing services in the management of the activity
than you did (regardless of whether the individual was 2. The extent of common control,
compensated for the management services). 3. The extent of common ownership,
4. Geographical location, and
Test for a spouse. Participation by your spouse during
the tax year in an activity you own may be counted as your 5. Interdependencies between or among the activities.
participation in the activity even if your spouse didn’t own Example. You have a significant ownership interest in
a bakery and a movie theater in Baltimore and in a bakery

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and a movie theater in Philadelphia. Depending on all the             • Activities conducted through other partnerships and 
relevant facts and circumstances, there may be more than          corporations.
one reasonable method for grouping your activities. For                 A partner or shareholder may not treat as separate 
instance, the following groupings may or may not be               activities those activities grouped together by the 
permissible.                                                      partnership or corporation.
• A single activity.
• A movie theater activity and a bakery activity.                 Regrouping Due to Net Investment Income Tax
• A Baltimore activity and a Philadelphia activity.               You may be able to regroup your activities, as described 
• Four separate activities.                                       below, if you’re subject to the Net Investment Income Tax 
  Once you choose a grouping under these rules, you               (NIIT) for the first time. For detailed information, see 
must continue using that grouping in later tax years unless       Regulations section 1.469-11(b)(3)(iv).
it’s determined that the original grouping was clearly 
                                                                  Regrouping on an original return. Under the NIIT fresh 
inappropriate or a material change in the facts and 
                                                                  start election, you may regroup for the first tax year you’re 
circumstances makes it clearly inappropriate.
                                                                  subject to the NIIT (without regard to the effect of 
  The IRS may regroup your activities if your grouping            regrouping). You may regroup only once under this 
fails to reflect one or more appropriate economic units and       election and that regrouping will apply to the tax year for 
one of the primary purposes of your grouping is to avoid          which you regroup and all future tax years. You’re eligible 
the passive activity limitations.                                 to regroup if:
Limitation on grouping certain activities.   The                        1. You weren’t previously subject to the NIIT;
following activities may not be grouped together.                       2. The amount you would have entered on Form 8960, 
  1. A rental activity with a trade or business activity          line 12, without the regrouping, would have been greater 
unless the activities being grouped together make up an           than zero; and
appropriate economic unit and:                                          3. The amount you would have entered on Form 8960, 
  a. The rental activity is insubstantial relative to the         line 13, without the regrouping, would have been greater 
trade or business activity or vice versa, or                      than the amount you would have entered on Form 8960, 
  b. Each owner of the trade or business activity has the         line 14, without the regrouping.
same proportionate ownership interest in the rental 
activity. If so, the portion of the rental activity involving the Regrouping on an amended return.       You may regroup 
rental of property used in the trade or business activity         your activities on an amended tax return, but only if you 
may be grouped with the trade or business activity.               weren’t subject to the NIIT on your original return (or 
                                                                  previously amended return). You’re eligible if:
  2. An activity involving the rental of real property with 
an activity involving the rental of personal property (except           1. You weren’t previously subject to the NIIT for the tax 
personal property provided in connection with the real            year for which you’re filing an amended return or any prior 
property or vice versa).                                          tax year;
  3. Any activity with another activity in a different type             2. The changes on the amended return cause you to 
of business and in which you hold an interest as a limited        be subject to the NIIT for the first time beginning in the 
partner if that other activity engages in holding, producing,     taxable year for which you’re amending the return;
or distributing motion picture films or videotapes; farming;            3. The limitation period for assessments under section 
leasing section 1245 property; or exploring for or                6501 hasn’t ended;
exploiting oil and gas resources or geothermal deposits.                4. The changes on your amended return cause the 
  4. Any trading activities in which you don't materially         amount on Form 8960, line 12, of your amended return to 
participate. A trading activity is an activity of trading in      be greater than zero; and
personal property. For this purpose, personal property is               5. The changes on your amended return cause the 
any personal property that is actively traded, for example,       amount on Form 8960, line 13, of your amended return to 
financial securities. A taxpayer who does not materially          be greater than the amount entered on Form 8960, 
participate in a trading activity is prohibited from grouping     line 14.
the activity with any other activity, including any other 
trading activity. The prohibition on grouping is effective for          This rule applies equally to changes to modified 
taxable years beginning on or after March 22, 2021. If you        adjusted gross income or net investment income upon an 
are a calendar year taxpayer, the new provisions first            IRS examination.
applied to you in calendar year 2022.                             Manner of regrouping.    If you regroup your activities 
                                                                  under this rule, you must attach to your original or 
Activities conducted through partnerships, S corpo-               amended return, as applicable, a statement that satisfies 
rations, and C corporations subject to section 469.               the requirements described in Regrouping under 
Once a partnership or corporation determines its activities       Disclosure Requirement next.
under these rules, a partner or shareholder may use these 
rules to group those activities with:                             Disclosure Requirement
• Each other,                                                     The following disclosure requirements for groupings 
• Activities conducted directly by the partner or                 apply. You’re required to report certain changes to your 
shareholder, or                                                   groupings that occur during the tax year to the IRS. If you 
                                                                  fail to report these changes, each trade or business 

                                                                  -6-                      Instructions for Form 8582 (2023)

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activity or rental activity will be treated as a separate income or deduction separately to you, and the gross
activity. You’ll be considered to have made a timely income or deduction is passive activity gross income or a
disclosure if you filed all affected income tax returns passive activity deduction (respectively), include that
consistent with the claimed grouping and make the amount in the net income or net loss entered on Form
required disclosure on the income tax return for the year in 8582.
which you first discovered the failure to disclose. If the IRS
The partnership or S corporation doesn’t have a
discovered the failure to disclose, you must have
record of your prior year unallowed losses from
reasonable cause for not making the required disclosure. CAUTION!
the passive activities of the partnership or S
For more information on disclosure requirements, see
corporation. If you had prior year unallowed losses from
Revenue Procedure 2010-13, available at IRS.gov/irb/
these activities, they can be found in column (c) of your
2010-04_IRB#RP-2010-13.
2022 Part VIII.
New grouping. You must file a written statement with
your original income tax return for the first tax year in Passive Activity Income
which two or more activities are originally grouped into a
To figure your overall gain or loss from all passive
single activity. The statement must provide the names,
activities or any passive activity, take into account only
addresses, and employer identification numbers (EINs), if
passive activity income. Don’t enter income that isn’t
applicable, for the activities being grouped as a single
passive activity income on Form 8582.
activity. In addition, the statement must contain a
declaration that the grouped activities make up an Passive activity income includes all income from
appropriate economic unit for the measurement of gain or passive activities (with certain exceptions described in
loss under the passive activity rules. Temporary Regulations section 1.469-2T(c)(2) and
Addition to an existing grouping. You must file a Regulations section 1.469-2(c)(2)), including gain from
written statement with your original income tax return for the disposition of an interest in a passive activity and from
the tax year in which you add a new activity to an existing the disposition of property used in a passive activity at the
group. The statement must provide the name, address, time of the disposition.
and EIN, if applicable, for the activity that’s being added Passive activity income doesn’t include the following.
and for the activities in the existing group. In addition, the • Income from an activity that isn’t a passive activity.
statement must contain a declaration that the activities • Portfolio income, including interest (other than
make up an appropriate economic unit for the self-charged interest treated as passive activity income,
measurement of gain or loss under the passive activity discussed later), dividends, annuities, and royalties not
rules. derived in the ordinary course of a trade or business, and
Regrouping. You must file a written statement with your gain or loss from the disposition of property that produces
original income tax return for the tax year in which you portfolio income or is held for investment (see section
regroup the activities. The statement must provide the 163(d)(5)). See Temporary Regulations section
names, addresses, and EINs, if applicable, for the 1.469-2T(c)(3).
activities that are being regrouped. If two or more activities • Alaska Permanent Fund dividends.
are being regrouped into a single activity, the statement • Personal service income, including salaries, wages,
must contain a declaration that the regrouped activities commissions, self-employment income from trade or
make up an appropriate economic unit for the business activities in which you materially participated for
measurement of gain or loss under the passive activity the tax year, deferred compensation, taxable social
rules. In addition, the statement must contain an security and other retirement benefits, and payments from
explanation of the material change in the facts and partnerships to partners for personal services. See
circumstances that made the original grouping clearly Temporary Regulations section 1.469-2T(c)(4).
inappropriate. • Income from positive section 481 adjustments allocated
to activities other than passive activities. See Temporary
Passive Activity Income and Regulations section 1.469-2T(c)(5).
• Income or gain from investments of working capital.
Deductions Income from an oil or gas property if you treated any
•
Take into account only passive activity income and loss from a working interest in the property for any tax
passive activity deductions to figure your net income or year beginning after 1986 as a nonpassive loss under the
net loss from all passive activities or any passive activity. rule excluding working interests in oil and gas wells from
If your passive activity is reported on Schedule C, E, or passive activities (see item 3 under Activities That Are Not
F, and the activity has no prior year unallowed losses or Passive Activities, earlier). See Regulations section
any gain or loss from the disposition of assets or an 1.469-2(c)(6).
interest in the activity, take into account only the passive • Any income from intangible property if your personal
activity income and passive activity deductions from the efforts significantly contributed to the creation of the
activity to figure the amount to enter on Form 8582. property.
• Any income treated as not from a passive activity under
If you own an interest in a passive activity through a Temporary Regulations section 1.469-2T(f) and
partnership or an S corporation, the partnership or S Regulations section 1.469-2(f). See Recharacterization of
corporation will generally provide you with the net income Passive Income, later.
or net loss from the passive activity. If, however, the
partnership or S corporation must state an item of gross

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• Overall gain from any interest in a PTP (see item 2 • Losses from dispositions of property that produce
under Passive activity loss rules for partners in PTPs, portfolio income or property held for investment.
later). • State, local, and foreign income taxes.
• State, local, and foreign income tax refunds. • Charitable contribution deductions.
• Income from a covenant not to compete. • Net operating loss deductions, percentage depletion
• Any reimbursement of a casualty or theft loss included carryovers under section 613A(d), and capital loss
in income as recovery of all or part of a prior year loss carryovers.
deduction if the deduction for the loss wasn’t treated as a • Deductions and losses that would’ve been allowed for
passive activity deduction. tax years beginning before 1987, but for basis or at-risk
• Cancellation of debt income to the extent that at the limitations.
time the debt was discharged, the debt wasn’t properly • Net negative section 481 adjustments allocated to
allocable under Temporary Regulations section 1.163-8T activities other than passive activities. See Temporary
to passive activities. Regulations section 1.469-2T(d)(7).
• Deductions for losses attributable to a federally
Recharacterization of Passive Income declared disaster.
Certain income from passive activities must be • The deduction allowed for the deductible part of
recharacterized and excluded from passive activity self-employment taxes.
income. The amount of income recharacterized equals
the net income from the sources given below. If during the Self-Charged Interest
tax year you received net income from any of these Certain self-charged interest income or deductions may
sources (either directly or through a partnership or an S be treated as passive activity gross income or passive
corporation), see Pub. 925 to find out how to report net activity deductions if the loan proceeds are used in a
income or loss from these sources. For more information, passive activity. Generally, self-charged interest income
see Temporary Regulations section 1.469-2T(f) and and deductions result from loans between you and a
Regulations section 1.469-2(f). partnership or S corporation in which you had a direct or
indirect ownership interest. This includes both loans you
Income from the following sources may be subject to made to the partnership or S corporation and loans the
the net income recharacterization rules. partnership or S corporation made to you. It also includes
• Significant participation passive activities defined in loans from one partnership or S corporation to another
item 4 under Tests for individuals, earlier. partnership or S corporation if each owner in the
• Rental of property if less than 30% of the unadjusted borrowing entity has the same proportional ownership
basis of the property is subject to depreciation. interest in the lending entity.
• Passive equity-financed lending activities.
• Rental of property incidental to a development activity. The self-charged interest rules don’t apply to your
• Rental of property to a nonpassive activity. interest in a partnership or S corporation if the entity made
• Acquisition of an interest in a pass-through entity that an election under Regulations section 1.469-7(g) to avoid
licenses intangible property. the application of these rules. For more details on the
self-charged interest rules, see Regulations section
Passive Activity Deductions 1.469-7.
To figure your overall gain or overall loss from all passive
activities or any passive activity, take into account only Former Passive Activities
passive activity deductions. A former passive activity is any activity that was a passive
activity in a prior tax year but is not a passive activity in the
Passive activity deductions include all deductions from current tax year. A prior year unallowed loss from a former
activities that are passive activities for the current tax year passive activity is allowed to the extent of current year
and all deductions from passive activities that were income from the activity.
disallowed under the PAL rules in prior tax years and
carried forward to the current tax year. See Regulations If current year net income from the activity is less than
section 1.469-1(f)(4). or equal to the prior year unallowed loss, enter the prior
year unallowed loss and any current year net income from
Passive activity deductions include any loss from a
the activity on Form 8582.
disposition of property used in a passive activity at the
time of the disposition and any loss from a disposition of If current year net income from the activity is more than
less than your entire interest in a passive activity. See the prior year unallowed loss from the activity, enter the
Dispositions, later, for the treatment of losses upon prior year unallowed loss and the current year net income
disposition of your entire interest in an activity. up to the amount of prior year unallowed loss on Form
Passive activity deductions don’t include the following. 8582.

• Deductions for expenses (other than interest expense) If the activity has a net loss for the current year, enter
that are clearly and directly allocable to portfolio income. the prior year unallowed loss (but not the current year
• Qualified home mortgage interest, capitalized interest loss) on Form 8582.
expenses, and other interest expenses (except
self-charged interest treated as a passive activity To report a disposition of a former passive activity,
deduction (discussed next) and interest expenses follow the rules under Dispositions next.
properly allocable to passive activities).

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Dispositions 1040), you report a total loss of $15,450, which includes a
current year $2,800 net loss and a $12,650 prior year
Disposition of an Entire Interest unallowed loss. You have an overall gain from the
disposition ($15,525 – $15,450 = $75).
If you disposed of your entire interest in a passive activity
or a former passive activity to an unrelated person in a Because you had an overall gain, you make the
fully taxable transaction during the tax year, your losses following entries in Part IV. You enter the $15,525 gain on
allocable to the activity for the year aren’t limited by the the disposition in column (a), the current year loss of
PAL rules. $2,800 in column (b), and the prior year unallowed loss of
$12,650 in column (c).
A fully taxable transaction is a disposition in which you
Example 2. Activity with overall loss. You sell your
recognize all realized gain or loss.
entire interest in an oil and gas limited partnership that
If you’re using the installment method to report this kind was your only passive activity for a gain of $2,000. You
of disposition, figure the loss for the current year that isn’t have a current year Schedule E loss of $3,330 and a
limited by the PAL rules by multiplying your overall loss Schedule E prior year unallowed loss of $1,115.
(which doesn’t include losses allowed in prior years) by Because you have an overall loss of $2,445 after
the following fraction: combining the gain and losses, none of the amounts are
entered on Form 8582.
Gain recognized in the current year You enter the net loss plus the prior year unallowed
Unrecognized gain as of the beginning of the current loss ($3,330 + $1,115 = $4,445) on Schedule E, Part II,
year column (i), and the $2,000 gain on the sale on Form 8949,
in either Part I or Part II, depending on how long you held
the partnership interest.
A partner in a PTP isn’t treated as having disposed of
an entire interest in an activity of a PTP until there’s an Disposition of Less Than an Entire Interest
entire disposition of the partner's interest in the PTP. Gains and losses from the disposition of less than an
entire interest in an activity are treated as part of the net
Reporting an Entire Disposition on Form 4797 or income or net loss from the activity for the current year.
Form 8949 A disposition of less than substantially all of an
If you completely dispose of your entire interest in a ! entire interest doesn’t trigger the allowance of
passive activity or a former passive activity, you may have CAUTION prior year unallowed losses.
to report net income or loss and prior year unallowed
losses from the activity. All the net income and losses are Disposition of Substantially All of an Activity
reported on the forms and schedules normally used.
You may treat the disposition of substantially all of an
Combine all income and losses (including any prior activity as a separate activity if you can prove with
year unallowed losses) from the activity for the tax year to reasonable certainty:
see if you have an overall gain or loss. 1. The prior year unallowed losses, if any, allocable to
If you have an overall gain, report the income, losses, the part of the activity disposed of; and
and prior year unallowed losses in Part IV or V. 2. The net income or loss for the year of disposition
allocable to the part of the activity disposed of.
If you have an overall gain and this is a former passive
activity, report all income and losses (including any prior
year unallowed losses) on the forms and schedules Specific Instructions
normally used and don’t use Form 8582.
Part I—2023 Passive Activity Loss
If you have an overall loss when you combine the
Use Part I to combine the net income and net loss from all
income and losses, don’t use Form 8582 for the activity.
passive activities to determine if you have a passive
All losses (including prior year unallowed losses) are
activity loss (PAL) for 2023. Use Parts IV and V first to
allowed in full. Report the income and losses on the forms
determine the entries for lines 1 and 2 of Part I, as follows.
and schedules normally used.
• Use Part IV for rental real estate activities with active
An overall loss from an entire disposition of a passive participation.
activity is a nonpassive loss if you have an aggregate loss • Use Part V for all other passive activities.
from all other passive activities. When figuring your Line 3. If you have prior year unallowed CRD from rental
modified adjusted gross income for Part II, line 6, of Form real estate activities, treat that dollar amount as negative
8582, be sure to take into account the overall loss from and combine with lines 1d and 2d. Enter the combined
the disposition of the activity. amount on line 3 and enter “CRD” and the dollar amount
Example 1. Activity with overall gain. You sell your of the CRD (as a negative) on the dotted line.
entire interest in a rental real estate activity in which you
actively participated for a gain of $15,525. $7,300 of the Note. If you included prior year unallowed CRD from
gain is section 1231 gain reported on Form 4797, rental real estate activities in line 3, and line 3 is a loss and
Part I, and $8,225 is ordinary recapture income reported line 1d is zero or more, go to the instructions for Part II,
on Form 4797, Part II. On line 22 of Schedule E (Form line 9, later.

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If you need additional lines for any of the Parts IV If you have prior year unallowed CRD from passive
TIP through IX, you can either attach copies of the activities other than rental real estate activities, include
applicable pages of Form 8582, or your own that amount in Part V. Add "CRD" after the name of the
schedule that’s in the same format as the applicable activity.
part(s).
Column (a). Enter the current year net income for each
activity. Enter the total of column (a) on Part I, line 2a, of
Part IV Form 8582. (See the example under Column (a) for Part
Individuals and qualifying estates who actively IV, earlier.)
participated in rental real estate activities must include the Column (b). Enter the current year net loss for each
income or loss from those activities in Part IV to figure the activity. Enter the total of column (b) on Part I, line 2b, of
amounts to enter on Part I, lines 1a through 1c, of Form Form 8582. (See the example under Column (b) for Part
8582. IV, earlier.)
Don’t enter a prior year unallowed loss in column (c) of Column (c). Enter the unallowed losses for the prior
Part IV unless you actively participated in the activity in years for each activity. You find these amounts in Part VII,
both the year the loss arose and the current tax year. If column (c), of your 2022 Form 8582. Enter the total of
you didn’t actively participate in both years, enter the prior column (c) from your 2023 Part V on Part I, line 2c, of
year unallowed loss in column (c) of Part V. Form 8582.
Married individuals who file separate returns and Columns (d) and (e). Combine income and losses in
! lived with their spouses at any time during the tax columns (a) through (c) for each activity, and either enter
CAUTION year don’t qualify under the active participation
the overall gain for the activity in column (d) or enter the
rule and must use Part V instead of Part IV. overall loss for the activity in column (e). Don’t enter
amounts from columns (d) and (e) in Parts I, II, or III of
Column (a). Enter the current year net income from each Form 8582. These amounts will be used when the rest of
activity. Enter the total of column (a) on Part I, line 1a, of Form 8582 is completed to figure the loss allowed for the
Form 8582. current year.
Example. A Schedule E rental activity has current year
profit of $5,000 and a Form 4797 gain of $2,000. You Part II—Special Allowance for Rental
enter $7,000 in column (a). Real Estate Activities With Active
Column (b). Enter the current year net loss for each Participation
activity. Don’t enter any prior year unallowed losses in this
column. Enter the total of column (b) on Part I, line 1b, of If your filing status is married filing separately and
Form 8582. ! you lived with your spouse at any time during the
If an activity has net income on one form or schedule CAUTION year, you are not eligible for the special
and a net loss on another form or schedule, report the net allowances in Part II. Do not complete Part II. Instead, go
amounts separately in columns (a) and (b) of Part IV. to Part III of Form 8582. See the instructions for Part
III—Total Losses Allowed, later.
Example. A Schedule E rental activity has current year
income of $1,000 on line 21 of Schedule E and a current Use Part II to figure the maximum amount of rental loss
year Form 4797 loss of $4,500. You enter $1,000 in allowed if you have an overall loss on Part I, line 1d, from
column (a) and $4,500 in column (b). your rental real estate activities you actively participated in
during 2023.
Column (c). Enter the prior year unallowed losses for
each activity. You find these amounts in Part VII, column Note. If you included prior year unallowed CRD from
(c), of your 2022 Form 8582. Enter the total of column (c) rental real estate activities in line 3, first figure the special
from your 2023 Part IV on Part I, line 1c, of Form 8582. $25,000 allowance for losses from rental real estate
Columns (d) and (e). Combine income and losses in activities with active participation from Part I, line 1d, if
columns (a) through (c) for each activity, and either enter any, without regard to the CRD, by completing lines 4
the overall gain for the activity in column (d) or enter the through 8. To apply any remaining portion of the $25,000
overall loss for the activity in column (e). Don’t enter allowance to prior year unallowed CRD from rental real
amounts from columns (d) and (e) in Parts I, II, or III of estate activities, see the instructions for line 9.
Form 8582. These amounts will be used when the rest of If you’re claiming both the premium tax credit
Form 8582 is completed to figure the loss allowed for the ! (PTC) and self-employed health insurance
current year. CAUTION deduction (SEHID) and Part I, lines 1d and 3, of
Form 8582 are both losses, see Self-Employed Health
Part V Insurance Deduction and PTC in Pub. 974. You’ll have to
Use Part V to figure the amounts to enter on Part I, lines complete worksheets in Pub. 974 before you complete
2a through 2c, for: Part II of Form 8582.
• Passive trade or business activities,
• Passive rental real estate activities that don’t qualify for Enter all numbers in Part II as positive amounts (that is,
the special allowance, and greater than zero).
• Rental activities other than rental real estate activities.

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Example. Part II, line 4, has a loss of $42,000 Line 8. Don’t enter more than $12,500 on line 8 if you’re
(reported as a positive amount) and line 8 is $25,000. You married filing a separate return and you and your spouse
enter $25,000 on line 9 (the smaller of line 4 or line 8, both lived apart at all times during the year.
treated as positive amounts).
Line 9. If you do not have prior year unallowed CRD from
Note. If you included prior year unallowed CRD from rental real estate activities, enter the smaller of line 4 or
rental real estate activities in line 3, and line 3 is a loss and line 8 on line 9.
line 1d is a loss, complete lines 4 through 8, then see the If you have prior year unallowed CRD from rental real
instructions for line 9 below. If line 1d of Part I is zero or estate activities included in line 3 of Part I, and you have a
more, and line 3 is a loss, go directly to the instructions for loss on line 1d and line 3 of Part I, first figure the special
line 9 below. $25,000 special allowance for losses from rental real
Line 4. Enter on line 4 the smaller of the loss on Part I, estate activities with active participation, without regard to
line 1d, or the loss on line 3. the CRD, by completing lines 4 through 8, then go to the
Worksheet below. If line 1d of Part I is zero or more, and
Example. Part I, line 1d, has a loss of $3,000 and line 3 is a loss, complete the Worksheet below and enter
line 2d has a gain of $100. The combined loss on line 3 is the result on line 9 as described below.
$2,900. You enter $2,900 as a positive number on Part II,
line 4 (the smaller of the loss on Part I, line 1d, or the loss The remaining portion of the $25,000 allowance, if any,
on line 3). is available for the prior year unallowed CRD from rental
real estate activities. Use the Worksheet to figure the
Line 5. Married persons filing separate returns who lived maximum amount of prior year unallowed CRD allowed
apart from their spouses at all times during the year must from rental real estate activities.
enter $75,000 on line 5 instead of $150,000. Worksheet for Special Allowance for Prior
Line 6. To figure modified adjusted gross income, Unallowed Commercial Revitalization Deductions
combine all the amounts used to figure adjusted gross From Rental Real Estate Activities
income except don’t take into account:
• Passive income or loss included on Form 8582, Enter all numbers in this calculation as positive amounts (greater than
• Any rental real estate loss allowed to real estate zero)
professionals (defined under Activities That Are Not A. Enter $25,000* reduced by the amount, if any, of the
Passive Activities, earlier), smaller of Part II, line 4 or line 8 . . . . . . . . . . . . . . . . . . . $
• Any overall loss from a PTP, B. Enter the loss from Part I, line 3 . . . . . . . . . . . . . . . . . $
• The taxable amount of social security and tier 1 railroad C. Reduce line B by the amount of the smaller of Part II,
retirement benefits, line 4 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
• Deductible contributions to traditional individual
retirement accounts (IRAs) and section 501(c)(18) D. Enter the smallest of the amount of the prior unallowed
CRD (as a positive amount), the amount on line A, or the
pension plans, amount on line C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
• The deduction allowed for the deductible part of
self-employment taxes, * Enter $12,500 (reduced by the amount, if any, of the smaller of Part II, line 4
• The exclusion from income of interest from series EE or line 8) on line A if you’re married but filing a separate return and you and
and I U.S. savings bonds used to pay higher education your spouse lived apart at all times during the year.
expenses,
• The exclusion of amounts received under an
employer's adoption assistance program, Combine line D with the smaller of line 4 or line 8 and
• The student loan interest deduction, or enter the combined amount on line 9. Enter “CRD” and the
• The deduction allowed for foreign-derived intangible dollar amount of the special allowance for CRD on the
income and global intangible low-taxed income. dotted line.

Include in modified adjusted gross income any portfolio Part III—Total Losses Allowed
income and expenses that are clearly and directly Use Part III to figure the amount of the losses from all
allocable to portfolio income. Also include any income passive activities (as determined in Part I) allowed for
that’s treated as nonpassive income, such as overall gain 2023.
from a PTP and net income from an activity or item of
property subject to the recharacterization of passive Line 11. Use Parts IV through IX of Form 8582 and the
income rules. related instructions to figure the unallowed loss to be
carried forward and the allowed loss to report on your
When figuring modified adjusted gross income, include
forms and schedules for 2023.
any overall loss from the entire disposition of a passive
activity (considered a nonpassive loss). Parts IV and V
Example. Your adjusted gross income on line 11 of Parts IV and V, columns (d) and (e), show whether an
Form 1040 or Form 1040-SR is $92,000 and you have activity had an overall gain or loss. If you have activities
taxable social security benefits of $5,500 on line 6b. Your that show overall gain in column (d) of Parts IV or V, report
modified adjusted gross income is $86,500 ($92,000 – all the income and losses listed in columns (a), (b), and (c)
$5,500). for those activities on the proper forms and schedules,
including Form 8582.

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If you have activities that show an overall loss in enter the results in column (c). The total of column (c)
column (e) of Parts IV or V, you must allocate your must be the same as Part II, line 9, of Form 8582.
allowed loss on Part III, line 11, of Form 8582 to those If there is prior year unallowed CRD included in Part II,
activities by completing Parts VI, VII, plus VIII and/or IX. line 9:
Complete Part VI only if you entered an amount (other 1. For the Part VI for rental real estate activities with
than zero) on Part II, line 9, of Form 8582. Otherwise, skip active participation, multiply each ratio in column (b) by
Part VI and complete Part VII for all activities in Part IV or the lesser of line 4 or line 8; and
V that have overall losses in column (e) and any amount 2. For the Part VI for prior year unallowed CRD,
of prior year unallowed CRD included in line 3. multiply each ratio in column (b) by the amount from line D
of the Worksheet in the instructions for line 9 above.
Part VI
Use Part VI to allocate the special allowance on Part II, The total of column (c) for the Part VI for rental real estate
line 9, of Form 8582 among your rental real estate activities with active participation should be the same as
activities. the lesser of line 4 or line 8, Part II, and the total of column
(c) for the second Part VI for prior year unallowed CRD
If you used the Worksheet in the instructions for line 9 should be the amount from line D of the Worksheet.
to apply any remaining special allowance to prior year
Column (c) total is the same as column (a) total. If
unallowed CRD from one or more rental real estate
the total losses in column (c) are the same as those in
activities, complete a separate Part VI to allocate that
column (a), the losses in Part IV (or, in the case of the
portion of the special allowance to those CRD activities.
second Part VI for prior unallowed CRD, the additional
In the first column of Part VI, enter the name of each amount listed in Part I, line 3) are allowed in full and aren’t
activity. In the second column, enter the form or schedule carried over to Part VII. Report all amounts in columns (a),
and line number on which the loss will be reported. (b), and (c) of Part IV on the proper forms and schedules.
Example. You receive a Schedule K-1 from Column (c) total is less than column (a) total. If the
partnership P that reports losses from two rental real total losses in column (c) are less than the total losses in
estate activities, Activity X and Activity Y. The losses from column (a), complete column (d).
partnership P are reported on line 28A of Schedule E. In Column (d). Subtract column (c) from column (a) and
the first two columns of Part VI, enter: enter the results in column (d). Also enter the amounts
from column (d) of Part VI in column (a) of Part VII.
Name of Activity Form or Schedule
Part VII—Allocation of Unallowed Losses
Activity X Sch E, line 28A
Complete Part VII if any activities have an overall loss in
Activity Y Sch E, line 28A column (e) of Part V or losses in column (d) of Part VI (in
column (e) of Part IV and any prior year unallowed CRD
included in Part I, line 3, if you didn’t have to complete
If the loss from an activity is reported in more than one Part VI).
place, identify both locations in the second column (for
example, Sch E, line 28A/Form 4797, line 2). If you need On Part VII, enter the name of each activity and the
additional space, show this information on an attached form or schedule and line number on which the loss will
statement. be reported. See the Example for Part VI. If you have prior
year unallowed CRD from a passive activity other than
If you entered an amount on Part II, line 9, and there is
rental real estate in Part V, and/or unallowed losses for
no amount included in line 9 from prior year disallowed
prior year CRD from a rental real estate activity in Part VI,
CRD, list in Part VI all activities with an overall loss in
column (d), add “CRD” after the name of each of the
column (e) of Part IV.
activities.
If you also included an amount for prior year unallowed
Column (a). Enter the amounts, if any, from column (d)
CRD from rental real estate activities in line 9, complete
of Part VI (from column (e) of Part IV and any prior year
another Part IV for these CRD activities. You can use
unallowed CRD included in Part I, line 3, if you didn’t have
another Part IV or your own schedule in the same format
to complete Part VI). Also enter the losses, if any, from
as Part IV. Enter the prior year unallowed CRD for each
column (e) of Part V.
activity in column (a) of the second Part IV. Then follow
the instructions for column (b) and column (c) below for Column (b). Divide each of the individual losses shown
each Part IV. in column (a) by the total of all the losses in column (a)
and enter this ratio for each activity in column (b). The
Column (a). Enter the overall loss from column (e) of
total of all the ratios must equal 1.00.
Part IV for each activity.
Column (c). Complete the following computation.
Column (b). Divide each of the individual losses shown
in column (a) by the total of all the losses in column (a),
and enter this ratio for each activity in column (b). The
total of all the ratios in column (b) must equal 1.00.
Column (c). Multiply each ratio in column (b) by the
amount on Part II, line 9, of Form 8582, if there is no prior
year unallowed CRD from rental real estate activities, and

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A. Enter as a positive amount the forms and schedules normally used, subject to any
Part I, line 3, of Form 8582. . . . . . . . . . further limitations described in Coordination With Other
B. Enter Part II, line 9, of Limitations, earlier.
Form 8582 . . . . . . . . . . . . . . . . . . . . See the forms and schedules listed under How To
C. Subtract line from B Report Allowed Losses, later.
line A . . . . . . . . . . . . . . . . . . . . . . .
Part IX—Activities With Losses Reported on Two
or More Forms or Schedules
Multiply each ratio in column (b) by the amount on line
C above, and enter the result in column (c).
Use Part IX for any activity listed in Part VII that has losses
Parts VIII and IX that are reported on two or more different forms and
schedules or are identified separately on the same form or
Parts VIII and IX figure your unallowed and allowed losses
schedule (for example, 28% rate and non-28%-rate
for each activity.
capital losses reported on Form 8949). Part IX allocates
If you have losses from any activity that are reported on the allowed and unallowed loss for the activity and
two or more different forms or schedules, use Part IX allocates the allowed loss to the different forms or
instead of Part VIII for that activity. schedules (or where identified separately on the same
form or schedule) used to report the losses.
Also use Part IX instead of Part VIII for any activity with
two or more transactions that are reported on the same Only losses that would cause a difference in tax liability
form or schedule but must be separately identified for tax if they were reported on a different form or schedule or are
purposes. Transactions that must be separately identified identified separately on the same form or schedule are
include capital losses that are 28% rate losses and those kept separate. Those forms, schedules, and parts are the
that aren’t. following.
Note. 28% rate gain or loss includes all collectibles gains • Schedules C, E, and F.
and deductible long-term losses and section 1202 gain on • Form 8949 (Parts I and II (28% rate losses and
the sale of qualified small business stock. See the non-28%-rate losses)).

Instructions for Schedule D for details. Note. You must generally make a separate entry in Form
8949, Part I or Part II, for each transaction reported. See
Part VIII—Allowed Losses the Instructions for Form 8949.
• Forms 4684 (Section B), 4797 (Parts I and II), and
Use Part VIII for any activity listed in Part VII if all the loss 4835.
from that activity is reported on one form or schedule and
no transactions need to be identified separately (as Use a separate copy of Part IX for each activity for
discussed in Part IX, later). Also see Identification of which you have losses reported on two or more different
Disallowed Passive Activity Deductions in Pub. 925 for forms or schedules or which are identified separately on
more information. the same form or schedule.
Example. You will report all the allowed loss from an
activity listed in Part VII on Schedule E. Use Part VIII to In Part IX, enter the form or schedule and line number
determine the allowed loss, even if part of the loss is a on the dotted line above each line 1a (for example,
current year Schedule E loss and part of it is a prior year Schedule D, line 12, to report a long-term capital loss from
unallowed Schedule E loss. a partnership).
In Part VIII, enter the name of each activity and the form Line 1a, column (a). Enter the net loss plus any prior
or schedule and line number on which the loss is reported. year unallowed loss from the activity that’s reported on the
Identify each CRD from Part VII on a separate line of Part same form or, in the case of Form 4797 and Form 8949,
VIII and add "CRD" after the name of the activity. See the the same part.
Example for Part VI. If you have a Form 8949 28% rate loss and a Form
8949 non-28%-rate loss, see Example of Form 8949
Column (a). For each activity entered in Part VIII, enter
transactions, later, before completing Part IX.
the net loss plus the prior year unallowed loss for the
activity. Figure this amount by adding the losses in Line 1b, column (a). Enter any net income from the
columns (b) and (c) of Parts IV and V and any prior year activity that’s reported on the same form or schedule (or
unallowed CRD included in Part I, line 3. on the same part of the same form or schedule) as the
loss on line 1a, column (a).
Column (b). For each activity entered in Part VIII, enter
the amount from column (c) of Part VII for the activity. Example. You enter a prior year unallowed loss from
These are your unallowed losses for 2023. Keep a record Form 4797, Part I, on line 1a. If the activity has a current
of these amounts so the losses can be used to figure your year Form 4797, Part I, gain, enter the gain on line 1b,
PAL next year. column (a). If the activity doesn’t have a Form 4797, Part I,
gain, enter -0- on line 1b, column (a).
Column (c). Subtract column (b) from column (a). These
amounts are the losses allowed for 2023 under the Column (b). Subtract line 1b, column (a), from line 1a,
passive loss rules. Report the amounts in this column on column (a), and enter the result in column (b). If line 1b,

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column (a), is more than line 1a, column (a), enter -0- in           Unallowed losses for Activity I are the following.
column (b).                                                     •    28% rate loss: 0.25 x $3,130 = $782.50.
Column (c).    Divide each of the losses entered in column      •    Non-28%-rate loss: 0.75 x $3,130 = $2,347.50.
(b) by the total of column (b) and enter the ratio in column         Allowed losses for Activity I are the following.
(c). The total of this column must be 1.00.                     •    28% rate loss: $1,000 − $782.50 = $217.50.
                                                                •    Non-28%-rate loss: $3,000 − $2,347.50 = $652.50.
Column (d).    Multiply the unallowed loss for this activity, 
found in Part VII, column (c), by each ratio in column (c) of        The total loss allowed for Activity I ($870) is entered in 
Part IX. If -0- is entered in column (b) of Part IX, also enter Part II of Form 8949. The allowed 28% rate loss ($217.50) 
-0- for that form or schedule in column (d).                    is entered on the 28% Rate Gain Worksheet (see the 
                                                                instructions for Schedule D, line 18). Keep a record of the 
   The amount in column (d) is the unallowed loss for           unallowed 28% rate and non-28%-rate losses to figure the 
2023. Keep a record of Part IX so you can use the losses        PAL for next year.
to figure your PAL next year.
                                                                     See the forms and schedules listed under How To 
Column (e).    Subtract the amount in column (d) from the       Report Allowed Losses next.
loss entered on line 1a, column (a). This amount is the 
loss allowed for 2023 under the passive loss rules. Report      How To Report Allowed Losses
the amounts in this column on the forms or schedules 
                                                                Line 3 is income. If Part I, line 3, of Form 8582 shows 
normally used, subject to any further limitations described 
                                                                net income or zero, all the losses in columns (b) and (c) of 
in Coordination With Other Limitations, earlier. The forms 
                                                                Parts IV and V and any prior year unallowed CRD 
and schedules you use must show the losses from this 
                                                                included in line 3 are allowed in full under the passive loss 
column and the income, if any, for that activity from 
                                                                rules. Report the income and losses in columns (a), (b), 
column (a) of Part IV or Part V.
                                                                and (c) of Parts IV and V and any prior year unallowed 
Example of Form 8949 transactions.          The taxpayer        CRD included in line 3 on the forms and schedules 
had the following Form 8949 transactions from passive           normally used.
activities in 2023.
   Activity I                                                   Line 11 is the same as the total of Part I, lines 1b, 1c, 
                                                                2b, 2c, and CRD included in line 3.  In this case, all the 
   A passive activity prior year unallowed long-term            losses in columns (b) and (c) of Parts IV and V and any 
capital loss (a 28% rate loss) of $1,000 and a current year     prior year unallowed CRD included in line 3 are allowed in 
long-term capital loss (a non-28%-rate loss) of $3,000.         full under the passive loss rules. Report the income and 
   Activity II                                                  losses in columns (a), (b), and (c) of Parts IV and V on the 
   A current year collectibles loss (a 28% rate loss) of        forms and schedules normally used.
$230 and net income of $1,100 from Schedule E (Form             Columns (a) and (c) of Part VI are the same amount. 
1040).                                                          In this case, all the losses in columns (b) and (c) of Part IV 
   Part V                                                       and any prior year unallowed CRD included in line 3 are 
   Activity I has an overall loss of $4,000 (current year       allowed in full under the passive loss rules. Report the 
long-term capital loss of $3,000 and a prior year               income and losses in columns (a), (b), and (c) of Part IV 
unallowed long-term capital loss of $1,000). Activity II has    and any prior year unallowed CRD included in line 3 on 
an overall gain of $870 (current year net income of $1,100      the forms and schedules normally used.
less a current year long-term capital loss of $230). Part III,  Losses allowed in column (c) of Part VIII.    The 
line 11, of Form 8582 shows an allowed loss of $1,100.          amounts in column (c) of Part VIII are the losses or 
   Since Activity II has an overall gain, the amounts shown     deductions allowed for 2023 for the activities listed in that 
in columns (a) and (b) of Part V for that activity are          part. Report the loss allowed from column (c) of Part VIII 
reported on the proper forms and schedules and aren’t           and the income, if any, for that activity from column (a) of 
shown in any other part.                                        Part IV or V on the form or schedule normally used.
   Part VII                                                     Losses allowed in column (e) of Part IX.    The amounts 
   Activity I has an unallowed loss of $3,130 (Part I, line 3,  in column (e) of Part IX are the losses or deductions 
of Form 8582 ($3,130) less the sum of Part II, line 9, of       allowed for 2023 for the activity listed on that part. Report 
Form 8582 (-0-) x 100%).                                        the losses allowed from column (e) of Part IX and the 
                                                                income, if any, for that activity from column (a) of Part IV 
   Part IX
                                                                or V on the forms or schedules normally used.
   Part IX is used to figure the portion of the unallowed 
loss attributable to the 28% rate loss and the portion          Schedules C and F, and Form 4835.    Enter on the net 
attributable to the non-28%-rate loss.                          profit or loss line of your Schedule C or F, or line 34c of 
                                                                Form 4835, the allowed passive loss from the part. To the 
   The loss attributable to the 28% rate loss ($1,000) and 
                                                                left of the entry space, enter “PAL.”
the loss attributable to the non-28%-rate loss ($3,000) are 
separate entries in Part IX. The ratio of each loss to the           If the net profit or loss line on your form or schedule 
total of the two losses is figured as follows. $1,000/$4,000    shows net profit for the year, reduce the net profit by the 
= 0.25 and $3,000/$4,000 = 0.75. Each of these ratios is        allowed loss from Part VIII or IX and enter the result on the 
multiplied by the unallowed loss for Activity I, shown in       net profit or loss line.
column (c) of Part VII ($3,130).

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Example. Schedule C shows net profit for the year of Entire disposition with an overall gain. Gains and
$5,000 from a passive activity. The activity also has a losses from this activity were included on Form 8582 so
Form 4797 gain of $2,500 and a prior year unallowed that the gains might offset other PALs. Report all the gains
Schedule C loss of $6,000. The loss allowed for 2023 is and losses on the forms and schedules normally used,
$6,000. You enter a net loss of $1,000 on line 31 of and to the left of the entry space, enter “EDPA.”
Schedule C (the $5,000 net profit for the year less the
$6,000 loss allowed for the year). To the left of the entry Publicly Traded Partnerships (PTPs)
space, you enter “PAL.” A PTP is a partnership whose interests are traded on an
See Form 4797 and Form 8949, later, if you also had established securities market or are readily tradable on a
passive gains and losses from the sale of assets or of an secondary market (or its substantial equivalent).
interest in a passive activity. An established securities market includes any national
Schedule E, Part I. Enter the allowed loss from the part securities exchange and any local exchange registered
on line 22 of Schedule E. An activity that has net profit for under the Securities Exchange Act of 1934 or exempted
the year and prior year unallowed losses will have net from registration because of the limited volume of
profit on line 21 and the allowed loss on line 22. The transactions. It also includes any over-the-counter market.
allowed loss on line 22 will include the loss allowed to the A secondary market generally exists if a person stands
extent of the net profit. Line 24 of Schedule E will show ready to make a market in the interest. An interest is
total profit and line 25 will show total losses allowed (both treated as readily tradable if the interest is regularly
passive and nonpassive). Line 26 will show the total net quoted by persons, such as brokers or dealers, who are
profit or loss. making a market in the interest.
Schedule E, Parts II and III. Any item of income shown The substantial equivalent of a secondary market
on your Schedule K-1 that’s passive income must be exists if there’s no identifiable market maker, but holders
entered as passive income in the appropriate column of of interests have a readily available, regular, and ongoing
Schedule E, Part II or III. Enter the passive loss allowed opportunity to sell or exchange interests through a public
from Part VIII or IX of Form 8582 in the appropriate means of obtaining or providing information on offers to
column for passive losses. The passive losses allowed buy, sell, or exchange interests. Similarly, the substantial
include the loss allowed to the extent of any net income equivalent of a secondary market exists if prospective
from the activity. Passive net income or loss reportable in buyers and sellers have the opportunity to buy, sell, or
Schedule E, Part II, includes any self-charged interest exchange interests in a timeframe and with the regularity
income and deductions treated as passive activity income and continuity that the existence of a market maker would
and deductions. See Self-Charged Interest, earlier. provide.
See Form 4797 and Form 8949, later, if you also had
passive gains or losses from the sale of assets or of an Special Instructions for PTPs
interest in a passive activity. Section 469(k) provides that the passive activity
Form 4684, Section B. Any passive activity gain from limitations must be applied separately to items from each
Form 4684 is unchanged. It was used on Form 8582 to PTP. PALs from a PTP may generally be used only to
determine allowable PALs. If you don’t have passive offset income or gain from passive activities of the same
losses on Form 4684, complete Form 4684 and follow the PTP. The special allowance for rental real estate activities
instructions for that form for where to report the gain. (including CRDs) doesn’t apply to PALs from a PTP.
If you have passive losses on Form 4684, cross Passive activity loss rules for partners in PTPs. Don’t
through the amount you first entered on line 31, 32, 38a, report passive income, gains, or losses from a PTP on
38b, or 39 of that form, and enter the allowed loss from Form 8582. Instead, use the following rules to figure and
the part. To the left of the entry space, enter “PAL.” report your income, gains, and losses from passive
activities you held through each PTP you owned during
Form 4797 and Form 8949. If you sold assets from a
the tax year.
passive activity or you sold an interest in your passive
activity, all gains from the activity must be entered on the 1. Combine any current year income, gains and
appropriate line of Form 4797 or Form 8949. Identify the losses, and any prior year unallowed losses to see if you
gain as “FPA.” Enter any allowed losses for Form 4797 or have an overall loss from the PTP. Include only the same
Form 8949 on the appropriate line. On Form 8949, include types of income and losses you would include to figure
“PAL” in the description of the property in column (a). On your net income or loss from a non-PTP passive activity.
Form 4797, enter “PAL” to the left of the entry space (for See Passive Activity Income and Deductions, earlier.
example, line 2 or line 10). 2. If you have an overall gain, the net gain portion
(total gain minus total losses) is nonpassive income.
Entire disposition with an overall loss. If you made an
entire disposition of your interest in a passive activity and It’s important to figure the nonpassive income because
that activity had an overall loss, none of the gains, if any, it must be included in modified adjusted gross income to
or losses were entered on Form 8582. However, all the figure the special allowance for active participation in a
gains and losses must be reported on the forms or non-PTP rental real estate activity on Form 8582. Also,
schedules normally used. To the left of the entry space, you may be able to include the nonpassive income in
enter “EDPA.” investment income when figuring your investment interest
expense deduction. See Form 4952, Investment Interest
Expense Deduction.

Instructions for Form 8582 (2023) -15-

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Report all gains and allowed losses from the activity on (c) of Part VIII (column (e) of Part IX) are the allowed
the forms or schedules normally used, and to the left of losses to report on your forms or schedules. Report these
each entry space, enter “From PTP.” losses and any income from the PTP on the forms and
Example. You have Schedule E income of $8,000 and schedules normally used.
a Form 4797 prior year unallowed loss of $3,500 from the 4. If you have an overall loss and you disposed of your
passive activities of a PTP. You have a $4,500 overall entire interest in the PTP to an unrelated person in a fully
gain ($8,000 − $3,500) that’s nonpassive income. On taxable transaction during the year, your losses (including
Schedule E, Part II, you report the $4,500 net gain as prior year unallowed losses) allocable to the activity for
nonpassive income in column (k). In column (h), you the year aren’t limited by the passive loss rules. A fully
report the remaining Schedule E gain of $3,500 ($8,000 − taxable transaction is one in which you recognize all your
$4,500) as passive income. On the appropriate line of realized gain or loss. Report the income and losses on the
Form 4797, you report the prior year unallowed loss of forms and schedules normally used.
$3,500. You enter “From PTP” to the left of each entry
space. For rules on the disposition of an entire interest
3. If you have an overall loss (but didn’t dispose of reported using the installment method, see Disposition of
your entire interest in the PTP to an unrelated person in a an Entire Interest, earlier.
fully taxable transaction during the year), the losses are
allowed only to the extent of the income, and the excess Paperwork Reduction Act Notice. We ask for the
loss is carried forward to use in a future year if you have information on this form to carry out the Internal Revenue
income to offset it. Report as a passive loss on the laws of the United States. You are required to give us the
schedule or form you normally use the portion of the loss information. We need it to ensure that you are complying
equal to the income. Report the income as passive with these laws and to allow us to figure and collect the
income on the form or schedule you normally use. right amount of tax.
Example. You have a Schedule E loss of $12,000 You are not required to provide the information
(current year losses plus prior year unallowed losses) and requested on a form that is subject to the Paperwork
Form 4797 gain of $7,200 from the passive activities of a Reduction Act unless the form displays a valid OMB
PTP. You report the $7,200 gain on the appropriate line of control number. Books or records relating to a form or its
Form 4797. On Schedule E, Part II, you report $7,200 of instructions must be retained as long as their contents
the losses as a passive loss in column (g). You carry may become material in the administration of any Internal
forward the unallowed loss of $4,800 ($12,000 − $7,200). Revenue law. Generally, tax returns and return
If you have unallowed losses from more than one information are confidential, as required by section 6103.
activity of the PTP or from the same activity of the PTP The time needed to complete and file this form will vary
that must be reported on different forms or schedules, depending on individual circumstances. The estimated
allocate the unallowed losses on a pro rata basis to figure burden for individual taxpayers filing this form is approved
the amount allowed for each activity or on each form or under OMB control number 1545-0074 and is included in
schedule. the estimates shown in the instructions for their individual
To allocate and keep a record of the unallowed income tax return. The estimated burden for all other
TIP losses, use Parts VII, VIII, and IX of Form 8582. taxpayers who file this form is shown below.

List each activity of the PTP in Part VII. Enter the overall Recordkeeping. . . . . . . . . . . . . . . . . . 26 min.
loss from each activity in column (a). Complete column (b) Learning about the law or the form . . 22 min.
of Part VII according to its instructions. Multiply the total Preparing the form. . . . . . . . . . . . . . . 1 hr., 52 min.
unallowed loss from the PTP by each ratio in column (b)
and enter the result in column (c) of Part VII. Copying, assembling, and sending
the form to the IRS. . . . . . . . . . . . . . . 48 min.
Next, complete Part VIII for each activity listed in Part
VII if all the loss from that activity is reported on one form
or schedule. Use Part IX instead of Part VIII for each
activity with losses reported on two or more different If you have comments concerning the accuracy of
forms or schedules (or are identified separately on the these time estimates or suggestions for making this form
same form or schedule). Enter the net loss plus any prior simpler, we would be happy to hear from you. See the
year unallowed losses in column (a) of Part VIII (or line 1a, instructions for the tax return with which this form is filed.
column (a), of Part IX, if applicable). The losses in column

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