Former Passive — Instruction 8582 — Instructions for Form

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 current tax year. A prior-year unallowed loss from a former passive activity is allowed to the extent of current year income from the activity.

If current year net income from the activity is less than or equal to the prior-year unallowed loss, enter the prior-year unallowed loss and any current year net income from the activity on Form 8582.

The deduction allowed for the deductible part of self-employment taxes.

Income from the following sources may be subject to the net income recharacterization rules.

Significant participation passive activities defined in item 4 under Tests for individuals, earlier.
Rental of property if less than 30% of the unadjusted basis of the property is subject to depreciation.
Passive equity-financed lending activities.
Rental of property incidental to a development activity.
Rental of property to a nonpassive activity.
Acquisition of an interest in a pass-through entity that licenses intangible property.

Passive Activity Deductions To figure your overall gain or overall loss from all passive activities or any passive activity, take into account only passive activity deductions.

Passive activity deductions include all deductions from activities that are passive activities for the current tax year and all deductions from passive activities that were disallowed under the PAL rules in prior tax years and carried forward to the current tax year. See Regulations section 1.469-1(f)(4).

8 Instructions for Form 8582 (2025)

If current year net income from the activity is more than the prior-year unallowed loss from the activity, enter the prior-year unallowed loss and the current year net income up to the amount of prior-year unallowed loss on Form 8582.

If the activity has a net loss for the current year, enter the prior-year unallowed loss (but not the current year loss) on Form 8582.

To report a disposition of a former passive activity, follow the rules under Dispositions next.