Purpose of Form

Form 8582 is used by noncorporate taxpayers to figure the amount of any passive activity loss (PAL) for the current

tax year and to report the application of prior-year unallowed PALs.

A PAL occurs when total losses (including prior-year unallowed losses) from all your passive activities exceed the total income from all your passive activities.

• You don’t hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust.

Generally, passive activities include the following.

• Trade or business activities in which you did not materially participate for the tax year.

• Rental activities, regardless of your participation.

PALs can’t be used to offset income from nonpassive activities. However, a special allowance for rental real estate activities may allow some losses even if the losses exceed passive income.

PALs not allowed in the current year are carried forward until they’re allowed either against passive activity 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.

For more information, see Pub. 925, Passive Activity and At-Risk Rules.

Note: Corporations subject to the passive activity rules must use Form 8810, Corporate Passive Activity Loss and Credit Limitations.