Part I. 2025 Passive Activity Loss

Lines 1d and 3 If line 1d or 3 shows net income or zero, all the deductions and losses are allowed,

including any prior year unallowed losses entered on line 1c. Enter the deductions on the appropriate lines of Form 1120, U.S. Corporation Income Tax Return. Also enter any losses from Form 4797 or Form 8949 (and Schedule D (Form 1120)) on Form 1120, if applicable, including any prior year unallowed losses that are properly entered on those forms.

If the prior year unallowed losses include deductions that would have been reported on Form 1120, page 1, instead of on Form 4797 or Form 8949 (and Schedule D (Form 1120), as applicable), include the prior year unallowed losses on the appropriate line along with any current year deduction or loss from that line.

Example. The corporation had $1,000 of deductions for current year repairs and maintenance and $500 of deductions for prior year unallowed repairs and maintenance. Enter $1,500 as the deduction for repairs and maintenance allowed from passive activities on the proper line.

• Gross income and deductions from any trade or business activity of trading certain

Line 2. Closely Held Corporations Closely held corporations can offset the loss, if any, on line 1d with net active income. Net active income is the corporation's taxable income for the tax year, determined without regard to the following items.

• Net passive income or loss.

• Portfolio income. See Passive Activity Income, earlier.

• Deductions attributable to portfolio income described in Temporary Regulations sections 1.469-2T(d)(2)(i), (ii), and (iv).

personal property described in Temporary Regulations section 1.469-1T(e)(6), but only if the corporation did not materially participate in the activity for the tax year.

If the corporation disposed of its entire interest in a passive activity to an unrelated party in a fully taxable transaction, figure net active income by taking into account an overall loss from that activity only to the extent it exceeds overall gain from all other passive activities (the gain, if any, shown on Form 8810, line 1d).

If there is an overall loss from all other passive activities (Form 8810, line 1d, is a loss), figure net active income by taking into account all of the overall loss from that activity.

Line 4. Total Deductions and Losses Allowed Worksheet 2, columns (d) and (e), show whether an activity had an overall gain or loss.

Overall gain. A corporation with an overall gain for any of the activities in Worksheet 2, column (d), will report all of the deductions and losses listed in Worksheet 1 and any prior year unallowed losses in Worksheet 2 for that activity on the appropriate lines of Form 1120 and on Form 8949 and Schedule D (Form 1120), or Form 4797, as applicable.

Overall loss. A corporation uses Worksheets 3 and 4 for any of the activities that show an overall loss in column (e). Use Worksheet 3 to figure the unallowed deductions and losses to be carried forward to Worksheet 4. Use Worksheet 4 to figure the allowed deductions and losses to report on the forms and schedules for 2025.

• Interest expense allocated under Temporary Regulations section 1.163-8T to a portfolio expenditure (within the meaning of Temporary Regulations section 1.163-8T(b)(6)).

• Gain on the disposition of substantially appreciated property formerly held for investment. See Regulations section 1.469-2(c)(2)(iii)(F).

• Gross income from certain oil or gas properties treated under Regulations section 1.469-2(c)(6) as not from a passive activity.

8 Instructions for Form 8810 (2025)

Worksheet 2 for Form 8810, Lines 1a, 1b, and 1c Keep for Your Records

Worksheet 3—Allocation of Unallowed Deductions and Losses Keep for Your Records

If the corporation has activities in Worksheet 2 with an overall loss in column (e), use Worksheet 3 to figure the unallowed deductions and losses for each activity.

If any of the activities in Worksheet 2 had an overall gain in column (d), all of the deductions and losses (including prior year unallowed losses) for that activity are allowed in full. Enter the deductions on the appropriate line of Form 1120 and enter any losses on Form 4797, Form 8949, and Schedule D (Form 1120), as applicable.

Prior year unallowed losses from 2024. If there were prior year unallowed losses from 2024, include the prior year unallowed losses on the appropriate line along with any current year deduction or loss for that line. See the example in the instructions for lines 1d and 3, earlier. Prior year unallowed losses from Form 4797 and Form 8949 should have been kept separate in 2024, and should be identified as “prior year unallowed losses” on Form 4797 and Form 8949.

Column (a). Enter the loss from Worksheet 2, column (e).

Column (b). Divide each of the individual losses in column (a) by the total of all the losses in column (a) and enter the ratio for each of the activities in column (b). The total of all the ratios should equal 1.00.

Column (c). Multiply the unallowed loss from Form 8810, line 3, by each of the ratios in column (b) and enter the results in column (c).