U.S. Individual Income Tax Return Forms

2023

Instructions for Form 8582

Department of the Treasury
Internal Revenue Service

Passive Activity Loss Limitations
Section references are to the Internal Revenue Code
unless otherwise noted.

Future Developments

For the latest information about developments related to
Form 8582 and its instructions, such as legislation
enacted after they were published, go to IRS.gov/
Form8582.

General Instructions

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.

Reminders

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

Prior year unallowed commercial revitalization deduction (CRD). If you have prior year unallowed CRDs
limited by the passive loss rules, you may continue to
include them in the calculations as shown in the Specific
Instructions, beginning with Part I—2023 Passive Activity
Loss, later.

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

Excess business loss limitation. If you are a
noncorporate taxpayer and have allowable business
losses after taking into account first the at-risk limitations
and then the passive loss limitations (this form), your
losses may be subject to the excess business loss
limitation. After taking into account all the other loss
limitations, complete Form 461, Limitation on Business
Losses, to figure the amount of your excess business
loss. See Form 461 and its instructions for details on the
excess business loss limitation.
Reporting prior year unallowed losses. Form 8582
must generally be filed by taxpayers who have an overall
gain (including any prior year unallowed losses) from
business or rental passive activities. See Exception under
Who Must File, later.
Regrouping due to Net Investment Income Tax. You
may be able to regroup your activities if you’re subject to
the Net Investment Income Tax. See Regrouping Due to
Net Investment Income Tax under Grouping of Activities,
later, for more information.

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.
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.
Jun 23, 2023

Who Must File

Form 8582 is filed by individuals, estates, and trusts who
have passive activity deductions (including prior year
unallowed losses). However, you don’t have to file Form
8582 if you meet the following exception.

Exception

You actively participated in rental real estate activities
(see Special Allowance for Rental Real Estate Activities,
later), and you meet all of the following conditions.
• Rental real estate activities with active participation
were your only passive activities.
• You have no prior year unallowed losses from these (or
any other passive) activities.
• Your total loss from the rental real estate activities
wasn’t more than $25,000 ($12,500 if married filing
separately).
• If you’re married filing separately, you lived apart from
your spouse all year.
• You have no current or prior year unallowed credits
from a passive activity.
• Your modified adjusted gross income (see the
instructions for line 6, later) was not more than $100,000
(not more than $50,000 if married filing separately).
• 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.
If all the above conditions are met, your rental real
estate losses are not limited, and you don’t need to
complete Form 8582. Enter losses reported on
Schedule E (Form 1040), Supplemental Income and Loss,
Part I, line 21, on Schedule E (Form 1040), Part l, line 22.
For losses from a partnership or an S corporation, enter
the amount of the allowable loss from Schedule K-1 on
Schedule E (Form 1040), Part II, column (g). Enter losses
reported on line 32 of Form 4835, Farm Rental Income
and Expenses, on Form 4835, line 34c.

Cat. No. 64294A

Coordination With Other Limitations

were performed in real property trades or businesses in
which you materially participated, and
b. You performed more than 750 hours of services
during the tax year in real property trades or businesses in
which you materially participated.

Generally, PALs are subject to other limitations (for
example, basis and at-risk limitations) before they’re
subject to the passive loss limitations. Once a loss
becomes allowable under these other limitations, you
must determine whether the loss is limited under the
passive loss rules. See Form 6198, At-Risk Limitations,
for details on the at-risk rules. Also, capital losses that are
allowable under the passive loss rules may be limited
under the capital loss limitations of section 1211.
Percentage depletion deductions that are allowable under
the passive loss rules may be limited under section
613A(d).

For purposes of whether you materially participated
under item (2), each interest in rental real estate is a
separate activity, unless you elect to treat all interests in
rental real estate as one activity. For details on making
this election, see the Instructions for Schedule E (Form
1040).
If you’re married filing jointly, one spouse must
separately meet both (2)(a) and (2)(b) without taking into
account services performed by the other spouse.
A real property trade or business is any real property
development, redevelopment, construction,
reconstruction, acquisition, conversion, rental, operation,
management, leasing, or brokerage trade or business.
Real property includes land, buildings, and other
inherently permanent structures permanently affixed to
land. Any interest in real property, including fee
ownership, co-ownership, leasehold, option, or similar
interest is real property. Tenant improvements to land,
buildings, or other structures that are inherently
permanent or otherwise classified as real property are real
property for this purpose. See Regulations section
1.469-9(b)(2) for more definitions and information about
determining whether a trade or business is a real property
trade or business.
For examples of the determination of whether a trade or
business is a real property trade or business, see
Regulations section 1.469-9(b)(2)(iii).
Services you performed as an employee aren’t treated
as performed in a real property trade or business unless
you owned more than 5% of the stock (or more than 5% of
the capital or profits interest) in the employer.

If you have allowable business losses after taking into
account the loss limitations discussed above and
computing the allowable passive losses on this form, your
losses may be subject to the excess business loss
limitation. Complete Form 461 to figure the amount of your
excess business loss. Any disallowed loss resulting from
this limitation will be treated as a net operating loss (NOL)
that must be carried forward and deducted in a
subsequent year. See Form 461 and its instructions for
details on the excess business loss limitation.

Definitions

Except as otherwise indicated, the following terms in
these instructions are defined as shown below.
Net income. This is the excess of current year income
over current year deductions from the activity. This
includes any current year gains or losses from the
disposition of assets or an interest in the activity.
Net loss. This is the excess of current year deductions
over current year income from the activity. This includes
any current year gains or losses from the disposition of
assets or an interest in the activity.
Overall gain. This is the excess of the “net income” from
the activity over the prior year unallowed losses from the
activity.

Note. If a rental real estate activity isn’t a passive activity
for the current year, any prior year unallowed loss is
treated as a loss from a former passive activity. See
Former Passive Activities, later.
3. A working interest in an oil or gas well. Your working
interest must be held directly or through an entity that
doesn’t limit your liability (such as a general partner
interest in a partnership). In this case, it doesn’t matter
whether you materially participated in the activity for the
tax year.
If, however, your liability was limited for part of the year
(for example, you converted your general partner interest
to a limited partner interest during the year), some of your
income and losses from the working interest may be
treated as passive activity gross income and passive
activity deductions. See Temporary Regulations section
1.469-1T(e)(4)(ii).
4. The rental of a dwelling unit you used as a
residence if section 280A(c)(5) applies. This section
applies if you rented out a dwelling unit that you also used
as a home during the year for a number of days that
exceeds the greater of 14 days or 10% of the number of
days during the year that the home was rented at a fair
rental.

Overall loss. This is (a) the excess of the prior year
unallowed losses from the activity over the “net income”
from the activity, or (b) the prior year unallowed losses
from the activity plus the “net loss” from the activity.
Prior year unallowed losses. These are the losses from
an activity that were disallowed under the PAL limitations
in a prior year and carried forward to the tax year under
section 469(b). See Regulations section 1.469-1(f)(4) and
Pub. 925.

Activities That Are Not Passive
Activities

The following aren’t passive activities.
1. Trade or business activities in which you materially
participated for the tax year.
2. Any rental real estate activity in which you materially
participated if you were a “real estate professional” for the
tax year. You were a real estate professional only if:
a. More than half of the personal services you
performed in trades or businesses during the tax year
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Instructions for Form 8582 (2023)

by the ratio of the gross rental income from that class to
the activity's total gross rental income. The activity's
average period of customer use equals the sum of these
class-by-class average periods weighted by gross
income. See Regulations section 1.469-1(e)(3)(iii).
Significant personal services include only services
performed by individuals. To determine if personal
services are significant, all relevant facts and
circumstances are taken into consideration, including the
frequency of the services, the type and amount of labor
required to perform the services, and the value of the
services relative to the amount charged for use of the
property.
2. Extraordinary personal services were provided in
making the rental property available for customer use.
This applies only if the services are performed by
individuals and the customers' use of the property is
incidental to their receipt of the services.
3. Rental of the property is incidental to a nonrental
activity.
The rental of property is incidental to an activity of
holding property for investment if the main purpose of
holding the property is to realize a gain from its
appreciation and the gross rental income is less than 2%
of the smaller of the unadjusted basis or the fair market
value (FMV) of the property.
Unadjusted basis is the cost of the property without
regard to depreciation deductions or any other basis
adjustment described in section 1016.
The rental of property is incidental to a trade or
business activity if:
a. You own an interest in the trade or business activity
during the tax year,
b. The rental property was mainly used in the trade or
business activity during the tax year or during at least 2 of
the 5 preceding tax years, and
c. The gross rental income from the property is less
than 2% of the smaller of the unadjusted basis or the FMV
of the property.

5. An activity of trading personal property for the
account of owners of interests in the activity. For purposes
of this rule, personal property means property that’s
actively traded, such as stocks, bonds, and other
securities. See Temporary Regulations section
1.469-1T(e)(6) for more details.
Generally, income and losses from these activities
aren’t entered on Form 8582. However, losses from these
activities may be subject to limitations other than the
passive loss rules.

Trade or Business Activities

A trade or business activity is an activity (other than a
rental activity or an activity treated as incidental to an
activity of holding property for investment) that:
1. Involves the conduct of a trade or business (within
the meaning of section 162),
2. Is conducted in anticipation of starting a trade or
business, or
3. Involves research or experimental expenditures
deductible under section 174.
Trade or business activities are generally reported on
Schedule C (Form 1040), Profit or Loss From Business
(Sole Proprietorship); Schedule F (Form 1040), Profit or
Loss From Farming; or in Part II or III of Schedule E (Form
1040). For trade or business activities that are significant
participation passive activities (defined in item 4 under
Tests for individuals, later), see Pub. 925 for how to report
their income or losses.

Rental Activities

A rental activity is a passive activity even if you materially
participated in the activity (unless it’s a rental real estate
activity in which you materially participated and you were
a real estate professional).
An activity is a rental activity if tangible property (real or
personal) is used by customers or held for use by
customers and the gross income (or expected gross
income) from the activity represents amounts paid (or to
be paid) mainly for the use of the property. It doesn’t
matter whether the use is under a lease, a service
contract, or some other arrangement.
However, if you meet any of the five exceptions below,
the rental of the property isn’t treated as a rental activity.
See Reporting Income and Losses From the Activities,
later, if you meet any of the exceptions.

Lodging provided for the employer's convenience to an
employee or the employee's spouse or dependents is
incidental to the activity or activities in which the employee
performs services.
4. You customarily make the rental property available
during defined business hours for nonexclusive use by
various customers.
5. You provide property for use in a nonrental activity
of a partnership, S corporation, or a joint venture in your
capacity as an owner of an interest in the partnership, S
corporation, or joint venture.

Exceptions

An activity is not a rental activity if any of the following
apply.
1. The average period of customer use is:
a. 7 days or less, or
b. 30 days or less and significant personal services
were provided in making the rental property available for
customer use.

Example. If a partner contributes the use of property
to a partnership, none of the partner's distributive share of
partnership income is income from a rental activity unless
the partnership is engaged in a rental activity.
Also, a partner's gross income from a guaranteed
payment under section 707(c) isn’t income from a rental
activity. The determination of whether the property used in
the activity is provided in the partner's capacity as an

Figure the average period of customer use for a class
of property by dividing the total number of days in all rental
periods by the number of rentals during the tax year. If the
activity involves renting more than one class of property,
multiply the average period of customer use of each class
Instructions for Form 8582 (2023)

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owner of an interest in the partnership is made on the
basis of all the facts and circumstances.

Form 8855, Election To Treat a Qualified Revocable Trust
as Part of an Estate.

Reporting Income and Losses From the
Activities

You aren’t considered to actively participate in a rental
real estate activity if at any time during the tax year your
interest (including your spouse's interest) in the activity
was less than 10% (by value) of all interests in the activity.

If an activity meets any of the five exceptions listed above,
it’s not a rental activity. You must then determine:
1. Whether your rental of the property is a trade or
business activity (see Trade or Business Activities,
earlier), and, if so,
2. Whether you materially participated in the activity
for the tax year (see Material Participation, later).

Active participation is a less stringent requirement than
material participation (see Material Participation, later).
You may be treated as actively participating if, for
example, you participated in making management
decisions or arranged for others to provide services (such
as repairs) in a significant and bona fide sense.
Management decisions that may count as active
participation include:
• Approving new tenants,
• Deciding on rental terms,
• Approving capital or repair expenditures, and
• Other similar decisions.

If the activity is a trade or business activity in which you
didn’t materially participate, enter the income and losses
from the activity in Part V.
If the activity is a trade or business activity in which you
did materially participate, report any income or loss from
the activity on the forms or schedules normally used.

The maximum special allowance is:

• $25,000 for single individuals and married individuals

If the rental activity didn’t meet any of the five
exceptions, it’s generally a passive activity. However,
special rules apply if you conduct the rental activity
through a publicly traded partnership (PTP) or if any of the
rules described under Recharacterization of Passive
Income, later, apply. Also see the PTP rules, later.

filing a joint return for the tax year.
• $12,500 for married individuals who file separate
returns for the tax year and lived apart from their spouses
at all times during the tax year.
• $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
the instructions for Parts IV and V for details.

Modified adjusted gross income limitation. If your
modified adjusted gross income (see the instructions for
line 6, later) is $100,000 or less ($50,000 or less if married
filing separately), your loss is deductible up to the amount
of the maximum special allowance referred to in the
preceding paragraph.

Special Allowance for Rental Real
Estate Activities
Active participation. If you actively participated in a
passive rental real estate activity, you may be able to
deduct up to $25,000 of loss from the activity from your
nonpassive income. This special allowance is an
exception to the general rule disallowing losses in excess
of income from passive activities.
The special allowance isn’t available if you were
married, are filing a separate return for the year, and lived
with your spouse at any time during the year.

If your modified adjusted gross income is more than
$100,000 ($50,000 if married filing separately) but less
than $150,000 ($75,000 if married filing separately), your
special allowance is limited to 50% of the difference
between $150,000 ($75,000 if married filing separately)
and your modified adjusted gross income.
Generally, if your modified adjusted gross income is
$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
part of the decedent's estate may actively participate in a
rental real estate activity. Unless future regulations
provide an exception, limited partners are not treated as
actively participating in a partnership's rental real estate
activity.

If you qualify under the active participation rules, use
Part IV. See the instructions for Part IV, later.

Material Participation

For the material participation tests listed below,
participation generally includes any work done in
connection with an activity if you owned an interest in the
activity at the time you did the work. The capacity in which
you did the work doesn’t matter. However, work isn’t
participation if:
• It isn’t work that an owner would customarily do in the
same type of activity, and
• One of your main reasons for doing the work was to
avoid the disallowance of losses or credits from the
activity under the passive activity rules.

A qualifying estate is the estate of a decedent for tax
years ending less than 2 years after the date of the
decedent's death if the decedent would’ve satisfied the
active participation requirements for the rental real estate
activity for the tax year the decedent died.
A qualified revocable trust may elect to be treated as
part of a decedent's estate for purposes of the special
allowance for active participation in rental real estate
activities. The election must be made by both the executor
(if any) of the decedent's estate and the trustee of the
revocable trust. For details, see Regulations section
1.645-1. To make this election, see the instructions on

Proof of participation. You may prove your participation
in an activity by any reasonable means. You don’t have to
maintain contemporaneous daily time reports, logs, or
similar documents if you can establish your participation
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Instructions for Form 8582 (2023)

an interest in the activity and whether or not you and your
spouse file a joint return for the tax year.

by other reasonable means. For this purpose, reasonable
means include, but are not limited to, identifying services
performed over a period of time and the approximate
number of hours spent performing the services during that
period, based on appointment books, calendars, or
narrative summaries.

Tests for investors. Work done as an investor in an
activity isn’t treated as participation unless you were
directly involved in the day-to-day management or
operations of the activity. For purposes of this test, work
done as an investor includes the following.
1. Studying and reviewing financial statements or
reports on operations of the activity.
2. Preparing or compiling summaries or analyses of
the finances or operations of the activity for your own use.
3. Monitoring the finances or operations of the activity
in a nonmanagerial capacity.

Tests for individuals. You materially participated for the
tax year in an activity if you satisfy at least one of the
following tests.
1. You participated in the activity for more than 500
hours.
2. Your participation in the activity for the tax year was
substantially all of the participation in the activity of all
individuals (including individuals who didn’t own any
interest in the activity) for the year.
3. You participated in the activity for more than 100
hours during the tax year, and you participated at least as
much as any other individual (including individuals who
didn’t own any interest in the activity) for the year.
4. The activity is a significant participation activity for
the tax year, and you participated in all significant
participation activities during the year for more than 500
hours.
A significant participation activity is any trade or
business activity in which you participated for more than
100 hours during the year and in which you didn’t
materially participate under any of the material
participation tests (other than this fourth test).
5. You materially participated in the activity (other than
by meeting this fifth test) for any 5 (whether or not
consecutive) of the 10 immediately preceding tax years.
6. The activity is a personal service activity in which
you materially participated for any 3 (whether or not
consecutive) preceding tax years.
An activity is a personal service activity if it involves the
performance of personal services in the fields of health,
law, engineering, architecture, accounting, actuarial
science, performing arts, consulting, or in any other trade
or business in which capital isn’t a material
income-producing factor.
7. Based on all the facts and circumstances, you
participated in the activity on a regular, continuous, and
substantial basis during the tax year.
You didn’t materially participate in the activity under this
seventh test, however, if you participated in the activity for
100 hours or less during the tax year.
Your participation in managing the activity doesn’t
count in determining whether you materially participated
under this test if:
a. Any person (except you) received compensation for
performing services in the management of the activity, or
b. Any individual spent more hours during the tax year
performing services in the management of the activity
than you did (regardless of whether the individual was
compensated for the management services).

Special rules for limited partners. If you were a limited
partner in an activity, you generally didn’t materially
participate in the activity. You did materially participate in
the activity, however, if you met material participation test
1, 5, or 6 under Tests for individuals, earlier, for the tax
year.
However, for purposes of the material participation
tests, you aren’t treated as a limited partner if you also
were a general partner in the partnership at all times
during the partnership's tax year ending with or within your
tax year (or, if shorter, during the portion of the
partnership's tax year in which you directly or indirectly
owned your limited partner interest).
Special rules for certain retired or disabled farmers
and surviving spouses of farmers. Certain retired or
disabled farmers and surviving spouses of farmers are
treated as materially participating in a farming activity if
the real property used in the activity would meet the estate
tax rules for special valuation of farm property passed
from a qualifying decedent. See Temporary Regulations
section 1.469-5T(h)(2).
Estates and trusts. The PAL limitations apply in figuring
the distributable net income and taxable income of an
estate or trust. The rules for determining material
participation for this purpose haven’t yet been issued.

Grouping of Activities

Generally, one or more trade or business activities or
rental activities may be treated as a single activity if the
activities make up an appropriate economic unit for the
measurement of gain or loss under the passive activity
rules.
Whether activities make up an appropriate economic
unit depends on all the relevant facts and circumstances.
The factors given the greatest weight in determining
whether activities make up an appropriate economic unit
are:
1. Similarities and differences in types of trades or
businesses,
2. The extent of common control,
3. The extent of common ownership,
4. Geographical location, and
5. Interdependencies between or among the activities.

Test for a spouse. Participation by your spouse during
the tax year in an activity you own may be counted as your
participation in the activity even if your spouse didn’t own
Instructions for Form 8582 (2023)

Example. You have a significant ownership interest in
a bakery and a movie theater in Baltimore and in a bakery
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• Activities conducted through other partnerships and
corporations.
A partner or shareholder may not treat as separate
activities those activities grouped together by the
partnership or corporation.

and a movie theater in Philadelphia. Depending on all the
relevant facts and circumstances, there may be more than
one reasonable method for grouping your activities. For
instance, the following groupings may or may not be
permissible.
• A single activity.
• A movie theater activity and a bakery activity.
• A Baltimore activity and a Philadelphia activity.
• Four separate activities.
Once you choose a grouping under these rules, you
must continue using that grouping in later tax years unless
it’s determined that the original grouping was clearly
inappropriate or a material change in the facts and
circumstances makes it clearly inappropriate.
The IRS may regroup your activities if your grouping
fails to reflect one or more appropriate economic units and
one of the primary purposes of your grouping is to avoid
the passive activity limitations.

Regrouping Due to Net Investment Income Tax

You may be able to regroup your activities, as described
below, if you’re subject to the Net Investment Income Tax
(NIIT) for the first time. For detailed information, see
Regulations section 1.469-11(b)(3)(iv).

Regrouping on an original return. Under the NIIT fresh
start election, you may regroup for the first tax year you’re
subject to the NIIT (without regard to the effect of
regrouping). You may regroup only once under this
election and that regrouping will apply to the tax year for
which you regroup and all future tax years. You’re eligible
to regroup if:
1. You weren’t previously subject to the NIIT;
2. The amount you would have entered on Form 8960,
line 12, without the regrouping, would have been greater
than zero; and
3. The amount you would have entered on Form 8960,
line 13, without the regrouping, would have been greater
than the amount you would have entered on Form 8960,
line 14, without the regrouping.

Limitation on grouping certain activities. The
following activities may not be grouped together.
1. A rental activity with a trade or business activity
unless the activities being grouped together make up an
appropriate economic unit and:
a. The rental activity is insubstantial relative to the
trade or business activity or vice versa, or
b. Each owner of the trade or business activity has the
same proportionate ownership interest in the rental
activity. If so, the portion of the rental activity involving the
rental of property used in the trade or business activity
may be grouped with the trade or business activity.
2. An activity involving the rental of real property with
an activity involving the rental of personal property (except
personal property provided in connection with the real
property or vice versa).
3. Any activity with another activity in a different type
of business and in which you hold an interest as a limited
partner if that other activity engages in holding, producing,
or distributing motion picture films or videotapes; farming;
leasing section 1245 property; or exploring for or
exploiting oil and gas resources or geothermal deposits.
4. Any trading activities in which you don't materially
participate. A trading activity is an activity of trading in
personal property. For this purpose, personal property is
any personal property that is actively traded, for example,
financial securities. A taxpayer who does not materially
participate in a trading activity is prohibited from grouping
the activity with any other activity, including any other
trading activity. The prohibition on grouping is effective for
taxable years beginning on or after March 22, 2021. If you
are a calendar year taxpayer, the new provisions first
applied to you in calendar year 2022.

Regrouping on an amended return. You may regroup
your activities on an amended tax return, but only if you
weren’t subject to the NIIT on your original return (or
previously amended return). You’re eligible if:
1. You weren’t previously subject to the NIIT for the tax
year for which you’re filing an amended return or any prior
tax year;
2. The changes on the amended return cause you to
be subject to the NIIT for the first time beginning in the
taxable year for which you’re amending the return;
3. The limitation period for assessments under section
6501 hasn’t ended;
4. The changes on your amended return cause the
amount on Form 8960, line 12, of your amended return to
be greater than zero; and
5. The changes on your amended return cause the
amount on Form 8960, line 13, of your amended return to
be greater than the amount entered on Form 8960,
line 14.
This rule applies equally to changes to modified
adjusted gross income or net investment income upon an
IRS examination.
Manner of regrouping. If you regroup your activities
under this rule, you must attach to your original or
amended return, as applicable, a statement that satisfies
the requirements described in Regrouping under
Disclosure Requirement next.

Activities conducted through partnerships, S corporations, and C corporations subject to section 469.
Once a partnership or corporation determines its activities
under these rules, a partner or shareholder may use these
rules to group those activities with:
• Each other,
• Activities conducted directly by the partner or
shareholder, or

Disclosure Requirement

The following disclosure requirements for groupings
apply. You’re required to report certain changes to your
groupings that occur during the tax year to the IRS. If you
fail to report these changes, each trade or business
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Instructions for Form 8582 (2023)

income or deduction separately to you, and the gross
income or deduction is passive activity gross income or a
passive activity deduction (respectively), include that
amount in the net income or net loss entered on Form
8582.

activity or rental activity will be treated as a separate
activity. You’ll be considered to have made a timely
disclosure if you filed all affected income tax returns
consistent with the claimed grouping and make the
required disclosure on the income tax return for the year in
which you first discovered the failure to disclose. If the IRS
discovered the failure to disclose, you must have
reasonable cause for not making the required disclosure.
For more information on disclosure requirements, see
Revenue Procedure 2010-13, available at IRS.gov/irb/
2010-04_IRB#RP-2010-13.

The partnership or S corporation doesn’t have a
record of your prior year unallowed losses from
CAUTION the passive activities of the partnership or S
corporation. If you had prior year unallowed losses from
these activities, they can be found in column (c) of your
2022 Part VIII.

!

New grouping. You must file a written statement with
your original income tax return for the first tax year in
which two or more activities are originally grouped into a
single activity. The statement must provide the names,
addresses, and employer identification numbers (EINs), if
applicable, for the activities being grouped as a single
activity. In addition, the statement must contain a
declaration that the grouped activities make up an
appropriate economic unit for the measurement of gain or
loss under the passive activity rules.

Passive Activity Income

To figure your overall gain or loss from all passive
activities or any passive activity, take into account only
passive activity income. Don’t enter income that isn’t
passive activity income on Form 8582.
Passive activity income includes all income from
passive activities (with certain exceptions described in
Temporary Regulations section 1.469-2T(c)(2) and
Regulations section 1.469-2(c)(2)), including gain from
the disposition of an interest in a passive activity and from
the disposition of property used in a passive activity at the
time of the disposition.

Addition to an existing grouping. You must file a
written statement with your original income tax return for
the tax year in which you add a new activity to an existing
group. The statement must provide the name, address,
and EIN, if applicable, for the activity that’s being added
and for the activities in the existing group. In addition, the
statement must contain a declaration that the activities
make up an appropriate economic unit for the
measurement of gain or loss under the passive activity
rules.

Passive activity income doesn’t include the following.

• Income from an activity that isn’t a passive activity.
• Portfolio income, including interest (other than

self-charged interest treated as passive activity income,
discussed later), dividends, annuities, and royalties not
derived in the ordinary course of a trade or business, and
gain or loss from the disposition of property that produces
portfolio income or is held for investment (see section
163(d)(5)). See Temporary Regulations section
1.469-2T(c)(3).
• Alaska Permanent Fund dividends.
• Personal service income, including salaries, wages,
commissions, self-employment income from trade or
business activities in which you materially participated for
the tax year, deferred compensation, taxable social
security and other retirement benefits, and payments from
partnerships to partners for personal services. See
Temporary Regulations section 1.469-2T(c)(4).
• Income from positive section 481 adjustments allocated
to activities other than passive activities. See Temporary
Regulations section 1.469-2T(c)(5).
• Income or gain from investments of working capital.
• Income from an oil or gas property if you treated any
loss from a working interest in the property for any tax
year beginning after 1986 as a nonpassive loss under the
rule excluding working interests in oil and gas wells from
passive activities (see item 3 under Activities That Are Not
Passive Activities, earlier). See Regulations section
1.469-2(c)(6).
• Any income from intangible property if your personal
efforts significantly contributed to the creation of the
property.
• Any income treated as not from a passive activity under
Temporary Regulations section 1.469-2T(f) and
Regulations section 1.469-2(f). See Recharacterization of
Passive Income, later.

Regrouping. You must file a written statement with your
original income tax return for the tax year in which you
regroup the activities. The statement must provide the
names, addresses, and EINs, if applicable, for the
activities that are being regrouped. If two or more activities
are being regrouped into a single activity, the statement
must contain a declaration that the regrouped activities
make up an appropriate economic unit for the
measurement of gain or loss under the passive activity
rules. In addition, the statement must contain an
explanation of the material change in the facts and
circumstances that made the original grouping clearly
inappropriate.

Passive Activity Income and
Deductions

Take into account only passive activity income and
passive activity deductions to figure your net income or
net loss from all passive activities or any passive activity.
If your passive activity is reported on Schedule C, E, or
F, and the activity has no prior year unallowed losses or
any gain or loss from the disposition of assets or an
interest in the activity, take into account only the passive
activity income and passive activity deductions from the
activity to figure the amount to enter on Form 8582.
If you own an interest in a passive activity through a
partnership or an S corporation, the partnership or S
corporation will generally provide you with the net income
or net loss from the passive activity. If, however, the
partnership or S corporation must state an item of gross
Instructions for Form 8582 (2023)

-7-

• Losses from dispositions of property that produce
portfolio income or property held for investment.
• State, local, and foreign income taxes.
• Charitable contribution deductions.
• Net operating loss deductions, percentage depletion
carryovers under section 613A(d), and capital loss
carryovers.
• Deductions and losses that would’ve been allowed for
tax years beginning before 1987, but for basis or at-risk
limitations.
• Net negative section 481 adjustments allocated to
activities other than passive activities. See Temporary
Regulations section 1.469-2T(d)(7).
• Deductions for losses attributable to a federally
declared disaster.
• The deduction allowed for the deductible part of
self-employment taxes.

• Overall gain from any interest in a PTP (see item 2
under Passive activity loss rules for partners in PTPs,
later).
• State, local, and foreign income tax refunds.
• Income from a covenant not to compete.
• Any reimbursement of a casualty or theft loss included
in income as recovery of all or part of a prior year loss
deduction if the deduction for the loss wasn’t treated as a
passive activity deduction.
• Cancellation of debt income to the extent that at the
time the debt was discharged, the debt wasn’t properly
allocable under Temporary Regulations section 1.163-8T
to passive activities.
Recharacterization of Passive Income

Certain income from passive activities must be
recharacterized and excluded from passive activity
income. The amount of income recharacterized equals
the net income from the sources given below. If during the
tax year you received net income from any of these
sources (either directly or through a partnership or an S
corporation), see Pub. 925 to find out how to report net
income or loss from these sources. For more information,
see Temporary Regulations section 1.469-2T(f) and
Regulations section 1.469-2(f).

Self-Charged Interest

Certain self-charged interest income or deductions may
be treated as passive activity gross income or passive
activity deductions if the loan proceeds are used in a
passive activity. Generally, self-charged interest income
and deductions result from loans between you and a
partnership or S corporation in which you had a direct or
indirect ownership interest. This includes both loans you
made to the partnership or S corporation and loans the
partnership or S corporation made to you. It also includes
loans from one partnership or S corporation to another
partnership or S corporation if each owner in the
borrowing entity has the same proportional ownership
interest in the lending entity.

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.

The self-charged interest rules don’t apply to your
interest in a partnership or S corporation if the entity made
an election under Regulations section 1.469-7(g) to avoid
the application of these rules. For more details on the
self-charged interest rules, see Regulations section
1.469-7.

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.

Former Passive Activities

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.

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).

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.

Passive activity deductions include any loss from a
disposition of property used in a passive activity at the
time of the disposition and any loss from a disposition of
less than your entire interest in a passive activity. See
Dispositions, later, for the treatment of losses upon
disposition of your entire interest in an activity.

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.

Passive activity deductions don’t include the following.

• Deductions for expenses (other than interest expense)

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.

that are clearly and directly allocable to portfolio income.
• Qualified home mortgage interest, capitalized interest
expenses, and other interest expenses (except
self-charged interest treated as a passive activity
deduction (discussed next) and interest expenses
properly allocable to passive activities).

To report a disposition of a former passive activity,
follow the rules under Dispositions next.
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Instructions for Form 8582 (2023)

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
unallowed loss. You have an overall gain from the
disposition ($15,525 – $15,450 = $75).
Because you had an overall gain, you make the
following entries in Part IV. You enter the $15,525 gain on
the disposition in column (a), the current year loss of
$2,800 in column (b), and the prior year unallowed loss of
$12,650 in column (c).

Disposition of an Entire Interest

If you disposed of your entire interest in a passive activity
or a former passive activity to an unrelated person in a
fully taxable transaction during the tax year, your losses
allocable to the activity for the year aren’t limited by the
PAL rules.
A fully taxable transaction is a disposition in which you
recognize all realized gain or loss.

Example 2. Activity with overall loss. You sell your
entire interest in an oil and gas limited partnership that
was your only passive activity for a gain of $2,000. You
have a current year Schedule E loss of $3,330 and a
Schedule E prior year unallowed loss of $1,115.
Because you have an overall loss of $2,445 after
combining the gain and losses, none of the amounts are
entered on Form 8582.
You enter the net loss plus the prior year unallowed
loss ($3,330 + $1,115 = $4,445) on Schedule E, Part II,
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.

If you’re using the installment method to report this kind
of disposition, figure the loss for the current year that isn’t
limited by the PAL rules by multiplying your overall loss
(which doesn’t include losses allowed in prior years) by
the following fraction:
Gain recognized in the current year
Unrecognized gain as of the beginning of the current
year

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
entire disposition of the partner's interest in the PTP.

Disposition of Less Than an Entire Interest

Gains and losses from the disposition of less than an
entire interest in an activity are treated as part of the net
income or net loss from the activity for the current year.

Reporting an Entire Disposition on Form 4797 or
Form 8949
If you completely dispose of your entire interest in a
passive activity or a former passive activity, you may have
to report net income or loss and prior year unallowed
losses from the activity. All the net income and losses are
reported on the forms and schedules normally used.

!

CAUTION

Disposition of Substantially All of an Activity

You may treat the disposition of substantially all of an
activity as a separate activity if you can prove with
reasonable certainty:
1. The prior year unallowed losses, if any, allocable to
the part of the activity disposed of; and
2. The net income or loss for the year of disposition
allocable to the part of the activity disposed of.

Combine all income and losses (including any prior
year unallowed losses) from the activity for the tax year to
see if you have an overall gain or loss.
If you have an overall gain, report the income, losses,
and prior year unallowed losses in Part IV or V.
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
normally used and don’t use Form 8582.

Specific Instructions
Part I—2023 Passive Activity Loss

If you have an overall loss when you combine the
income and losses, don’t use Form 8582 for the activity.
All losses (including prior year unallowed losses) are
allowed in full. Report the income and losses on the forms
and schedules normally used.

Use Part I to combine the net income and net loss from all
passive activities to determine if you have a passive
activity loss (PAL) for 2023. Use Parts IV and V first to
determine the entries for lines 1 and 2 of Part I, as follows.
• Use Part IV for rental real estate activities with active
participation.
• Use Part V for all other passive activities.

An overall loss from an entire disposition of a passive
activity is a nonpassive loss if you have an aggregate loss
from all other passive activities. When figuring your
modified adjusted gross income for Part II, line 6, of Form
8582, be sure to take into account the overall loss from
the disposition of the activity.

Line 3. If you have prior year unallowed CRD from rental
real estate activities, treat that dollar amount as negative
and combine with lines 1d and 2d. Enter the combined
amount on line 3 and enter “CRD” and the dollar amount
of the CRD (as a negative) on the dotted line.

Example 1. Activity with overall gain. You sell your
entire interest in a rental real estate activity in which you
actively participated for a gain of $15,525. $7,300 of the
gain is section 1231 gain reported on Form 4797,
Part I, and $8,225 is ordinary recapture income reported
on Form 4797, Part II. On line 22 of Schedule E (Form
Instructions for Form 8582 (2023)

A disposition of less than substantially all of an
entire interest doesn’t trigger the allowance of
prior year unallowed losses.

Note. If you included prior year unallowed CRD from
rental real estate activities in line 3, and line 3 is a loss and
line 1d is zero or more, go to the instructions for Part II,
line 9, later.
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If you need additional lines for any of the Parts IV

TIP through IX, you can either attach copies of the

applicable pages of Form 8582, or your own
schedule that’s in the same format as the applicable
part(s).

Part IV

Individuals and qualifying estates who actively
participated in rental real estate activities must include the
income or loss from those activities in Part IV to figure the
amounts to enter on Part I, lines 1a through 1c, of Form
8582.
Don’t enter a prior year unallowed loss in column (c) of
Part IV unless you actively participated in the activity in
both the year the loss arose and the current tax year. If
you didn’t actively participate in both years, enter the prior
year unallowed loss in column (c) of Part V.
Married individuals who file separate returns and
lived with their spouses at any time during the tax
CAUTION year don’t qualify under the active participation
rule and must use Part V instead of Part IV.

!

Column (a). Enter the current year net income from each
activity. Enter the total of column (a) on Part I, line 1a, of
Form 8582.
Example. A Schedule E rental activity has current year
profit of $5,000 and a Form 4797 gain of $2,000. You
enter $7,000 in column (a).
Column (b). Enter the current year net loss for each
activity. Don’t enter any prior year unallowed losses in this
column. Enter the total of column (b) on Part I, line 1b, of
Form 8582.
If an activity has net income on one form or schedule
and a net loss on another form or schedule, report the net
amounts separately in columns (a) and (b) of Part IV.
Example. A Schedule E rental activity has current year
income of $1,000 on line 21 of Schedule E and a current
year Form 4797 loss of $4,500. You enter $1,000 in
column (a) and $4,500 in column (b).
Column (c). Enter the prior year unallowed losses for
each activity. You find these amounts in Part VII, column
(c), of your 2022 Form 8582. Enter the total of column (c)
from your 2023 Part IV on Part I, line 1c, of Form 8582.
Columns (d) and (e). Combine income and losses in
columns (a) through (c) for each activity, and either enter
the overall gain for the activity in column (d) or enter the
overall loss for the activity in column (e). Don’t enter
amounts from columns (d) and (e) in Parts I, II, or III of
Form 8582. These amounts will be used when the rest of
Form 8582 is completed to figure the loss allowed for the
current year.

Part V

Use Part V to figure the amounts to enter on Part I, lines
2a through 2c, for:
• Passive trade or business activities,
• Passive rental real estate activities that don’t qualify for
the special allowance, and
• Rental activities other than rental real estate activities.

If you have prior year unallowed CRD from passive
activities other than rental real estate activities, include
that amount in Part V. Add "CRD" after the name of the
activity.
Column (a). Enter the current year net income for each
activity. Enter the total of column (a) on Part I, line 2a, of
Form 8582. (See the example under Column (a) for Part
IV, earlier.)
Column (b). Enter the current year net loss for each
activity. Enter the total of column (b) on Part I, line 2b, of
Form 8582. (See the example under Column (b) for Part
IV, earlier.)
Column (c). Enter the unallowed losses for the prior
years for each activity. You find these amounts in Part VII,
column (c), of your 2022 Form 8582. Enter the total of
column (c) from your 2023 Part V on Part I, line 2c, of
Form 8582.
Columns (d) and (e). Combine income and losses in
columns (a) through (c) for each activity, and either enter
the overall gain for the activity in column (d) or enter the
overall loss for the activity in column (e). Don’t enter
amounts from columns (d) and (e) in Parts I, II, or III of
Form 8582. These amounts will be used when the rest of
Form 8582 is completed to figure the loss allowed for the
current year.

Part II—Special Allowance for Rental
Real Estate Activities With Active
Participation
If your filing status is married filing separately and
you lived with your spouse at any time during the
CAUTION year, you are not eligible for the special
allowances in Part II. Do not complete Part II. Instead, go
to Part III of Form 8582. See the instructions for Part
III—Total Losses Allowed, later.

!

Use Part II to figure the maximum amount of rental loss
allowed if you have an overall loss on Part I, line 1d, from
your rental real estate activities you actively participated in
during 2023.
Note. If you included prior year unallowed CRD from
rental real estate activities in line 3, first figure the special
$25,000 allowance for losses from rental real estate
activities with active participation from Part I, line 1d, if
any, without regard to the CRD, by completing lines 4
through 8. To apply any remaining portion of the $25,000
allowance to prior year unallowed CRD from rental real
estate activities, see the instructions for line 9.
If you’re claiming both the premium tax credit
(PTC) and self-employed health insurance
CAUTION deduction (SEHID) and Part I, lines 1d and 3, of
Form 8582 are both losses, see Self-Employed Health
Insurance Deduction and PTC in Pub. 974. You’ll have to
complete worksheets in Pub. 974 before you complete
Part II of Form 8582.

!

Enter all numbers in Part II as positive amounts (that is,
greater than zero).

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Instructions for Form 8582 (2023)

Example. Part II, line 4, has a loss of $42,000
(reported as a positive amount) and line 8 is $25,000. You
enter $25,000 on line 9 (the smaller of line 4 or line 8, both
treated as positive amounts).
Note. If you included prior year unallowed CRD from
rental real estate activities in line 3, and line 3 is a loss and
line 1d is a loss, complete lines 4 through 8, then see the
instructions for line 9 below. If line 1d of Part I is zero or
more, and line 3 is a loss, go directly to the instructions for
line 9 below.
Line 4. Enter on line 4 the smaller of the loss on Part I,
line 1d, or the loss on line 3.
Example. Part I, line 1d, has a loss of $3,000 and
line 2d has a gain of $100. The combined loss on line 3 is
$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
on line 3).
Line 5. Married persons filing separate returns who lived
apart from their spouses at all times during the year must
enter $75,000 on line 5 instead of $150,000.
Line 6. To figure modified adjusted gross income,
combine all the amounts used to figure adjusted gross
income except don’t take into account:
• Passive income or loss included on Form 8582,
• Any rental real estate loss allowed to real estate
professionals (defined under Activities That Are Not
Passive Activities, earlier),
• Any overall loss from a PTP,
• The taxable amount of social security and tier 1 railroad
retirement benefits,
• Deductible contributions to traditional individual
retirement accounts (IRAs) and section 501(c)(18)
pension plans,
• The deduction allowed for the deductible part of
self-employment taxes,
• The exclusion from income of interest from series EE
and I U.S. savings bonds used to pay higher education
expenses,
• The exclusion of amounts received under an
employer's adoption assistance program,
• The student loan interest deduction, or
• The deduction allowed for foreign-derived intangible
income and global intangible low-taxed income.
Include in modified adjusted gross income any portfolio
income and expenses that are clearly and directly
allocable to portfolio income. Also include any income
that’s treated as nonpassive income, such as overall gain
from a PTP and net income from an activity or item of
property subject to the recharacterization of passive
income rules.
When figuring modified adjusted gross income, include
any overall loss from the entire disposition of a passive
activity (considered a nonpassive loss).
Example. Your adjusted gross income on line 11 of
Form 1040 or Form 1040-SR is $92,000 and you have
taxable social security benefits of $5,500 on line 6b. Your
modified adjusted gross income is $86,500 ($92,000 –
$5,500).

Instructions for Form 8582 (2023)

Line 8. Don’t enter more than $12,500 on line 8 if you’re
married filing a separate return and you and your spouse
lived apart at all times during the year.
Line 9. If you do not have prior year unallowed CRD from
rental real estate activities, enter the smaller of line 4 or
line 8 on line 9.
If you have prior year unallowed CRD from rental real
estate activities included in line 3 of Part I, and you have a
loss on line 1d and line 3 of Part I, first figure the special
$25,000 special allowance for losses from rental real
estate activities with active participation, without regard to
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
line 3 is a loss, complete the Worksheet below and enter
the result on line 9 as described below.
The remaining portion of the $25,000 allowance, if any,
is available for the prior year unallowed CRD from rental
real estate activities. Use the Worksheet to figure the
maximum amount of prior year unallowed CRD allowed
from rental real estate activities.

Worksheet for Special Allowance for Prior
Unallowed Commercial Revitalization Deductions
From Rental Real Estate Activities
Enter all numbers in this calculation as positive amounts (greater than
zero)
A. Enter $25,000* reduced by the amount, if any, of the
smaller of Part II, line 4 or line 8 . . . . . . . . . . . . . . . . . . . $
B. Enter the loss from Part I, line 3 . . . . . . . . . . . . . . . . . $
C. Reduce line B by the amount of the smaller of Part II,
line 4 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
D. Enter the smallest of the amount of the prior unallowed
CRD (as a positive amount), the amount on line A, or the
amount on line C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
* Enter $12,500 (reduced by the amount, if any, of the smaller of Part II, line 4
or line 8) on line A if you’re married but filing a separate return and you and
your spouse lived apart at all times during the year.

Combine line D with the smaller of line 4 or line 8 and
enter the combined amount on line 9. Enter “CRD” and the
dollar amount of the special allowance for CRD on the
dotted line.

Part III—Total Losses Allowed

Use Part III to figure the amount of the losses from all
passive activities (as determined in Part I) allowed for
2023.
Line 11. Use Parts IV through IX of Form 8582 and the
related instructions to figure the unallowed loss to be
carried forward and the allowed loss to report on your
forms and schedules for 2023.

Parts IV and V

Parts IV and V, columns (d) and (e), show whether an
activity had an overall gain or loss. If you have activities
that show overall gain in column (d) of Parts IV or V, report
all the income and losses listed in columns (a), (b), and (c)
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
column (e) of Parts IV or V, you must allocate your
allowed loss on Part III, line 11, of Form 8582 to those
activities by completing Parts VI, VII, plus VIII and/or IX.
Complete Part VI only if you entered an amount (other
than zero) on Part II, line 9, of Form 8582. Otherwise, skip
Part VI and complete Part VII for all activities in Part IV or
V that have overall losses in column (e) and any amount
of prior year unallowed CRD included in line 3.

Part VI

Use Part VI to allocate the special allowance on Part II,
line 9, of Form 8582 among your rental real estate
activities.
If you used the Worksheet in the instructions for line 9
to apply any remaining special allowance to prior year
unallowed CRD from one or more rental real estate
activities, complete a separate Part VI to allocate that
portion of the special allowance to those CRD activities.
In the first column of Part VI, enter the name of each
activity. In the second column, enter the form or schedule
and line number on which the loss will be reported.
Example. You receive a Schedule K-1 from
partnership P that reports losses from two rental real
estate activities, Activity X and Activity Y. The losses from
partnership P are reported on line 28A of Schedule E. In
the first two columns of Part VI, enter:
Name of Activity

Form or Schedule

Activity X

Sch E, line 28A

Activity Y

Sch E, line 28A

If the loss from an activity is reported in more than one
place, identify both locations in the second column (for
example, Sch E, line 28A/Form 4797, line 2). If you need
additional space, show this information on an attached
statement.
If you entered an amount on Part II, line 9, and there is
no amount included in line 9 from prior year disallowed
CRD, list in Part VI all activities with an overall loss in
column (e) of Part IV.
If you also included an amount for prior year unallowed
CRD from rental real estate activities in line 9, complete
another Part IV for these CRD activities. You can use
another Part IV or your own schedule in the same format
as Part IV. Enter the prior year unallowed CRD for each
activity in column (a) of the second Part IV. Then follow
the instructions for column (b) and column (c) below for
each Part IV.
Column (a). Enter the overall loss from column (e) of
Part IV for each activity.
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.

enter the results in column (c). The total of column (c)
must be the same as Part II, line 9, of Form 8582.
If there is prior year unallowed CRD included in Part II,
line 9:
1. For the Part VI for rental real estate activities with
active participation, multiply each ratio in column (b) by
the lesser of line 4 or line 8; and
2. For the Part VI for prior year unallowed CRD,
multiply each ratio in column (b) by the amount from line D
of the Worksheet in the instructions for line 9 above.
The total of column (c) for the Part VI for rental real estate
activities with active participation should be the same as
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
should be the amount from line D of the Worksheet.
Column (c) total is the same as column (a) total. If
the total losses in column (c) are the same as those in
column (a), the losses in Part IV (or, in the case of the
second Part VI for prior unallowed CRD, the additional
amount listed in Part I, line 3) are allowed in full and aren’t
carried over to Part VII. Report all amounts in columns (a),
(b), and (c) of Part IV on the proper forms and schedules.
Column (c) total is less than column (a) total. If the
total losses in column (c) are less than the total losses in
column (a), complete column (d).
Column (d). Subtract column (c) from column (a) and
enter the results in column (d). Also enter the amounts
from column (d) of Part VI in column (a) of Part VII.

Part VII—Allocation of Unallowed Losses

Complete Part VII if any activities have an overall loss in
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
Part VI).
On Part VII, enter the name of each activity and the
form or schedule and line number on which the loss will
be reported. See the Example for Part VI. If you have prior
year unallowed CRD from a passive activity other than
rental real estate in Part V, and/or unallowed losses for
prior year CRD from a rental real estate activity in Part VI,
column (d), add “CRD” after the name of each of the
activities.
Column (a). Enter the amounts, if any, from column (d)
of Part VI (from column (e) of Part IV and any prior year
unallowed CRD included in Part I, line 3, if you didn’t have
to complete Part VI). Also enter the losses, if any, from
column (e) of Part V.
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 must equal 1.00.
Column (c). Complete the following computation.

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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Instructions for Form 8582 (2023)

A. Enter as a positive amount
Part I, line 3, of Form 8582 . . . . . . . . . .
B. Enter Part II, line 9, of
Form 8582 . . . . . . . . . . . . . . . . . . . .
C. Subtract line B from
line A . . . . . . . . . . . . . . . . . . . . . . .

Multiply each ratio in column (b) by the amount on line
C above, and enter the result in column (c).

Parts VIII and IX

Parts VIII and IX figure your unallowed and allowed losses
for each activity.
If you have losses from any activity that are reported on
two or more different forms or schedules, use Part IX
instead of Part VIII for that activity.
Also use Part IX instead of Part VIII for any activity with
two or more transactions that are reported on the same
form or schedule but must be separately identified for tax
purposes. Transactions that must be separately identified
include capital losses that are 28% rate losses and those
that aren’t.

Note. 28% rate gain or loss includes all collectibles gains
and deductible long-term losses and section 1202 gain on
the sale of qualified small business stock. See the
Instructions for Schedule D for details.

Part VIII—Allowed Losses
Use Part VIII for any activity listed in Part VII if all the loss
from that activity is reported on one form or schedule and
no transactions need to be identified separately (as
discussed in Part IX, later). Also see Identification of
Disallowed Passive Activity Deductions in Pub. 925 for
more information.
Example. You will report all the allowed loss from an
activity listed in Part VII on Schedule E. Use Part VIII to
determine the allowed loss, even if part of the loss is a
current year Schedule E loss and part of it is a prior year
unallowed Schedule E loss.
In Part VIII, enter the name of each activity and the form
or schedule and line number on which the loss is reported.
Identify each CRD from Part VII on a separate line of Part
VIII and add "CRD" after the name of the activity. See the
Example for Part VI.
Column (a). For each activity entered in Part VIII, enter
the net loss plus the prior year unallowed loss for the
activity. Figure this amount by adding the losses in
columns (b) and (c) of Parts IV and V and any prior year
unallowed CRD included in Part I, line 3.
Column (b). For each activity entered in Part VIII, enter
the amount from column (c) of Part VII for the activity.
These are your unallowed losses for 2023. Keep a record
of these amounts so the losses can be used to figure your
PAL next year.
Column (c). Subtract column (b) from column (a). These
amounts are the losses allowed for 2023 under the
passive loss rules. Report the amounts in this column on
Instructions for Form 8582 (2023)

the forms and schedules normally used, subject to any
further limitations described in Coordination With Other
Limitations, earlier.
See the forms and schedules listed under How To
Report Allowed Losses, later.

Part IX—Activities With Losses Reported on Two
or More Forms or Schedules
Use Part IX for any activity listed in Part VII that has losses
that are reported on two or more different forms and
schedules or are identified separately on the same form or
schedule (for example, 28% rate and non-28%-rate
capital losses reported on Form 8949). Part IX allocates
the allowed and unallowed loss for the activity and
allocates the allowed loss to the different forms or
schedules (or where identified separately on the same
form or schedule) used to report the losses.
Only losses that would cause a difference in tax liability
if they were reported on a different form or schedule or are
identified separately on the same form or schedule are
kept separate. Those forms, schedules, and parts are the
following.
• Schedules C, E, and F.
• Form 8949 (Parts I and II (28% rate losses and
non-28%-rate losses)).
Note. You must generally make a separate entry in Form
8949, Part I or Part II, for each transaction reported. See
the Instructions for Form 8949.
• Forms 4684 (Section B), 4797 (Parts I and II), and
4835.
Use a separate copy of Part IX for each activity for
which you have losses reported on two or more different
forms or schedules or which are identified separately on
the same form or schedule.
In Part IX, enter the form or schedule and line number
on the dotted line above each line 1a (for example,
Schedule D, line 12, to report a long-term capital loss from
a partnership).
Line 1a, column (a). Enter the net loss plus any prior
year unallowed loss from the activity that’s reported on the
same form or, in the case of Form 4797 and Form 8949,
the same part.
If you have a Form 8949 28% rate loss and a Form
8949 non-28%-rate loss, see Example of Form 8949
transactions, later, before completing Part IX.
Line 1b, column (a). Enter any net income from the
activity that’s reported on the same form or schedule (or
on the same part of the same form or schedule) as the
loss on line 1a, column (a).
Example. You enter a prior year unallowed loss from
Form 4797, Part I, on line 1a. If the activity has a current
year Form 4797, Part I, gain, enter the gain on line 1b,
column (a). If the activity doesn’t have a Form 4797, Part I,
gain, enter -0- on line 1b, column (a).
Column (b). Subtract line 1b, column (a), from line 1a,
column (a), and enter the result in column (b). If line 1b,
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Unallowed losses for Activity I are the following.

column (a), is more than line 1a, column (a), enter -0- in
column (b).

• 28% rate loss: 0.25 x $3,130 = $782.50.
• Non-28%-rate loss: 0.75 x $3,130 = $2,347.50.

Column (c). Divide each of the losses entered in column
(b) by the total of column (b) and enter the ratio in column
(c). The total of this column must be 1.00.
Column (d). Multiply the unallowed loss for this activity,
found in Part VII, column (c), by each ratio in column (c) of
Part IX. If -0- is entered in column (b) of Part IX, also enter
-0- for that form or schedule in column (d).
The amount in column (d) is the unallowed loss for
2023. Keep a record of Part IX so you can use the losses
to figure your PAL next year.
Column (e). Subtract the amount in column (d) from the
loss entered on line 1a, column (a). This amount is the
loss allowed for 2023 under the passive loss rules. Report
the amounts in this column on the forms or schedules
normally used, subject to any further limitations described
in Coordination With Other Limitations, earlier. The forms
and schedules you use must show the losses from this
column and the income, if any, for that activity from
column (a) of Part IV or Part V.
Example of Form 8949 transactions. The taxpayer
had the following Form 8949 transactions from passive
activities in 2023.
Activity I
A passive activity prior year unallowed long-term
capital loss (a 28% rate loss) of $1,000 and a current year
long-term capital loss (a non-28%-rate loss) of $3,000.
Activity II
A current year collectibles loss (a 28% rate loss) of
$230 and net income of $1,100 from Schedule E (Form
1040).
Part V
Activity I has an overall loss of $4,000 (current year
long-term capital loss of $3,000 and a prior year
unallowed long-term capital loss of $1,000). Activity II has
an overall gain of $870 (current year net income of $1,100
less a current year long-term capital loss of $230). Part III,
line 11, of Form 8582 shows an allowed loss of $1,100.
Since Activity II has an overall gain, the amounts shown
in columns (a) and (b) of Part V for that activity are
reported on the proper forms and schedules and aren’t
shown in any other part.
Part VII
Activity I has an unallowed loss of $3,130 (Part I, line 3,
of Form 8582 ($3,130) less the sum of Part II, line 9, of
Form 8582 (-0-) x 100%).
Part IX
Part IX is used to figure the portion of the unallowed
loss attributable to the 28% rate loss and the portion
attributable to the non-28%-rate loss.
The loss attributable to the 28% rate loss ($1,000) and
the loss attributable to the non-28%-rate loss ($3,000) are
separate entries in Part IX. The ratio of each loss to the
total of the two losses is figured as follows. $1,000/$4,000
= 0.25 and $3,000/$4,000 = 0.75. Each of these ratios is
multiplied by the unallowed loss for Activity I, shown in
column (c) of Part VII ($3,130).

Allowed losses for Activity I are the following.

• 28% rate loss: $1,000 − $782.50 = $217.50.
• Non-28%-rate loss: $3,000 − $2,347.50 = $652.50.

The total loss allowed for Activity I ($870) is entered in
Part II of Form 8949. The allowed 28% rate loss ($217.50)
is entered on the 28% Rate Gain Worksheet (see the
instructions for Schedule D, line 18). Keep a record of the
unallowed 28% rate and non-28%-rate losses to figure the
PAL for next year.
See the forms and schedules listed under How To
Report Allowed Losses next.

How To Report Allowed Losses
Line 3 is income. If Part I, line 3, of Form 8582 shows
net income or zero, all the losses in columns (b) and (c) of
Parts IV and V and any prior year unallowed CRD
included in line 3 are allowed in full under the passive loss
rules. Report the income and losses in columns (a), (b),
and (c) of Parts IV and V and any prior year unallowed
CRD included in line 3 on the forms and schedules
normally used.
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
losses in columns (b) and (c) of Parts IV and V and any
prior year unallowed CRD included in line 3 are allowed in
full under the passive loss rules. Report the income and
losses in columns (a), (b), and (c) of Parts IV and V on the
forms and schedules normally used.
Columns (a) and (c) of Part VI are the same amount.
In this case, all the losses in columns (b) and (c) of Part IV
and any prior year unallowed CRD included in line 3 are
allowed in full under the passive loss rules. Report the
income and losses in columns (a), (b), and (c) of Part IV
and any prior year unallowed CRD included in line 3 on
the forms and schedules normally used.
Losses allowed in column (c) of Part VIII. The
amounts in column (c) of Part VIII are the losses or
deductions allowed for 2023 for the activities listed in that
part. Report the loss allowed from column (c) of Part VIII
and the income, if any, for that activity from column (a) of
Part IV or V on the form or schedule normally used.
Losses allowed in column (e) of Part IX. The amounts
in column (e) of Part IX are the losses or deductions
allowed for 2023 for the activity listed on that part. Report
the losses allowed from column (e) of Part IX and the
income, if any, for that activity from column (a) of Part IV
or V on the forms or schedules normally used.
Schedules C and F, and Form 4835. Enter on the net
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
left of the entry space, enter “PAL.”
If the net profit or loss line on your form or schedule
shows net profit for the year, reduce the net profit by the
allowed loss from Part VIII or IX and enter the result on the
net profit or loss line.

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Instructions for Form 8582 (2023)

Example. Schedule C shows net profit for the year of
$5,000 from a passive activity. The activity also has a
Form 4797 gain of $2,500 and a prior year unallowed
Schedule C loss of $6,000. The loss allowed for 2023 is
$6,000. You enter a net loss of $1,000 on line 31 of
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
space, you enter “PAL.”
See Form 4797 and Form 8949, later, if you also had
passive gains and losses from the sale of assets or of an
interest in a passive activity.
Schedule E, Part I. Enter the allowed loss from the part
on line 22 of Schedule E. An activity that has net profit for
the year and prior year unallowed losses will have net
profit on line 21 and the allowed loss on line 22. The
allowed loss on line 22 will include the loss allowed to the
extent of the net profit. Line 24 of Schedule E will show
total profit and line 25 will show total losses allowed (both
passive and nonpassive). Line 26 will show the total net
profit or loss.
Schedule E, Parts II and III. Any item of income shown
on your Schedule K-1 that’s passive income must be
entered as passive income in the appropriate column of
Schedule E, Part II or III. Enter the passive loss allowed
from Part VIII or IX of Form 8582 in the appropriate
column for passive losses. The passive losses allowed
include the loss allowed to the extent of any net income
from the activity. Passive net income or loss reportable in
Schedule E, Part II, includes any self-charged interest
income and deductions treated as passive activity income
and deductions. See Self-Charged Interest, earlier.
See Form 4797 and Form 8949, later, if you also had
passive gains or losses from the sale of assets or of an
interest in a passive activity.
Form 4684, Section B. Any passive activity gain from
Form 4684 is unchanged. It was used on Form 8582 to
determine allowable PALs. If you don’t have passive
losses on Form 4684, complete Form 4684 and follow the
instructions for that form for where to report the gain.
If you have passive losses on Form 4684, cross
through the amount you first entered on line 31, 32, 38a,
38b, or 39 of that form, and enter the allowed loss from
the part. To the left of the entry space, enter “PAL.”
Form 4797 and Form 8949. If you sold assets from a
passive activity or you sold an interest in your passive
activity, all gains from the activity must be entered on the
appropriate line of Form 4797 or Form 8949. Identify the
gain as “FPA.” Enter any allowed losses for Form 4797 or
Form 8949 on the appropriate line. On Form 8949, include
“PAL” in the description of the property in column (a). On
Form 4797, enter “PAL” to the left of the entry space (for
example, line 2 or line 10).
Entire disposition with an overall loss. If you made an
entire disposition of your interest in a passive activity and
that activity had an overall loss, none of the gains, if any,
or losses were entered on Form 8582. However, all the
gains and losses must be reported on the forms or
schedules normally used. To the left of the entry space,
enter “EDPA.”

Instructions for Form 8582 (2023)

Entire disposition with an overall gain. Gains and
losses from this activity were included on Form 8582 so
that the gains might offset other PALs. Report all the gains
and losses on the forms and schedules normally used,
and to the left of the entry space, enter “EDPA.”

Publicly Traded Partnerships (PTPs)

A PTP is a partnership whose interests are traded on an
established securities market or are readily tradable on a
secondary market (or its substantial equivalent).
An established securities market includes any national
securities exchange and any local exchange registered
under the Securities Exchange Act of 1934 or exempted
from registration because of the limited volume of
transactions. It also includes any over-the-counter market.
A secondary market generally exists if a person stands
ready to make a market in the interest. An interest is
treated as readily tradable if the interest is regularly
quoted by persons, such as brokers or dealers, who are
making a market in the interest.
The substantial equivalent of a secondary market
exists if there’s no identifiable market maker, but holders
of interests have a readily available, regular, and ongoing
opportunity to sell or exchange interests through a public
means of obtaining or providing information on offers to
buy, sell, or exchange interests. Similarly, the substantial
equivalent of a secondary market exists if prospective
buyers and sellers have the opportunity to buy, sell, or
exchange interests in a timeframe and with the regularity
and continuity that the existence of a market maker would
provide.

Special Instructions for PTPs

Section 469(k) provides that the passive activity
limitations must be applied separately to items from each
PTP. PALs from a PTP may generally be used only to
offset income or gain from passive activities of the same
PTP. The special allowance for rental real estate activities
(including CRDs) doesn’t apply to PALs from a PTP.
Passive activity loss rules for partners in PTPs. Don’t
report passive income, gains, or losses from a PTP on
Form 8582. Instead, use the following rules to figure and
report your income, gains, and losses from passive
activities you held through each PTP you owned during
the tax year.
1. Combine any current year income, gains and
losses, and any prior year unallowed losses to see if you
have an overall loss from the PTP. Include only the same
types of income and losses you would include to figure
your net income or loss from a non-PTP passive activity.
See Passive Activity Income and Deductions, earlier.
2. If you have an overall gain, the net gain portion
(total gain minus total losses) is nonpassive income.
It’s important to figure the nonpassive income because
it must be included in modified adjusted gross income to
figure the special allowance for active participation in a
non-PTP rental real estate activity on Form 8582. Also,
you may be able to include the nonpassive income in
investment income when figuring your investment interest
expense deduction. See Form 4952, Investment Interest
Expense Deduction.

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Report all gains and allowed losses from the activity on
the forms or schedules normally used, and to the left of
each entry space, enter “From PTP.”
Example. You have Schedule E income of $8,000 and
a Form 4797 prior year unallowed loss of $3,500 from the
passive activities of a PTP. You have a $4,500 overall
gain ($8,000 − $3,500) that’s nonpassive income. On
Schedule E, Part II, you report the $4,500 net gain as
nonpassive income in column (k). In column (h), you
report the remaining Schedule E gain of $3,500 ($8,000 −
$4,500) as passive income. On the appropriate line of
Form 4797, you report the prior year unallowed loss of
$3,500. You enter “From PTP” to the left of each entry
space.
3. If you have an overall loss (but didn’t dispose of
your entire interest in the PTP to an unrelated person in a
fully taxable transaction during the year), the losses are
allowed only to the extent of the income, and the excess
loss is carried forward to use in a future year if you have
income to offset it. Report as a passive loss on the
schedule or form you normally use the portion of the loss
equal to the income. Report the income as passive
income on the form or schedule you normally use.
Example. You have a Schedule E loss of $12,000
(current year losses plus prior year unallowed losses) and
Form 4797 gain of $7,200 from the passive activities of a
PTP. You report the $7,200 gain on the appropriate line of
Form 4797. On Schedule E, Part II, you report $7,200 of
the losses as a passive loss in column (g). You carry
forward the unallowed loss of $4,800 ($12,000 − $7,200).
If you have unallowed losses from more than one
activity of the PTP or from the same activity of the PTP
that must be reported on different forms or schedules,
allocate the unallowed losses on a pro rata basis to figure
the amount allowed for each activity or on each form or
schedule.
To allocate and keep a record of the unallowed

TIP losses, use Parts VII, VIII, and IX of Form 8582.
List each activity of the PTP in Part VII. Enter the overall
loss from each activity in column (a). Complete column (b)
of Part VII according to its instructions. Multiply the total
unallowed loss from the PTP by each ratio in column (b)
and enter the result in column (c) of Part VII.
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
forms or schedules (or are identified separately on the
same form or schedule). Enter the net loss plus any prior
year unallowed losses in column (a) of Part VIII (or line 1a,
column (a), of Part IX, if applicable). The losses in column

(c) of Part VIII (column (e) of Part IX) are the allowed
losses to report on your forms or schedules. Report these
losses and any income from the PTP on the forms and
schedules normally used.
4. If you have an overall loss and you disposed of your
entire interest in the PTP to an unrelated person in a fully
taxable transaction during the year, your losses (including
prior year unallowed losses) allocable to the activity for
the year aren’t limited by the passive loss rules. A fully
taxable transaction is one in which you recognize all your
realized gain or loss. Report the income and losses on the
forms and schedules normally used.
For rules on the disposition of an entire interest
reported using the installment method, see Disposition of
an Entire Interest, earlier.
Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us the
information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the
right amount of tax.
You are not required to provide the information
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its
instructions must be retained as long as their contents
may become material in the administration of any Internal
Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated
burden for individual taxpayers filing this form is approved
under OMB control number 1545-0074 and is included in
the estimates shown in the instructions for their individual
income tax return. The estimated burden for all other
taxpayers who file this form is shown below.
Recordkeeping . . . . . . . . . . . . . . . . . .

26 min.

Learning about the law or the form . .

22 min.

Preparing the form . . . . . . . . . . . . . . .

1 hr., 52 min.

Copying, assembling, and sending
the form to the IRS . . . . . . . . . . . . . . .

48 min.

If you have comments concerning the accuracy of
these time estimates or suggestions for making this form
simpler, we would be happy to hear from you. See the
instructions for the tax return with which this form is filed.

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Instructions for Form 8582 (2023)