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10284: 1040 - Form 8582


1040 Individual Data Entry

How can I generate Form 8582 in a 1040 return?

 

If losses from passive activities are involved, Form 8582, Passive Activity Loss Limitations, will be produced if it is necessary to limit those losses based on criteria established by the IRS.

For example, if the taxpayer's MAGI is too high, the losses may need to be limited. More information is available in Publication 925 and in the instructions for Form 8582.

The only data entry point for Form 8582 is the 8582 screen, which allows you to override figures for the Wks MAGI, a worksheet that determines the modified adjusted gross income (MAGI) for line 7 of this form.

If the 8582 does not appear in view mode, and you are expecting it to, check the following:

  1. There must be a loss from a passive activity such as Schedule E or K-1. Form 8582 is not required if there is a net gain.
  2. Check the activity code on Schedule E or K-1. If code C or D are selected, information does not flow to the 8582*. On the E, K1P, K1F, or K1S screen checkbox: 

Review the field help F1 for more info on each of these selections. 

  1. If The activity was disposed of during taxable year is selected, loss is not limited; therefore, no Form 8582 is required.

To force Form 8582 to print, open the PRNT screen and select the option Produce Form 8582.

If you want to limit a taxpayer's losses on Schedule E to the at-risk basis in the activity, go to the 6198 data entry screen. Be sure to tie the 6198 to the proper passive activity by using the FOR and MULTI-FORM CODE boxes. A 6198 At Risk and 6198 At Risk continued tab is available on the K1P, K1S, or K1F screen, if needed for at risk limitations for the pass-through entity. 


*The exception for this is when the rental was a passive activity in a prior year, but is marked as C or D (non-passive) for the current year. In this situation, the rental is considered to be a "former passive activity," and some information (such as prior unallowed passive operating losses) will carry to Form 8582. Per the Form 8582 Instructions

"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."

"A former passive activity is any activity that was a passive activity in a prior tax year but is not a passive activity in the current tax year. A prior year unallowed loss from a former passive activity is allowed to the extent of current year income from the activity.

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

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 and the applicable worksheets.

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 and the applicable worksheets"

Generally, rental real estate activities with active participation flow to Form 8582, Part 1, line 1, and the calculation is shown on Wks 85821, however, if the return is being filed as Married Filing Separate (MFS), worksheet 3 is used and it flows to Form 8582, Part 1, line 3 instead. This is because the Form 8582 Instructions specify that "Married individuals who file separate returns and lived with their spouses at any time during the tax year don’t qualify under the active participation rule and must use Worksheet 3 instead of Worksheet 1." This also applies to someone filing a 1040-NR with filing status 5. See note 402 if the taxpayer did not live with the spouse as an additional selection must be made on screen 1 to indicate this. 


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