J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

10.12 Form 8582

The purpose of Form 8582 is to assemble in one place items of income and expenses from passive activities in order to determine the effect of the passive loss rules on these items. After this determination, income and allowable deductions are reported as regular income and deductions in appropriate schedules attached to your tax return. For example, net profits of a self-employed person who is not active in the business are reported on Schedule C, sales of capital assets of a passive activity are reported on Form 8949 and Schedule D, your share of partnership income and allowable deductions is reported on Schedule E, and rental income and allowable deductions are reported on Schedule E.

Forms 8949 & Schedule D or Form 4797.

Gains or losses from the sale of assets from a passive activity or from the sale of a partial interest that is less than “substantially all” of your entire interest in a passive activity are reported on Form 8949/Schedule D (capital assets) or on Form 4797 (business property). The gain is also entered on Form 8582. Losses must first be entered on Form 8582 to see how much, if any, is allowable under the passive loss restrictions before an amount can be entered as a loss on Form 8949/Schedule D or Form 4797.

A disposition of an insubstantial part of your interest in the activity does not allow a deduction of suspended passive losses from prior years. When you dispose of your entire interest in a passive activity to a nonrelated party in a fully ...