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Form 8810 Instruksi

Instruksi untuk Form 8810, Corporate Passive Activity Loss dan Batasan Kredit

Artikelnr. 2023

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  • Bentuk 8810 - Rugi Aktivitas Pasif Perusahaan dan Batasan Kredit
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Department of the Treasury  
Internal Revenue Service  
2023  
Instructions for Form 8810  
Corporate Passive Activity Loss and Credit Limitations  
Section references are to the Internal  
Revenue Code unless otherwise noted.  
corporation has a passive activity credit for  
Employee-owner. A person is  
the year if its credits from passive activities considered to be an employee-owner if the  
(including prior year unallowed credits)  
exceed the sum of the tax attributable to  
net passive income and the tax  
person is an employee of the corporation  
on any day of the testing period, and owns  
any outstanding stock of the corporation  
on any day of the testing period. Stock  
ownership is determined under the  
Future Developments  
For the latest information about  
developments related to Form 8810 and  
its instructions, such as legislation  
enacted after they were published, go to  
attributable to net active income.  
For more information, see Pub. 925,  
Passive Activity and At-Risk Rules.  
attribution rules of section 318, except that  
“any” is substituted for “50 percent or more  
in value” in section 318(a)(2)(C).  
Definitions  
Closely held corporation. A corporation  
is a closely held corporation if at any time  
during the last half of the tax year more  
than 50% in value of its outstanding stock  
is directly or indirectly owned by or for not  
more than five individuals, and the  
corporation is not a personal service  
corporation.  
Certain organizations are treated as  
individuals for this test (see section  
542(a)). For rules of determining stock  
ownership, see section 544 (as modified  
by section 465(a)(3)).  
General Instructions  
Except as otherwise indicated, the  
following terms are defined below.  
Purpose of Form  
Personal service corporation. A  
personal service corporation is a  
corporation whose principal activity for the  
testing period (defined below) for the tax  
year is the performance of personal  
services. The services must be  
substantially performed by  
Personal service corporations and closely  
held corporations use Form 8810 to figure  
the amount of any passive activity loss  
(PAL) or credit for the current tax year and  
the amount of losses and credits from  
passive activities allowed on the  
corporation's tax return. Form 8810 is also  
used to make the election to increase the  
basis of credit property when the  
employee-owners. Employee-owners must  
own more than 10% of the fair market  
value (FMV) of the corporation's  
outstanding stock on the last day of the  
testing period.  
corporation disposes of its interest in an  
activity for which it has an unused credit.  
Other Passive Activity Terms  
Some additional terms are defined below.  
Generally, passive activities include  
trade or business activities in which the  
corporation did not materially participate  
for the tax year, and rental activities  
regardless of its participation.  
Testing period. Generally, the testing  
period for a tax year is the prior tax year.  
The testing period for a new corporation  
starts with the first day of its first tax year  
and ends on the earlier of:  
Net income. 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.  
Note. Individuals subject to the passive  
activity rules use Form 8582, Passive  
Activity Loss Limitations.  
The last day of its first tax year, or  
The last day of the calendar year in  
Net loss. 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.  
which the first tax year began.  
Principal activity. The principal  
activity of a corporation is considered to  
be the performance of personal services if,  
during the testing period, the corporation's  
compensation costs for the performance  
of personal services are more than 50% of  
its total compensation costs.  
Who Must File  
Personal service corporations and closely  
held corporations that have losses or  
credits (including prior year unallowed  
losses and credits) from passive activities  
must file Form 8810.  
Overall gain. The excess of the net  
income from the activity over the prior year  
unallowed losses from the activity.  
Overall loss. The excess of the prior year  
unallowed losses from the activity over the  
net income from the activity or the prior  
year unallowed losses from the activity  
plus the net loss from the activity.  
Passive activity loss (PAL). A personal  
service corporation has a PAL for the year  
if the total losses (including prior year  
unallowed losses) from its passive  
activities exceed the total income from its  
passive activities. A closely held  
Performance of personal services.  
Personal services are those performed in  
the health, law, engineering, architecture,  
accounting, actuarial science, performing  
arts, or consulting field (as defined in  
Temporary Regulations section  
Prior year unallowed losses. The  
deductions and 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).  
corporation has a PAL for the year if the  
total losses (including prior year unallowed  
losses) from all its passive activities  
exceed the sum of the total income from  
all its passive activities and its net active  
income.  
1.448-1T(e)). The term “performance of  
personal services” includes any activity  
involving the performance of personal  
services in these areas.  
Substantial performance by  
employee-owners. Personal services  
are substantially performed by  
Coordination With Other  
Limitations  
Passive activity credit. A personal  
service corporation has a passive activity  
credit for the year if its credits from passive  
activities (including prior year unallowed  
credits) exceed the tax attributable to net  
passive income. A closely held  
employee-owners if, for the testing period,  
more than 20% of the corporation's  
compensation costs for the performance  
of personal services are for services  
performed by employee-owners.  
Generally, items of deduction or loss from  
a passive activity are subject to other  
limitations before they are subject to the  
PAL limitations. Once a deduction or loss  
Aug 8, 2023  
Cat. No. 10357E  
becomes allowable under these other  
See Regulations section 1.469-9(g) for  
lease, a service contract, or some other  
arrangement.  
limitations, the corporation must determine details on how to make or revoke this  
whether the deduction or loss is limited  
under the PAL rules. Examples of other  
limitations include the following.  
election. For information on making a late  
election, see Rev. Proc. 2011-34, 2011-24  
I.R.B. 875, available at IRS.gov/irb/  
Exceptions  
An activity is not a rental activity if any of  
the following apply.  
Basis.  
Section 163(j) interest deduction  
1. The average period of customer  
A real property trade or business is any  
limitations.  
use (see below) of the rental property is:  
real property development,  
At-risk limitations. See Form 6198,  
redevelopment, construction,  
a. 7 days or less, or  
At-Risk Limitations, for details on the  
at-risk rules.  
reconstruction, acquisition, conversion,  
rental, operation, management, leasing, or  
brokerage trade or business.  
b. 30 days or less and significant  
personal services (see below) were  
provided in making the rental property  
available for customer use.  
In addition, certain allowances under  
the PAL rules may be limited under other  
rules. These include the following.  
Note. If an activity qualifies for the  
exception described above in 2023, but  
has a prior year unallowed PAL, the prior  
year unallowed loss is treated as a loss  
from a former passive activity. See Former  
3. A working interest in an oil or gas  
well held directly or through an entity that  
does not limit the corporation's liability  
(such as a general partner's interest in a  
partnership). In this case, it does not  
matter whether the corporation materially  
participated in the activity for the tax year.  
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 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) for  
more details.  
Capital losses allowable under the PAL  
rules may be limited under the capital loss  
limitations of section 1211(a).  
Percentage depletion deductions  
allowable under the PAL rules may be  
limited under section 613A(d).  
Special Rules for  
Consolidated Group  
The passive activity loss and passive  
activity credit of an affiliated group of  
corporations filing a consolidated return  
for the tax year (a consolidated group) are  
determined by taking into account the  
following items of each member of the  
group.  
If, however, the corporation's liability  
was limited for part of the year (for  
example, the corporation converted its  
general partnership interest to a limited  
partnership interest during the year), some  
of the corporation's income and losses  
from the working interest may be treated  
as passive activity gross income and  
passive activity deductions. See  
Significant personal services include  
only services performed by individuals. To  
determine if personal services are  
significant, all the relevant facts and  
circumstances are taken into  
Passive activity gross income and  
deductions.  
Gain or loss on dispositions.  
Net active income (for a consolidated  
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 the use of the property.  
Significant personal services do not  
include:  
group treated as a closely held  
corporation).  
Temporary Regulations section  
1.469-1T(e)(4) for more details.  
Credits from passive activities.  
4. 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 is actively traded, such as  
stocks, bonds, and other securities. See  
Temporary Regulations section  
Activities That Are Not  
Passive Activities  
The following are not classified as passive  
activities. Generally, income, losses, and  
credits from these activities are not  
a. Services needed to permit the  
lawful use of the property;  
b. Services to repair or improve  
property that would extend its useful life for  
a period substantially longer than the  
average rental period; and  
entered on Form 8810. However, losses  
and credits from these activities may be  
subject to limitations other than the  
passive activity loss and credit rules.  
1.469-1T(e)(6) for more details.  
Rental Activities  
A rental activity is a passive activity even if  
the corporation materially participated in  
the activity unless it meets the  
c. Services that are similar to those  
commonly provided with long-term rentals  
of real estate, such as cleaning and  
1. Trade or business activities in  
which the corporation materially  
participated for the tax year.  
requirements described in item 2 under  
above. In addition, if the corporation meets  
any of the five exceptions listed below, the  
rental of the property is not treated as a  
rental activity. See Reporting Income,  
Rental Activities, later, if the corporation  
meets any of the exceptions.  
maintenance of common areas, routine  
repairs, trash collection, elevator service,  
and security at entrances or perimeters.  
2. Any rental real estate activity in  
which the corporation materially  
participated if the corporation was a  
closely held corporation that derived more  
than 50% of its gross receipts from real  
property trades or businesses in which it  
materially participated. For these  
2. Extraordinary personal services  
were provided in making the rental  
property available for customer use.  
Extraordinary personal services are  
services provided in making rental  
purposes, gross receipts do not include  
portfolio income, as defined later under  
property available for customer use only if  
they are performed by individuals and the  
customers' use of the property is  
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  
For purposes of this rule, each interest  
in rental real estate is a separate activity,  
unless the corporation elects to treat all  
interests in rental real estate as one  
activity. The corporation makes the  
incidental to their receipt of the services.  
3. Rental of the property is incidental  
to a nonrental activity.  
amounts paid (or to be paid) mainly for the  
use of the property. It does not matter  
whether the use of the property is under a  
The rental of property is incidental to an  
activity of holding property for investment if  
the main purpose for holding the property  
election by attaching a statement to its  
original income tax return for the tax year.  
Instructions for Form 8810 (2023)  
-2-  
 
during the tax year 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 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.  
To report income, deductions, losses,  
or credits from a trade or business activity  
in which the corporation did not materially  
participate, see Trade or business  
under Reporting Income, Deductions,  
Losses, and Credits From Trade or  
Business Activities, later.  
each trade or business activity in which  
the corporation did not materially  
participate. If, however, the corporation  
held the activity through a PTP or the  
activity is a significant participation activity,  
special rules apply. See Publicly Traded  
Partnerships (PTPs), later. See Significant  
Participation Passive Activities under  
Recharacterization of Passive Income in  
Pub. 925 for details about how to report  
income or losses from significant  
If the corporation meets any of the five  
exceptions and the activity is a trade or  
business activity in which the corporation  
materially participated, report any income,  
deduction, loss, or credit from the activity  
on the forms or schedules normally used.  
The rental of property is incidental to a  
trade or business activity if:  
participation passive activities.  
a. The corporation owned 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.  
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. The corporation customarily makes  
the rental property available during  
defined business hours for nonexclusive  
use by various customers.  
5. The corporation provides property  
for use in a nonrental activity of a  
partnership or joint venture in its capacity  
as an owner of an interest in the  
partnership or joint venture.  
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  
attributable to a guaranteed payment  
under section 707(c) is not income from a  
rental activity. The determination of  
whether the property used in the activity is  
provided in the partner's capacity as an  
owner of an interest in the partnership is  
made on the basis of all the facts and  
circumstances.  
In general, if the corporation has credits  
from passive activities, use Worksheet 5 to  
figure the amount to enter in Part II of Form  
8810. However, if the corporation held the  
activity through a PTP, special rules apply.  
See Credits From PTPs, later, for details  
about how to report credits from these  
activities.  
If the rental activity did not meet any of  
the five exceptions, it is generally a  
passive activity. Special rules apply if the  
corporation conducted the rental activity  
through a publicly traded partnership  
(PTP) or if any of the rules described  
Income, later, apply. See PAL rules for  
partners in PTPs under Special  
Material Participation  
Personal service corporations and closely  
held corporations materially or significantly  
participate in an activity if one or more  
individuals, each of whom would materially  
or significantly participate in the activity if  
the corporation's activity were the  
Instructions for PTPs, later.  
If none of the special rules apply, use  
Worksheets 1 and 2 to determine the  
amount to enter in Part I of Form 8810 for  
each passive rental activity. If the  
corporation has credits from passive rental  
activities, use Worksheet 5 to figure the  
amount to enter in Part II of Form 8810.  
The worksheets are located later in the  
instructions.  
individual's activity, directly or indirectly  
own more than 50% (by value) of the  
corporation's outstanding stock. For this  
purpose, an individual's participation in all  
activities other than activities of the  
corporation is disregarded.  
A closely held corporation also  
Trade or Business  
Activities  
materially participates in an activity if the  
corporation satisfies the qualifying  
business requirements of section 465(c)  
(7)(C) (without regard to section 465(c)(7)  
(C)(iv) for the excluded business  
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:  
exception from the at-risk limitations).  
These requirements are met if:  
1. Involves the conduct of a trade or  
business (within the meaning of section  
162),  
1. During the entire 12-month period  
ending on the last day of the tax year,  
substantially all the services of at least  
one full-time employee of the corporation  
were in the active management of the  
activity;  
2. Is conducted in anticipation of  
starting a trade or business, or  
3. Involves research or experimental  
expenditures deductible under section 174  
(or that would be if the corporation chose  
to deduct rather than capitalize them).  
2. During the same period,  
substantially all the services of at least  
three full-time nonowner employees were  
directly related to the activity; and  
Reporting Income, Deductions,  
Losses, and Credits From Trade  
or Business Activities  
Trade or business activities with mate-  
rial participation. If the corporation  
materially participated in a trade or  
business activity, that activity is not a  
passive activity. Report the income,  
deductions, losses, and credits from the  
activity on the form or schedule normally  
used.  
Reporting Income, Deductions,  
Losses, and Credits From  
Rental Activities  
3. The deductions attributable to the  
activity and allowed solely under sections  
162 and 404 exceed 15% of the gross  
income from the activity for the tax year.  
If the corporation meets any of the five  
exceptions listed above, the corporation's  
rental of the property is not a rental activity.  
The corporation then must determine:  
Participation. For purposes of the  
material participation tests listed below,  
participation generally includes any work  
the individual did (without regard to the  
capacity in which the individual did it) in  
connection with an activity in which the  
corporation owned an interest at the time  
the individual did the work.  
1. Whether the rental of the property  
is a trade or business activity (see Trade or  
Business Activities, later) and, if so,  
Trade or business activities without  
material participation. In general, use  
Worksheets 1 and 2 to determine the  
amount to enter in Part I of Form 8810 for  
2. Whether the corporation materially  
participated in the activity for the tax year.  
Work is not treated as participation,  
however, if the work is not work that an  
Instructions for Form 8810 (2023)  
-3-  
     
owner of that type of activity would  
customarily do, and if one of the  
participated in all significant participation  
The corporation is not treated as a  
activities during the year for more than 500 limited partner, however, if the corporation  
individual's main reasons for doing the  
work is to avoid the disallowance of losses  
or credits from the activity under the  
passive activity loss and credit rules.  
hours. For this purpose, an individual's  
participation in all activities other than  
was also a general partner in the  
partnership at all times during the  
activities of the corporation is disregarded. partnership's tax year ending with or within  
the corporation's tax year (or, if shorter,  
during the portion of the partnership's tax  
year in which the corporation directly or  
indirectly owned a limited partnership  
interest).  
A significant participation activity is any  
trade or business activity in which the  
individual participated for more than 100  
hours during the year and in which the  
individual did not materially participate  
under any of the material participation  
tests (other than this fourth test). For more  
information regarding significant  
Proof of participation. Participation  
in an activity can be proved by any  
reasonable means. Contemporaneous  
daily time reports, logs, or similar  
documents are not required if participation  
can be established by other reasonable  
means. Reasonable means for this  
purpose may include, but are not limited  
to, the identification of 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.  
Consolidated groups. See Regulations  
section 1.469-1(h)(4) for rules for  
determining whether a consolidated group  
materially or significantly participates.  
participation, see Pub. 925.  
5. The individual 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.  
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  
6. The activity is a personal service  
activity in which the individual 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 field of health, law,  
engineering, architecture, accounting,  
actuarial science, performing arts, or  
consulting, or in any other trade or  
business in which capital is not a material  
income-producing factor.  
Tests for investors. Work done as an  
investor in an activity is not treated as  
participation unless the individual was  
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 activities.  
economic unit are:  
Studying and reviewing financial  
statements or reports on operations of the  
activity.  
1. Similarities and differences in types  
of trades or businesses,  
Preparing or compiling summaries or  
2. The extent of common control,  
3. The extent of common ownership,  
4. Geographical location, and  
analyses of the finances or operations of  
the activity for the individual's own use.  
7. Based on all the facts and  
circumstances, the individual participated  
in the activity on a regular, continuous, and  
substantial basis during the tax year.  
Monitoring the finances or operations of  
the activity in a nonmanagerial capacity.  
5. Interdependencies between or  
among the activities. This includes the  
extent to which the activities purchase or  
sell goods between or among themselves,  
involve products or services that are  
normally provided together, have the same  
customers, have the same employees, or  
are accounted for with a single set of  
books and records.  
If the individual is married for the tax  
year, the individual's participation in an  
activity includes any participation in the  
activity during the tax year by that  
The individual does not materially  
participate in the activity under this  
seventh test, however, if the individual  
participated in the activity for 100 hours or  
less during the tax year. Participation in  
managing the activity does not count in  
determining whether the individual  
materially participated under the test if:  
individual's spouse, whether or not the  
spouse owned any interest in the activity  
and whether or not the individual and  
spouse file a joint return for the tax year.  
a. Any person (except that individual)  
received compensation for performing  
services in the management of the activity,  
or  
b. Any person in the activity spent  
more hours during the tax year than that  
individual spent performing services in the  
management of the activity (regardless of  
whether the individual was compensated  
for the management services).  
Tests for individuals. An individual  
materially participates in an activity of the  
corporation if one or more of the following  
tests are satisfied.  
1. The individual participated in the  
activity for more than 500 hours during the  
tax year.  
2. The individual's participation in the  
activity for the tax year was substantially  
all of the participation in the activity of all  
individuals (including individuals who did  
not own any interest in the corporation or  
the activity) for the year.  
3. The individual participated in the  
activity for more than 100 hours during the  
tax year, and that individual participated at  
least as much as any other individual  
(including individuals who did not own any  
interest in the corporation or the activity)  
for the year.  
Example. A corporation has a  
significant ownership interest in a bakery  
and a movie theater in Baltimore and in a  
bakery and a movie theater in  
Philadelphia. Depending on all the  
relevant facts and circumstances, there  
may be more than one reasonable method  
for grouping the activities. For instance,  
the following groupings may or may not be  
permissible.  
A single activity.  
A movie theater activity and a bakery  
Special rules for limited partners.  
Generally, a limited partner cannot  
activity.  
A Baltimore activity and a Philadelphia  
materially participate in an activity.  
activity.  
However, the corporation is considered to  
materially participate in an activity in which  
it holds a limited partnership interest if one  
or more individuals (each of whom would  
materially participate in the activity under  
test 1, 5, or 6, discussed above, for the tax  
year if the corporation's activity were the  
individual's activity) directly or indirectly  
own more than 50% (by value) of the  
corporation's outstanding stock.  
Four separate activities.  
Once the corporation chooses a  
grouping under these rules, it must  
continue using that grouping in later tax  
years unless either:  
The corporation determines that the  
4. The activity is a significant  
participation activity for the individual for  
the tax year, and the individual  
original grouping was clearly  
inappropriate, or  
Instructions for Form 8810 (2023)  
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A material change in the facts and  
grouped together by the partnership or  
corporation.  
was clearly inappropriate or the nature of  
the material change in the facts and  
circumstances that made the original  
grouping clearly inappropriate.  
circumstances makes that grouping  
clearly inappropriate.  
Partial disposition of an activity.  
The corporation can, for the tax year in  
which there is a disposition of substantially  
all of an activity, treat the part disposed of  
as a separate activity if it can prove with  
reasonable certainty:  
1. The prior year unallowed losses  
and credits, if any, allocable to the part of  
the activity disposed of; and  
The IRS may regroup the corporation's  
activities if any of the activities resulting  
from the corporation's groupings are not  
an appropriate economic unit and one of  
the primary purposes of the grouping (or  
failure to regroup as required under  
Regulations section 1.469-4(e)) is to avoid  
the underlying purposes of the passive  
activity rules.  
The corporation must comply with  
disclosure requirements for certain  
changes to the corporation's groupings as  
described in Disclosure Requirement,  
later.  
Reporting of pre-existing groupings re-  
quired only upon change. The  
corporation is not required to file a written  
statement reporting the grouping of the  
trade or business activities and rental  
activities that have been made for tax  
years beginning before January 25, 2010  
(pre-existing groupings), until the  
corporation makes a change to the  
grouping.  
2. The net income or loss and any  
credits for the year of disposition allocable  
to the disposed part of the activity.  
Effect of failure to report. If the  
corporation fails to report these changes,  
each trade or business activity or rental  
activity will be treated as a separate  
activity. The corporation will be considered  
to have made a timely disclosure if it has  
filed all affected income tax returns  
consistent with the claimed grouping and  
makes the required disclosure on the  
income tax return for the year in which the  
corporation first discovered the failure to  
disclose. If the IRS first discovers the  
failure to disclose, however, the  
Disclosure Requirement  
A corporation is required to report to the  
IRS certain changes to the corporation’s  
groupings that occur during the tax year.  
For more information on these disclosure  
requirements, see Rev. Proc. 2010-13,  
2010-4 I.R.B. 329, available at IRS.gov/irb/  
Limitation on grouping certain activi-  
ties. The following activities cannot 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  
New grouping. The corporation must file  
a written statement with its original income  
tax return for the first tax year in which two  
or more activities are originally grouped as  
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  
corporation must also have reasonable  
cause for not making the required  
disclosure.  
b. Each owner of the trade or  
business activity has the same  
proportionate ownership interest in the  
rental activity. If so, the rental activity  
portion involving the rental of property  
used in the trade or business activity can  
be grouped with the trade or business  
activity. See Rental activities under  
Grouping Your Activities in Pub. 925 for an  
example.  
Passive Activity Income  
and Deductions  
statement must contain a declaration that  
the grouped activities make up an  
Take into account only passive activity  
income and passive activity deductions to  
figure the corporation's overall gain or  
overall loss from all passive activities or  
any passive activity. In figuring the PAL, a  
closely held corporation subtracts both  
passive activity income and net active  
income from its passive activity  
appropriate economic unit for the  
measurement of gain or loss under the  
passive activity rules.  
Addition to an existing grouping. The  
corporation must file a written statement  
with its original income tax return for the  
tax year in which the corporation adds a  
new activity to an existing grouping. The  
statement must provide the name,  
address, and EIN, if applicable, for the  
activity that is being added and for the  
activities in the existing grouping. In  
addition, the statement must contain a  
declaration that the activities make up an  
appropriate economic unit for the  
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).  
deductions. See the instructions for line 2,  
later, for the definition of net active  
income.  
3. Any activity with another activity in  
a different type of business and in which  
the corporation holds an interest as a  
limited partner or as a limited entrepreneur  
if that other activity is 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.  
Self-Charged Interest  
Certain “self-charged” interest income or  
expense can be treated as passive activity  
gross income or passive activity  
deductions if the loan proceeds are used  
in a passive activity. Generally,  
measurement of gain or loss under the  
passive activity rules.  
self-charged interest income and expense  
result from loans between the corporation  
and a partnership in which the corporation  
had a direct or indirect ownership interest.  
It may also result from loans between one  
partnership and another if each owner in  
the borrowing entity has the same  
Regrouping. The corporation must file a  
written statement with its original income  
tax return for the tax year in which the  
corporation regroups activities under  
Regulations section 1.469-4(e)(2). The  
statement must provide the names,  
Activities conducted through partner-  
ships and other C corporations sub-  
ject to section 469. Once a partnership  
or corporation determines its activities  
under these rules, a partner or  
proportional ownership interest in the  
lending entity. The self-charged interest  
rules do not apply to the corporation's  
partnership interest if the partnership  
made an election under Regulations  
section 1.469-7(g) to avoid the application  
of these rules. See Regulations section  
1.469-7 for details.  
addresses, and EINs, if applicable, for the  
activities that are being regrouped. If the  
corporation regroups two or more activities  
into a single activity, the statement must  
contain a declaration that the regrouped  
activities make up an appropriate  
shareholder can use these rules to group  
those activities with:  
Each other,  
Activities conducted directly by the  
partner or shareholder, or  
Activities conducted through other  
economic unit for the measurement of gain  
or loss under the passive activity rules. In  
addition, the statement must contain an  
explanation of why the original grouping  
partnerships and corporations.  
A partner or shareholder cannot treat  
as separate activities those activities  
Instructions for Form 8810 (2023)  
-5-  
     
interest treated as a passive activity  
deduction (see Self-Charged Interest,  
earlier). For example, capitalized interest  
expense is not a passive activity  
deduction.  
Recharacterization of Passive  
Income  
Passive Activity Income  
Passive activity income includes all  
income from passive activities, including  
(with certain exceptions described in  
Temporary Regulations section  
Certain income from passive activities can  
be recharacterized and excluded from  
passive activity income. The amount of  
income recharacterized equals the net  
income from the sources described below.  
If during the tax year the corporation  
received net income from any of these  
sources (either directly or through a  
partnership), see Recharacterization of  
Passive Income in Pub. 925 for details on  
reporting net income or loss from these  
sources.  
Losses from dispositions of property  
1.469-2T(c)(2) and Regulations section  
1.469-2(c)(2)) gain from the disposition of  
an interest in a passive activity or property  
used in a passive activity at the time of the  
disposition.  
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  
carrybacks and carryovers.  
Passive activity income does not  
include the following.  
Deductions and losses that would have  
passive activities, discussed earlier.  
Portfolio income, including interest,  
been allowed for tax years beginning  
before 1987 but for basis or at-risk  
limitations.  
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). See  
Self-Charged Interest, earlier, for an  
exception.  
Income from the following sources may  
be subject to the net income  
Net negative section 481 adjustments  
recharacterization rules.  
allocated to activities other than passive  
activities. See Temporary Regulations  
section 1.469-2T(d)(7).  
Significant participation passive  
activities. A significant participation  
passive activity is any trade or business  
earlier) in which the corporation is treated  
as having participated for more than 100  
hours during the tax year but did not  
materially participate.  
Deductions for losses from fire, storm,  
shipwreck, or other casualty, or from theft,  
if losses similar in cause and severity do  
not regularly recur in the activity.  
Personal service income, including  
commissions and income from trade or  
business activities in which the  
Former Passive Activities  
Rental of property when less than 30%  
corporation materially participated for the  
tax year. See Temporary Regulations  
section 1.469-2T(c)(4).  
of the unadjusted basis of the property is  
subject to depreciation.  
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. The following apply.  
Passive equity-financed lending  
Income from positive section 481  
activities.  
adjustments allocated to activities other  
than passive activities. See Temporary  
Regulations section 1.469-2T(c)(5).  
Rental of property incidental to a  
development activity.  
Rental of property to a nonpassive  
Income or gain from investments of  
activity.  
If the current year net income from the  
working capital.  
Income from an oil or gas property if the  
Acquisition of an interest in a  
activity is less than the prior year  
unallowed loss, enter the prior year  
unallowed loss and any current year net  
income from the activity on Form 8810 and  
the applicable worksheets.  
pass-through entity that licenses  
intangible property.  
corporation 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, as discussed in item 3 under  
earlier. See Regulations section  
Passive Activity Deductions  
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 under section 469(b).  
If the current year net income from the  
activity is more than or equal to the prior  
year unallowed loss from the activity,  
report the income and loss on the forms  
and schedules normally used; do not enter  
the amounts on Form 8810.  
1.469-2(c)(6).  
Any income treated as income not from  
If the activity has a net loss for the  
a passive activity under Temporary  
Regulations section 1.469-2T(f) and  
Regulations section 1.469-2(f). See  
later.  
current year, enter the prior year  
unallowed loss (but not the current year  
loss) on Form 8810 and the applicable  
worksheets.  
Passive activity deductions include  
losses from dispositions of property used  
in a passive activity at the time of the  
disposition and losses from a disposition  
of less than an entire interest in a passive  
activity. See Dispositions, later, for the  
treatment of losses upon certain  
dispositions of an entire interest in an  
activity.  
For rules about prior year unallowed  
credits from former passive activities, see  
section 469(f). To report a disposition of a  
former passive activity, follow the rules  
under Dispositions next.  
Overall gain from any interest in a PTP.  
later.  
State, local, and foreign income tax  
refunds.  
Any reimbursement of a casualty or  
Passive activity deductions do not  
include the following.  
Dispositions  
theft loss included in income as recovery  
of all or part of a prior year loss deduction,  
if the deduction for the loss was not  
treated as a passive activity deduction.  
Deductions for expenses (other than  
Disposition of Less Than an  
interest expense) that are clearly and  
directly allocable to portfolio income.  
Entire Interest  
Cancellation of debt income to the  
Dividends-received deductions for  
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.  
extent that at the time the debt was  
discharged it was not properly allocable  
under Temporary Regulations section  
1.163-8T to passive activities.  
dividends not included in passive activity  
gross income.  
Interest expense, other than interest  
expense properly allocable under  
Temporary Regulations section 1.163-8T  
to passive activities or self-charged  
Note. A disposition of less than  
substantially all of an entire interest does  
Instructions for Form 8810 (2023)  
-6-  
     
not trigger the allowance of prior year  
unallowed losses.  
Worksheet 1—Computation of Income,  
Gains, Deductions, and Losses for  
Worksheet 2  
Disposition of an Entire Interest  
Keep for Your Records  
If the corporation disposed of its entire  
interest in a passive activity or a former  
passive activity to an unrelated party in a  
fully taxable transaction during the tax  
year, the losses allocable to the activity for  
the year are not limited by the PAL rules. A  
fully taxable transaction is a transaction in  
which all the realized gain or loss is  
recognized.  
Name of Activity:  
Name of Activity:  
1. Gross receipts . . . . . . . . . . . .  
2. Schedule D and Form 8949 gains  
(see instructions) . . . . . . . . . .  
3. Form 4797 gains . . . . . . . . . .  
4. Other passive income . . . . . . .  
If the corporation is using the  
installment method to report this kind of  
disposition, figure the loss for the current  
year that is not limited by the PAL rules by  
multiplying the corporation's overall loss  
(which does not include losses allowed in  
prior years) by the following fraction.  
5. Total income. Add lines 1 through  
4. Enter the result here and in  
Worksheet 2, column (a) . . . . .  
6. Deductions: . . . . . . . . . . . .  
a. Cost of goods sold . . . . . . . . .  
b. Compensation of officers . . . . .  
c. Salaries and wages . . . . . . . .  
Gain recognized in the current year  
Unrecognized gain as of the beginning  
of the current year  
d. Repairs and  
maintenance . . . . . . . . . . . . .  
e. Bad debts . . . . . . . . . . . . . .  
f. Rents . . . . . . . . . . . . . . . . .  
g. Taxes and licenses . . . . . . . . .  
h. Interest . . . . . . . . . . . . . . . .  
i. Depreciation . . . . . . . . . . . . .  
j. Depletion . . . . . . . . . . . . . . .  
k. Advertising . . . . . . . . . . . . . .  
l. Other deductions . . . . . . . . . .  
Unallowed passive activity credits,  
unlike unallowed PALs, are not allowable  
when the corporation disposes of its  
interest in an activity. However, the  
corporation can elect to increase the basis  
of the credit property by the amount of the  
original basis reduction of the property to  
the extent that the credit has not been  
allowed under the passive activity rules.  
Unallowed passive activity credits that are  
not used to increase the basis of the credit  
property are carried forward until they are  
allowed. To make the election, complete  
Part III of Form 8810. No basis adjustment  
can be elected on a partial disposition of  
the corporation's interest in a passive  
activity.  
7. Total deductions. Add lines 6a  
through 6l . . . . . . . . . . . . . .  
8. Schedule D and Form 8949 losses  
(see instructions) . . . . . . . . . .  
9. Form 4797 losses . . . . . . . . . .  
10. Total deductions and losses.  
Add lines 7 through 9. Enter the  
result here and in Worksheet 2,  
column (b) . . . . . . . . . . . . . .  
A partner in a PTP is not treated as  
having disposed of an entire interest in an  
activity of a PTP until there is an entire  
disposition of the partner's interest in the  
PTP.  
include the income, gains, deductions,  
and losses (including prior year unallowed  
losses) on Worksheet 1. If this is the  
corporation's only passive activity or a  
former passive activity, report the income,  
gains, deductions, and losses (including  
prior year unallowed losses) on the forms  
and schedules normally used, but do not  
enter them on the worksheets or on Form  
8810.  
Temporary Regulations sections  
1.469-1T(h)(7) and (8) for rules on  
applying the PAL rules to dispositions of  
property and other intercompany  
transactions.  
See Dispositions in Pub. 925 for  
additional information about dispositions,  
including rules for dispositions by gift or  
death.  
Specific Instructions  
Note. Complete Worksheets 1 and 2  
before completing Form 8810, Part I.  
Reporting an Entire Disposition  
When the corporation completely  
disposes of an entire interest in a passive  
activity or a former passive activity, there  
may be net income or loss and prior year  
unallowed losses from the activity.  
Combine all income, gains, deductions,  
and losses (including any prior year  
unallowed losses) from the activity for the  
tax year to see if the corporation has an  
overall gain or loss.  
Worksheet 1  
If the corporation has an overall loss  
when combining all income, gains,  
Use Worksheet 1 to figure the total current  
year income, gains, deductions, and  
losses for each passive activity.  
deductions, and losses (including any  
prior year unallowed losses) from the  
activity, report all the income, gains,  
deductions, and losses on the forms and  
schedules normally used, but do not enter  
them on the worksheets or on Form 8810.  
Lines 1 through 4. Enter on these lines  
the gross receipts and other income from  
passive activities and passive activity  
gains reported on Schedule D (Form  
1120) and Form 8949, as applicable, and  
Form 4797, Sales of Business Property.  
If the corporation has an overall gain  
from a passive activity and also has other  
passive activities to report on Form 8810,  
Note. Members of a consolidated group,  
see Regulations section 1.469-1(h)(6) and  
Instructions for Form 8810 (2023)  
-7-  
including any prior year unallowed losses  
entered on line 1c. Enter the deductions  
on the appropriate lines of Form 1120,  
U.S. Corporation Income Tax Return. Also  
enter any losses from Form 4797 or Form  
8949 (and Schedule D (Form 1120)) on  
Form 1120, if applicable, including any  
prior year unallowed losses that are  
properly entered on those forms.  
Gross income and deductions from any  
Line 5. Enter total income on this line and  
trade or business activity of trading certain  
personal property described in Temporary  
Regulations section 1.469-1T(e)(6), but  
only if the corporation did not materially  
participate in the activity for the tax year.  
in Worksheet 2, column (a).  
Lines 6a through 6l. Enter passive  
activity deductions.  
Lines 8 and 9. Enter on line 8 losses  
from passive activities reported on  
If the corporation disposed of its entire  
interest in a passive activity to an  
unrelated party in a fully taxable  
transaction, figure net active income by  
taking into account an overall loss from  
that activity only to the extent it exceeds  
overall gain from all other passive activities  
(the gain, if any, shown on Form 8810,  
line 1d).  
Schedule D (Form 1120) and Form 8949,  
as applicable. Enter on line 9 losses from  
passive activities reported on Form 4797.  
If the prior year unallowed losses  
include deductions that would have been  
reported on Form 1120, page 1, instead of  
on Form 4797 or Form 8949 (and  
Line 10. Enter total deductions and  
losses on this line and in Worksheet 2,  
column (b).  
Schedule D (Form 1120), as applicable),  
include the prior year unallowed losses on  
the appropriate line along with any current  
year deduction or loss from that line.  
Gross receipts, gains from the sale of  
business assets, capital gains, and other  
passive income should also be entered on  
the forms and schedules normally used.  
Allowable passive activity deductions and  
losses are entered on the forms and  
schedules after Form 8810 is completed  
and the deductions and losses are  
allocated to the activities.  
If there is an overall loss from all other  
passive activities (Form 8810, line 1d, is a  
loss), figure net active income by taking  
into account all of the overall loss from that  
activity.  
Example. The corporation had $1,000  
of deductions for current year repairs and  
maintenance and $500 of deductions for  
prior year unallowed repairs and  
maintenance. Enter $1,500 as the  
deduction for repairs and maintenance  
allowed from passive activities on the  
proper line.  
Line 4. Total Deductions and  
Losses Allowed  
Worksheet 2  
Worksheet 2, columns (d) and (e), show  
whether an activity had an overall gain or  
loss.  
Columns (a) and (b). Enter in column  
(a) the total income for the current year  
shown on Worksheet 1, line 5. Enter in  
column (b) the total deductions and losses  
shown on Worksheet 1, line 10.  
Line 2. Closely Held  
Corporations  
Overall gain. A corporation with an  
overall gain for any of the activities in  
Worksheet 2, column (d), will report all of  
the deductions and losses listed in  
Closely held corporations can offset the  
loss, if any, on line 1d with net active  
income. Net active income is the  
corporation's taxable income for the tax  
year, determined without regard to the  
following items.  
Column (c). Enter the prior year  
unallowed losses from Worksheet 4,  
column (c), located in the 2022  
Instructions for Form 8810.  
Worksheet 1 and any prior year unallowed  
losses in Worksheet 2 for that activity on  
the appropriate lines of Form 1120 and on  
Form 8949 and Schedule D (Form 1120),  
or Form 4797, as applicable.  
Totals. Enter the totals from Worksheet 2,  
columns (a), (b), and (c), on Form 8810,  
lines 1a, 1b, and 1c, respectively.  
Net passive income or loss.  
Portfolio income. See Passive Activity  
Income, earlier.  
Overall loss. A corporation uses  
Worksheets 3 and 4 for any of the  
activities that show an overall loss in  
column (e). Use Worksheet 3 to figure the  
unallowed deductions and losses to be  
carried forward to Worksheet 4. Use  
Worksheet 4 to figure the allowed  
deductions and losses to report on the  
forms and schedules for 2023.  
Deductions attributable to portfolio  
Columns (d) and (e). Combine income,  
deductions, and losses in columns (a)  
through (c) for each activity. Enter any  
overall gain in column (d) or any overall  
loss in column (e). Do not enter the  
amounts from columns (d) and (e) on  
Form 8810. These amounts will be used  
when Form 8810 is completed to figure the  
loss allowed for the current year.  
income described in Temporary  
Regulations sections 1.469-2T(d)(2)(i), (ii),  
and (iv).  
Interest expense allocated under  
Temporary Regulations section 1.163-8T  
to a portfolio expenditure (within the  
meaning of Temporary Regulations  
section 1.163-8T(b)(6)).  
Gain on the disposition of substantially  
appreciated property formerly held for  
investment. See Regulations section  
1.469-2(c)(2)(iii)(F).  
Part I. 2023 Passive  
Activity Loss  
Lines 1d and 3  
Gross income from certain oil or gas  
properties treated under Regulations  
If line 1d or 3 shows net income or zero, all section 1.469-2(c)(6) as not from a  
the deductions and losses are allowed  
passive activity.  
Instructions for Form 8810 (2023)  
-8-  
   
Keep for Your Records  
Worksheet 2 for Form 8810, Lines 1a, 1b, and 1c  
Current Year  
Prior Year  
Overall Gain or Loss  
Name of Activity  
(a) Income  
(Line 1a)  
(b) Deductions and  
Losses (Line 1b)  
(c) Unallowed  
Losses (Line 1c)  
(d) Gain  
(e) Loss  
Totals. Enter on Form 8810, lines  
1a, 1b, and 1c . . . . . . . . . . . . . .  
Keep for Your Records  
Worksheet 3—Allocation of Unallowed Deductions and Losses  
If the corporation has activities in Worksheet 2 with an overall loss in column (e), use Worksheet 3 to figure the unallowed deductions and losses for  
each activity.  
If any of the activities in Worksheet 2 had an overall gain in column (d), all of the deductions and losses (including prior year unallowed losses) for  
that activity are allowed in full. Enter the deductions on the appropriate line of Form 1120 and enter any losses on Form 4797, Form 8949, and  
Schedule D (Form 1120), as applicable.  
Prior year unallowed losses from 2022. If there were prior year unallowed losses from 2022, include the prior year unallowed losses on the  
appropriate line along with any current year deduction or loss for that line. See the example in the instructions for lines 1d and 3, earlier. Prior year  
unallowed losses from Form 4797 and Form 8949 should have been kept separate in 2022, and should be identified as “prior year unallowed losses”  
on Form 4797 and Form 8949.  
Column (a). Enter the loss from Worksheet 2, column (e).  
Column (b). Divide each of the individual losses in column (a) by the total of all the losses in column (a) and enter the ratio for each of the activities  
in column (b). The total of all the ratios should equal 1.00.  
Column (c). Multiply the unallowed loss from Form 8810, line 3, by each of the ratios in column (b) and enter the results in column (c).  
(a) Loss From  
Worksheet 2, Column (e)  
(c) Unallowed Deductions  
and Losses  
Name of Activity  
(b) Ratio  
Totals . . . . . . . . . . . . . . . . . . . . . . . . . .  
1.00  
Form 8949 and Schedule D (Form 1120),  
as applicable.  
If the unallowed loss is from losses  
reported on more than one form or  
schedule, allocate the unallowed loss from  
among the net losses as follows.  
Worksheet 4  
Use Worksheet 4 to allocate the unallowed  
deductions and losses for each activity  
among Form 1120 deductions and any  
losses to be reported on Form 4797, or  
If the unallowed loss is reported on one  
form or schedule, skip the following  
example and complete Worksheet 4.  
Instructions for Form 8810 (2023)  
-9-  
Keep for Your Records  
Worksheet 4—Allowed Deductions and Losses  
Name of Activity:  
(c) Unallowed  
Deductions and  
Losses  
(d) Allowed  
Deductions and  
Losses  
(a) Deductions and  
Losses  
(b) Ratio  
1. Form 1120 deductions:  
a. Cost of goods sold . . . . . . . . . . . . . . . .  
b. Compensation of officers . . . . . . . . . . .  
c. Salaries and wages . . . . . . . . . . . . . . .  
d. Repairs and maintenance . . . . . . . . . . .  
e. Bad debts . . . . . . . . . . . . . . . . . . . . . .  
f. Rents . . . . . . . . . . . . . . . . . . . . . . . . . .  
g. Taxes and licenses . . . . . . . . . . . . . . . .  
h. Interest . . . . . . . . . . . . . . . . . . . . . . . .  
i. Depreciation . . . . . . . . . . . . . . . . . . . . .  
j. Depletion . . . . . . . . . . . . . . . . . . . . . . .  
k. Advertising . . . . . . . . . . . . . . . . . . . . .  
l. Other deductions . . . . . . . . . . . . . . . . .  
Total Form 1120 deductions . . . . . . . . .  
1.00  
2. Schedule D and Form 8949 losses . . . . . .  
3. Form 4797 losses . . . . . . . . . . . . . . . . . .  
Name of Activity:  
(c) Unallowed  
Deductions and  
Losses  
(d) Allowed  
Deductions and  
Losses  
(a) Deductions and  
Losses  
(b) Ratio  
1. Form 1120 deductions:  
a. Cost of goods sold . . . . . . . . . . . . . . . .  
b. Compensation of officers . . . . . . . . . . .  
c. Salaries and wages . . . . . . . . . . . . . . .  
d. Repairs and maintenance . . . . . . . . . . .  
e. Bad debts . . . . . . . . . . . . . . . . . . . . . .  
f. Rents . . . . . . . . . . . . . . . . . . . . . . . . . .  
g. Taxes and licenses . . . . . . . . . . . . . . . .  
h. Interest . . . . . . . . . . . . . . . . . . . . . . . .  
i. Depreciation . . . . . . . . . . . . . . . . . . . . .  
j. Depletion . . . . . . . . . . . . . . . . . . . . . . .  
k. Advertising . . . . . . . . . . . . . . . . . . . . .  
l. Other deductions . . . . . . . . . . . . . . . . .  
Total Form 1120 deductions . . . . . . . . .  
1.00  
2. Schedule D and Form 8949 losses . . . . . .  
3. Form 4797 losses . . . . . . . . . . . . . . . . . .  
Instructions for Form 8810 (2023)  
-10-  
column (a) by the total of all of the Form  
1120 deductions in column (a) and enter  
the ratio for each of the deductions in  
column (b). The total of the ratios must  
equal 1.00.  
gain from passive activities of the same  
PTP. Any unallowed loss from a PTP  
passive activity is carried forward and  
allowed in a tax year when the corporation  
has passive income from the same PTP or  
when the corporation disposes of its entire  
interest in that PTP to an unrelated person  
in a fully taxable transaction.  
Example. The corporation has one  
passive activity. The activity has an  
unallowed loss of $18,000 in Worksheet 3,  
column (c), and the following net losses  
and net gain.  
Column (c). Allocate the portion of the  
loss in Worksheet 3, column (c), among  
the Form 1120 deductions by multiplying  
the unallowed loss attributable to the total  
Form 1120 deductions by each of the  
ratios in column (b). Enter the portion of  
the unallowed loss in Worksheet 3, column  
(c), that is attributable to a Form 8949 (or  
Schedule D (Form 1120)) or Form 4797  
loss in column (c) of this worksheet.  
Form 1120  
Gross receipts  
Deductions  
$100,000  
120,000  
Income from passive activities the  
corporation holds through a PTP cannot  
be used to offset losses from passive  
activities the corporation holds through  
another PTP or losses from any other  
passive activities.  
Net loss  
($20,000)  
Form 8949  
Form 4797  
Gain  
Loss  
$1,000 Gain  
(2,000) Loss  
$5,000  
(2,000)  
PAL rules for partners in PTPs. Do not  
include any income, gains, deductions, or  
losses from PTP passive activities on  
Form 8810. Instead, use the following  
rules to figure and report income, gains,  
deductions, and losses from passive  
activities held through each PTP that the  
corporation owned an interest in during  
the tax year.  
Net loss  
($1,000) Net gain  
$3,000  
Column (d). Subtract column (c) from  
column (a) and enter the results in this  
column. Enter the deductions allowed for  
Form 1120 on the proper lines of Form  
1120. Enter the allowed losses on the  
appropriate forms.  
Add the net losses of $20,000 and  
$1,000, for a total of $21,000. Divide the  
net loss reported on each form by the total  
of the net losses, and multiply the result by  
the unallowed loss of $18,000, as shown  
below.  
Publicly Traded  
Partnerships (PTPs)  
1. Combine any current year income,  
gains, deductions, and losses, and prior  
year unallowed losses to see if there is an  
overall gain or loss. Include only the same  
types of income and losses that would be  
included in figuring net income or loss  
from a non-PTP passive activity (see  
earlier).  
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).  
Form  
1120:  
$20,000  
$21,000  
x
$18,000 = $17,143  
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.  
Form  
8949:  
$1,000  
$21,000  
x
$18,000 = $857  
2. If there is an overall gain, the net gain  
portion (total income in excess of total  
deductions and losses) is nonpassive  
income. Report the income, deductions,  
and losses on the forms and schedules  
normally used.  
On Form 4797, report the $2,000 loss  
and the $5,000 gain. On Worksheet 4,  
enter the $17,143 of unallowed deductions  
allocated to Form 1120 in column (c) on  
the line for total Form 1120 deductions.  
Enter the $857 of unallowed Form 8949  
losses in column (c) of line 2. Use  
A secondary market generally exists  
where 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.  
3. If there is an overall loss (other than in  
a year in which the corporation disposed  
of its entire interest in the PTP), the  
deductions and losses are allowed to the  
extent of the income, and the excess  
deductions and losses are carried forward  
for use in a future year when there is  
income to offset them. Report the income  
and the loss allowed to the extent of  
income on the form or schedule normally  
used.  
Worksheet 4 to allocate the $17,143 to the  
Form 1120 deductions and show the  
allowed and unallowed Form 8949 loss.  
Line 1, column (a). Enter the current  
year deductions for each Form 1120  
expense (Worksheet 1, lines 6a through  
6l) plus any prior year unallowed Form  
1120 deduction for that activity. For  
example, if Worksheet 1, line 6i, shows  
current year depreciation for the activity of  
$2,200, and the activity had prior year  
unallowed depreciation of $1,200, enter  
$3,400 on Worksheet 4, line 1i, column  
(a).  
The substantial equivalent of a  
secondary market exists where there is 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 where prospective buyers  
and sellers have the opportunity to buy,  
sell, or exchange interests in a time frame  
and with the regularity and continuity that  
the existence of a market maker would  
provide.  
Part II. 2023 Passive  
Activity Credits  
Use Form 8810, Part II, to figure the  
amount of credits allowed from passive  
activities for the current year and the  
amount that is unallowed and carried  
forward.  
Line 2, column (a). Enter any Form 8949  
losses (or any Schedule D (Form 1120)  
losses, as applicable) from Worksheet 1,  
line 8, plus any prior year unallowed  
losses from the 2022 Form 8949 for that  
activity.  
Worksheet 5  
Special Instructions for PTPs  
Complete Worksheet 5 before completing  
Part II. Use Worksheet 5 to figure the  
amounts to enter on Form 8810, lines 5a  
and 5b.  
Line 3, column (a). Enter any Form 4797  
losses from Worksheet 1, line 9, plus any  
prior year unallowed Form 4797 losses for  
that activity.  
Section 469(k) provides that the passive  
activity rules and limitations must be  
applied separately to items from each PTP.  
Losses from passive activities the  
corporation holds through a PTP can  
generally be used only to offset income or  
Column (a). Convert any current year  
qualified expenditures into credits and  
complete Form 3800, General Business  
Line 1, column (b). Divide each of the  
individual Form 1120 deductions shown in  
Instructions for Form 8810 (2023)  
-11-  
   
Keep for Your Records  
Worksheet 5—For Form 8810, Lines 5a and 5b  
(b) Prior Year  
Unallowed Credits  
(Line 5b)  
(c) Total Credits  
(Add Columns (a)  
and (b))  
(a) Current Year  
Credits (Line 5a)  
Name of Activity  
From Form  
Totals. Enter on Form 8810, lines 5a and 5b . . . . . . . . . . . . . . . . . . .  
C. Net passive income. See instructions  
Credit, before beginning Worksheet 5. See Worksheet 6, column (c), located in the  
for line C  
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Cooperatives next for special instructions  
2022 Instructions for Form 8810 (adjusted  
if required).  
D. Subtract line C from line B. If zero or  
for certain cooperatives.  
less, enter -0- here and on  
Enter the credits from Form 3800, lines  
2, 23, and 32, in Worksheet 5, column (a).  
Enter "Form 3800, line" followed by the  
appropriate line number (2, 23, or 32) in  
the “From Form” column. Separate the  
credits by activity and by type before  
making entries in the worksheet. For  
example, a corporation has a distilled  
spirits credit from each of two passive  
activities. Enter each distilled spirits credit  
on separate lines in Worksheet 5, column  
(a). A corporation has a distilled spirits  
credit and a disabled access credit from  
the same passive activity. Enter the  
distilled spirits credit and the disabled  
access credit on separate lines in  
For rules about prior year unallowed  
credits from former passive activities, see  
section 469(f).  
line E  
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E. Tax attributable to line D. Figure the  
tax on the line D amount as if it were  
the corporation's only taxable  
Line 7  
income  
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F. Tax attributable to net passive  
If any of the following apply, enter -0- on  
line 7 and do not complete Part I or Part II  
of the Computation for Line 7, later.  
income. Subtract line E from line A.  
Closely held corporations that do not  
have net active income and personal  
service corporations enter the  
The corporation is a personal service  
corporation with a loss or zero on Form  
8810, line 1d.  
amount here and on Form 8810,  
line 7  
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The corporation is a personal service  
corporation with net passive income on  
Form 8810, line 1d, and the corporation  
has an overall loss from the entire  
disposition of a passive activity that is  
equal to or greater than the net income on  
line 1d.  
Part II. Tax Attributable to Net  
Active Income  
Worksheet 5, column (a).  
Cooperatives. A closely held cooperative  
that is allocating part or all of a general  
business credit to patrons will need to  
enter the credits being allocated on  
Worksheet 5 so that the passive activity  
rules can be applied before any part of the  
credit is allocated to patrons. For this  
purpose, Form 3800 should be completed  
using only credits that will not be allocated  
to patrons. Credits that are being allocated  
to patrons should be picked up from the  
separate credit forms.  
The corporation is a closely held  
G. Enter amount from line E if Part I is  
completed. Otherwise, enter income  
tax before credits from Form 1120,  
corporation with a loss or zero on Form  
8810, line 1d, and that amount is equal to  
or greater than the net active income on  
Form 8810, line 2.  
Schedule J, line 2*  
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H. Taxable income from Form  
The corporation is a closely held  
1120  
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corporation with net income on Form  
8810, line 3, and the corporation has an  
overall loss from an entire disposition that  
is equal to or greater than the net income  
on line 3.  
I. Net active income  
J. Net passive income or loss. See  
instructions for line J  
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K. Combine lines I and J. If less than  
zero, enter as a negative  
amount  
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Computation for Line 7  
L. Subtract line K from line H. If zero or  
Column (b). In figuring this year's  
less, enter -0- here and on  
passive activity credit, the corporation  
must take into account any credits from  
passive activities disallowed for prior years  
and carried forward to this year adjusted, if  
required, for items such as recaptured  
credits (see Regulations section  
Part I. Tax Attributable to Net  
Passive Income  
line M  
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M. Tax attributable to line L. Figure the  
tax on the line L amount as if it were  
the corporation's only taxable  
A. Income tax before credits from Form  
income  
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1120, Schedule J, line 2*  
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N. Subtract line M from line G. If zero or  
B. Taxable income from Form  
less, enter -0- here and on  
1.469-3(f)). Enter in Worksheet 5, column  
(b), the prior year unallowed credits from  
1120  
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line P  
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Instructions for Form 8810 (2023)  
-12-  
   
Keep for Your Records  
Worksheet 6—Allowed and Unallowed Credits  
Use Worksheet 6 to allocate the allowed and unallowed credits for each activity.  
Column (a). Enter the total credits from Worksheet 5, column (c).  
Column (b). Divide each of the credits in column (a) by the total of all credits in column (a). The total of the ratios should equal 1.00.  
Column (c). Multiply Form 8810, line 8, by the ratios in column (b) and enter the results in column (c). These are the unallowed credits for 2023.  
Keep a record of these amounts so the credits can be carried to the next year.  
Column (d). Subtract column (c) from column (a). These are the allowed credits for 2023. The amounts in this column are generally reported on  
Form To Be  
Reported On  
(c) Unallowed  
Credits  
Name of Activity  
(a) Credits  
(b) Ratio  
(d) Allowed Credits  
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
O. Enter the corporation's nonpassive  
1.00  
See the instructions for the tax return  
filed for information on how to figure tax.  
Reporting Allowed Credits on  
Tax Return  
Form 3800. Include on the applicable line  
(3, 24, or 33) of Form 3800 each passive  
activity general business credit allowed  
from Worksheet 6, column (d).  
Cooperatives. A closely held cooperative  
that is allocating part or all of a general  
business credit to patrons will show any  
allocation of the credit allowed from  
Worksheet 6, column (d), on the  
applicable lines of the separate credit  
forms.  
credits without regard to the tax  
liability limitations  
P. Tax attributable to net active income.  
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Line C. Enter the net income, if any, from  
Form 8810, line 1d. If the corporation has  
an overall loss from the entire disposition  
of a passive activity, the amount to enter  
on line C is the net income from line 1d  
reduced by the overall loss, but not below  
zero. If the result is zero, skip the rest of  
the Part I computation.  
Subtract line O from line N  
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Q. Tax attributable to net passive  
income and net active income.  
Add lines F and P. Enter the result  
here and on Form 8810, line 7  
.
.
* Subtract any decrease in taxes due  
(negative amount) from Form 8978  
included on Form 1120, Schedule J, line 6,  
from the amount entered on lines A and G.  
Line J. If the corporation has net passive  
income, enter the amount from line C on  
this line. If the corporation has a net loss  
from Form 8810, line 1d, enter that amount  
on line J as a negative amount.  
Computation for Line 7, Part I. This part  
is used by personal service corporations  
and closely held corporations with net  
passive income.  
Credits From PTPs  
A credit from a passive activity held  
through a PTP is allowed to the extent of  
the tax attributable to net passive income  
from that PTP. See Publicly Traded  
Partnerships (PTPs), earlier, for the  
definition of a PTP.  
Line 9  
Computation for Line 7, Part II. This  
part is used by closely held corporations  
that have net active income. See the  
instructions for line 2, earlier, for the  
definition of net active income. If the  
corporation has both net passive income  
and net active income, complete Part I and  
Part II and enter the amount from line Q on  
Form 8810, line 7.  
If the corporation has one type of credit,  
the amount on line 9 is the credit allowed  
for the year. See Reporting Allowed  
If the corporation has more than one  
type of credit or has credits from more  
than one activity, use Worksheet 6 to  
figure how much of the credit on line 9 is  
allowed for each activity. Keep a record of  
the unallowed credit and the activity to  
which it belongs to figure the credit  
allowed next year.  
Do not enter credits from PTPs on  
Form 8810 or the worksheets. Instead, use  
the following steps to figure the allowed  
and unallowed credits from passive  
activities held through PTPs.  
1. Figure the tax attributable to net  
passive income for each PTP with current  
year passive activity credits or prior year  
unallowed credits.  
Note. When using taxable income in the  
computation for line 7, it is not necessary  
to refigure items based on taxable income,  
such as the contributions deduction, the  
dividends-received deduction, and the net  
operating loss deduction.  
2. Use the smaller of the tax  
attributable to net income from passive  
activities of the PTP or the credit (including  
Instructions for Form 8810 (2023)  
-13-  
   
prior year unallowed credits) from passive  
activities of the PTP as the amount  
allowed. Report the allowed credits on the  
forms normally used and keep a record of  
the unallowed credits to be carried to the  
next year.  
reduction) to the extent that the credit has  
not previously been allowed because of  
the passive credit limitations. The amount  
of the unallowed credit that can then be  
applied against tax is reduced by the  
amount of the basis adjustment. Once the  
election is made, it is irrevocable.  
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  
Part III. Election To  
Increase Basis of Credit  
Property  
No basis adjustment can be elected on  
a partial disposition of the corporation's  
interest in a passive activity or if the  
disposition is not fully taxable. The amount  
of any unallowed credit, however, may  
remain available to offset the tax  
attributable to net passive and net active  
income.  
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  
business taxpayers filing this form is  
approved under OMB control number  
1545-0123 and is included in the  
Line 10  
Check the box on this line if the  
corporation elects to increase the basis of  
credit property it used in a passive activity  
or former passive activity by the unallowed  
credit that reduced the property's basis.  
estimates shown in the instructions for  
their business income tax return.  
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.  
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.  
The election is available for a fully  
taxable disposition of an entire interest in  
an activity for which a basis adjustment  
was made as a result of placing in service  
property for which a credit was taken. The  
corporation can elect to increase the basis  
of the credit property immediately before  
the disposition (by an amount no greater  
than the amount of the original basis  
You are not required to provide the  
information requested on a form that is  
Instructions for Form 8810 (2023)  
-14-