IRS Form 8582 (Passive Activity Loss) - How to Record Publicly Traded Partnership (PTP) Investments

IRS Form 8582 is completed by noncorporate taxpayers to report their passive activity income and losses. Passive activity losses can generally only be offset against other passive activity income.

Special rules apply to investments in publicly traded partnerships (PTP) where the taxpayer receives a Schedule K-1. Under IRC Section 469, the passive activity loss (PAL) rules apply separately to each PTP investment. The Form 8582 does NOT report activities from PTP investments. The PTP income & loss must be separately tracked on a proforma Form 8582 for each PTP investment.

In this example, we have a taxpayer with three Schedule K-1s from passive activities. Two are from PTP investments, and the third investment is in a non-PTP partnership where the taxpayer does not materially participate.

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