Form 8810
Forms

Form 8810: Corporate Passive Activity Loss and Credit Limitations

For personal service corporations and closely held corporations, Form 8810 is used to figure the amount of passive activity loss or credit for the current tax year as well as the amount of losses and credits from passive activities allowed on the corporation’s tax return.

What is Form 8810?

Form 8810 is used by personal service corporations and closely held corporations to calculate the amount of any passive activity loss or credit for the current tax year, as well as to make the election to increase the basis of credit property following the sale of an interest in an activity. Generally, a passive activity involves the performance of services in the fields of health, law, engineering, architecture, accounting, etc., and with the PAL rules, it is possible for corporations to determine their passive activity loss or credit. In addition, special rules for consolidated groups and activities that are not classified as passive activities are also defined.

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IRS Form 8810 – Who Needs to Fill It Out?

Form 8810 is required to be filed by personal service corporations and closely held corporations that have losses or credits from passive activities. These activities can include trade or business activities where the corporation did not materially participate, as well as rental activities regardless of its participation. Form 8810 is used to figure the amount of any passive activity losses or credits for the current tax year. Additionally, it is used to make the election to increase the basis of credit property when the corporation is disposing of its interest. Those individuals subject to the passive activity rules should use Form 8582.

Step-by-Step: Form 8810 Instructions For Filling Out the Document

Form 8810 is necessary to determine the amount losses or credits from passive activities allowed on a corporation’s tax return. It is used to calculate the PAL or passive activity credit for the tax year, or to make the election to increase the basis of credit property in the case of disposition. Personal service corporations and closely held corporations must file Form 8810 if they qualify, with certain terms including “personal service corporation,” “testing period,” and “substantially performed by employee-owners” defined by the source text. Qualifying activities for which the form does not need to be filed, as well as other limitations to deductions and allowances, are also discussed in the source text.

See also:  Form 1099-CAP: Changes in Corporate Control and Capital Structure

Below, we present a table that will help you understand how to fill out Form 8810.

Form 8810 Instructions
Filling out Form 8810 is necessary to determine the amount of losses or credits from passive activities allowed on a corporation’s tax return. It is used to calculate the PAL or passive activity credit for the tax year, or to make the election to increase the basis of credit property in the case of disposition. Personal service corporations and closely held corporations must file Form 8810 if they qualify, with certain terms including “personal service corporation,” “testing period,” and “substantially performed by employee-owners” defined by the source text. Qualifying activities for which the form does not need to be filed, as well as other limitations to deductions and allowances, are also discussed in the source text.
  • Understand the purpose of Form 8810 and its relevance to passive activities.
  • Determine if your corporation qualifies for filing this form.
  • Learn the definitions of key terms mentioned in the form’s instructions.
  • Be aware of exceptions where the form doesn’t need to be filed.
  • Follow the provided instructions for accurate completion.
See also:  Form 1040: U.S. Individual Income Tax Return

Do You Need to File Form 8810 Each Year?

Generally, personal service corporations and closely held corporations must use FORM 8810 to figure the amount of any passive activity loss or credit for the current tax year, as well as make the election to increase the basis of credit property when the corporation disposes of its interest in an activity. This form must also be used if the losses or credits from passive activities of the corporation, including prior year unallowed losses and credits, exceed the total income from passive activities, plus any net active income for closely held corporations. It is important to note that the principal activity of a corporation must be the performance of personal services in certain fields, and the services must be substantially performed by employee-owners, in order to have to file this form.

Download the official IRS Form 8810 PDF

On the official IRS website, you will find a link to download Form 8810. However, to make it easier for you, we are providing the link in our article, which comes directly from the official irs.gov website! Click the link to download Form 8810 directly from the source.

Sources:

https://www.irs.gov/forms-pubs/about-form-8810

https://www.irs.gov/instructions/i8810

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