Updated October 18, 2026. Quick answer: Part VII spreads the total unallowed loss over each activity that has an overall loss. You enter each activity’s loss, divide it by the total to get a ratio, then multiply the ratio by a figure built from Part I, line 3 and Part II, line 9. The result in column (c) is each activity’s unallowed loss.
Related reading on this site: IRS Publication 925.
Who completes Part VII
The form titles it “Allocation of Unallowed Losses.” The instructions say “Complete Part VII if any activities have an overall loss in column (e) of Part V” or have losses in column (d) of Part VI. If you skipped Part VI, the instructions say to complete Part VII “for all activities in Part(s) IV and/or V that have overall losses in column (e)”. Part VI is covered on the Part VI page.
Names and form references
“On Part VII, enter the name of each activity and the form or schedule and line number on which the loss will be reported.” For a carryover activity the instructions add: “add “CRD” after the name of each of the activities.” The form’s own column caption reads “Form or schedule”.
Column (a): the loss
“Enter the amounts, if any, from column (d) of Part VI” and, as the instructions continue, “Also enter the losses, if any, from column (e) of Part V”. The Part IV and Part V results are explained on the Parts IV and V page.
Column (b): the ratio
“Divide each of the individual losses shown in column (a) by the total of all the losses in column (a)” and put the ratio in column (b). “The total of all the ratios must equal 1.00.” The form’s column heads read “(a) Loss” and “(b) Ratio”.
Where the number comes from
Column (c) is a short computation that the instructions lay out as steps A to C, using these lines of the form: “Enter as a positive amount Part I, line 3, of Form 8582” (step A), “Enter Part II, line 9, of Form 8582” (step B), and “Subtract line B from line A” (step C). Then “Multiply each ratio in column (b) by the amount on line C above, and enter the result in column (c).”
The form’s column head is “(c) Unallowed loss”. The line 3 and line 9 figures come from Parts I and II of Form 8582.
A computed illustration, not an IRS example, of the ratio step with two activities whose column (a) losses are 3 and 1: 3 / 4 = 0.75 and 1 / 4 = 0.25, and the two ratios add to 1.00. The ratios would then be multiplied by the line C amount.
Where it goes next
The unallowed amounts carry to Part VIII or Part IX. The instructions say “Parts VIII and IX figure your unallowed and allowed losses for each activity.” For Part VIII, “enter the amount from column (c) of Part VII for the activity.” See the Part VIII and Part IX pages.
Edition and line numbers
This page reads the 2025 Form 8582, Passive Activity Loss Limitations and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. The form’s own header says “Attach to Form 1040, 1040-SR, or 1041.” Check the tax year printed on the form you are filling in and use the line numbers on that year’s form, because a different year’s form can number or word its lines differently.
Common mistakes
- Skipping the ratio check. The instructions say “The total of all the ratios must equal 1.00.”
- Dropping the carryover marker. The instructions say “add “CRD” after the name of each of the activities.”
- Starting Part VII from the wrong Parts. The instructions say “Complete Part VII if any activities have an overall loss in column (e) of Part V”
Related: Form 8582, Schedule E, rental income in retirement, and Part VIII.
Sources
- Instructions for Form 8582, Passive Activity Loss Limitations (2025): https://www.irs.gov/pub/irs-pdf/i8582.pdf
- Form 8582, Passive Activity Loss Limitations (2025): https://www.irs.gov/pub/irs-pdf/f8582.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.