Material participation. For the definition of material partici-pation for purposes of the passive activity rules, see the instruc-tions for Schedule C (Form 1040), line G. If you meet any of the material participation tests described in those instructions, check the "Yes" box.
If you are a retired or disabled farmer, you are treated as materially participating in a farming business if you materially participated 5 or more of the 8 years preceding your retirement or disability. Also, a surviving spouse is treated as materially participating in a farming activity if he or she actively manages the farm and the real property used for farming meets the estate tax rules for special valuation of farm property passed from a qualifying decedent.
Check the "No" box if you did not materially participate. If you checked "No" and you have a loss from this business, see Limit on passive losses, next. If you have a profit from this business activity but have current year losses from other pas-sive activities or prior year unallowed passive activity losses, see the Instructions for Form 8582.
Limit on passive losses. If you checked the "No" box and you have a loss from this business, you may have to use Form 8582 to figure your allowable loss, if any, to enter on Schedule F (Form 1040), line 34. In most cases, you can deduct losses from passive activities only to the extent of income from pas-sive activities. For details, see Pub. 925.