Partner'S Instructions For Schedule K-1 (Form 1065-B) - Partner'S Share Of Income (Loss) From An Electing Large Partnership (For Partner'S Use Only) - 2001 Page 3
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10If the publicly traded partnership
unless you elect to treat all interests in
not owners of interests in the activity) for
!
box on Schedule K-1 is checked,
rental real estate as one activity. For
the tax year.
do not report passive income
details on making this election, see the
4. The activity was a significant
CAUTION
(loss) from the partnership on Form 8582.
Instructions for Schedule E (Form 1040).
participation activity for the tax year, and
See page 4 for the special rules for
you participated in all significant
If you are married filing jointly, either
publicly traded partnerships.
participation activities (including activities
you or your spouse must separately meet
outside the partnership) during the year
both of the above conditions, without
For limited partners of an electing
for more than 500 hours. A significant
taking into account services performed by
large partnership, all income, loss,
participation activity is any trade or
the other spouse.
deductions, and credits from trade or
business activity in which you participated
business and rental activities generally
A real property trade or business is
for more than 100 hours during the tax
are reported as being from a trade or
any real property development,
year and in which you did not materially
business that is a single passive activity.
redevelopment, construction,
participate under any of the material
However, the determination of whether an
reconstruction, acquisition, conversion,
participation tests (other than this test 4).
activity is a passive activity must be made
rental, operation, management, leasing,
5. You materially participated in the
by any partner who is either a:
or brokerage trade or business. Services
•
activity for any 5 tax years (whether or not
General partner or
you performed as an employee are not
•
consecutive) during the 10 tax years that
Limited partner who is a disqualified
treated as performed in a real property
immediately precede the tax year.
person (as defined on page 2) with
trade or business unless you owned more
6. The activity was a personal service
respect to items of income, gain, loss,
than 5% of the stock (or more than 5% of
activity and you materially participated in
deduction, and credit attributable to
the capital or profits interest) in the
the activity for any 3 tax years (whether or
partnership oil and gas properties.
employer.
not consecutive) preceding the tax year.
In addition, the partnership is required
3. Working interests in oil or gas
A personal service activity involves the
to provide each general partner and
wells.
performance of personal services in the
disqualified person the information
4. The rental of a dwelling unit any
fields of health, law, engineering,
necessary to comply with the passive
partner used for personal purposes during
architecture, accounting, actuarial
activity rules of section 469. Items of
the year for more than the greater of 14
science, performing arts, consulting, or
income, gain, loss, credit, etc., must be
days or 10% of the number of days that
any other trade or business in which
separately reported to general partners
the residence was rented at fair rental
capital is not a material income-producing
for each trade or business, rental real
value.
factor.
estate, and other rental activity.
5. Activities of trading personal
7. Based on all the facts and
property for the account of owners of
Note: Except for the publicly traded
circumstances, you participated in the
interests in the activities.
partnership discussion on page 4, the
activity on a regular, continuous, and
following information on passive activity
substantial basis during the tax year.
Material participation. You must
limitations applies only to general
determine if you materially participated (a)
partners. Limited partners who are
Work counted toward material
in each trade or business activity held
disqualified persons should see Pub. 925
participation. Generally, any work that
through the partnership and (b) if you
for a complete discussion of the passive
you or your spouse do in connection with
were a real estate professional (defined
activity rules.
an activity held through a partnership
above), in each rental real estate activity
(where you own your partnership interest
Generally, passive activities include:
held through the partnership. All
at the time the work is done) is counted
determinations of material
1. Trade or business activities in
toward material participation. However,
participation are made based on your
which you did not materially participate
work in connection with the activity is not
participation during the partnership’s
and
counted toward material participation if
tax year.
2. Activities that meet the definition of
either of the following applies.
rental activities under Temporary
Material participation standards for
1. The work is not the sort of work that
Regulations section 1.469-1T(e)(3) and
partners who are individuals are listed
owners of the activity would usually do
Regulations section 1.469-1(e)(3).
below. Special rules apply to certain
and one of the principal purposes of the
retired or disabled farmers and to the
Passive activities do not include:
work that you or your spouse does is to
surviving spouses of farmers. See the
avoid the passive loss or credit
1. Trade or business activities in
Instructions for Form 8582 for details.
limitations.
which you materially participated.
Corporations should refer to the
2. You do the work in your capacity as
2. Rental real estate activities in which
Instructions for Form 8810 for the material
an investor and you are not directly
you materially participated if you were a
participation standards that apply to them.
involved in the day-to-day operations of
real estate professional for the tax year.
Individuals (other than limited
the activity. Examples of work done as an
You were a real estate professional only
partners). If you are an individual (either
investor that would not count toward
if you met both of the following conditions:
a general partner or a limited partner who
material participation include:
a. More than half of the personal
owned a general partnership interest at all
a. Studying and reviewing financial
services you performed in trades or
times during the tax year), you materially
statements or reports on operations of the
businesses were performed in real
participated in an activity only if one or
activity.
property trades or businesses in which
more of the following apply:
b. Preparing or compiling summaries
you materially participated and
1. You participated in the activity for
or analyses of the finances or operations
b. You performed more than 750
more than 500 hours during the tax year.
of the activity for your own use.
hours of services in real property trades
2. Your participation in the activity for
c. Monitoring the finances or
or businesses in which you materially
the tax year constituted substantially all
operations of the activity in a
participated.
the participation in the activity of all
nonmanagerial capacity.
Note: For a closely held C corporation
individuals (including individuals who are
(defined in section 465(a)(1)(B)), the
not owners of interests in the activity for
Effect of determination. If you
above conditions are treated as met if
the tax year).
determine that you materially participated
more than 50% of the corporation’s gross
3. You participated in the activity for
in (a) a trade or business activity of the
receipts were from real property trades or
more than 100 hours during the tax year,
partnership or (b) if you were a real estate
businesses in which the corporation
and your participation in the activity for
professional (defined above) in a rental
materially participated.
the tax year was not less than the
real estate activity of the partnership,
For purposes of this rule, each interest
participation in the activity of any other
report the income (loss), deductions, and
in rental real estate is a separate activity,
individual (including individuals who were
credits from that activity as indicated in
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