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on a separate line of Part II of Schedule

$25,000 (not more than $12,500 if

statement to tell you what kind of portfolio

married filing separately and you lived

income is reported on line 4f.

apart from your spouse all year).

If the partnership has a residual

Income

e. If you are a married person filing

interest in a real estate mortgage

separately, you lived apart from your

investment conduit (REMIC), it will report

spouse all year.

Line 1—Ordinary Income

on the statement your share of REMIC

f. You have no current or prior year

(Loss) From Trade or Business

taxable income (net loss) that you report

unallowed credits from a passive activity.

on Schedule E (Form 1040), Part IV,

Activities

g. Your modified adjusted gross

column (d). The statement will also report

The amount reported for line 1 is your

income was not more than $100,000 (not

your share of any “excess inclusion” that

share of the ordinary income (loss) from

more than $50,000 if married filing

you report on Schedule E, Part IV,

the trade or business activities of the

separately and you lived apart from your

column (c), and your share of section 212

partnership. Generally, where you report

spouse all year).

expenses that you report on Schedule E,

this amount on Form 1040 depends on

h. Your interest in the rental real

Part IV, column (e). If you itemize your

whether the amount is from an activity

estate activity was not held as a limited

deductions on Schedule A (Form 1040),

that is a passive activity to you. If you are

partner.

you may also deduct these section 212

an individual partner filing your 2001

2. If you have a loss from a passive

expenses as a miscellaneous deduction

Form 1040, find your situation below and

activity on line 2 and you do not meet all

subject to the 2% limit on Schedule A, line

report your line 1 income (loss) as

the conditions in 1 above, report the loss

22.

instructed, after applying the basis and

following the Instructions for Form 8582 to

Line 5—Guaranteed Payments

at-risk limitations on losses:

figure how much of the loss you can

to Partners

1. Report line 1 income (loss) from

report on Schedule E (Form 1040), Part

partnership trade or business activities in

II, column (g). However, if the box in Item

Generally, amounts on this line are not

which you materially participated on

H is checked, report the loss following the

passive income, and you should report

rules for Publicly traded partnerships

Schedule E (Form 1040), Part II, column

them on Schedule E (Form 1040), Part II,

on page 4.

(i) or (k).

column (k) (for example, guaranteed

3. If you were a real estate

2. Report line 1 income (loss) from

payments for personal services).

professional and you materially

partnership trade or business activities in

Line 6—Net Section 1231 Gain

participated in the activity, report line 2

which you did not materially participate,

(Loss) (Other Than Due to

income (loss) on Schedule E (Form

as follows:

Casualty or Theft)

1040), Part II, column (i) or (k).

a. If income is reported on line 1,

4. If you have income from a passive

report the income on Schedule E, Part II,

If the amount on line 6 is from a rental

activity on line 2, enter the income on

column (h). However, if the box in Item H

activity, the section 1231 gain (loss) is

Schedule E, Part II, column (h). However,

is checked, report the income following

generally a passive activity amount.

if the box in Item H is checked, report the

the rules for Publicly traded

Likewise, if the amount is from a trade or

income following the rules for Publicly

partnerships on page 4.

business activity and you did not

traded partnerships on page 4.

b. If a loss is reported on line 1, follow

materially participate in the activity, the

the Instructions for Form 8582, to figure

section 1231 gain (loss) is a passive

how much of the loss can be reported on

Line 3—Net Income (Loss)

activity amount.

Schedule E, Part II, column (g). However,

From Other Rental Activities

However, an amount on line 6 from a

if the box in Item H is checked, report the

rental real estate activity is not from a

The amount on line 3 is a passive activity

loss following the rules for Publicly

passive activity if you were a real estate

amount for all partners. Report the

traded partnerships on page 4.

professional (defined on page 3) and you

income or loss as follows:

materially participated in the activity.

1. If line 3 is a loss, report the loss

Line 2—Net Income (Loss)

If the amount on line 6 is either (a) a

following the Instructions for Form 8582.

From Rental Real Estate

loss that is not from a passive activity or

However, if the box in Item H is checked,

Activities

(b) a gain, report it on line 2, column (g)

report the loss following the rules for

of Form 4797, Sales of Business

Publicly traded partnerships on page 4.

Generally, the income (loss) reported on

Property. Do not complete columns (b)

2. If income is reported on line 3,

line 2 is a passive activity amount for all

through (f) on line 2. Instead, write “From

report the income on Schedule E (Form

partners. However, the income (loss) on

Schedule K-1 (Form 1065)” across these

1040), Part II, column (h). However, if the

line 2 is not from a passive activity if you

columns.

box in Item H is checked, report the

were a real estate professional (defined

income following the rules for Publicly

on page 3) and you materially participated

If the amount on line 6 is a loss from a

traded partnerships on page 4.

in the activity.

passive activity, see Passive loss

limitations in the Instructions for Form

If you are filing a 2001 Form 1040, use

4797. You will need to report the loss

Lines 4a Through 4f—Portfolio

the following instructions to determine

following the Instructions for Form 8582 to

Income (Loss)

where to enter a line 2 amount:

figure how much of the loss is allowed on

Portfolio income or loss is not subject to

1. If you have a loss from a passive

Form 4797. However, if the box in Item H

the passive activity limitations. Portfolio

activity on line 2 and you meet all of the

is checked, report the loss on line 6

income includes income not derived in the

following conditions, enter the loss on

following the rules for Publicly traded

ordinary course of a trade or business

Schedule E (Form 1040), Part II, column

partnerships on page 4.

from interest, ordinary dividends,

(g):

Any amount of gain from section 1231

annuities, or royalties and gain or loss on

a. You actively participated in the

property held more than 5 years will be

the sale of property that produces such

partnership rental real estate activities.

indicated on an attachment to Schedule

income or is held for investment.

See Active participation in a rental real

K-1. Include this amount in your

estate activity on page 4.

computation of qualified 5-year gain only

Column (c) of Schedule K-1 tells

b. Rental real estate activities with

if the amount on your Form 4797, line 7,

individual partners where to report this

active participation were your only

is more than zero.

income on Form 1040.

passive activities.

Line 7—Other Income (Loss)

c. You have no prior year unallowed

The partnership uses line 4f to report

losses from these activities.

portfolio income other than interest,

Amounts on this line are other items of

d. Your total loss from the rental real

ordinary dividend, royalty, and capital

income, gain, or loss not included on lines

estate activities was not more than

gain (loss) income. It will attach a

1 through 6. The partnership should give

-6-

Partner’s Instructions for Schedule K-1 (Form 1065)

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Credits, Deductions, Etc. (For Partner'S Use Only) - 2001 Page 6

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