Shareholder'S Instructions For Schedule K-1 (Form 1120s)

•

spouse’s interest) in the activity was

Any taxable social security or

more than one activity, the

less than 10% (by value) of all

equivalent railroad retirement

corporation will provide a statement

interests in the activity.

benefits.

allocating the interest income or

•

Any deductible contributions to an

expense with respect to each activity.

Active participation is a less

IRA or certain other qualified

The self-charged interest rules do not

stringent requirement than material

retirement plans under section 219.

apply to your interest in the S

participation. You may be treated as

•

The domestic production activities

corporation if the corporation made

actively participating if you

deduction.

an election under Regulations section

participated, for example, in making

•

The student loan interest

1.469-7(g) to avoid the application of

management decisions or arranging

deduction.

these rules. See the Instructions for

for others to provide services (such

•

The tuition and fees deduction.

Form 8582 for details.

as repairs) in a significant and bona

•

The deduction for one-half of

fide sense. Management decisions

self-employment taxes.

that can count as active participation

•

The exclusion from income of

Specific Instructions

include approving new tenants,

interest from Series EE or I U.S.

deciding rental terms, approving

Savings Bonds used to pay higher

capital or repair expenditures, and

Part I. Information About

education expenses.

other similar decisions.

•

The exclusion of amounts received

the Corporation

An estate is a qualifying estate if

under an employer’s adoption

the decedent would have satisfied the

assistance program.

Item D

active participation requirement for

Commercial revitalization

the activity for the tax year the

If the corporation is a

deduction. The special $25,000

decedent died. A qualifying estate is

registration-required tax shelter, it

allowance for the commercial

treated as actively participating for tax

should have completed Item D. Use

revitalization deduction from rental

years ending less than 2 years after

the information on Schedule K-1

real estate activities is not subject to

the date of the decedent’s death.

(name of the corporation, corporation

the active participation rules or

identifying number, and tax shelter

Modified adjusted gross income

modified adjusted gross income limits

registration number) to complete your

limitation. The maximum special

discussed above. See code O for box

Form 8271, Investor Reporting of Tax

allowance that single individuals and

12 on page 9.

Shelter Registration Number.

married individuals filing a joint return

Special rules for certain other

can qualify for is $25,000. The

activities. If you have net income

Item E

maximum is $12,500 for married

(loss), deductions, or credits from any

individuals who file separate returns

If you claim or report any income,

activity to which special rules apply,

and who lived apart at all times during

loss, deduction, or credit from a

the corporation will identify the activity

the year. The maximum special

registration-required tax shelter, you

and all amounts relating to it on

allowance for which an estate can

must attach Form 8271 to your tax

Schedule K-1 or on an attachment.

qualify is $25,000 reduced by the

return. If the corporation has invested

special allowance for which the

If you have net income subject to

in a registration-required tax shelter, it

surviving spouse qualifies.

recharacterization under Temporary

will check item E and it must give you

Regulations section 1.469-2T(f) and

a copy of its Form 8271 with

If your modified adjusted gross

Regulations section 1.469-2(f), see

Schedule K-1. Use this information to

income (defined below) is $100,000

Recharacterization of Passive Income

complete your Form 8271.

or less ($50,000 or less if married

in Pub. 925.

filing separately), your loss is

Part III. Shareholder’s

deductible up to the amount of the

If you have net income (loss),

maximum special allowance referred

deductions, or credits from either of

Share of Current Year

to in the preceding paragraph. If your

the following activities, treat such

modified adjusted gross income is

Income, Deductions,

amounts as nonpassive and report

more than $100,000 (more than

them as instructed in these

Credits, and Other Items

$50,000 if married filing separately),

instructions.

the special allowance is limited to

The amounts shown in boxes 1

1. The rental of a dwelling unit any

50% of the difference between

through 17 reflect your share of

shareholder used for personal

$150,000 ($75,000 if married filing

income, loss, deductions, credits,

purposes during the year for more

separately) and your modified

etc., from corporate business or

than the greater of 14 days or 10% of

adjusted gross income. When

rental activities without reference to

the number of days that the residence

modified adjusted gross income is

limitations on losses, credits, or other

was rented at fair rental value.

$150,000 or more ($75,000 or more if

items that may have to be adjusted

2. Trading personal property for

married filing separately), there is no

because of:

the account of owners of interests in

special allowance.

1. The adjusted basis of your

the activity.

stock and debt in the corporation,

Modified adjusted gross income is

2. The at-risk limitations,

your adjusted gross income figured

Self-charged interest. The

without taking into account:

corporation will report any

3. The passive activity limitations,

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Any passive activity loss.

“self-charged” interest income or

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Any rental real estate loss allowed

expense that resulted from loans

4. Any other limitations that must

under section 469(c)(7) to real estate

between you and the corporation (or

be taken into account at the

professionals (defined on page 3).

between the corporation and another

shareholder level in figuring taxable

•

Any overall loss from a

S corporation or partnership in which

income (for example, the section 179

publicly-traded partnership.

you have an interest). If there was

expense limitation).

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Instructions for Schedule K-1 (Form 1120S)

Shareholder'S Instructions For Schedule K-1 (Form 1120s) - 2005 Page 5

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