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Worksheet 4

Form 1120 deductions by multiplying the

Column (d). Subtract column (c) from

unallowed loss attributable to the total Form

column (a) and enter the results in this

Use Worksheet 4 to allocate the unallowed

1120 deductions by each of the ratios in

column. Enter the deductions allowed for

deductions and losses for each activity

column (b). Enter the portion of the

Form 1120 on the proper lines of Form 1120

among Form 1120 deductions and any

unallowed loss in Worksheet 3, column (c)

and enter the allowed Schedule D (Form

losses to be reported on Form 4797 and

that is attributable to a Schedule D (Form

1120) and Form 4797 losses on that form or

Schedule D (Form 1120).

1120) or Form 4797 loss in column (c) of

schedule.

If the unallowed loss is reported on one

this worksheet.

form or schedule, skip the following example

and complete Worksheet 4.

If the unallowed loss is from losses

reported on more than one form or

schedule, allocate the unallowed loss from

column (c) of Worksheet 3 among the net

Worksheet 4—Allowed Deductions and Losses

losses as follows.

Example. The corporation has one passive

Name of Activity:

(d) Allowed

(a) Deductions

activity. The activity has an unallowed loss

(b) Ratio

Deductions

and Losses

of $18,000 in column (c) of Worksheet 3 and

and Losses

the following net losses and net gain.

1. Form 1120 deductions:

a. Cost of goods sold . . . . .

Form 1120

Gross receipts

$100,000

b. Compensation of officers

Deductions

120,000

Net loss

($20,000)

c. Salaries and wages . . . .

d. Repairs and maintenance

Schedule D

(Form 1120)

Form 4797

e. Bad debts . . . . . . . . . . .

Gain

$1,000

Gain

$5,000

Loss

(2,000)

Loss

(2,000)

f. Rents . . . . . . . . . . . . . .

Net loss

($1,000)

Net gain

$3,000

Add the net losses of $20,000 and

g. Taxes and licenses . . . . .

$1,000, for a total of $21,000. Divide the net

h. Interest . . . . . . . . . . . . .

loss reported on each form by the total of

the net losses, and multiply the result by the

i. Depreciation . . . . . . . . . .

unallowed loss of $18,000, as shown below.

j. Depletion . . . . . . . . . . . .

$20,000

Form 1120:

x $18,000 = $17,143

k. Advertising . . . . . . . . . .

$21,000

l. Other deductions . . . . . . .

Schedule D

$1,000

x $18,000 = $857

(Form 1120):

$21,000

Total Form 1120

deductions: . . . . . . . . . . .

1.00

On Form 4797, report the $2,000 loss

and the $5,000 gain. On Worksheet 4, enter

2. Schedule D (Form 1120)

the $17,143 of unallowed deductions

losses . . . . . . . . . . . . . . .

allocated to Form 1120 in column (c) on the

line for total Form 1120 deductions. Enter

3. Form 4797 losses . . . . . . .

the $857 of unallowed Schedule D (Form

Name of Activity:

(d) Allowed

1120) losses in column (c) of line 2. Use

(a) Deductions

(b) Ratio

Deductions

Worksheet 4 to allocate the $17,143 to the

and Losses

Form 1120 deductions and show the

allowed and unallowed Schedule D (Form

1. Form 1120 deductions:

1120) loss.

a. Cost of goods sold . . . . .

Line 1, column (a). Enter the current year

deductions for each Form 1120 expense

b. Compensation of officers

(lines 6a through 6l of Worksheet 1) plus

c. Salaries and wages . . . .

any prior year unallowed Form 1120

deduction for that activity. For example, if

d. Repairs and maintenance

line 6i of Worksheet 1 shows current year

depreciation for the activity of $2,200, and

e. Bad debts . . . . . . . . . . .

the activity had prior year unallowed

f. Rents . . . . . . . . . . . . . .

depreciation of $1,200, enter $3,400 on line

1i, column (a), of Worksheet 4.

g. Taxes and licenses . . . . .

Line 2, column (a). Enter any Schedule D

h. Interest . . . . . . . . . . . . .

(Form 1120) losses from line 8 of Worksheet

1 plus any prior year unallowed Schedule D

i. Depreciation . . . . . . . . . .

(Form 1120) losses for that activity.

Line 3, column (a). Enter any Form 4797

j. Depletion . . . . . . . . . . . .

losses from line 9 of Worksheet 1 plus any

k. Advertising . . . . . . . . . .

prior year unallowed Form 4797 losses for

that activity.

l. Other deductions . . . . . . .

Line 1, column (b). Divide each of the

Total Form 1120

individual Form 1120 deductions shown in

deductions . . . . . . . . . . .

1.00

column (a) by the total of all of the Form

1120 deductions in column (a) and enter the

2. Schedule D (Form 1120)

ratio for each of the deductions in column

losses . . . . . . . . . . . . . . .

(b). The total of the ratios must equal 1.00.

3. Form 4797 losses . . . . . . .

Column (c). Allocate the portion of the loss

in Worksheet 3, column (c), among the

-9-

Instructions for Form 8810 (2010)

Instructions For Form 8810 - Corporate Passive Activity Loss And Credit Limitations - 2010 Page 9

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