2010 Partner'S Instructions For Schedule K-1 (Form 1065-B) - Department Of The Treasury Page 5
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12($75,000 or more if married filing
activity, the partnership will provide a
column (g), report the remaining
Schedule E gain of $3,500 ($8,000 −
separately), there is no special allowance.
statement allocating the interest income
or expense with respect to each activity.
$4,500). On the appropriate line of Form
Modified adjusted gross income is your
The self-charged interest rules do not
4797, report the prior year unallowed loss
adjusted gross income figured without
apply to your partnership interest if the
of $3,500. Be sure to enter “From PTP” to
taking into account the following amounts,
partnership made an election under
the left of each entry space.
if applicable:
Regulations section 1.469-7(g) to avoid
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3. If you have an overall loss (but did
Any passive activity loss.
the application of these rules. See the
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not dispose of your entire interest in the
Any rental real estate loss allowed
Instructions for Form 8582 for more
PTP to an unrelated person in a fully
under section 469(c)(7) to real estate
information.
taxable transaction during the year), the
professionals (as defined previously).
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losses are allowed to the extent of the
Any overall loss from a publicly traded
Publicly traded partnerships. The
income, and the excess loss is carried
partnership.
passive activity limitations are applied
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forward to use in a future year when you
Any taxable social security or
separately for items (other than the
have income to offset it. Report as a
equivalent railroad retirement benefits.
low-income housing credit and the
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passive loss on the schedule or form you
Any deductible contributions to an IRA
rehabilitation credit) from each publicly
normally use the portion of the loss equal
or certain other qualified retirement plans
traded partnership (PTP). Thus, a net
to the income. Report the income as
under section 219.
passive loss from a PTP may not be
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passive income on the form or schedule
The domestic production activities
deducted from other passive income.
you normally use.
deduction.
Instead, a passive loss from a PTP is
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The student loan interest deduction.
Example. You have a Schedule E loss
suspended and carried forward to be
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The tuition and fees deduction.
applied against passive income from the
of $12,000 (current year losses plus prior
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The deduction for one-half of
same PTP in later years. If the partner’s
year unallowed losses) and a Schedule D
self-employment taxes.
entire interest in the PTP is completely
gain of $7,200. Report the $7,200 gain on
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The exclusion from income of interest
disposed of, any unused losses are
the appropriate line of Schedule D. On
from Series EE and I U.S. Savings Bonds
allowed in full in the year of disposition.
Schedule E (Form 1040), line 28, report
used to pay higher education expenses.
$7,200 of the losses as a passive loss in
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If you have an overall gain from a PTP,
The exclusion of amounts received
column (f). Carry forward to 2011 the
the net gain is nonpassive income. In
under an employer’s adoption assistance
unallowed loss of $4,800 ($12,000 −
addition, the nonpassive income is
program.
$7,200).
included in investment income to figure
Commercial revitalization
If you have unallowed losses from
your investment interest expense
deduction. The special $25,000
more than one activity of the PTP or from
deduction.
allowance for the commercial
the same activity of the PTP that must be
Do not report passive income, gains,
revitalization deduction from rental real
reported on different forms, you must
or losses from a PTP on Form 8582.
estate activities is not subject to the active
allocate the unallowed losses on a pro
Instead, use the following rules to figure
participation rules or modified adjusted
rata basis to figure the amount allowed
and report on the proper form or schedule
gross income limits discussed above. See
from each activity or on each form.
your income, gains, and losses from
Code Q, Commercial Revitalization
passive activities that you held through
Deduction on page 11.
To allocate and keep a record of
each PTP you owned during the tax year.
the unallowed losses, use
TIP
Special rules for certain other
Worksheets 5, 6, and 7 of Form
1. Combine any current year income,
activities. If you have net income (loss),
8582. List each activity of the PTP in
gains (losses), and any prior year
deductions, or credits from any activity to
Worksheet 5. Enter the overall loss from
unallowed losses to see if you have an
which special rules apply, the partnership
overall gain (loss) from the PTP. Include
each activity in column (a). Complete
will identify the activity and all amounts
only the same types of income and losses
column (b) of Worksheet 5 according to
relating to it on Schedule K-1 or on an
its instructions. Multiply the total
you would include in your net income or
attachment.
unallowed loss from the PTP by each
loss from a non-PTP passive activity. See
If you have net income subject to
ratio in column (b) and enter the result in
Pub. 925 for more details.
recharacterization under Temporary
2. If you have an overall gain, the net
column (c) of Worksheet 5. Then,
Regulations section 1.469-2T(f) and
gain portion (total gain minus total losses)
complete Worksheet 6 if all the loss from
Regulations section 1.469-2(f), report
is nonpassive income. On the form or
the same activity is to be reported on one
such amounts according to the
schedule you normally use, report the net
form or schedule. Use Worksheet 7
Instructions for Form 8582 (or Form
gain portion as nonpassive income and
instead of Worksheet 6 if you have more
8810).
the remaining income and the total losses
than one loss to be reported on different
If you have net income (loss),
as passive income and loss. To the left of
forms or schedules for the same activity.
deductions, or credits from any of the
the entry space, enter “From PTP.” It is
Enter the net loss plus any prior year
following activities, treat such amounts as
important to identify the nonpassive
unallowed losses in column (a) of
nonpassive and report them as instructed
income because the nonpassive portion is
Worksheet 6 (or Worksheet 7 if
in these instructions.
included in modified adjusted gross
applicable). The losses in column (c) of
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Working interests in oil and gas wells.
income for purposes of figuring on Form
Worksheet 6 (column (e) of Worksheet 7)
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The rental of a dwelling unit any partner
8582 the “special allowance” for active
are the allowed losses to report on the
used for personal purposes during the
participation in a non-PTP rental real
forms or schedules. Report both these
year for more than the greater of 14 days
estate activity. In addition, the nonpassive
losses and any income from the PTP on
or 10% of the number of days that the
income is included in investment income
the forms and schedules you normally
residence was rented at fair rental value.
when figuring your investment interest
use.
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Trading personal property for the
expense deduction on Form 4952,
4. If you have an overall loss and you
account of owners of interests in the
Investment Interest Expense Deduction.
disposed of your entire interest in the PTP
activity.
Example. If you have Schedule E
to an unrelated person in a fully taxable
Self-charged interest. The partnership
income of $8,000, and a Form 4797 prior
transaction during the year, your losses
must report any “self-charged” interest
year unallowed loss of $3,500 from the
(including prior year unallowed losses)
income or expense that resulted from
passive activities of a particular PTP, you
allocable to the activity for the year are
have a $4,500 overall gain ($8,000 −
loans between you and the partnership
not limited by the passive loss rules. A
(or between the partnership and another
$3,500). On Schedule E (Form 1040), line
fully taxable transaction is one in which
partnership in which you have an
28, report the $4,500 net gain as
you recognize all your realized gain
interest). If there was more than one
nonpassive income in column (j). In
(loss). Report the income and losses on
-5-
Instructions for Schedule K-1 (1065-B) (2010)
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