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) - 2004 Page 3
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General partner or
Regulations section 1.469-1T(e)(3) and
unless you elect to treat all interests in
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Limited partner who is a disqualified
Regulations section 1.469-1(e)(3).
rental real estate as one activity. For
person (as defined on page 2) with
details on making this election, see the
respect to items of income, gain, loss,
Instructions for Schedule E (Form 1040).
Passive activities do not include:
deduction, and credit attributable to
If you are married filing jointly, either
1. Trade or business activities in
partnership oil and gas properties.
you or your spouse must separately meet
which you materially participated.
both of the above conditions, without
2. Rental real estate activities in which
In addition, the partnership is required
taking into account services performed by
you materially participated if you were a
to provide each general partner and
the other spouse.
real estate professional for the tax year.
disqualified person the information
You were a real estate professional only if
A real property trade or business is
necessary to comply with the passive
you met both of the following conditions.
any real property development,
activity rules of section 469. Items of
redevelopment, construction,
income, gain, loss, credit, etc., must be
a. More than half of the personal
reconstruction, acquisition, conversion,
separately reported to general partners
services you performed in trades or
rental, operation, management, leasing,
for each trade or business, rental real
businesses were performed in real
or brokerage trade or business. Services
estate, and other rental activity.
property trades or businesses in which
you performed as an employee are not
you materially participated and
Note. Except for the publicly traded
treated as performed in a real property
b. You performed more than 750
partnership discussion on page 5, the
trade or business unless you owned more
hours of services in real property trades
following information on passive activity
than 5% of the stock (or more than 5% of
or businesses in which you materially
limitations applies only to general
the capital or profits interest) in the
participated.
partners. Limited partners who are
employer.
disqualified persons should see Pub. 925
Note. For a closely held C corporation
3. Working interests in oil or gas
for a complete discussion of the passive
(defined in section 465(a)(1)(B)), the
wells.
activity rules.
above conditions are treated as met if
4. The rental of a dwelling unit any
more than 50% of the corporation’s gross
Generally, passive activities include:
partner used for personal purposes during
receipts were from real property trades or
the year for more than the greater of 14
1. Trade or business activities in
businesses in which the corporation
days or 10% of the number of days that
which you did not materially participate
materially participated.
the residence was rented at fair rental
and
value.
2. Activities that meet the definition of
For purposes of this rule, each interest
5. Activities of trading personal
rental activities under Temporary
in rental real estate is a separate activity,
property for the account of owners of
interests in the activities.
Worksheet for Adjusting the Basis of a Partner’s Interest in the Partnership
Material participation. You must
(Keep for your records.)
determine if you materially participated (a)
in each trade or business activity held
1. Your adjusted basis at the end of the prior year. Do not enter less
through the partnership and (b) if you
than zero. Enter -0- if this is your first tax year. . . . . . . . . . . . . .
1.
were a real estate professional (defined
above), in each rental real estate activity
Increases:
held through the partnership. All
2. Money and your adjusted basis in property contributed to the
determinations of material participation
partnership less the associated liabilities (but not less than zero).
2.
are made based on your participation
during the partnership’s tax year.
3. Your increased share of or assumption of partnership liabilities.
(Subtract your share of liabilities shown on your 2003 Schedule
Material participation standards for
K-1 from your share of liabilities shown on your 2004 Schedule K-1
partners who are individuals are listed
and add the amount of any partnership liabilities you assumed
below. Special rules apply to certain
during the tax year.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
retired or disabled farmers and to the
surviving spouses of farmers. See the
4. Your share of the partnership’s income or gain (including
Instructions for Form 8582 for details.
tax-exempt income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
Corporations should refer to the
5. Any gain recognized this year on contributions of property. Do not
Instructions for Form 8810 for the material
include gain from transfer of liabilities . . . . . . . . . . . . . . . . . . . .
5.
participation standards that apply to them.
Decreases:
Individuals (other than limited
partners). If you are an individual (either
6. Withdrawals and distributions of money and the adjusted basis of
a general partner or a limited partner who
property distributed to you from the partnership. Do not include the
owned a general partnership interest at all
amount of property distributions included in the partner’s income
times during the tax year), you materially
(taxable income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
participated in an activity only if one or
Caution. A distribution may be taxable if the amount exceeds your
more of the following apply.
adjusted basis of your partnership interest immediately before the
1. You participated in the activity for
distribution.
more than 500 hours during the tax year.
2. Your participation in the activity for
7. Your share of the partnership’s nondeductible expenses that are
the tax year constituted substantially all
not capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.
the participation in the activity of all
8. Your share of the partnership’s losses and deductions (including
individuals (including individuals who are
capital losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
not owners of interests in the activity for
the tax year).
9. Your adjusted basis in the partnership at end of this tax year. (Add
3. You participated in the activity for
lines 1 through 5 and subtract lines 6 through 8 from the total. If
more than 100 hours during the tax year,
zero or less, enter -0-.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.
and your participation in the activity for
Caution. The deduction for your share of the partnership’s losses
the tax year was not less than the
and deductions is limited to your adjusted basis in your partnership
participation in the activity of any other
interest. If you entered zero on line 9 and the amount computed for
individual (including individuals who were
line 9 was less than zero, a portion of your share of the partnership
not owners of interests in the activity) for
losses and deductions may not be deductible (See Basis Rules on
the tax year.
page 2 for more information.)
4. The activity was a significant
participation activity for the tax year, and
-3-
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