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 5
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10the residence was rented at fair rental
expense deduction on Form 4952,
(including prior year unallowed losses)
value.
Investment Interest Expense Deduction.
allocable to the activity for the year are
not limited by the passive loss rules. A
3. Trading personal property for the
Example. If you have Schedule E
account of owners of interests in the
fully taxable transaction is one in which
income of $8,000, and a Form 4797 prior
you recognize all your realized gain
activity.
year unallowed loss of $3,500 from the
(loss). Report the income and losses on
passive activities of a particular PTP, you
have a $4,500 overall gain ($8,000 −
the forms and schedules you normally
Self-charged interest. The partnership
use.
will report any “self-charged” interest
$3,500). On Schedule E (Form 1040), line
income or expense that resulted from
28, report the $4,500 net gain as
Note. For rules on the disposition of an
loans between you and the partnership
nonpassive income in column (j). In
entire interest reported using the
(or between the partnership and another
column (g), report the remaining
installment method, see the Instructions
Schedule E gain of $3,500 ($8,000 −
partnership in which you have an
for Form 8582.
interest). If there was more than one
$4,500). On the appropriate line of Form
activity, the partnership will provide a
4797, report the prior year unallowed loss
statement allocating the interest income
of $3,500. Be sure to enter “From PTP” to
Specific Instructions
or expense with respect to each activity.
the left of each entry space.
The self-charged interest rules do not
3. If you have an overall loss (but did
apply to your partnership interest if the
not dispose of your entire interest in the
Publicly Traded
partnership made an election under
PTP to an unrelated person in a fully
Regulations section 1.469-7(g) to avoid
taxable transaction during the year), the
Partnership
the application of these rules. See the
losses are allowed to the extent of the
If the “publicly traded partnership” box is
Instructions for Form 8582 for more
income, and the excess loss is carried
checked, you are a partner in a publicly
information.
forward to use in a future year when you
traded partnership and must follow the
have income to offset it. Report as a
Publicly traded partnerships. The
rules under Publicly traded partnerships
passive loss on the schedule or form you
passive activity limitations are applied
shown above.
normally use the portion of the loss equal
separately for items (other than the
to the income. Report the income as
Partner’s Share of
low-income housing credit and the
passive income on the form or schedule
rehabilitation credit) from each publicly
Liabilities
you normally use.
traded partnership (PTP). Thus, a net
Example. You have a Schedule E loss
The partnership will show your share of
passive loss from a PTP may not be
of $12,000 (current year losses plus prior
the partnership’s nonrecourse liabilities,
deducted from other passive income.
year unallowed losses) and a Schedule D
partnership-level qualified nonrecourse
Instead, a passive loss from a PTP is
gain of $7,200. Report the $7,200 gain on
financing, and other liabilities as of the
suspended and carried forward to be
the appropriate line of Schedule D. On
end of the partnership’s tax year. If you
applied against passive income from the
Schedule E (Form 1040), line 28, report
terminated your interest in the partnership
same PTP in later years. If the partner’s
$7,200 of the losses as a passive loss in
during the tax year, the amounts should
entire interest in the PTP is completely
column (f). Carry forward to 2005 the
reflect the share that existed immediately
disposed of, any unused losses are
unallowed loss of $4,800 ($12,000 −
before the total disposition. A partner’s
allowed in full in the year of disposition.
$7,200).
“other liability” is any partnership liability
If you have an overall gain from a PTP,
If you have unallowed losses from
for which a partner is personally liable.
the net gain is nonpassive income. In
more than one activity of the PTP or from
Use the total of the three amounts for
addition, the nonpassive income is
the same activity of the PTP that must be
computing the adjusted basis of your
included in investment income to figure
reported on different forms, you must
partnership interest.
your investment interest expense
allocate the unallowed losses on a pro
Generally, you can use only the
deduction.
rata basis to figure the amount allowed
amounts shown next to “Qualified
from each activity or on each form.
Do not report passive income, gains,
nonrecourse financing” and “Other” to
or losses from a PTP on Form 8582.
To allocate and keep a record of
compute your amount at risk. Do not
Instead, use the following rules to figure
TIP
include any amounts that are not at risk if
the unallowed losses, use
and report on the proper form or schedule
such amounts are included in either of
Worksheets 5, 6, and 7 of Form
your income, gains, and losses from
8582. List each activity of the PTP in
these categories.
passive activities that you held through
Worksheet 5. Enter the overall loss from
If your partnership is engaged in two or
each PTP you owned during the tax year.
each activity in column (a). Complete
more different types of activities subject to
1. Combine any current year income,
column (b) of Worksheet 5 according to
the at-risk provisions, or a combination of
gains (losses), and any prior year
its instructions. Multiply the total
at-risk activities and any other activity, the
unallowed losses to see if you have an
unallowed loss from the PTP by each
partnership should give you a statement
overall gain (loss) from the PTP. Include
ratio in column (b) and enter the result in
showing your share of nonrecourse
only the same types of income and losses
column (c) of Worksheet 5. Then,
liabilities, partnership-level qualified
you would include in your net income or
complete Worksheet 6 if all the loss from
nonrecourse financing, and other
loss from a non-PTP passive activity. See
the same activity is to be reported on one
liabilities for each activity.
Pub. 925 for more details.
form or schedule. Use Worksheet 7
Qualified nonrecourse financing
2. If you have an overall gain, the net
instead of Worksheet 6 if you have more
secured by real property used in an
gain portion (total gain minus total losses)
than one loss to be reported on different
activity of holding real property that is
is nonpassive income. On the form or
forms or schedules for the same activity.
subject to the at-risk rules is treated as an
schedule you normally use, report the net
Enter the net loss plus any prior year
amount at risk. Qualified nonrecourse
gain portion as nonpassive income and
unallowed losses in column (a) of
financing generally includes financing for
the remaining income and the total losses
Worksheet 6 (or Worksheet 7 if
which no one is personally liable for
as passive income and loss. To the left of
applicable). The losses in column (c) of
repayment that is borrowed for use in an
the entry space, enter “From PTP. ” It is
Worksheet 6 (column (e) of Worksheet 7)
activity of holding real property and that is
important to identify the nonpassive
are the allowed losses to report on the
loaned or guaranteed by a federal, state,
income because the nonpassive portion is
forms or schedules. Report both these
or local government or borrowed from a
included in modified adjusted gross
losses and any income from the PTP on
“qualified” person.
income for purposes of figuring on Form
the forms and schedules you normally
8582 the “special allowance” for active
use.
Qualified persons include any persons
participation in a non-PTP rental real
4. If you have an overall loss and you
actively and regularly engaged in the
estate activity. In addition, the nonpassive
disposed of your entire interest in the PTP
business of lending money, such as a
income is included in investment income
to an unrelated person in a fully taxable
bank or savings and loan association.
when figuring your investment interest
transaction during the year, your losses
Qualified persons generally do not include
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