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) - 2003 Page 3
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10the total pre-1976 losses from a section
1. Trade or business activities in
Corporations should refer to the
465(c)(1) activity for which there existed a
which you materially participated.
Instructions for Form 8810 for the material
corresponding amount of nonrecourse
2. Rental real estate activities in which
participation standards that apply to them.
liability at the end of the year in which the
you materially participated if you were a
Individuals (other than limited
losses occurred. Also, you should get a
real estate professional for the tax year.
partners). If you are an individual (either
separate statement of income, expenses,
You were a real estate professional only
a general partner or a limited partner who
etc., for each activity from the partnership.
if you met both of the following conditions:
owned a general partnership interest at all
a. More than half of the personal
Passive Activity Limitations
times during the tax year), you materially
services you performed in trades or
participated in an activity only if one or
Section 469 provides rules that limit the
businesses were performed in real
more of the following apply:
deduction of certain losses and credits.
property trades or businesses in which
These rules apply to partners who:
1. You participated in the activity for
you materially participated and
•
Are individuals, estates, trusts, closely
more than 500 hours during the tax year.
b. You performed more than 750
held corporations, or personal service
2. Your participation in the activity for
hours of services in real property trades
corporations and
the tax year constituted substantially all
or businesses in which you materially
•
Have a passive activity loss or credit for
the participation in the activity of all
participated.
the tax year.
individuals (including individuals who are
Note: For a closely held C corporation
not owners of interests in the activity for
If you have a passive activity loss or
(defined in section 465(a)(1)(B)), the
the tax year).
credit, use Form 8582, Passive Activity
above conditions are treated as met if
Loss Limitations, to figure your allowable
3. You participated in the activity for
more than 50% of the corporation’s gross
more than 100 hours during the tax year,
passive losses and Form 8582-CR,
receipts were from real property trades or
and your participation in the activity for
Passive Activity Credit Limitations, to
businesses in which the corporation
figure your allowable passive credits. For
the tax year was not less than the
materially participated.
a corporation, use Form 8810, Corporate
participation in the activity of any other
For purposes of this rule, each interest
individual (including individuals who were
Passive Activity Loss and Credit
in rental real estate is a separate activity,
Limitations. See the instructions for these
not owners of interests in the activity) for
unless you elect to treat all interests in
forms for more information.
the tax year.
rental real estate as one activity. For
4. The activity was a significant
If the publicly traded partnership
details on making this election, see the
participation activity for the tax year, and
!
box on Schedule K-1 is checked,
Instructions for Schedule E (Form 1040).
you participated in all significant
do not report passive income
CAUTION
participation activities (including activities
If you are married filing jointly, either
(loss) from the partnership on Form 8582.
outside the partnership) during the year
you or your spouse must separately meet
See page 4 for the special rules for
for more than 500 hours. A significant
both of the above conditions, without
publicly traded partnerships.
participation activity is any trade or
taking into account services performed by
For limited partners of an electing
business activity in which you participated
the other spouse.
large partnership, all income, loss,
for more than 100 hours during the tax
A real property trade or business is
deductions, and credits from trade or
year and in which you did not materially
any real property development,
business and rental activities generally
participate under any of the material
redevelopment, construction,
are reported as being from a trade or
participation tests (other than this test 4).
reconstruction, acquisition, conversion,
business that is a single passive activity.
5. You materially participated in the
rental, operation, management, leasing,
However, the determination of whether an
activity for any 5 tax years (whether or not
or brokerage trade or business. Services
activity is a passive activity must be made
consecutive) during the 10 tax years that
you performed as an employee are not
by any partner who is either a:
immediately precede the tax year.
•
treated as performed in a real property
General partner or
6. The activity was a personal service
•
trade or business unless you owned more
Limited partner who is a disqualified
activity and you materially participated in
than 5% of the stock (or more than 5% of
person (as defined on page 2) with
the activity for any 3 tax years (whether or
the capital or profits interest) in the
respect to items of income, gain, loss,
not consecutive) preceding the tax year.
employer.
deduction, and credit attributable to
A personal service activity involves the
3. Working interests in oil or gas
partnership oil and gas properties.
performance of personal services in the
wells.
In addition, the partnership is required
fields of health, law, engineering,
4. The rental of a dwelling unit any
to provide each general partner and
architecture, accounting, actuarial
partner used for personal purposes during
disqualified person the information
science, performing arts, consulting, or
the year for more than the greater of 14
necessary to comply with the passive
any other trade or business in which
days or 10% of the number of days that
activity rules of section 469. Items of
capital is not a material income-producing
the residence was rented at fair rental
income, gain, loss, credit, etc., must be
factor.
value.
separately reported to general partners
7. Based on all the facts and
5. Activities of trading personal
for each trade or business, rental real
circumstances, you participated in the
property for the account of owners of
estate, and other rental activity.
activity on a regular, continuous, and
interests in the activities.
Note: Except for the publicly traded
substantial basis during the tax year.
Material participation. You must
partnership discussion on page 4, the
determine if you materially participated (a)
following information on passive activity
Work counted toward material
in each trade or business activity held
limitations applies only to general
participation. Generally, any work that
through the partnership and (b) if you
partners. Limited partners who are
you or your spouse do in connection with
were a real estate professional (defined
disqualified persons should see Pub. 925
an activity held through a partnership
above), in each rental real estate activity
for a complete discussion of the passive
(where you own your partnership interest
held through the partnership. All
activity rules.
at the time the work is done) is counted
determinations of material
toward material participation. However,
Generally, passive activities include:
participation are made based on your
work in connection with the activity is not
1. Trade or business activities in
participation during the partnership’s
counted toward material participation if
which you did not materially participate
tax year.
either of the following applies.
and
Material participation standards for
1. The work is not the sort of work that
2. Activities that meet the definition of
partners who are individuals are listed
owners of the activity would usually do
rental activities under Temporary
below. Special rules apply to certain
and one of the principal purposes of the
Regulations section 1.469-1T(e)(3) and
retired or disabled farmers and to the
work that you or your spouse does is to
Regulations section 1.469-1(e)(3).
surviving spouses of farmers. See the
avoid the passive loss or credit
Passive activities do not include:
Instructions for Form 8582 for details.
limitations.
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