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 4
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2. You do the work in your capacity as
You are not considered to actively
The exclusion of amounts received
an investor and you are not directly
participate in a rental real estate activity if
under an employer’s adoption assistance
involved in the day-to-day operations of
at any time during the tax year your
program.
the activity. Examples of work done as an
interest (including your spouse’s interest)
Commercial revitalization
investor that would not count toward
in the activity was less than 10% (by
deduction. The special $25,000
material participation include:
value) of all interests in the activity.
allowance for the commercial
a. Studying and reviewing financial
revitalization deduction from rental real
Active participation is a less stringent
statements or reports on operations of the
estate activities is not subject to the active
requirement than material participation.
activity.
participation rules or modified adjusted
You may be treated as actively
b. Preparing or compiling summaries
gross income limits discussed above. See
participating if you participated, for
or analyses of the finances or operations
Code S — Commercial Revitalization
example, in making management
of the activity for your own use.
Deduction on page 10.
decisions or arranging for others to
c. Monitoring the finances or
provide services (such as repairs) in a
Special rules for certain other
operations of the activity in a
significant and bona fide sense.
activities. If you have net income (loss),
nonmanagerial capacity.
Management decisions that can count as
deductions, or credits from any activity to
active participation include approving new
which special rules apply, the partnership
Effect of determination. If you
tenants, deciding rental terms, approving
will identify the activity and all amounts
determine that you materially participated
capital or repair expenditures, and other
relating to it on Schedule K-1 or on an
in (a) a trade or business activity of the
similar decisions.
attachment.
partnership or (b) if you were a real estate
If you have net income subject to
An estate is a qualifying estate if the
professional (defined on page 3) in a
recharacterization under Temporary
decedent would have satisfied the active
rental real estate activity of the
Regulations section 1.469-2T(f) and
participation requirement for the activity
partnership, report the income (loss),
Regulations section 1.469-2(f), report
for the tax year the decedent died. A
deductions, and credits from that activity
such amounts according to the
qualifying estate is treated as actively
as indicated in the instructions for the
Instructions for Form 8582 (or Form
participating for tax years ending less
boxes in which those items were
8810).
than 2 years after the date of the
reported.
decedent’s death.
If you have net income (loss),
If you determine that you did not
deductions, or credits from any of the
The maximum special allowance that
materially participate in a trade or
following activities, treat such amounts as
single individuals and married individuals
business activity of the partnership or if
nonpassive and report them as instructed
filing a joint return can qualify for is
you have income (loss), deductions, or
in these instructions:
$25,000. The maximum is $12,500 for
credits from a rental activity of the
1. Working interests in oil and gas
married individuals who file separate
partnership (other than a rental real
returns and who lived apart all times
wells.
estate activity in which you materially
during the year. The maximum special
2. The rental of a dwelling unit any
participated as a real estate professional),
allowance for which an estate can qualify
partner used for personal purposes during
the amounts from that activity are
is $25,000 reduced by the special
the year for more than the greater of 14
passive. Report passive income (losses),
allowance for which the surviving spouse
days or 10% of the number of days that
deductions, and credits as follows:
qualifies.
the residence was rented at fair rental
1. If you have an overall gain (the
value.
excess of income over deductions and
If your modified adjusted gross income
3. Trading personal property for the
losses, including any prior year unallowed
(defined below) is $100,000 or less
account of owners of interests in the
loss) from a passive activity, report the
($50,000 or less if married filing
activity.
income, deductions, and losses from the
separately), your loss is deductible up to
activity as indicated in the instructions for
the amount of the maximum special
Self-charged interest. The partnership
the boxes in which those items were
allowance referred to in the preceding
will report any “self-charged” interest
reported.
paragraph. If your modified adjusted
income or expense that resulted from
2. If you have an overall loss (the
gross income is more than $100,000
loans between you and the partnership
excess of deductions and losses,
(more than $50,000 if married filing
(or between the partnership and another
including any prior year unallowed loss,
separately), the special allowance is
partnership in which you have an
over income) or credits from a passive
limited to 50% of the difference between
interest). If there was more than one
activity, report the income, deductions,
$150,000 ($75,000 if married filing
activity, the partnership will provide a
losses, and credits from all passive
separately) and your modified adjusted
statement allocating the interest income
activities using the Instructions for Form
gross income. When modified adjusted
or expense with respect to each activity.
8582 or Form 8582-CR (or Form 8810), to
gross income is $150,000 or more
The self-charged interest rules do not
see if your deductions, losses, and credits
($75,000 or more if married filing
apply to your partnership interest if the
are limited under the passive activity
separately), there is no special allowance.
partnership made an election under
rules.
Regulations section 1.469-7(g) to avoid
Modified adjusted gross income is
the application of these rules. See the
your adjusted gross income figured
Special allowance for rental real estate
Instructions for Form 8582 for more
without taking into account:
activities. If you actively participated in a
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information.
Any passive activity loss.
rental real estate activity, you may be
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Any rental real estate loss allowed
Publicly traded partnerships. The
able to deduct up to $25,000 of the loss
under section 469(c)(7) to real estate
passive activity limitations are applied
from the activity from nonpassive income.
professionals (as defined on page 3).
separately for items (other than the
This “special allowance” is an exception
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Any taxable social security or
low-income housing credit and the
to the general rule disallowing losses in
equivalent railroad retirement benefits.
rehabilitation credit) from each publicly
excess of income from passive activities.
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Any deductible contributions to an IRA
traded partnership (PTP). Thus, a net
The special allowance is not available if
or certain other qualified retirement plans
passive loss from a PTP may not be
you were married, file a separate return
under section 219.
deducted from other passive income.
for the year, and did not live apart from
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The student loan interest deduction.
Instead, a passive loss from a PTP is
your spouse at all times during the year.
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The tuition and fees deduction.
suspended and carried forward to be
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Only individuals and qualifying estates
The deduction for one-half of
applied against passive income from the
can actively participate in a rental real
self-employment taxes.
same PTP in later years. If the partner’s
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estate activity. Estates (other than
The exclusion from income of interest
entire interest in the PTP is completely
qualifying estates), trusts, and
from Series EE and I U.S. Savings Bonds
disposed of, any unused losses are
corporations cannot actively participate.
used to pay higher education expenses.
allowed in full in the year of disposition.
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