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 5
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10If you have an overall gain from a PTP,
Carry forward to 2004 the unallowed loss
reflect the share that existed immediately
of $4,800 ($12,000 − $7,200).
before the total disposition. A partner’s
the net gain is nonpassive income. In
“other liability” is any partnership liability
addition, the nonpassive income is
If you have unallowed losses from
for which a partner is personally liable.
included in investment income to figure
more than one activity of the PTP or from
your investment interest expense
the same activity of the PTP that must be
Use the total of the three amounts for
deduction.
reported on different forms, you must
computing the adjusted basis of your
allocate the unallowed losses on a pro
partnership interest.
Do not report passive income, gains,
rata basis to figure the amount allowed
Generally, you may use only the
or losses from a PTP on Form 8582.
from each activity or on each form.
amounts shown next to “Qualified
Instead, use the following rules to figure
nonrecourse financing” and “Other” to
To allocate and keep a record of
and report on the proper form or schedule
compute your amount at risk. Do not
TIP
the unallowed losses, use
your income, gains, and losses from
include any amounts that are not at risk if
Worksheets 5, 6, and 7 of Form
passive activities that you held through
such amounts are included in either of
8582. List each activity of the PTP in
each PTP you owned during the tax year.
these categories.
Worksheet 5. Enter the overall loss from
1. Combine any current year income,
If your partnership is engaged in two or
each activity in column (a). Complete
gains and losses, and any prior year
more different types of activities subject to
column (b) of Worksheet 5 according to
unallowed losses to see if you have an
the at-risk provisions, or a combination of
its instructions. Multiply the total
overall gain or loss from the PTP. Include
at-risk activities and any other activity, the
unallowed loss from the PTP by each
only the same types of income and losses
partnership should give you a statement
ratio in column (b) and enter the result in
you would include in your net income or
showing your share of nonrecourse
column (c) of Worksheet 5. Then,
loss from a non-PTP passive activity. See
liabilities, partnership-level qualified
complete Worksheet 6 if all the loss from
Pub. 925 for more details.
nonrecourse financing, and other
the same activity is to be reported on one
2. If you have an overall gain, the net
liabilities for each activity.
form or schedule. Use Worksheet 7
gain portion (total gain minus total losses)
instead of Worksheet 6 if you have more
Qualified nonrecourse financing
is nonpassive income. On the form or
than one loss to be reported on different
secured by real property used in an
schedule you normally use, report the net
forms or schedules for the same activity.
activity of holding real property that is
gain portion as nonpassive income and
Enter the net loss plus any prior year
subject to the at-risk rules is treated as an
the remaining income and the total losses
unallowed losses in column (a) of
amount at risk. Qualified nonrecourse
as passive income and loss. To the left of
Worksheet 6 (or Worksheet 7 if
financing generally includes financing for
the entry space, write “From PTP.” It is
applicable). The losses in column (c) of
which no one is personally liable for
important to identify the nonpassive
Worksheet 6 (column (e) of Worksheet 7)
repayment that is borrowed for use in an
income because the nonpassive portion is
are the allowed losses to report on the
activity of holding real property and that is
included in modified adjusted gross
forms or schedules. Report both these
loaned or guaranteed by a Federal, state,
income for purposes of figuring on Form
losses and any income from the PTP on
or local government or borrowed from a
8582 the “special allowance” for active
the forms and schedules you normally
“qualified” person.
participation in a non-PTP rental real
use.
Qualified persons include any persons
estate activity. In addition, the nonpassive
4. If you have an overall loss and you
actively and regularly engaged in the
income is included in investment income
disposed of your entire interest in the PTP
business of lending money, such as a
when figuring your investment interest
to an unrelated person in a fully taxable
bank or savings and loan association.
expense deduction on Form 4952,
transaction during the year, your losses
Qualified persons generally do not
Investment Interest Expense Deduction.
(including prior year unallowed losses)
include related parties (unless the
allocable to the activity for the year are
Example. If you have Schedule E
nonrecourse financing is commercially
not limited by the passive loss rules. A
income of $8,000, and a Form 4797 prior
reasonable and on substantially the same
fully taxable transaction is one in which
year unallowed loss of $3,500 from the
terms as loans involving unrelated
you recognize all your realized gain or
passive activities of a particular PTP, you
persons), the seller of the property, or a
have a $4,500 overall gain ($8,000 −
loss. Report the income and losses on the
person who receives a fee for the
forms and schedules you normally use.
$3,500). On Schedule E, Part II, report
partnership’s investment in the real
the $4,500 net gain as nonpassive
property.
Note: For rules on the disposition of an
income in column (j). In column (g), report
See Pub. 925 for more information on
entire interest reported using the
the remaining Schedule E gain of $3,500
qualified nonrecourse financing.
installment method, see the Instructions
($8,000 − $4,500). On the appropriate line
Both the partnership and you must
for Form 8582.
of Form 4797, report the prior year
meet the qualified nonrecourse rules on
unallowed loss of $3,500. Be sure to write
this debt before you can include the
“From PTP” to the left of each entry
amount shown next to “Qualified
Specific Instructions
space.
nonrecourse financing” in your at-risk
3. If you have an overall loss (but did
computation.
not dispose of your entire interest in the
Publicly Traded
See Limitations on Losses,
PTP to an unrelated person in a fully
Deductions, and Credits beginning on
Partnership
taxable transaction during the year), the
page 2 for more information on the at-risk
losses are allowed to the extent of the
If the “publicly traded partnership” box is
limitations.
income, and the excess loss is carried
checked, you are a partner in a publicly
forward to use in a future year when you
Tax Shelter Registration
traded partnership and must follow the
have income to offset it. Report as a
rules starting on page 4 under Publicly
Number
passive loss on the schedule or form you
traded partnerships.
normally use the portion of the loss equal
If the partnership is a registration-required
to the income. Report the income as
Partner’s Share of
tax shelter or has invested in a
passive income on the form or schedule
registration-required tax shelter, it should
Liabilities
you normally use.
have entered a tax shelter registration
Example. You have a Schedule E loss
The partnership will show your share of
number in this box. If you claim or report
of $12,000 (current year losses plus prior
the partnership’s nonrecourse liabilities,
any income, loss, deduction, or credit
year unallowed losses) and a Schedule D
partnership-level qualified nonrecourse
from a tax shelter, you must attach Form
gain of $7,200. Report the $7,200 gain on
financing, and other liabilities as of the
8271, Investor Reporting of Tax Shelter
the appropriate line of Schedule D. On
end of the partnership’s tax year. If you
Registration Number, to your tax return. If
Schedule E, Part II, report $7,200 of the
terminated your interest in the partnership
the partnership has invested in a tax
losses as a passive loss in column (f).
during the tax year, the amounts should
shelter, it must give you a copy of its
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