Shareholder'S Instructions For Schedule K-1 (Form 1120s)

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Item E

Any rental real estate loss allowed under

reported as a single dollar amount, the

section 469(c)(7) to real estate professionals

corporation will enter an asterisk in the left

If you claim or report any income, loss,

(as defined on page 2).

column and write “STMT” in the dollar amount

deduction, or credit from a registration-required

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Any taxable social security or equivalent

entry space to indicate the information is

tax shelter, you must attach Form 8271 to your

railroad retirement benefits.

provided on an attached statement.

tax return. If the corporation has invested in a

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Any deductible contributions to an IRA or

registration-required tax shelter, it will check

Income (loss)

certain other qualified retirement plans under

item E and it must give you a copy of its Form

section 219.

8271 with Schedule K-1. Use this information

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Box 1. Ordinary business income

The student loan interest deduction.

to complete your Form 8271.

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(loss)

The tuition and fees deduction.

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Part III. Shareholder’s Share of

The deduction for one-half of

The amount reported in box 1 is your share of

self-employment taxes.

the ordinary income (loss) from trade or

Current Year Income, Deductions,

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The exclusion from income of interest from

business activities of the corporation.

Credits, and Other Items

Series EE or I U.S. Savings Bonds used to pay

Generally, where you report this amount on

The amounts shown in boxes 1 through 17

higher education expenses.

Form 1040 depends on whether or not the

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reflect your share of income, loss, deductions,

The exclusion of amounts received under an

amount is from an activity that is a passive

credits, and other information from all

employer’s adoption assistance program.

activity to you. If you are an individual

corporate activities without reference to

shareholder, find your situation below and

Commercial revitalization deduction.

limitations on losses, credits, or other items

report your box 1 income (loss) as instructed

The special $25,000 allowance for the

that may have to be adjusted because of:

after applying the basis and at-risk limitations

commercial revitalization deduction from rental

1. The adjusted basis of your stock and

on losses. If the corporation had more than one

real estate activities is not subject to the active

debt in the corporation,

trade or business activity, it will attach a

participation rules or modified adjusted gross

2. The at-risk limitations,

statement identifying the amount of income or

income limits discussed above. See the

3. The passive activity limitations, or

loss from each activity.

instructions for box 12, code N, for more

4. Any other limitations that must be taken

1. Report box 1 income (loss) from trade or

information.

into account at the shareholder level in figuring

business activities in which you materially

taxable income (e.g., the section 179 expense

Special rules for certain other activities. If

participated on Schedule E (Form 1040), line

limitation).

you have net income (loss), deductions, or

28, column (h) or (j).

credits from any activity to which special rules

2. Report box 1 income (loss) from trade or

For information on these provisions, see

apply, the corporation will identify the activity

business activities in which you did not

Limitations on Losses, Deductions, and Credits

and all amounts relating to it on Schedule K-1

materially participate, as follows:

beginning on page 1. The limitations for 4 are

or on an attachment.

a. If income is reported in box 1, report the

discussed throughout these instructions and in

income on Schedule E, line 28, column (g).

other referenced forms and instructions.

If you have net income subject to

b. If a loss is reported in box 1, follow the

recharacterization under Temporary

If you are an individual, and your pro rata

Instructions for Form 8582 to determine how

Regulations section 1.469-2T(f) and

share items are not affected by any of the

much of the loss can be reported on Schedule

Regulations section 1.469-2(f), report such

limitations, take the amounts shown and enter

E, line 28, column (f).

amounts according to the Instructions for Form

them on the lines of your tax return as

8582.

indicated in the summarized reporting

Box 2. Net rental real estate income

information showing on the back of the

If you have net income (loss), deductions,

(loss)

Schedule K-1. If any of the limitations apply,

or credits from either of the following activities,

Generally, the income (loss) reported in box 2

adjust the amounts for the limitations before

treat such amounts as nonpassive and report

is a passive activity amount for all

you enter them on your return. When

them as instructed in these instructions:

shareholders. However, the income (loss) in

applicable, the passive activity limitations on

1. The rental of a dwelling unit any

box 2 is not from a passive activity if you were

losses are applied after the limitations on

shareholder used for personal purposes during

a real estate professional (defined on page 2)

losses for a shareholder’s basis in stock and

the year for more than the greater of 14 days

and you materially participated in the activity. If

debt and the shareholder’s at-risk amount.

or 10% of the number of days that the

the corporation had more than one rental real

Note: The line number references on page 2

residence was rented at fair rental value.

estate activity, it will attach a statement

of Schedule K-1 are to forms in use for tax

2. Trading personal property for the

identifying the amount of income or loss from

years beginning in 2004. If you are a calendar

account of owners of interests in the activity.

each activity.

year shareholder in a fiscal year 2004 – 2005

If you are filing a 2004 Form 1040, use the

corporation, enter these amounts on the

Self-charged interest. The corporation will

following instructions to determine where to

corresponding lines of the tax form in use for

report any “self-charged” interest income or

enter a box 2 amount:

2005.

expense that resulted from loans between you

1. If you have a loss from a passive activity

If you have losses, deductions, credits, etc.,

and the corporation (or between the

in box 2 and you meet all of the following

from a prior year that were not deductible or

corporation and other S corporation or

conditions, enter the loss on Schedule E (Form

usable because of certain limitations, such as

partnership in which you have an interest). If

1040), line 28, column (f):

the basis rules or the at-risk limitations, take

there was more than one activity, the

them into account in determining your income,

a. You actively participated in the

corporation will provide a statement allocating

loss, etc., for this year. However, except for

corporate rental real estate activities. (See

the interest income or expense with respect to

passive activity losses and credits, do not

Special allowance for a rental real estate

each activity. The self-charged interest rules do

combine the prior-year amounts with any

activity on page 3.)

not apply to your interest in the S corporation if

amounts shown on this Schedule K-1 to get a

b. Rental real estate activities with active

the corporation made an election under

net figure to report on your return. Instead,

participation were your only passive activities.

Regulations section 1.469-7(g) to avoid the

report the amounts on your return on a

c. You have no prior year unallowed

application of these rules. See the Instructions

year-by-year basis.

losses from these activities.

for Form 8582 for more information.

d. Your total loss from the rental real

If you have amounts other than those

estate activities was not more than $25,000

shown on Schedule K-1 to report on

(not more than $12,500 if married filing

Schedule E (Form 1040), enter each

CAUTION

Specific Instructions

separately and you lived apart from your

item separately on line 28 of Schedule E.

spouse all year).

Codes. In box 10 and boxes 12 through 17,

e. If you are a married person filing

Part I. Information about the

the corporation will identify each item by

separately, you lived apart from your spouse all

Corporation

entering a code in the column to the left of the

year.

dollar amount entry space. These codes are

f. You have no current or prior year

Item D

identified on the back of Schedule K-1 and in

unallowed credits from a passive activity.

these instructions.

If the corporation is a registration-required tax

g. Your modified adjusted gross income

shelter, it should have completed Item D. Use

Attached statements. The corporation will

was not more than $100,000 (not more than

the information on Schedule K-1 (name of

enter an asterisk (*) after the code, if any, in

$50,000 if married filing separately and you

corporation, corporation identifying number,

the column to the left of the dollar amount entry

lived apart from your spouse all year).

and tax shelter registration number) to

space for each item for which it has attached a

2. If you have a loss from a passive activity

complete your Form 8271, Investor Reporting

statement providing additional information. For

in box 2 and you do not meet all of the

of Tax Shelter Registration Number.

those informational items that cannot be

conditions in 1 above, follow the Instructions

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Instructions for Schedule K-1 (Form 1120S)

Shareholder'S Instructions For Schedule K-1 (Form 1120s) - 2004 Page 4

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