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) - 2014 Page 4
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13details on making this election, see the
4. The activity was a significant
You materially participated in a trade or
Instructions for Schedule E (Form 1040).
participation activity for the tax year, and
business activity of the partnership, or
you participated in all significant
You were a real estate professional in a
A real property trade or business is any
participation activities (including activities
rental real estate activity of the
real property development,
outside the partnership) during the year for
partnership.
redevelopment, construction,
more than 500 hours. A significant
reconstruction, acquisition, conversion,
If you determine that you did not
participation activity is any trade or
rental, operation, management, leasing, or
materially participate in a trade or
business activity in which you participated
brokerage trade or business. Services you
business activity of the partnership or if
for more than 100 hours during the tax
performed as an employee are not treated
you have income (loss), deductions, or
year and in which you did not materially
as performed in a real property trade or
credits from a rental activity of the
participate under any of the material
business unless you owned more than 5%
partnership (other than a rental real estate
participation tests (other than this test 4).
of the stock (or more than 5% of the
activity in which you materially participated
capital or profits interest) in the employer.
5. You materially participated in the
as a real estate professional), the amounts
activity for any 5 tax years (whether or not
from that activity are passive. Report
3. Working interests in oil or gas wells.
consecutive) during the 10 tax years that
passive income (losses), deductions, and
4. The rental of a dwelling unit any
immediately precede the tax year.
credits as follows.
partner used for personal purposes during
6. The activity was a personal service
1. If you have an overall gain (the
the year for more than the greater of 14
activity and you materially participated in
excess of income over deductions and
days or 10% of the number of days that
the activity for any 3 tax years (whether or
losses, including any prior year unallowed
the residence was rented at fair rental
not consecutive) preceding the tax year. A
loss) from a passive activity, report the
value.
personal service activity involves the
income, deductions, and losses from the
5. Activities of trading personal
performance of personal services in the
activity as indicated in the instructions for
property for the account of owners of
fields of health, law, engineering,
the boxes in which those items were
interests in the activities.
architecture, accounting, actuarial
reported.
science, performing arts, consulting, or
2. If you have an overall loss (the
Material participation. You must
any other trade or business in which
excess of deductions and losses,
determine if you (a) materially participated
capital is not a material income-producing
including any prior year unallowed loss,
in each trade or business activity held
factor.
over income) or credits from a passive
through the partnership and (b) were a
7. Based on all the facts and
activity, report the income, deductions,
real estate professional (defined earlier),
circumstances, you participated in the
losses, and credits from all passive
in each rental real estate activity held
activity on a regular, continuous, and
activities using the Instructions for Form
through the partnership. All determinations
substantial basis during the tax year.
8582 or Form 8582-CR (or Form 8810), to
of material participation are made based
see if your deductions, losses, and credits
on your participation during the
Work counted toward material
are limited under the passive activity rules.
partnership's tax year.
participation. Generally, any work that
Material participation standards for
you or your spouse do in connection with
Special allowance for rental real estate
partners who are individuals are listed
an activity held through a partnership
activities. If you actively participated in a
below. Special rules apply to certain
(where you own your partnership interest
rental real estate activity, you may be able
retired or disabled farmers and to the
at the time the work is done) is counted
to deduct up to $25,000 of the loss from
surviving spouses of farmers. See the
toward material participation. However,
the activity from nonpassive income. This
Instructions for Form 8582 for details.
work in connection with the activity is not
“special allowance” is an exception to the
counted toward material participation if
Corporations should refer to the
general rule disallowing losses in excess
either of the following applies.
Instructions for Form 8810 for the material
of income from passive activities. The
participation standards that apply to them.
1. The work is not the sort of work that
special allowance is not available if you
owners of the activity would usually do
were married, filed a separate return for
Individuals (other than limited
and one of the principal purposes of the
the year, and did not live apart from your
partners). If you are an individual (either
work that you or your spouse does is to
spouse at all times during the year.
a general partner or a limited partner who
avoid the passive loss or credit limitations.
Only individuals, qualifying estates, and
owned a general partnership interest at all
2. You do the work in your capacity as
qualifying revocable trusts that made a
times during the tax year), you materially
an investor and you are not directly
section 645 election can actively
participated in an activity only if one or
involved in the day-to-day operations of
participate in a rental real estate activity.
more of the following apply.
the activity. Examples of work done as an
Estates (other than qualifying estates),
1. You participated in the activity for
investor that would not count toward
trusts (other than qualifying revocable
more than 500 hours during the tax year.
material participation include the following.
trusts that made a section 645 election),
2. Your participation in the activity for
and corporations cannot actively
a. Studying and reviewing financial
the tax year constituted substantially all
participate.
statements or reports on operations of the
the participation in the activity of all
activity.
You are not considered to actively
individuals (including individuals who are
participate in a rental real estate activity if
b. Preparing or compiling summaries
not owners of interests in the activity for
at any time during the tax year your
or analyses of the finances or operations
the tax year).
interest (including your spouse's interest)
of the activity for your own use.
3. You participated in the activity for
in the activity was less than 10% (by
c. Monitoring the finances or
more than 100 hours during the tax year,
value) of all interests in the activity.
operations of the activity in a
and your participation in the activity for the
Active participation is a less stringent
nonmanagerial capacity.
tax year was not less than the participation
requirement than material participation.
in the activity of any other individual
Effect of determination. Income
You may be treated as actively
(including individuals who were not
(loss), deductions, and credits from an
participating if you participated, for
owners of interests in the activity) for the
activity are nonpassive if you determine
example, in making management
tax year.
that:
decisions or arranging for others to
Instructions for Schedule K-1 (1065-B)
-4-
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