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Shareholder’s Instructions for Schedule K-1 (100S)

For S Corporation Shareholder’s Use Only

References in these instructions are to the Internal Revenue Code (IRC) as of January 1, 1998, and to the California Revenue and Taxation Code (R&TC).

What’s New

the passive activity loss back to the form or

Basis is decreased by:

schedule it is normally reported on to figure

1. Fair market value of property distributions

For income years beginning on or after

your California adjustment amount. Enter this

(including cash) made by the corporation

January 1, 1998, tax-exempt organizations as

adjustment amount on the corresponding line

(excluding dividend distributions reported

described in IRC Sections 401(a) and

of Schedule CA (540 or 540NR), California

on Form 1099-DIV and distributions in

501(c)(3) (qualified tax-exempt shareholder)

Adjustments, or Form 541, California Fiduciary

excess of basis) reported on

may be shareholders in an S corporation. For

Income Tax Return.

Schedule K-1 (100S), line 21.

purposes of determining the number of share-

If there is no California schedule or form to

2. All losses and deductions (including non-

holders of an S corporation, a qualified tax-

figure your passive activity loss adjustment

deductible expenses) reported on

exempt shareholder will count as one

amount on (i.e., rental loss from passive activ-

Schedule K-1 (100S).

shareholder.

ities), you may figure the adjustment amount

These items are not a complete list of factors

Purpose

on the California Adjustment Worksheet in the

that determine basis.

instructions for form FTB 3801. Enter the total

The S corporation uses Schedule K-1 (100S)

At-risk rules

of your adjustments from all passive activities

to report your share of the S corporation’s

Generally, if you have: (1) a loss or other

from line 1 and line 2 of this worksheet on

income, deductions, credits, etc. Please keep

deduction from an activity carried on as a

Schedule CA (540 or 540NR), as applicable.

a copy of it for your records.

trade or business or for the production of

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

income by the corporation; and (2) amounts in

Although the S corporation is subject to vari-

from a prior year that were not deductible or

the activity for which you are not at-risk, you

ous taxes, you are liable for the income tax

usable because of certain limitations, such as

will have to complete federal Form 6198,

on your share of the S corporation’s income,

the at-risk rules, these carryforward losses,

At-Risk Limitations, to figure the allowable

whether or not distributed, and you must

deductions and credits may be taken into

loss to report on your return. For California

include your share on your tax return.

account in determining your net income, loss,

purposes, you must complete federal

The amount of losses and deductions that you

etc., for this year. However, do not combine

Form 6198 using California amounts.

may claim on your individual tax return may

the prior year amounts with any amounts

The at-risk rules generally limit the amount of

be less than the amount reported on Sched-

shown on this Schedule K-1 (100S) to get a

loss (including loss on disposition of assets)

ule K-1 (100S). Generally, the amount of

net figure to report on any supporting sched-

and other deductions (such as IRC

losses and deductions you may claim is lim-

ules, statements or forms attached to your

Section 179 or R&TC Sections 17266,

ited to your basis in the S corporation, debt

return. Instead, report the amounts on an

17267.2, 17267.6 and 17268 deductions) that

owed to you by the S corporation and the

attached schedule, statement or form on a

you may claim to the amount you could actu-

amount for which you are considered at-risk. If

year-by-year basis.

ally lose in the activity. See the federal

the S corporation has losses, deductions or

Line 1 through Line 3

Schedule K-1 (Form 1120S) instructions for

credits from a passive activity, you must also

The amounts shown on line 1 through line 3

At-Risk Limitations for more information.

apply the passive activity rules. It is your

reflect your share of income or loss from the

responsibility to consider and apply any appli-

Passive activity limitations

S corporation’s business or rental operations

cable limitations. See Limitations on Losses,

Caution: During 1993, the U.S. Congress

without reference to your limitations on losses

Deductions and Credits. Use these instruc-

made changes to the passive activity loss pro-

or adjustments that may be required because

tions to help you report the items shown on

visions of the IRC relating to real estate pro-

of:

Schedule K-1 (100S) on your California tax

fessionals. California has not conformed to

•

return.

The adjusted basis of your S corporation

those changes.

ownership interest;

For the line items where ‘‘attach schedule’’

•

California tax law conforms to federal IRC

The amount for which you are at-risk as

appears, the S corporation should have pro-

Section 469 rules that limit the deduction of

determined under IRC Section 465; and

vided additional information applicable to that

•

certain losses and credits.

The passive activity limitations of IRC

line or the S corporation should have made

These rules apply to shareholders who:

Section 469.

an entry on Side 2, line 23.

•

Are individuals, estates or trusts; and

See the federal Schedule K-1 (Form 1120S)

Nonresident shareholders of an S corporation

•

Have a loss or credit from a passive

instructions for line 1 through line 3 for more

that is doing business in California may qualify

activity.

information.

to file a group nonresident return on

A passive activity is generally a rental activity

Form 540NR, California Nonresident or Part-

Limitations on Losses, Deductions

Year Resident Income Tax Return. For more

or a trade or business activity in which the

and Credits

shareholder does not materially participate.

information on the election to file a group non-

resident return, get FTB Pub. 1067, Guide-

Basis rules

If you have a loss or deductions from a pas-

lines for Filing a Group Form 540NR.

Generally, you may not claim your share of

sive activity, you will need to complete form

Line 1 through Line 22

the S corporation loss (including capital loss)

FTB 3801 to figure the allowable amounts to

that is larger than the adjusted basis of your

report on your individual return. You will also

If you are an individual shareholder, take the

shareholder interest at the end of the S corpo-

need to complete form FTB 3801 if you have

amounts in column (c) that are from nonpas-

ration’s income year.

passive activity income from this S corporation

sive activities and enter these amounts on the

and passive activity loss or deduction from

appropriate form or schedule as explained in

Basis is increased by:

another source.

these instructions.

1. All income (including tax-exempt income)

The amounts reported on line 2 and line 3 of

Report the amounts in column (d) or column

reported on Schedule K-1 (100S).

Schedule K-1 (100S) are from rental activities

(e) that are from passive activities on the

2. Money and adjusted basis in property con-

of the S corporation and are generally passive

California form or schedule where they are

tributed to the corporation.

activity income (loss) to all shareholders.

normally reported. Bring the total amounts fig-

3. The excess of the deduction for depletion

ured on the appropriate California form or

over the adjusted basis of the property

There is an exception to this rule for losses

schedule to form FTB 3801, Passive Activity

subject to depletion.

incurred by qualified investors in qualified low-

Loss Limitations, to figure the amount of your

income housing projects. The S corporation

passive activity loss limitation. Then transfer

Schedule K-1 (100S) 1998

Page 1

Shareholder'S Instructions For Form 100s Schedule K-1 - Shareholder'S Share Of Income, Deductions, Credits, Etc

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