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At-Risk Limitations

Since at-risk limitations apply for

more than 5% of the capital or profits

each activity, you should get a

interest) in the employer.

Generally, if you have (a) a loss or

separate statement of income,

3. The rental of a dwelling unit any

other deduction from any activity

expenses, and other items, for each

shareholder used for personal

carried on as a trade or business or

activity from the corporation.

purposes during the year for more

for the production of income by the

than the greater of 14 days or 10% of

corporation, and (b) amounts in the

Passive Activity Limitations

the number of days that the residence

activity for which you aren't at risk, you

Section 469 provides rules that limit

was rented at fair rental value.

will have to complete Form 6198,

the deduction of certain losses and

At-Risk Limitations, to figure your

4. Activities of trading personal

credits. These rules apply to

allowable loss for the activity.

property for the account of owners of

shareholders who:

interests in the activities.

Are individuals, estates, or trusts;

The at-risk rules generally limit the

and

If you have a passive activity loss

amount of loss and other deductions

Have a passive activity loss or

or credit, use Form 8582, Passive

that you can claim to the amount you

credit for the tax year.

Activity Loss Limitations, to figure your

could actually lose in the activity.

allowable passive losses and Form

These losses and deductions include

Generally, passive activities

8582-CR, Passive Activity Credit

a loss on the disposition of assets and

include:

Limitations, to figure your allowable

the section 179 expense deduction.

1. Trade or business activities in

passive credits. See the instructions

However, if you acquired your stock

which you didn't materially participate,

for these forms for details.

before 1987, the at-risk rules don't

and

apply to losses from an activity of

2. Activities that meet the

If the corporation had more than

holding real property placed in service

definition of rental activities under

one activity, it will attach a statement

before 1987 by the corporation. The

Temporary Regulations section

to your Schedule K-1 that identifies

activity of holding mineral property

1.469-1T(e)(3) and Regulations

each activity (trade or business

doesn't qualify for this exception.

section 1.469-1(e)(3).

activity, rental real estate activity,

rental activity other than rental real

Generally, you aren't at risk for

Passive activities don't include the

estate, portfolio income) and specifies

amounts such as the following.

following.

the income (loss), deductions, and

The basis of your stock in the

1. Trade or business activities in

credits from each activity.

corporation or the basis of your loans

which you materially participated.

to the corporation if the cash or other

Material participation. You must

property used to purchase the stock

2. Rental real estate activities in

determine if you materially

or make the loans was from a source

which you materially participated if

participated (a) in each trade or

(a) covered by nonrecourse

you were a real estate professional for

business activity held through the

indebtedness (except for certain

the tax year. You were a real estate

corporation and (b) if you were a real

qualified nonrecourse financing, as

professional only if you met both of

estate professional (defined earlier),

defined in section 465(b)(6)); (b)

the following conditions.

in each rental real estate activity held

protected against loss by a guarantee,

a. More than half of the personal

through the corporation.

stop-loss agreement, or other similar

services you performed in trades or

Each interest in rental real estate is

arrangement; or (c) that is covered by

businesses were performed in real

a separate activity, unless you elect to

indebtedness from a person who has

property trades or businesses in

treat all interests in rental real estate

an interest in the activity or from a

which you materially participated.

as one activity. For details on making

person related to a person (except

b. You performed more than 750

this election, see the Instructions for

you) having such an interest, other

hours of services in real property

Schedule E (Form 1040),

than a creditor.

trades or businesses in which you

Supplemental Income and Loss.

Any cash or property contributed to

materially participated.

All determinations of material

a corporate activity, or your interest in

participation are based on your

the corporate activity, that is (a)

If you are married filing jointly,

participation during the corporation's

covered by nonrecourse

either you or your spouse must

tax year.

indebtedness (except for certain

separately meet both (a) and (b) of

qualified nonrecourse financing, as

the above conditions, without taking

Material participation standards for

defined in section 465(b)(6)); (b)

into account services performed by

shareholders who are individuals are

protected against loss by a guarantee,

the other spouse.

listed below. Special rules apply to

stop-loss agreement, or other similar

certain retired or disabled farmers and

A real property trade or business is

arrangement; or (c) that is covered by

to the surviving spouses of farmers.

any real property development,

indebtedness from a person who has

See the Instructions for Form 8582 for

redevelopment, construction,

an interest in the activity or from a

details.

reconstruction, acquisition,

person related to a person (except

conversion, rental, operation,

Individuals. If you are an

you) having such an interest, other

management, leasing, or brokerage

individual, you materially participated

than a creditor.

trade or business. Services you

in an activity only if one or more of the

performed as an employee aren't

following apply.

Any loss from a section 465 activity

treated as performed in a real

not allowed for this tax year will be

1. You participated in the activity

property trade or business unless you

treated as a deduction allocable to the

for more than 500 hours during the tax

owned more than 5% of the stock (or

activity in the next tax year.

year.

-8-

Instructions for Schedule K-1 (Form 1120S) (2017)

Instructions For Schedule K-1 (Form 1120s) - Shareholder'S Share Of Income, Deductions, Credits, Etc. - 2017 Page 8

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