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of holding mineral property does not qualify

conditions are treated as met if more than

Corporations should refer to the

for this exception. The partnership should

50% of the corporation's gross receipts were

Instructions for Form 8810 for the material

identify on a statement attached to

from real property trades or businesses in

participation standards that apply to them.

Schedule K-1 any losses that are not subject

which the corporation materially participated.

Individuals (other than limited

to the at-risk limitations.

For purposes of this rule, each interest in

partners). If you are an individual (either a

rental real estate is a separate activity,

general partner or a limited partner who

Generally, you are not at risk for amounts

unless you elect to treat all interests in rental

owned a general partnership interest at all

such as the following.

real estate as one activity. For details on

times during the tax year), you materially

Nonrecourse loans used to finance the

making this election, see the Instructions for

participated in an activity only if one or more

activity, to acquire property used in the

Schedule E (Form 1040) Supplemental

of the following apply.

activity, or to acquire your interest in the

Income and Loss.

activity, that are not secured by your own

1. You participated in the activity for

If you are married filing jointly, either you

property (other than the property used in the

more than 500 hours during the tax year.

or your spouse must separately meet both (a

activity). See the instructions for item K, later,

2. Your participation in the activity for

and b) of the above conditions, without

for the exception for qualified nonrecourse

the tax year constituted substantially all the

taking into account services performed by

financing secured by real property.

participation in the activity of all individuals

the other spouse.

Cash, property, or borrowed amounts

(including individuals who are not owners of

used in the activity (or contributed to the

A real property trade or business is any

interests in the activity).

activity, or used to acquire your interest in

real property development, redevelopment,

3. You participated in the activity for

the activity) that are protected against loss

construction, reconstruction, acquisition,

more than 100 hours during the tax year, and

by a guarantee, stop-loss agreement, or

conversion, rental, operation, management,

your participation in the activity for the tax

other similar arrangement (excluding

leasing, or brokerage trade or business.

year was not less than the participation in the

casualty insurance and insurance against

Services you performed as an employee are

activity of any other individual (including

tort liability).

not treated as performed in a real property

individuals who were not owners of interests

Amounts borrowed for use in the activity

trade or business unless you owned more

in the activity) for the tax year.

from a person who has an interest in the

than 5% of the stock (or more than 5% of the

activity, other than as a creditor, or who is

4. The activity was a significant

capital or profits interest) in the employer.

related, under section 465(b)(3), to a person

participation activity for the tax year, and you

3. Working interests in oil or gas wells if

(other than you) having such an interest.

participated in all significant participation

you were a general partner.

activities (including activities outside the

You should get a separate statement of

4. The rental of a dwelling unit any

partnership) during the year for more than

income, expenses, etc., for each activity

partner used for personal purposes during

500 hours. A significant participation activity

from the partnership.

the year for more than the greater of 14 days

is any trade or business activity in which you

or 10% of the number of days that the

participated for more than 100 hours during

Passive Activity Limitations

residence was rented at fair rental value.

the year and in which you did not materially

Section 469 provides rules that limit the

5. Activities of trading personal property

participate under any of the material

deduction of certain losses and credits.

for the account of owners of interests in the

participation tests (other than this test).

These rules apply to partners who:

activities.

5. You materially participated in the

Are individuals, estates, trusts, closely

activity for any 5 tax years (whether or not

If you are an individual, an estate, or a

held C corporations, or personal service

consecutive) during the 10 tax years that

trust, and you have a passive activity loss or

corporations and

immediately precede the tax year.

credit, use Form 8582, Passive Activity Loss

Have a passive activity loss or credit for

Limitations, to figure your allowable passive

6. The activity was a personal service

the tax year.

losses and Form 8582-CR, Passive Activity

activity and you materially participated in the

Generally, passive activities include the

Credit Limitations, to figure your allowable

activity for any 3 tax years (whether or not

following.

passive credits. For a corporation, use Form

consecutive) preceding the tax year. A

8810, Corporate Passive Activity Loss and

personal service activity involves the

1. Trade or business activities in which

Credit Limitations. See the instructions for

performance of personal services in the

you did not materially participate and

these forms for details.

fields of health, law, engineering,

2. Activities that meet the definition of

architecture, accounting, actuarial science,

rental activities under Temporary

If the partnership had more than one

performing arts, consulting, or any other

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

activity, it will attach a statement to your

trade or business in which capital is not a

Regulations section 1.469-1(e)(3).

Schedule K-1 that identifies each activity

material income-producing factor.

(trade or business activity, rental real estate

Passive activities do not include:

7. Based on all the facts and

activity, rental activity other than rental real

circumstances, you participated in the

1. Trade or business activities in which

estate, etc.) and specifies the income (loss),

activity on a regular, continuous, and

you materially participated.

deductions, and credits from each activity.

substantial basis during the tax year.

2. Rental real estate activities in which

Material participation. You must

you materially participated if you were a real

Limited partners. If you are a limited

determine if you materially participated (a) in

estate professional for the tax year. You

partner, you do not materially participate in

each trade or business activity held through

were a real estate professional only if you

an activity unless you meet one of the tests

the partnership and (b) if you were a real

met both of the following conditions.

in paragraphs 1, 5, or 6, above.

estate professional (defined earlier), in each

a. More than half of the personal

rental real estate activity held through the

Work counted toward material

services you performed in trades or

partnership. All determinations of material

participation. Generally, any work that you

businesses were performed in real property

participation are based on your participation

or your spouse does in connection with an

trades or businesses in which you materially

during the partnership's tax year.

activity held through a partnership (where

participated and

Material participation standards for

you own your partnership interest at the time

b. You performed more than 750 hours

partners who are individuals are listed below.

the work is done) is counted toward material

of services in real property trades or

Special rules apply to certain retired or

participation. However, work in connection

businesses in which you materially

disabled farmers and to the surviving

with the activity is not counted toward

participated.

spouses of farmers. See the Instructions for

material participation if either of the following

Form 8582 for details.

applies.

Note. For a closely held C corporation

(defined in section 465(a)(1)(B)), the above

Partner's Instructions for Schedule K-1 (Form 1065)

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Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Deductions, Credits, Etc. (For Partner'S Use Only) - 2014 Page 3

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