Instructions For Form 8960 (2015) (Page 6 of 20) in pdf

on Form 1099-R, box 2a. However, if the

not taken into account in computing net

Net rental income or loss that is a

payor checks box 2b indicating the taxable

investment income. For example, gain that

nonpassive activity because it was

amount cannot be determined, you may

is not taxable by reason of section 121

grouped with a trade or business under

need to calculate the taxable portion of

Regulations section 1.469-4(d)(1). See

(sale of a principal residence) or section

your distribution. See Pub. 939, General

1031 (like-kind exchanges) is not included

Special Rules for Certain Rental

Income,

Rule for Pensions and Annuities, and Pub.

in net investment income.

earlier.

575, Pension and Annuity Income, for

Other rental income or loss from a

See

Lines 5a-5d — Net Gains and

details.

section 162 trade or business reported on

Losses

Worksheet, later, for assistance in

Schedule K-1 (Form 1065), Partner's

calculating net gain or loss includable in

Share of Income, Deductions, Credits,

Line 4a—Rental Real Estate,

net investment income.

etc., line 3, from a partnership, or

Royalties, Partnerships, S

Schedule K-1 (Form 1120S),

Corporations, and Trusts

Shareholder's Share of Income,

Deductions, Credits, etc., line 3, from an S

Enter the following amount from your

Line 5a—Net Gain or Loss From

corporation, where the activity is not a

properly completed return:

Disposition of Property

passive activity.

Form 1040, line 17;

Calculate and enter the amount of net gain

Net income that has been

Form 1041, line 5;

or loss from the disposition of property by

recharacterized as not from a passive

Form 1041-QFT, the portion of line 4

combining the following amounts from

activity under the section 469 passive loss

that is income and loss that properly would

your properly completed return:

rules and is derived in the ordinary course

be reported by a trust filing Form 1041 on

of a section 162 trade or business. For

Form 1040, lines 13 and 14;

Form 1041, line 5;

example:

Form 1041, lines 4 and 7;

Form 1040NR, the amount properly

Form 1041-QFT, line 3, and the portion

1. Net rental income or loss from a

reported on the attachment to your Form

of line 4 attributed to ordinary gain/(loss);

rental that meets an exception under

1040NR representing the amount that you

Form 1040NR, the amounts properly

Regulations section 1.469-1T(e)(3)(ii), the

would enter on Form 1040, line 17, if you

reported on the attachment to your Form

activity rises to a section 162 trade or

were filing Form 1040 and including

1040NR representing the amounts that

business, and you materially participated

income and loss only for your period of

you would enter on Form 1040, lines 13

in the activity, or

U.S. residency.

and 14, if you were filing Form 1040 and

2. Net income from property rented to

including net gain or loss only for your

See

Special computational rules for

a nonpassive activity. See

Special Rules

period of U.S. residency.

qualified funeral trusts (QFTs)

and

for Certain Rental

Income, earlier.

Dual-status

individual, earlier.

See

Special computational rules for

Note. Any income from an estate or trust

qualified funeral trusts (QFTs)

and

Line 4b—Adjustment for Net

reported on Part III of Schedule E (Form

Dual-status

individual, earlier.

1040), Supplemental Income and Loss,

Income or Loss Derived in the

that excluded net investment income is

Ordinary Course of a Non-Section

Note. If you incur gain or loss from a

taken into account on line 7. Do not report

disposition that is not reported as

1411 Trade or Business

those adjustments on line 4b.

described in the previous paragraph,

Enter the net positive or net negative

report it on line 7. See

Line 7—Other

For line 4b adjustments, enter net

amount for the following items included in

Modifications to Investment

Income, later.

positive amounts as a negative

line 4a that are not included in determining

adjustment and enter net

CAUTION

net investment income:

negative amounts as a positive

Line 5b—Net Gain or Loss From

Net income or loss from a section 162

adjustment.

Disposition of Property That Is Not

trade or business that is not a passive

activity and is not engaged in a trade or

Lines 5a-5d—Gains and Losses

Subject to Net Investment Income

business of trading financial instruments

on the Dispositions of Property

Tax

or commodities,

Generally, net gain from the disposition of

Use line 5b to adjust the amounts included

Net income or loss from a section 1411

on line 5a for gains and losses that are

property not used in a trade or business

trade or business that is taken into

excluded from the calculation of net

and net gain or loss from the disposition of

account in determining self-employment

investment income. Enter the amount of

property held in a

section 1411 trade or

income,

business

is included in net investment

gains (as a negative number) and losses

Royalties derived in the ordinary course

income if included in taxable income.

(as a positive number) included on line 5a

of a section 162 trade or business that is

that are excluded from net investment

not a passive activity, and

Disposition usually means:

income. For example, line 5b will include

Passive losses of a former passive

Sale,

amounts such as:

activity that are allowed as a deduction in

Exchange,

Gain or loss from the sale of property

the current year by reason of section

Transfer,

held in a non-section 1411 trade or

469(f)(1)(A).

Conversion,

business.

Cash settlement,

In addition, use line 4b to adjust for

1. However, if the losses are

Cancellation,

certain types of nonpassive rental income

attributable to formerly suspended passive

Termination,

or loss derived in the ordinary course of a

losses of the non-section 1411 trade or

Lapse,

section 162 trade or business. For

business, such gains and losses are

Expiration,

example, line 4b includes the following

excluded from net investment income to

Deemed disposition, for example under

items:

the extent the nonpassive income from the

section 877A, or

Nonpassive net rental income or loss of

non-section 1411 trade or business is

Other disposition.

a real estate professional where the rental

excluded from net investment income.

activity rises to a section 162 trade or

Gains and losses that are not taken into

See Regulations section 1.1411-4(g)(8)

business.

account in computing taxable income are

for more information and examples.

Instructions for Form 8960 (2015)

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Instructions For Form 8960 (2015) Page 6

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