Shareholder's Instructions for Schedule K-1 (Form 1120S) |
2003 Tax Year |
Shareholder's Instructions for Schedule K-1 (Form 1120S) - Main Contents
This is archived information that pertains only to the 2003 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
The corporation uses Schedule K-1 (Form 1120S) to report your pro rata share of the corporation's income (reduced by any tax
the corporation paid
on the income), credits, deductions, etc. Keep it for your records. Do not file it with your tax return. The corporation has filed a copy
with the IRS.
Although the corporation may have to pay a built-in gains tax and an excess net passive income tax, you are liable for income
tax on your share of
the corporation's income, whether or not distributed, and you must include your share on your tax return if a return is required.
Your
distributive share of S corporation income is not self-employment income and it is not subject to self-employment tax.
Where “attach schedule” appears beside a line on Schedule K-1, see either the schedule that the corporation has attached for that line or line
23 of Schedule K-1.
The notation “see instructions for Schedule K-1” in item A at the top of Schedule K-1 is directed to the corporation. You, as a shareholder,
should disregard this notation.
Schedule K-1 does not show the amount of actual dividend distributions the corporation made to you. The corporation must report to you
such amounts totaling $10 or more for the calendar year on Form 1099-DIV, Dividends and Distributions.
Inconsistent Treatment of Items
Generally, you must report subchapter S items shown on your Schedule K-1 (and any attached schedules) the same way that the
corporation treated the
items on its return.
If the treatment on your original or amended return is inconsistent with the corporation's treatment, or if the corporation
has not filed a return,
you must file Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), with your original or amended return
to identify and explain any inconsistency (or to note that a corporate return has not been filed).
If you are required to file Form 8082, but fail to do so, you may be subject to the accuracy-related penalty. This penalty
is in addition to any
tax that results from making your amount or treatment of the item consistent with that shown on the corporation's return.
Any deficiency that results
from making the amounts consistent may be assessed immediately.
If you believe the corporation has made an error on your Schedule K-1, notify the corporation and ask for a corrected Schedule
K-1. Do
not change any items on your copy of Schedule K-1. Be sure that the corporation sends a copy of the corrected Schedule K-1 to
the IRS. If you
are unable to reach agreement with the corporation regarding the inconsistency, you must file Form 8082.
Every corporation that had operations in, or related to, a boycotting country, company, or national of a country, must file
Form 5713,
International Boycott Report.
If the corporation cooperated with an international boycott, it must give you a copy of its Form 5713. You must file your
own Form 5713 to report
the corporation's activities and any other boycott operations that you may have. You may lose certain tax benefits if the
corporation participated in,
or cooperated with, an international boycott. See Form 5713 and the instructions for more information.
Generally, the corporation decides how to figure taxable income from its operations. For example, it chooses the accounting
method and depreciation
methods it will use. However, certain elections are made by you separately on your income tax return and not by the corporation.
These elections are
made under the following code sections:
- Section 59(e) (deduction of certain qualified expenditures ratably over the period of time specified in that section). For
more information,
see the instructions for lines 16a and 16b.
- Section 617 (deduction and recapture of certain mining exploration expenditures), and
- Section 901 (foreign tax credit).
If the corporation attaches a statement to Schedule K-1 indicating that it has changed its tax year and that you may elect
to report your pro rata
share of the income attributable to that change ratably over 4 tax years, see Rev. Proc. 2003-79, 2003-45 I.R.B. 1036 for
details on making the
election. To make the election, you must file Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request, with your
income tax return for each of the 4 tax years. File Form 8082 for this purpose in accordance with Rev. Proc. 2003-79 instead
of the Form 8082
instructions.
For more information on the treatment of S corporation income, credits, deductions, etc., see Pub. 535, Business Expenses; Pub.
550, Investment Income and Expenses; and Pub. 925, Passive Activity and At-Risk Rules.
To get forms and publications, see the instructions for your tax return.
Limitations on Losses, Deductions, and Credits
There are three separate potential limitations on the amount of losses passed to the shareholder that you may deduct on your
return. These
limitations and the order in which you must apply them are as follows: the basis rules, the at-risk limitations, and the passive
activity limitations.
Each of these limitations is discussed separately below.
Other limitations may apply to specific deductions (for example, the section 179 expense deduction). Generally, these limitations
apply before the
basis, at-risk, and passive limitations.
Generally, the deduction for your share of aggregate losses and deductions reported on Schedule K-1 is limited to the basis
of your stock
(determined with regard to distributions received during the tax year) and debt owed to you by the corporation. The basis
of your stock is figured at
year-end.
You are responsible for maintaining records to show the computation of the basis of your stock in the corporation. Schedule
K-1 provides
information to help you make the computation at the end of each corporate tax year. The basis of your stock (generally, its
cost) is adjusted as
follows and, except as noted, in the order listed. In addition, basis may be adjusted under other provisions of the Internal
Revenue Code.
- Basis is increased by (a) all income (including tax-exempt income) reported on Schedule K-1 and (b) the excess of the
deduction for depletion (other than oil and gas depletion) over the basis of the property subject to depletion.
You must report the taxable income on your return (if you are required to file one) for it to increase your basis.
Basis is not increased by income from discharge of your indebtedness in the S corporation.
- Basis is decreased by property distributions (including cash) made by the corporation (excluding dividend distributions reported
on Form
1099-DIV and distributions in excess of basis) reported on Schedule K-1, line 20.
- Basis is decreased by (a) nondeductible expenses and (b) the depletion deduction for any oil and gas property held by
the corporation, but only to the extent your pro rata share of the property's adjusted basis exceeds that deduction.
- Basis is decreased by all deductible losses and deductions reported on Schedule K-1.
You may elect to decrease your basis under 4 above prior to decreasing your basis under 3 above. If you make this election,
any amount described under 3 that exceeds the basis of your stock and debt owed to you by the corporation is treated as an amount described
under 3 for the following tax year. To make the election, attach a statement to your timely filed original or amended return that
states
you agree to the carryover rule of Regulations section 1.1367-1(f) and the name of the S corporation to which the rule applies.
Once made, the
election applies to the year for which it is made and all future tax years for that S corporation, unless the IRS agrees to
revoke your election.
The basis of each share of stock is increased or decreased (but not below zero) based on its pro rata share of the above adjustments.
If the total
decreases in basis attributable to a share exceed that share's basis, the excess reduces (but not below zero) the remaining
bases of all other shares
of stock in proportion to the remaining basis of each of those shares.
The basis of loans to the corporation is the balance the corporation now owes you, less any reduction for losses in a prior
year. See the
instructions for line 21. Any loss not allowed for the tax year because of this limitation is available for indefinite carryover,
limited to the basis
of your stock and debt, in each subsequent tax year. See section 1366(d) for details.
When determining your basis in loans to the corporation, remember that:
- Distributions do not reduce loan basis.
- Loans that a shareholder guarantees or co-makes are not part of a shareholder's loan basis.
Generally, you will have to complete Form 6198, At-Risk Limitations, to figure your allowable loss, if you have:
- A loss or other deduction from any activity carried on by the corporation as a trade or business or for the production of
income,
and
- Amounts in the activity for which you are not at risk.
The at-risk rules generally limit the amount of loss and other deductions that you can claim to the amount you could actually
lose in the activity.
These losses and deductions include a loss on the disposition of assets and the section 179 expense deduction. However, if
you acquired your stock
before 1987, the at-risk rules do not apply to losses from an activity of holding real property placed in service before 1987
by the corporation. The
activity of holding mineral property does not qualify for this exception. The corporation should identify on an attachment
to Schedule K-1 the amount
of any losses that are not subject to the at-risk limitations.
Generally, you are not at risk for amounts such as the following:
- The basis of your stock in the corporation or basis of your loans to the corporation if the cash or other property used to
purchase the
stock or make the loans was from a source (a) covered by nonrecourse indebtedness (except for certain qualified nonrecourse financing, as
defined in section 465(b)(6)); (b) protected against loss by a guarantee, stop-loss agreement, or other similar arrangement; or
(c)that is covered by indebtedness from a person who has an interest in the activity or from a related person to a person (except
you)
having such an interest, other than a creditor.
- Any cash or property contributed to a corporate activity, or your interest in the corporate activity, that is (a) covered by
nonrecourse indebtedness (except for certain qualified nonrecourse financing, as defined in section 465(b)(6)); (b) protected against loss
by a guarantee, stop-loss agreement, or other similar arrangement; or (c) that is covered by indebtedness from a person who has an interest
in such activity or from a related person to a person (except you) having such an interest, other than a creditor.
Any loss from a section 465 activity not allowed for this tax year will be treated as a deduction allocable to the activity
in the next tax year.
To help you complete Form 6198, the corporation should specify on an attachment to Schedule K-1 your share of the total pre-1976
losses from a
section 465(c)(1) activity for which there existed a corresponding amount of nonrecourse liability at the end of the year
in which the losses
occurred. Also, you should get a separate statement of income, expenses, etc., for each activity from the corporation.
Passive Activity Limitations
Section 469 provides rules that limit the deduction of certain losses and credits. These rules apply to shareholders who:
- Are individuals, estates, or trusts and
- Have a passive activity loss or credit for the year.
Generally, passive activities include:
- Trade or business activities in which you did not materially participate and
- Activities that meet the definition of rental activities under Temporary Regulations section 1.469-1T(e)(3) and Regulations
section
1.469-1(e)(3).
Passive activities do not include:
- Trade or business activities in which you materially participated.
- Rental real estate activities in which you materially participated if you were a “real estate professional” for the tax year. You were
a real estate professional only if you met both of the following conditions:
- More than half of the personal services you performed in trades or businesses were performed in real property trades or businesses
in which
you materially participated and
- You performed more than 750 hours of services in real property trades or businesses in which you materially participated.
For purposes of this rule, each interest in rental real estate is a separate activity, unless you elect to treat all interests
in rental real
estate as one activity. For details on making this election, see the Instructions for Schedule E (Form 1040).
If you are married filing jointly, either you or your spouse must separately meet both of the above conditions, without taking
into account
services performed by the other spouse.
A real property trade or business is any real property development, redevelopment, construction, reconstruction, acquisition,
conversion, rental,
operation, management, leasing, or brokerage trade or business. Services you performed as an employee are not treated as performed
in a real property
trade or business unless you owned more than 5% of the stock (or more than 5% of the capital or profits interest) in the employer.
- The rental of a dwelling unit any shareholder used for personal purposes during the year for more than the greater of 14 days or
10% of the number of days that the residence was rented at fair rental value.
- Activities of trading personal property for the account of owners of interests in the activities.
The corporation will identify separately each activity that may be passive to you. If the corporation had more than one activity,
it will report
information in the line 23 Supplemental Information space, or attach a statement if more space is needed, that (a) identifies each activity
(trade or business activity, rental real estate activity, rental activity other than rental real estate, etc.); (b) specifies the income
(loss), deductions, and credits from each activity; and (c) provides other details you may need to determine if an activity loss or credit
is subject to the passive activity limitations.
If you have a passive activity loss or credit, see Form 8582, Passive Activity Loss Limitations, to figure your allowable passive
losses, and Form 8582-CR, Passive Activity Credit Limitations, to figure your allowable passive credit. See the instructions for these
forms for more information.
Material participation.
You must determine if you materially participated (a) in each trade or business activity held through the corporation and
(b), if you were a real estate professional (defined above), in each rental real estate activity held through the corporation.
All
determinations of material participation are made based on your participation during the corporation's tax year.
Material participation standards for shareholders who are individuals are listed below. Special rules apply to certain
retired or disabled farmers
and to the surviving spouses of farmers. See the Instructions for Form 8582 for details.
Individuals.
If you are an individual, you materially participate in a trade or business activity only if one or more of the following
apply:
- You participated in the activity for more than 500 hours during the tax year.
- Your participation in the activity for the tax year constituted substantially all of the participation in the activity of
all individuals
(including individuals who are not owners of interests in the activity).
- You participated in the activity for more than 100 hours during the tax year, and your participation in the activity for the
tax year was
not less than the participation in the activity of any other individual (including individuals who were not owners of interests
in the activity) for
the tax year.
- The activity was a significant participation activity for the tax year, and your aggregate participation in all significant
participation
activities (including those outside the corporation) during the tax year exceeded 500 hours. A significant participation activity is any
trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially
participate under any
of the material participation tests (other than this test 4).
- You materially participated in the activity for any 5 tax years (whether or not consecutive) during the 10 tax years that
immediately
precede the tax year.
- The activity was a personal service activity and you materially participated in the activity for any 3 tax years (whether
or not
consecutive) preceding the tax year. A personal service activity involves the performance of personal services in the fields of health,
law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business,
in which capital is not a
material income-producing factor.
- Based on all of the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis
during the tax
year.
Work counted toward material participation.
Generally, any work that you or your spouse does in connection with an activity held through an S corporation (in
which you own stock at the time
the work is done) is counted toward material participation. However, work in connection with an activity is not counted toward
material participation
if either of the following applies:
- The work is not the type of work that owners of the activity would usually do and one of the principal purposes of the work
that you or your
spouse does is to avoid the passive loss or credit limitations.
- You do the work in your capacity as an investor and you are not directly involved in the day-to-day operations of the activity.
Examples of
work done as an investor that would not count toward material participation include:
- Studying and reviewing financial statements or reports on operations of the activity,
- Preparing or compiling summaries or analyses of the finances or operations of the activity, and
- Monitoring the finances or operations of the activity in a nonmanagerial capacity.
Effect of determination.
If you determine that you (a) materially participated in a trade or business activity of the corporation or (b) were a real
estate professional (defined on page 2), in a rental real estate activity of the corporation, report the income (loss), deductions,
and credits from
that activity as indicated in either column (c) of Schedule K-1 or the instructions for your tax return.
If you determine that you did not materially participate in a trade or business activity of the corporation, or you have income (loss),
deductions, or credits from a rental activity of the corporation (other than a rental real estate activity in which you materially
participated, if
you were a real estate professional), the amounts from that activity are passive. Report passive income (losses), deductions,
and credits as follows:
- If you have an overall gain (the excess of income over deductions and losses, including any prior year unallowed loss) from
a passive
activity, report the income, deductions, and losses from the activity as indicated on Schedule K-1 or in these instructions.
- If you have an overall loss (the excess of deductions and losses, including any prior year unallowed loss, over income) or
credits from a
passive activity, you must report the income, deductions, losses, and credits from all passive activities using the Instructions for Form
8582 or Form 8582-CR, to see if your deductions, losses, and credits are limited under the passive activity rules.
Special allowance for a rental real estate activity.
If you actively participated in a rental real estate activity, you may be able to deduct up to $25,000 of the loss from the activity
from nonpassive income. This special allowance is an exception to the general rule disallowing losses in excess of income
from passive activities. The
special allowance is not available if you were married, are filing a separate return for the year, and did not live apart
from your spouse at all
times during the year.
Only individuals and qualifying estates can actively participate in a rental real estate activity. Estates (other
than qualifying estates) and
trusts cannot actively participate.
You are not considered to actively participate in a rental real estate activity if, at any time during the tax year,
your interest (including your
spouse's interest) in the activity was less than 10% (by value) of all interests in the activity.
Active participation is a less stringent requirement than material participation. You may be treated as actively participating
if you participated,
for example, in making management decisions or arranging for others to provide services (such as repairs) in a significant
and bona fide sense.
Management decisions that can count as active participation include approving new tenants, deciding on rental terms, approving
capital or repair
expenditures, and other similar decisions.
An estate is a qualifying estate if the decedent would have satisfied the active participation requirement for the
activity for the tax year the
decedent died. A qualifying estate is treated as actively participating for tax years ending less than 2 years after the date
of the decedent's death.
Modified adjusted gross income limitation.
The maximum special allowance that single individuals and married individuals filing a joint return can qualify for
is $25,000. The maximum is
$12,500 for married individuals who file separate returns and who lived apart at all times during the year. The maximum special
allowance for which an
estate can qualify is $25,000 reduced by the special allowance for which the surviving spouse qualifies.
If your modified adjusted gross income (defined below) is $100,000 or less ($50,000 or less if married filing separately),
your loss is deductible
up to the amount of the maximum special allowance referred to in the preceding paragraph. If your modified adjusted gross
income is more than $100,000
(more than $50,000 if married filing separately), the special allowance is limited to 50% of the difference between $150,000
($75,000 if married
filing separately) and your modified adjusted gross income. When modified adjusted gross income is $150,000 or more ($75,000
or more if married filing
separately), there is no special allowance.
Modified adjusted gross income is your adjusted gross income figured without taking into account:
- Any passive activity loss.
- Any rental real estate loss allowed under section 469(c)(7) to real estate professionals (as defined on page 2).
- Any taxable social security or equivalent railroad retirement benefits.
- Any deductible contributions to an IRA or certain other qualified retirement plans under section 219.
- The student loan interest deduction.
- The tuition and fees deduction.
- The deduction for one-half of self-employment taxes.
- The exclusion from income of interest from Series EE or I U.S. Savings Bonds used to pay higher education expenses.
- The exclusion of amounts received under an employer's adoption assistance program.
Commercial revitalization deduction.
The special $25,000 allowance for the commercial revitalization deduction from rental real estate activities is not
subject to the active
participation rules or modified adjusted gross income limits discussed above. See item 23 of the Supplemental Information
instructions on pages 7 and
8.
Special rules for certain other activities.
If you have net income (loss), deductions, or credits from any activity to which special rules apply, the corporation
will identify the activity
and all amounts relating to it on Schedule K-1 or on an attachment.
If you have net income subject to recharacterization under Temporary Regulations section 1.469-2T(f) and Regulations
section 1.469-2(f), report
such amounts according to the Instructions for Form 8582.
If you have net income (loss), deductions, or credits from either of the following activities, treat such amounts
as nonpassive and report them as
instructed in column (c) of Schedule K-1 or in these instructions:
- The rental of a dwelling unit any shareholder used for personal purposes during the year for more than the greater of 14 days
or 10% of the
number of days that the residence was rented at fair rental value.
- Trading personal property for the account of owners of interests in the activity.
Self-charged interest.
The corporation will report any “ self-charged” interest income or expense that resulted from loans between you and the corporation (or between
the corporation and other S corporation or partnership in which you have an interest). If there was more than one activity,
the corporation will
provide a statement allocating the interest income or expense with respect to each activity. The self-charged interest rules
do not apply to your
interest in the S corporation if the corporation made an election under Regulations section 1.469-7(g) to avoid the application
of these rules. See
the Instructions for Form 8582 for more information.
If the corporation is a registration-required tax shelter or has invested in a registration-required tax shelter, it should
have completed Item C.
If you claim or report any income, loss, deduction, or credit from a tax shelter, you are required to attach Form 8271, Investor Reporting
of Tax Shelter Registration Number, to your tax return. If the corporation has invested in a tax shelter, it must give you
a copy of its Form 8271
with your Schedule K-1. Use this information to complete your Form 8271.
If the corporation itself is a registration-required tax shelter, use the information on Schedule K-1 (name of corporation,
corporation identifying
number, and tax shelter registration number) to complete your Form 8271.
The amounts on lines 1 through 23 show your share of ordinary income, loss, deductions, credits, and other information from
all corporate
activities. These amounts do not take into account limitations on losses, credits, or other items that may have to be adjusted
because of:
- The adjusted basis of your stock and debt in the corporation,
- The at-risk limitations,
- The passive activity limitations, or
- Any other limitations that must be taken into account at the shareholder level in figuring taxable income (e.g., the section
179 expense
limitation).
For information on the limitations of 1, 2, and 3, see Limitations on Losses, Deductions, and Credits beginning on
page 1. The limitations for 4 are discussed throughout these instructions and in other referenced forms and instructions.
If you are an individual, and your pro rata share items are not affected by any of the limitations, report the amounts shown
in column (b) of
Schedule K-1 as indicated in column (c). If any of the limitations apply, adjust the column (b) amounts for the limitations
before you enter the
amounts on your return. When applicable, the passive activity limitations on losses are applied after the limitations on losses
for a shareholder's
basis in stock and debt and the shareholder's at-risk amount.
Note:
The line number references in column (c) are to forms in use for tax years beginning in 2003. If you are a calendar year shareholder
in a fiscal
year 2003–2004 corporation, enter these amounts on the corresponding lines of the tax form in use for 2004.
If you have losses, deductions, credits, etc., from a prior year that were not deductible or usable because of certain limitations,
such as the
basis rules or the at-risk limitations, take them into account in determining your income, loss, etc., for this year. However,
except for passive
activity losses and credits, do not combine the prior-year amounts with any amounts shown on this Schedule K-1 to get a net
figure to report on your
return. Instead, report the amounts on your return on a year-by-year basis.
Line 1—Ordinary Income (Loss) From Trade or Business Activities
The amount reported on line 1 is your share of the ordinary income (loss) from trade or business activities of the corporation.
Generally, where
you report this amount on Form 1040 depends on whether the amount is from an activity that is a passive activity to you. If
you are an individual
shareholder, find your situation below and report your line 1 income (loss) as instructed after applying the basis and at-risk
limitations on losses.
- Report line 1 income (loss) from trade or business activities in which you materially participated on Schedule E (Form 1040),
Part II,
column (h) or (j).
- Report line 1 income (loss) from trade or business activities in which you did not materially participate, as follows:
- If income is reported on line 1, report the income on Schedule E, Part II, column (g).
- If a loss is reported on line 1, follow the Instructions for Form 8582 to determine how much of the loss can be reported on
Schedule E, Part
II, column (f).
Line 2—Net Income (Loss) From Rental Real Estate Activities
Generally, the income (loss) reported on line 2 is a passive activity amount for all shareholders. However, the income (loss)
on line 2 is not from
a passive activity if you were a real estate professional (defined on page 2) and you materially participated in the activity.
If you are filing a 2003 Form 1040, use the following instructions to determine where to enter a line 2 amount:
- If you have a loss from a passive activity on line 2 and you meet all of the following conditions, enter the loss on Schedule E
(Form 1040), Part II, column (f):
- You actively participated in the corporate rental real estate activities. (See Special allowance for a rental real estate
activityon page 3.)
- Rental real estate activities with active participation were your only passive activities.
- You have no prior year unallowed losses from these activities.
- Your total loss from the rental real estate activities was not more than $25,000 (not more than $12,500 if married filing
separately and you
lived apart from your spouse all year).
- If you are a married person filing separately, you lived apart from your spouse all year.
- You have no current or prior year unallowed credits from a passive activity.
- Your modified adjusted gross income was not more than $100,000 (not more than $50,000 if married filing separately and you
lived apart from
your spouse all year).
- If you have a loss from a passive activity on line 2 and you do not meet all of the conditions in 1 above, follow the
Instructions for Form 8582 to determine how much of the loss can be reported on Schedule E (Form 1040), Part II, column (f).
- If you were a real estate professional and you materially participated in the activity, report line 2 income (loss) on Schedule
E, Part II,
column (h) or (j).
- If you have income from a passive activity on line 2, enter the income on Schedule E, Part II, column (g).
Line 3—Net Income (Loss) From Other Rental Activities
The amount on line 3 is a passive activity amount for all shareholders. Report the income or loss as follows:
- If line 3 is a loss, report the loss using the Instructions for Form 8582.
- If income is reported on line 3, report the income on Schedule E (Form 1040), Part II, column (h).
Lines 4a Through 4f—Portfolio Income (Loss)
Portfolio income or loss is not subject to the passive activity limitations. Portfolio income includes income not derived
in the ordinary course of
a trade or business from interest, ordinary dividends, annuities, or royalties, and gain or loss on the sale of property that
produces such income or
is held for investment.
Column (c) of Schedule K-1 tells shareholders where to report this income on Form 1040 and related schedules.
Qualified dividends.
Report any qualified dividends on line 9b of Form 1040.
Note:
Qualified dividends are excluded from investment income, but you may elect to include part or all of these amounts in investment
income. See the
instructions for line 4g of Form 4952, Investment Interest Expense Deduction, for important information on making this election.
Line 4f
of Schedule K-1 is used to report income other than that reported on lines 4a through 4e. The type and the amount
of income reported on line 4f
will be listed in the line 23 Supplemental Information space of Schedule K-1.
If the corporation held a residual interest in a real estate mortgage investment conduit (REMIC), it will report on
line 4f your share of REMIC
taxable income or (net loss) that you report on Schedule E (Form 1040), Part IV, column (d). It will also report your share
of any “ excess
inclusion” that you report on Schedule E, Part IV, column (c), and your share of section 212 expenses that you report on Schedule E,
Part IV,
column (e). If you itemize your deductions on Schedule A (Form 1040), you may also deduct these section 212 expenses as a
miscellaneous itemized
deduction subject to the 2% limit on Schedule A, line 22.
Lines 5a and 5b—Net Section 1231 Gain (Loss) (Other Than Due to Casualty or Theft)
The amount on line 5a or 5b is generally a passive activity amount if it is from a:
- Rental activity or
- Trade or business activity in which you did not materially participate.
However, an amount on line 5a or 5b from a rental real estate activity is not from a passive activity if you were a real estate
professional
(defined on page 2) and you materially participated in the activity.
If the amount on line 5b is either (a) a loss that is not from a passive activity or (b) a gain, report it on Form
4797, line 2, column (g). If any portion of the net section 1231 gain (loss) was generated after May 5, 2003, it will be reported
on line 5a. Report
this amount on line 2, column (h), of Form 4797. Do not complete columns (b) through (f) on line 2. Instead, write “From Schedule K-1
(Form 1120S)” across these columns.
If the amount on line 5a or 5b is a loss from a passive activity, see Passive Loss Limitations in the Instructions for Form 4797. You
will need to report the loss following the Instructions for Form 8582 to determine the amount to enter on Form 4797.
Any amount of gain from section 1231 property held more than 5 years prior to May 6, 2003, will be indicated on an attachment
to Schedule K-1.
Include this amount in your computation of qualified 5-year gain only if the amount on line 7 of your Form 4797, Sales of
Business Property, is more than zero. The corporation will also identify in the line 23 Supplemental Information space the
activity to which the
amounts on lines 5a and 5b relate.
Line 6—Other Income (Loss)
Amounts on this line are other items of income, gain, or loss not included on lines 1 through 5. The corporation should give
you a description and
the amount of your share for each of these items.
Report loss items that are passive activity amounts to you using the Instructions for Form 8582.
Report income or gain items that are passive activity amounts to you as instructed below.
The instructions below also tell you where to report line 6 items if such items are not passive activity amounts.
Line 6 items include the following:
- Income from recoveries of tax benefit items. A tax benefit item is an amount you deducted in a prior tax year that reduced
your income tax.
Report this amount on Form 1040, line 21, to the extent it reduced your tax.
- Gambling gains and losses.
- If the corporation was not engaged in the trade or business of gambling:
- Report gambling winnings on Form 1040, line 21.
- Deduct gambling losses to the extent of winnings on Schedule A, line 27.
- If the corporation was engaged in the trade or business of gambling:
- Report gambling winnings in Part II of Schedule E.
- Deduct gambling losses to the extent of winnings in Part II of Schedule E.
- Net gain (loss) from involuntary conversions due to casualty or theft. The corporation will give you a schedule that shows
the amounts to be
reported on Form 4684, Casualties and Thefts, line 34, columns (b)(i), (b)(ii), and (c).
- Net short-term capital gain or loss, net long-term capital gain or loss, and the 28% rate gain or loss from Schedule D (Form
1120S) that is
not portfolio income (e.g., gain or loss from the disposition of nondepreciable personal property used in a trade or business
activity of
the corporation). Report total net short-term gain or loss on Schedule D (Form 1040), line 5, column (f) and the Post-May
5, 2003, net short-term gain
or loss on Schedule D (Form 1040), line 5, column (g). Report the total net long-term gain or loss on Schedule D (Form 1040),
line 12, column (f), and
the Post-May 5, 2003, net long-term gain or loss on Schedule D (Form 1040), line 12, column (g).
Any amount of 28% rate gain or loss from collectibles will be indicated on an attachment to Schedule K-1. See Supplemental Information, Line
23, item 20, for more information. Include this amount on line 4 of the worksheet for line 20 of Schedule D (Form 1040).
Any amount of long-term capital gain from such property held more than 5 years prior to May 6, 2003, will be indicated on
an attachment to Schedule
K-1. Include this amount on line 5 of the worksheet for line 35 of Schedule D (Form 1040). See item 21 of the instructions
for line 23.
- Any net gain or loss from section 1256 contracts. Report this amount on line 1 of Form 6781, Gains and Losses From Section 1256
Contracts and Straddles.
- Gain from the sale or exchange of qualified small business stock (as defined in the Instructions for Schedule D) that is eligible
for the
50% section 1202 exclusion. The corporation should also give you the name of the corporation that issued the stock, your share
of the corporation's
adjusted basis and sales price of the stock, and the dates the stock was bought and sold. Corporate shareholders are not eligible
for the section 1202
exclusion. The following additional limitations apply at the shareholder level:
- You must have held an interest in the corporation when the corporation acquired the qualified small business stock and at
all times
thereafter until the corporation disposed of the qualified small business stock.
- Your pro rata share of the eligible section 1202 gain cannot exceed the amount that would have been allocated to you based
on your interest
in the corporation at the time the stock was acquired.
See the Instructions for Schedule D (Form 1040) for details on how to report the gain and the amount of the allowable exclusion.
- Gain eligible for section 1045 rollover (replacement stock purchased by the corporation). The corporation should also give
you the name of
the corporation that issued the stock, your share of the corporation's adjusted basis and sales price of the stock, and the
dates the stock was bought
and sold. Corporate shareholders are not eligible for the section 1045 rollover. To qualify for the section 1045 rollover:
- You must have held an interest in the corporation during the entire period in which the corporation held the qualified small
business stock
(more than 6 months prior to the sale) and
- Your pro rata share of the gain eligible for the section 1045 rollover cannot exceed the amount that would have been allocated
to you based
on your interest in the corporation at the time the stock was acquired.
See the Instructions for Schedule D (Form 1040) for details on how to report the gain and the amount of the allowable postponed
gain.
- Gain eligible for section 1045 rollover (replacement stock not purchased by the corporation). The corporation should also
give you the name
of the corporation that issued the stock, your share of the corporation's adjusted basis and sales price of the stock, and
the dates the stock was
bought and sold. Corporate shareholders are not eligible for the section 1045 rollover. To qualify for the section 1045 rollover:
- You must have held an interest in the corporation during the entire period in which the corporation held the qualified small
business stock
(more than 6 months prior to the sale).
- Your pro rata share of the gain eligible for the section 1045 rollover cannot exceed the amount that would have been allocated
to you based
on your interest in the corporation at the time the stock was acquired, and
- You must purchase other qualified small business stock (as defined in the Instructions for Schedule D (Form 1040)) during
the 60-day period
that began on the date the stock was sold by the corporation.
See the Instructions for Schedule D (Form 1040) for details on how to report the gain and the amount of the allowable postponed
gain.
Line 7—Charitable Contributions
The corporation will give you a schedule that shows the amount of contributions subject to the 50%, 30%, and 20% limitations.
For more details, see
the instructions for Schedule A (Form 1040).
If property other than cash is contributed, and the claimed deduction for one item or group of similar items of property exceeds
$5,000, the
corporation is required to give you a copy of Form 8283, Noncash Charitable Contributions, and you must attach it to your tax return.
Do not deduct the amount shown on Form 8283. It is the corporation's contribution. You should deduct the amount shown on your Schedule
K-1,
line 7.
If the corporation provides you with information that the contribution was property other than cash and does not give you
a Form 8283, see the
Instructions for Form 8283 for filing requirements. Do not file Form 8283 unless the total claimed deduction of all contributed
items of property
exceeds $500.
Charitable contribution deductions are not taken into account in figuring your passive activity loss for the year. Do not
enter them on Form 8582.
Line 8—Section 179 Expense Deduction
The corporation will identify your share of the section 179 expense deduction and the activity associated with it. Use this
amount, along with the
total cost of section 179 property placed in service during the year from other sources, to complete Part I of Form 4562, Depreciation and
Amortization. Use Part I of Form 4562 to figure your allowable section 179 expense deduction from all sources. Report the
amount on line 12 of Form
4562 allocable to a passive activity from the corporation using the Instructions for Form 8582. If the amount is not a passive
activity deduction,
report it on Schedule E (Form 1040), Part II, column (i).
Line 9—Deductions Related to Portfolio Income
Amounts on this line are deductions that are clearly and directly allocable to portfolio income reported on lines 4a through
4f (other than
investment interest expense and section 212 expenses from a REMIC). Generally, you should enter line 9 amounts on Schedule
A (Form 1040), line 22. See
the instructions for Schedule A, lines 22 and 27, for more information.
These deductions are not taken into account in figuring your passive activity loss for the year. Do not enter them on Form
8582.
Amounts on this line are other deductions not included on lines 7, 8, 9, 15g, and 16a, such as:
- Itemized deductions that Form 1040 filers enter on Schedule A (Form 1040).
Note:
If there was a gain (loss) from a casualty or theft to property not used in a trade or business or for income-
producing purposes, the corporation will notify you. You will have to complete your own Form 4684.
- Any penalty on early withdrawal of savings.
- Soil and water conservation expenditures. See section 175 for limitations on the amount you are allowed to deduct.
- Expenditures for the removal of architectural and transportation barriers to the elderly and disabled that the corporation
elected to treat
as a current expense. The deductions are limited by section 190(c) to $15,000 per year from all sources.
- Interest expense allocated to debt-financed distributions. The manner in which you report such interest expense depends on
your use of the
distributed debt proceeds. See Notice 89-35, 1989-1 C.B. 675, for details.
- Contributions to a capital construction fund (CCF). The deduction for a CCF investment is not taken on Schedule E (Form 1040).
Instead, you
subtract the deduction from the amount that would normally be entered as taxable income on line 40 (Form 1040). In the margin
to the left of line 40,
write "CCF" and the amount of the deduction.
If the corporation has more than one corporate activity (line 1, 2, or 3 of Schedule K-1), it will identify the activity to
which the expenses
relate.
The corporation should also give you a description and your share of each of the expense items. Associate any passive activity
deduction included
on line 10 with the line 1, 2, or 3 activity to which it relates and report the deduction using the Instructions for Form
8582 (or only on Schedule E
(Form 1040), if applicable).
If the corporation paid or accrued interest on debts properly allocable to investment property, the amount of interest you
are allowed to deduct
may be limited.
For more information on the special provisions that apply to investment interest expense, see Form 4952, Investment Interest Expense
Deduction, and Pub. 550, Investment Income and Expenses.
Line 11a—Interest Expense on Investment Debts
Enter this amount on Form 4952, line 1, along with investment interest expense from Schedule K-1, line 10, if any, and from
other sources to
determine how much of your total investment interest is deductible.
Lines 11b(1) and (2)—Investment Income and Investment Expenses
Use the amounts on these lines to determine the amounts to enter in Part II of Form 4952.
The amounts shown on lines 11b(1) and 11b(2) include only investment income and expenses reported on lines 4a, 4b(2), 4c,
4f, and 9 of this
Schedule K-1. If applicable, the corporation will have listed in the line 23 Supplemental Information space any other items
of investment income and
expenses reported elsewhere on this Schedule K-1. Be sure to take these amounts into account, along with the amounts on lines
11b(1) and 11b(2) and
your investment income and expenses from other sources, when figuring the amounts to enter in Part II of Form 4952.
If you have credits that are passive activity credits to you, you must complete Form 8582-CR in addition to the credit forms
identified below. See
the Instructions for Form 8582-CR for more information.
Also, if you are entitled to claim more than one listed general business credit (investment credit, work opportunity credit,
welfare-to-work
credit, credit for alcohol used as fuel, research credit, low-income housing credit, enhanced oil recovery credit, disabled
access credit, renewable
electricity production credit, Indian employment credit, credit for employer social security and Medicare taxes paid on certain
employee tips, orphan
drug credit, new markets credit, credit for small employer pension plan startup costs, credit for employer-provided child
care facilities and
services, and credit for contributions to selected community development corporations), you must complete Form 3800, General Business
Credit, in addition to the credit forms identified. If you have more than one credit, see the Instructions for Form 3800.
Line 12a—Credit for Alcohol Used as Fuel
Your share of the corporation's credit for alcohol used as fuel from all trade or business activities is reported on line
12a. Enter this credit on
Form 6478, Credit for Alcohol Used as Fuel, to determine your allowed credit for the year.
Line 12b—Low-Income Housing Credit
Your share of the corporation's low-income housing credit is shown on lines 12b(1) and 12b(2). Use Form 8586, Low-Income Housing Credit,
to determine your allowed credit for the year.
If the corporation invested in a partnership to which the provisions of section 42(j)(5) apply, it will report separately
on line 12b(1) your share
of the credit it received from the partnership.
Your share of all other low-income housing credits of the corporation is reported on line 12b(2). You must keep a separate
record of the amount of
low-income housing credit from these lines so that you will be able to correctly figure any recapture of the credit that may
result from the
disposition of all or part of your stock in the corporation. For more information, see the instructions for Form 8611, Recapture of
Low-Income Housing Credit.
Line 12c—Qualified Rehabilitation Expenditures Related to Rental Real Estate Activities
The corporation should identify your share of rehabilitation expenditures from each rental real estate activity. Enter the
expenditures on the
appropriate line of Form 3468, Investment Credit, to figure your allowable credit.
Line 12d—Credits (Other Than Credits Shown on Lines 12b and 12c) Related to Rental Real Estate Activities
The corporation will identify the type of credit and any other information you need to figure credits from rental real estate
activities (other
than the low-income housing credit and qualified rehabilitation expenditures).
Line 12e—Credits Related to Other Rental Activities
If applicable, your share of any credit from other rental activities will be reported on line 12e. Income or loss from these
activities is reported
on line 3 of Schedule K-1. If more than one credit is involved, the credits will be listed separately, each credit identified
as a line 12e credit,
and the activity to which the credit relates will be identified. This information will be shown on the line 23 Supplemental
Information space. The
credit may be limited by the passive activity limitations.
If applicable, your pro rata share of any other credit (other than on lines 12a through 12e) will be shown on line 13. If
more than one credit is
reported, the credits will be shown and identified in the line 23 Supplemental Information space. Expenditures qualifying
for the (a)
rehabilitation credit from other than rental real estate activities, (b) energy credit, or (c) reforestation credit will be
reported to you on line 23.
Line 13 credits include the following:
- Credit for backup withholding on dividends, interest income, and other types of income. Include the amount the corporation
reports to you in
the total that you enter on Form 1040, line 61.
- Nonconventional source fuel credit. Enter this credit on a schedule you prepare yourself to determine the allowed credit to
take on your tax
return. See section 29 for rules on how to figure the credit.
- Qualified electric vehicle credit (Form 8834).
- Unused credits from cooperatives.
- Work opportunity credit (Form 5884).
- Welfare-to-work credit (Form 8861).
- Credit for increasing research activities (Form 6765).
- Enhanced oil recovery credit (Form 8830).
- Disabled access credit (Form 8826).
- Renewable electricity production credit (Form 8835).
- Empowerment zone and renewable community employment credit (Form 8844).
- Indian employment credit (Form 8845).
- Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846).
- Orphan drug credit (Form 8820).
- New markets credit (Form 8874).
- Credit for small employer pension plan startup costs (Form 8881).
- Credit for employer-provided child care facilities and services (Form 8882).
- New York Liberty Zone business employee credit (Form 8884).
- Credit for contributions to selected community development corporations (Form 8847).
- General credits from an electing large partnership. Report these credits on Form 3800, line 1r.
- Qualified zone academy bond credit (Form 8860).
Adjustments and Tax Preference Items
Use the information reported on lines 14a through 14e (as well as adjustments and tax preference items from other sources)
to prepare your
Form 6251, Alternative Minimum Tax—Individuals, or Schedule I of Form 1041, U.S. Income Tax Return for Estates and Trusts.
Lines 14d(1) and 14d(2)—Gross Income From, and Deductions Allocable to, Oil, Gas, and Geothermal Properties
The amounts reported on these lines include only the gross income from, and deductions allocable to, oil, gas, and geothermal
properties included
on line 1 of Schedule K-1. The corporation should have reported separately any income from or deductions allocable to such
properties that are
included on lines 2 through 10. This separate information is reported in the line 23 Supplemental Information space. Use the
amounts reported on lines
14d(1) and 14d(2) and any amounts reported separately to help you determine the net amount to enter on line 25 of Form 6251.
Line 14e—Other Adjustments and Tax Preference Items
Enter the line 14e adjustments and tax preference items shown in the line 23 Supplemental Information space, with other items
from other sources,
on the applicable lines of Form 6251.
Use the information on lines 15a through 15h and attached schedules to figure your foreign tax credit. For more information,
see Form
1116, Foreign Tax Credit (Individual, Estate, Trust, or Nonresident Alien Individual), and its instructions. Also see Pub. 514,
Foreign Tax Credit for Individuals.
Lines 16a and 16b—Section 59(e)(2) Expenditures
The corporation will show on line 16a the type of qualified expenditures to which an election under section 59(e) may apply.
It will identify the
amount of the expenditures on line 16b. If there is more than one type of expenditure, the amount of each type will be listed
on an attachment.
Generally, section 59(e) allows each shareholder to elect to deduct certain expenses ratably over the number of years in the
applicable period
rather than deduct the full amount in the current year. Under the election, you may deduct circulation expenditures ratably
over a 3-year period.
Research and experimental expenditures and mining exploration and development costs qualify for a writeoff period of 10 years.
Intangible drilling and
development costs may be deducted over a 60-month period, beginning with the month in which such costs were paid or incurred.
If you make this election, these items are not treated as adjustments or tax preference items for purposes of the alternative
minimum tax. Make the
election on Form 4562.
Because each shareholder decides whether to make the election under section 59(e), the corporation cannot provide you with
the amount of the
adjustment or tax preference item related to the expenses listed on line 16a. You must decide both how to claim the expenses
on your return and how to
figure the resulting adjustment or tax preference item.
Line 17—Tax-Exempt Interest Income
You must report on your return, as an item of information, your share of the tax-exempt interest received or accrued by the
corporation during the
year. Individual shareholders must include this amount on Form 1040, line 8b. Generally, you must increase the basis of your
stock by this amount.
Line 18—Other Tax-Exempt Income
Generally, you must increase the basis of your stock by the amount shown on line 18, but do not include it in income on your
tax return.
Line 19—Nondeductible Expenses
The nondeductible expenses paid or incurred by the corporation are not deductible on your tax return. Generally, you must
decrease the basis of
your stock by this amount.
Reduce the basis of your stock (as explained on page 2) by the distributions on line 20. If these distributions exceed the
basis of your stock, the
excess is treated as gain from the sale or exchange of property and is reported on Schedule D (Form 1040).
If the line 21 payments are made on a loan with a reduced basis, the repayments must be allocated in part to a return of your
basis in the loan and
in part to the receipt of income. See Regulations section 1.1367-2 for information on reduction in basis of a loan and restoration
in basis of a loan
with a reduced basis. See Rev. Rul. 64-162, 1964-1 (Part 1) C.B. 304 and Rev. Rul. 68-537, 1968-2 C.B. 372, for other information.
Lines 22a and 22b—Recapture of Low-Income Housing Credit
The corporation will report on line 22a your share of any recapture of a low-income housing credit from its investment in
partnerships to which the
provisions of section 42(j)(5) apply. All other recapture of low-income housing credits will be reported on line 22b. Keep
a separate record of
recapture from line 22a and 22b so that you will be able to correctly figure any credit recapture that may result from the
disposition of all or part
of your corporate stock. For more information, see Form 8611.
Amounts shown on line 23 include:
- Taxes paid on undistributed capital gains by a regulated investment company or real estate investment trust. Form 1040 filers,
enter your
share of these taxes on line 67 of Form 1040, check the box for Form 2439, and add “Form 1120S.” Also reduce the basis of your stock by this
tax.
- Your share of gross income from the property, share of production for the tax year, etc., needed to figure your depletion
deduction for oil
and gas wells. The corporation should also allocate to you a proportionate share of the adjusted basis of each corporate oil
or gas property. See Pub.
535 on how to figure your depletion deduction. Also, reduce the basis of your stock by the amount of this deduction to the
extent the deduction does
not exceed your share of the adjusted basis of the property.
- Your pro rata share of gain or loss on the sale, exchange, or other disposition of property for which a section 179 expense
deduction was
passed through to shareholders. If the corporation passed through a section 179 deduction to its shareholders for the property,
you must report the
gain or loss and any recapture of the section 179 expense deduction for the property on your income tax return (see the instructions
for Form 4797 for
details). The corporation must provide all the following information with respect to a disposition of property for which a
section 179 expense
deduction was passed through to shareholders.
- Description of the property.
- Date the property was acquired.
- Date of the sale or other disposition of the property.
- Your pro rata share of the gross sales price.
- Your pro rata share of the cost or other basis plus the expense of sale (reduced as explained in the instructions for Form
4797, line
21).
- Your pro rata share of the depreciation allowed or allowable, determined as described in the instructions for Form 4797, line
22, but
excluding the section 179 expense deduction.
- Your pro rata share of the section 179 expense deduction (if any) passed through for the property and the corporation's tax
year(s) in which
the amount was passed through. To compute the amount of depreciation allowed or allowable for Form 4797, line 22, add to the
amount from item
f above the amount of your pro rata share of the section 179 expense deduction, reduced by any unused carryover of the deduction
for this
property. This amount may be different than the amount of section 179 expense you deducted for the property if your interest
in the corporation has
changed.
- An indication if the disposition is from a casualty or theft.
- If this is an installment sale, any information you need to complete Form 6252, Installment Sale Income.
- Recapture of section 179 expense deduction if business use of any property for which the section 179 expense deduction was
passed through to
shareholders dropped to 50 percent or less. If the business use of the property dropped to 50 percent or less, the corporation
must provide all the
following information.
- Your pro rata share of the depreciation allowed or allowable (not including the section 179 expense deduction).
- Your pro rata share of the section 179 expense deduction (if any) passed through for the property and the corporation's tax
year(s) in which
the amount was passed through. Reduce this amount by the portion, if any, of your unused (carryover) section 179 expense deduction
for this
property.
- Recapture of certain mining exploration expenditures (section 617).
- Any information or statements you need to comply with section 6111 (registration of tax shelters) or section 6662(d)(2)(B)(ii)
(regarding
adequate disclosure of items that may cause an understatement of income tax).
- Gross farming and fishing income. If you are an individual shareholder, enter this income, as an item of information, on Schedule
E (Form
1040), Part V, line 42. Do not report this income elsewhere on Form 1040.
For a shareholder that is an estate or trust, report this income to the beneficiaries, as an item of information, on Schedule
K-1 (Form 1041).
Do not report it elsewhere on Form 1041.
- Any information you need to figure the interest due under section 453(l)(3). If the corporation elected to report the dispositions
of
certain timeshares and residential lots on the installment method, your tax liability must be increased by the interest on
tax attributable to your
pro rata share of the installment payments received by the corporation during its tax year. If applicable, use the information
provided by the
corporation to figure your interest, report the interest on Form 1040, line 60. Write “453(l)(3)” and the amount of the interest on the dotted
line to the left of line 60.
- Any information you need to figure the interest due under section 453A(c) with respect to certain installment sales. If you
are an
individual, report the interest on Form 1040, line 60. Write “453A(c)” and the amount of the interest on the dotted line to the left of line 60.
See the instructions for Form 6252, Installment Sale Income, for more information. Also see section 453A(c) for details on making the
computation.
- Capitalization of interest under section 263A(f). To the extent certain production or construction expenditures of the corporation
are made
from proceeds associated with debt you incur as an owner-shareholder, you must capitalize the interest on this debt. If applicable,
use the
information on expenditures the corporation gives to you to determine the amount of interest you must capitalize. See Regulations
sections 1.263A-8
through 1.263A-15 for more information.
- Any information you need to figure the interest due or to be refunded under the look-back method of section 460(b)(2) on certain
long-term
contracts. Use Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, to report any such
interest.
- Your share of expenditures qualifying for the (a) rehabilitation credit from other than rental real estate activities,
(b) energy credit, or (c) reforestation credit. Enter the expenditures on the appropriate line of Form 3468 to figure your
allowable credit.
- Investment credit properties subject to recapture. Any information you need to figure your recapture tax on Form 4255, Recapture
of Investment Credit. See the Form 3468 on which you took the original credit for other information you need to complete Form
4255.
You may also need Form 4255 if you disposed of more than one-third of your stock in the corporation.
- Preproductive period farm expenses. You may elect to deduct these expenses currently or capitalize them under section 263A.
See Pub.
225, Farmer's Tax Guide, and Regulations section 1.263A-4 for more information.
- Any information you need to figure the recapture of the new markets credit (see Form 8874).
- Any information you need to figure recapture of the qualified electric vehicle credit. See Pub. 535 for details, including
how to figure the
recapture.
- Any information you need to figure your recapture of the Indian employment credit. Generally, if the corporation terminated
a qualified
employee less than 1 year after the date of initial employment, any Indian employment credit allowed for a prior tax year
by reason of wages paid or
incurred to that employee must be recaptured. For details, see section 45A(d).
- Nonqualified withdrawals by the corporation from a capital construction fund (CCF). These withdrawals are taxed separately
from your other
gross income at the highest marginal ordinary income or capital gain tax rate. Attach a statement to your Federal income tax
return to show your
computation of both the tax and interest for a nonqualified withdrawal. Include the tax and interest on Form 1040, line 60.
To the left of line 60,
write the amount of tax and interest and “CCF.”
- Unrecaptured section 1250 gain. Generally, report this amount on line 5 of the Unrecaptured Section 1250 Gain Worksheet in the
Schedule D (Form 1040) instructions. However, for an amount passed through from an estate, trust, real estate investment trust,
or regulated
investment company, report it on line 11 of that worksheet. Report on line 10 of that worksheet any gain from the corporation's
sale or exchange of a
partnership interest that is attributable to unrecaptured section 1250 gain.
- Your share of any collectibles gain or loss. Include this amount on line 4 of the worksheet for Schedule D (Form 1040), line
20.
- Any information you need to figure qualified 5-year gain. Include on line 5 of the worksheet for Schedule D (Form 1040), line
35, qualified
5-year gain from portfolio income. Take into account any qualified 5-year gain from section 1231 property when completing
line 2 of that worksheet, as
if it were included in Part I of Form 4797 (but only if line 7, column (g), of your Form 4797 is greater than zero).
- Any information you need to figure the interest due or to be refunded under the look-back method of section 167(g)(2) for
certain property
placed in service after September 13, 1995, and depreciated under the income forecast method. Use Form 8866, Interest Computation Under the
Look-Back Method for Property Depreciated Under the Income Forecast Method, to report any such interest.
- Amortizable basis of reforestation expenditures and the year paid or incurred. To figure your allowable amortization, including
limits that
may apply, see section 194 and Pub. 535. Follow the Instructions for Form 8582 to report amortization allocable to a passive
activity. Report
amortization from a trade or business activity in which you materially participated on a separate line in Part II, column
(i), of Schedule E (Form
1040).
- Any information you need to figure the interest due under section 1260(b). If the corporation had gain from certain constructive
ownership
transactions, your tax liability must be increased by the interest charge on any deferral of gain recognition under section
1260(b). If you are an
individual, report the interest on Form 1040, line 60. Write “1260(b)” and the amount of the interest on the dotted line to the left of line 60.
See section 1260(b) for details, including how to figure the interest.
- Extraterritorial income exclusion:
Note:
Upon request, the corporation should furnish you a copy of the corporation's Form 8873 if there is a reduction for international
boycott
operations, illegal bribes, kickbacks, etc.
- Corporation did not claim the exclusion. If the corporation reports your pro rata share of foreign trading gross receipts and the
extraterritorial income exclusion, the corporation was not entitled to claim the exclusion because it did not meet the foreign
economic process
requirements. You may still qualify for your pro rata share of this exclusion if the corporation's foreign trading gross receipts
for the tax year
were $5 million or less. To qualify for this exclusion, your foreign trading gross receipts from all sources for the tax year
also must have been $5
million or less. If you qualify for the exclusion, report the exclusion amount in accordance with the instructions on page
4 for line 1, 2, or 3,
whichever applies. See Form 8873, Extraterritorial Income Exclusion, for more information.
- Corporation claimed the exclusion. If the corporation reports your pro rata share of foreign trading gross receipts but not the
amount of the extraterritorial income exclusion, the corporation met the foreign economic process requirements and claimed
the exclusion when figuring
your pro rata share of corporate income. You also may need to know the amount of your pro rata share of foreign trading gross
receipts from this
corporation to determine if you met the $5 million or less exception discussed above for purposes of qualifying for an extraterritorial
income
exclusion from other sources.
- Commercial revitalization deduction from rental real estate activities. Follow the instructions for Form 8582 to determine
how much of this
deduction can be reported on Schedule E, Part II, column (f).
- Any information you need to complete a disclosure statement for reportable transactions in which the corporation participates.
If the
corporation participates in a transaction that must be disclosed on Form 8886, Reportable Transaction Disclosure Statement, both the
corporation and its shareholders may be required to file Form 8886 for the transaction. The determination of whether you are
required to disclose a
transaction of the corporation is based on the category(s) under which the transaction qualifies for disclosure. See the instructions
for Form 8886
for details.
- Any information you need to figure recapture of the credit for employer-provided child care facilities and services (Form
8882).
- Any other information you may need to file with your individual tax return that is not shown elsewhere on Schedule K-1.
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