Instructions for Form 1065-B Schedule K-1 |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
The partnership uses Schedule K-1 to report your share of the partnership's income, deductions, credits, etc. Keep it for
your records. Do not file
it with your tax return. The partnership has filed a copy with the IRS.
You are liable for tax on your share of the partnership income, whether or not distributed. Include your share on your tax
return if a return is
required. Use these instructions to help you report the items shown on Schedule K-1 on your tax return.
The amount of loss and deduction that you can claim on your tax return may be less than the amount reported on Schedule K-1.
It is the partner's
responsibility to consider and apply any applicable limitations. See Limitations on Losses, Deductions, and Credits beginning on page 2 for
more information.
Electing Large Partnerships (ELPs)
This partnership has elected simplified reporting requirements intended to make it simpler for you to report your share of
partnership income,
credits, deductions, etc. Generally, income, capital gains, credits, and deductions are combined at the partnership level
so that the number of
partnership items separately reported to partners is reduced. Most limitations and elections affecting partnership income
are made by the electing
large partnership.
For limited partners, income and other items from the partnership's trade or business and rental activities are treated as
being from a trade or
business that is a single passive activity. These items are reported in boxes 1, 4a, and 5, with most credits being reported
in boxes 7 and 8.
General partners must make their own determinations as to whether the activities are passive for them. Therefore, partnership
items from trade or
business, rental real estate, and other rental activities are separately reported for each activity in box 9.
Income, etc., from other activities (investment and portfolio income and deductions) are reported in boxes 2, 3, 4b, and 6
for both limited and
general partners.
You must report partnership items shown on your Schedule K-1 (and any attached schedules) the same way that the partnership
treated the items on
its return. If you believe the partnership has made an error on your Schedule K-1, notify the partnership. Do not change any
items on your copy of
Schedule K-1. Generally, an adjustment to correct an error will take effect for the tax year in which the partnership actually
makes the adjustment.
However, if the error involves a change to your distributive share of a partnership item, the partnership should file an amended
partnership return
and send you a corrected Schedule K-1.
If the treatment on your original or amended return is inconsistent with the partnership's treatment, 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
partnership's return. Any deficiency that results from making the amounts consistent may be assessed immediately.
Sale or Exchange of Partnership Interest
Generally, a partner who sells or exchanges a partnership interest in a section 751(a) exchange must notify the partnership,
in writing, within 30
days of the exchange (or, if earlier, by January 15 of the calendar year following the calendar year in which the exchange
occurred). A “section
751(a) exchange” is any sale or exchange of a partnership interest in which any money or other property received by the partner in exchange
for
that partner's interest is attributable to unrealized receivables (as defined in section 751(c)) or inventory items (as defined
in section 751(d)).
The written notice to the partnership must include the names and addresses of both parties to the exchange, the identifying
numbers of the
transferor and (if known) of the transferee, and the exchange date.
An exception to this rule is made for sales or exchanges of publicly traded partnership interests for which a broker is required
to file Form
1099-B, Proceeds From Broker and Barter Exchange Transactions.
If a partner is required to notify the partnership of a section 751(a) exchange but fails to do so, a $50 penalty may be imposed
for each such
failure. However, no penalty will be imposed if the partner can show that the failure was due to reasonable cause and not
willful neglect.
Any person who holds, directly or indirectly, an interest in a partnership as a nominee for another person must furnish a
written statement to the
partnership by the last day of the month following the end of the partnership's tax year. This statement must include the
name, address, and
identifying number of the nominee and such other person, description of the partnership interest held as nominee for that
person, and other
information required by Temporary Regulations section 1.6031(c)-1T. A nominee who fails to furnish this statement must furnish
to the person for whom
the nominee holds the partnership interest a copy of Schedule K-1 and related information within 30 days of receiving it from
the partnership.
A nominee who fails to furnish when due all the information required by Temporary Regulations section 1.6031(c)-1T, or who
furnishes incorrect
information, is subject to a $50 penalty for each statement for which a failure occurs. The maximum penalty is $100,000 for
all such failures during a
calendar year. If the nominee intentionally disregards the requirement to report correct information, each $50 penalty increases
to $100 or, if
greater, 10% of the aggregate amount of items required to be reported, and the $100,000 maximum does not apply.
Every partnership that had operations in, or related to, a boycotting country, company, or a national of a country must file
Form 5713,
International Boycott Report.
If the partnership cooperated with an international boycott, it must provide you with a copy of its Form 5713. As a general
or limited partner, you
must file your own Form 5713 to report the partnership's activities and any other boycott operations that you may have. You
may lose certain tax
benefits if the partnership participated in, or cooperated with, an international boycott. See Form 5713 and its instructions
for more information.
A general partner is a partner who is personally liable for partnership debts.
A limited partner is a partner in a partnership formed under a state limited partnership law, whose personal liability for partnership
debts is limited to the amount of money or other property that the partner contributed or is required to contribute to the
partnership. Some members
of other entities, such as domestic or foreign business trusts or limited liability companies that are classified as partnerships,
may be treated as
limited partners for certain purposes. For example, see Temporary Regulations section 1.469-5T(e)(3), which treats all members
with limited liability
as limited partners for purposes of section 469(h)(2) (relating to the passive activity loss limitation rules).
If you are a partner in a partnership holding oil and gas properties, you are a “disqualified person” if:
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You are an oil or natural gas retailer described in section 613A(d)(2) or crude oil refiner described in section 613A(d)(4)
or
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Your average daily production of domestic crude oil and natural gas exceeds 500 barrels for your tax year in which the partnership's
tax
year ends. See section 776(b) for more details.
Note.
Disqualified persons must report items of income, gain, loss, deduction, and credit attributable to partnership oil and gas properties
as if the special rules for ELPs did not apply.
Nonrecourse loans are those liabilities of the partnership for which no partner bears the economic risk of loss.
Generally, the partnership decides how to figure taxable income from its operations. However, two elections are made by you
separately on your
income tax return and not by the partnership. These elections are made under the following code sections.
If the partnership attaches a statement to Schedule K-1 indicating that it has changed its tax year and that you can elect
to report your
distributive 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 partnership income, deductions, credits, etc., see the following:
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Pub. 541, Partnerships;
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Pub. 535, Business Expenses; and
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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 partnership losses that you can 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.
Generally, you cannot claim your share of a partnership loss (including a capital loss) to the extent that it is greater than
the adjusted basis of
your partnership interest at the end of the partnership's tax year. Any losses and deductions not allowed this year because
of the basis limit can be
carried forward indefinitely and deducted in a later year subject to the basis limit for that year.
The partnership is not responsible for keeping the information needed to figure the basis of your partnership interest. You
can figure the adjusted
basis of your partnership interest by adding items that increase your basis and then subtracting items that decrease your
basis.
Use the worksheet on page 3 to figure the basis of your interest in the partnership.
Note.
Additional basis adjustments may apply to partners claiming deductions for depletion. See chapter 9 of Pub. 535 for details.
Worksheet for Adjusting the Basis of a Partner's Interest in the Partnership
1.
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Your adjusted basis at the end of the prior year. Do not enter less than zero. Enter -0- if this is your first tax
year.
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1.
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Increases: |
2.
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Money and your adjusted basis in property contributed to the partnership less the associated liabilities (but not less
than zero).
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2.
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3.
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Your increased share of or assumption of partnership liabilities. (Subtract your share of liabilities shown on your 2005
Schedule K-1 from your share of liabilities shown on your 2006 Schedule K-1 and add the amount of any partnership liabilities
you assumed during the
tax year.)
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3.
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4.
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Your share of the partnership's income or gain (including tax-exempt income)
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4.
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5.
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Any gain recognized this year on contributions of property. Do not include gain from transfer of liabilities
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5.
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Decreases: |
6.
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Withdrawals and distributions of money and the adjusted basis of property distributed to you from the partnership. Do
not include the amount of property distributions included in the partner's income (taxable income)
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6.
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Caution. A distribution may be taxable if the amount exceeds your adjusted basis of your partnership
interest immediately before the distribution.
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7.
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Your share of the partnership's nondeductible expenses that are not capital expenditures
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7.
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8.
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Your share of the partnership's losses and deductions (including capital losses)
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8.
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9.
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Your adjusted basis in the partnership at end of this tax year. (Add lines 1 through 5 and subtract lines 6
through 8 from the total. If zero or less, enter -0-.)
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9.
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Caution. The deduction for your share of the partnership's losses and deductions is limited to your
adjusted basis in your partnership interest. If you entered zero on line 9 and the amount computed for line 9 was less than
zero, a portion of your
share of the partnership losses and deductions may not be deductible (see Basis Rules on page 2 for more information.)
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Generally, if you have (a) a loss or other deduction from any activity carried on as a trade or business or for the production
of income by the
partnership and (b) amounts in the activity for which you are not at risk, you will have to complete Form 6198, At-Risk Limitations,
to figure your
allowable loss.
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.
However, if you acquired your partnership interest 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 partnership. The activity of holding mineral property does not qualify for this exception.
The partnership 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.
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Nonrecourse loans used to finance the activity, to acquire property used in the activity, or to acquire your interest in the
activity, that
are not secured by your own property (other than the property used in the activity). See the instructions for Partner's Share of Liabilities
on page 5 for the exception for qualified nonrecourse financing secured by real property.
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Cash, property, or borrowed amounts used in the activity (or contributed to the activity, or used to acquire your interest
in the activity)
that are protected against loss by a guarantee, stop-loss agreement, or other similar arrangement (excluding casualty insurance
and insurance against
tort liability).
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Amounts borrowed for use in the activity from a person who has an interest in the activity, other than as a creditor, or who
is related,
under section 465(b)(3), to a person (other than you) having such an interest.
You should get a separate statement of income, expenses, etc., for each activity from the partnership.
Passive Activity Limitations
Section 469 provides rules that limit the deduction of certain losses and credits. These rules apply to partners who:
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Are individuals, estates, trusts, closely held corporations, or personal service corporations and
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Have a passive activity loss or credit for the tax year.
Individuals, estates, and trusts.
If you have a passive activity loss or credit, use 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 credits.
If the publicly traded partnership (PTP) box on Schedule K-1 is checked, do not report passive income (loss) from the partnership
on Form 8582.
See page 5 for the special rules for PTPs.
Corporations.
Use Form 8810, Corporate Passive Activity Loss and Credit Limitations. See the instructions for more information.
For limited partners of an ELP, all income, loss, deductions, and credits from trade or business and rental activities generally
are reported as
being from a trade or business that is a single passive activity.
However, the determination of whether an activity is a passive activity must be made by any partner who is either a:
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General partner or
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Limited partner who is a disqualified person (as defined on page 2) with respect to items of income, gain, loss, deduction,
and credit
attributable to partnership oil and gas properties.
In addition, the partnership is required to provide each general partner and disqualified person the information necessary
to comply with the
passive activity rules of section 469. Items of income, gain, loss, credit, etc., must be separately reported to general partners
for each trade or
business, rental real estate, and other rental activity.
Except for the PTP discussion on page 5, the following information on passive activity limitations applies only to general
partners.
Generally, passive activities include:
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Trade or business activities in which you did not materially participate and
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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 the following.
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Trade or business activities in which you materially participated.
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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.
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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
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You performed more than 750 hours of services in real property trades or businesses in which you materially participated.
Note.
For a closely held C corporation (defined in section 465(a)(1)(B)), the above conditions are treated as met if more than 50%
of the corporation's
gross receipts were from real property trades or businesses in which the corporation 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.
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Working interests in oil or gas wells.
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The rental of a dwelling unit any partner 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.
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Activities of trading personal property for the account of owners of interests in the activities.
Material participation.
You must determine if you (a) materially participated in each trade or business activity held through the partnership and (b)
were a real estate professional (defined above), in each rental real estate activity held through the partnership. All determinations of
material participation are made based on your participation during the partnership's tax year.
Material participation standards for partners 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.
Corporations should refer to the Instructions for Form 8810 for the material participation standards that apply to
them.
Individuals (other than limited partners).
If you are an individual (either a general partner or a limited partner who owned a general partnership interest at
all times during the tax year),
you materially participated in an activity only if one or more of the following apply.
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You participated in the activity for more than 500 hours during the tax year.
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Your participation in the activity for the tax year constituted substantially all the participation in the activity of all
individuals
(including individuals who are not owners of interests in the activity for the tax year).
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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.
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The activity was a significant participation activity for the tax year, and you participated in all significant participation
activities
(including activities outside the partnership) during the year for more than 500 hours. A significant participation activity
is any trade or business
activity in which you participated for more than 100 hours during the tax year and in which you did not materially participate
under any of the
material participation tests (other than this test 4).
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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.
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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.
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Based on all 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 do in connection with an activity held through a partnership (where you
own your partnership interest
at the time the work is done) is counted toward material participation. However, work in connection with the activity is not
counted toward material
participation if either of the following applies.
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The work is not the sort 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.
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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:
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Studying and reviewing financial statements or reports on operations of the activity.
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Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use.
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Monitoring the finances or operations of the activity in a nonmanagerial capacity.
Effect of determination.
Income (loss), deductions, and credits from an activity are nonpassive if you determine that:
If you determine that you did not materially participate in a trade or business activity of the partnership or if
you have income (loss),
deductions, or credits from a rental activity of the partnership (other than a rental real estate activity in which you materially
participated as a
real estate professional), the amounts from that activity are passive. Report passive income (losses), deductions, and credits
as follows.
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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 in the instructions for the boxes in which
those items were
reported.
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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, report the income, deductions, losses, and credits from all passive activities using the Instructions for
Form 8582 or Form 8582-CR
(or Form 8810), to see if your deductions, losses, and credits are limited under the passive activity rules.
Special allowance for rental real estate activities.
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, filed 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), trusts,
and corporations 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 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.
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 live apart 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 the following.
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Any passive activity loss.
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Any rental real estate loss allowed under section 469(c)(7) to real estate professionals (as defined previously).
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Any taxable social security or equivalent railroad retirement benefits.
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Any deductible contributions to an IRA or certain other qualified retirement plans under section 219.
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The student loan interest deduction.
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The tuition and fees deduction.
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The deduction for one-half of self-employment taxes.
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The exclusion from income of interest from Series EE and I U.S. Savings Bonds used to pay higher education expenses.
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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 Code Q—Commercial Revitalization Deduction on page
11.
Special rules for certain other activities.
If you have net income (loss), deductions, or credits from any activity to which special rules apply, the partnership
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 (or Form 8810).
If you have net income (loss), deductions, or credits from any of the following activities, treat such amounts as
nonpassive and report them as
instructed in these instructions.
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Working interests in oil and gas wells.
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The rental of a dwelling unit any partner 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.
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Trading personal property for the account of owners of interests in the activity.
Self-charged interest.
The partnership must report any “ self-charged” interest income or expense that resulted from loans between you and the partnership (or between
the partnership and another partnership in which you have an interest). If there was more than one activity, the partnership
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
partnership interest if
the partnership 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.
Publicly traded partnerships.
The passive activity limitations are applied separately for items (other than the low-income housing credit and the
rehabilitation credit) from
each publicly traded partnership (PTP). Thus, a net passive loss from a PTP may not be deducted from other passive income.
Instead, a passive loss
from a PTP is suspended and carried forward to be applied against passive income from the same PTP in later years. If the
partner's entire interest in
the PTP is completely disposed of, any unused losses are allowed in full in the year of disposition.
If you have an overall gain from a PTP, the net gain is nonpassive income. In addition, the nonpassive income is included
in investment income to
figure your investment interest expense deduction.
Do not report passive income, gains, or losses from a PTP on Form 8582. Instead, use the following rules to figure
and report on the proper form or
schedule your income, gains, and losses from passive activities that you held through each PTP you owned during the tax year.
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Combine any current year income, gains (losses), and any prior year unallowed losses to see if you have an overall gain (loss)
from the PTP.
Include only the same types of income and losses you would include in your net income or loss from a non-PTP passive activity.
See Pub. 925 for more
details.
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If you have an overall gain, the net gain portion (total gain minus total losses) is nonpassive income. On the form or schedule
you normally
use, report the net gain portion as nonpassive income and the remaining income and the total losses as passive income and
loss. To the left of the
entry space, enter “From PTP.” It is important to identify the nonpassive income because the nonpassive portion is included in modified adjusted
gross income for purposes of figuring on Form 8582 the “special allowance” for active participation in a non-PTP rental real estate activity. In
addition, the nonpassive income is included in investment income when figuring your investment interest expense deduction
on Form 4952, Investment
Interest Expense Deduction.
Example. If you have Schedule E income of $8,000, and a Form 4797 prior year unallowed loss of $3,500 from the passive activities
of a
particular PTP, you have a $4,500 overall gain ($8,000 - $3,500). On Schedule E (Form 1040), line 28, report the $4,500 net
gain as nonpassive
income in column (j). In column (g), report the remaining Schedule E gain of $3,500 ($8,000 - $4,500). On the appropriate
line of Form 4797,
report the prior year unallowed loss of $3,500. Be sure to enter “From PTP” to the left of each entry space.
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If you have an overall loss (but did not dispose of your entire interest in the PTP to an unrelated person in a fully taxable
transaction
during the year), the losses are allowed to the extent of the income, and the excess loss is carried forward to use in a future
year when you have
income to offset it. Report as a passive loss on the schedule or form you normally use the portion of the loss equal to the
income. Report the income
as passive income on the form or schedule you normally use.
Example. You have a Schedule E loss of $12,000 (current year losses plus prior year unallowed losses) and a Schedule D gain of $7,200.
Report the $7,200 gain on the appropriate line of Schedule D. On Schedule E (Form 1040), line 28, report $7,200 of the losses
as a passive loss in
column (f). Carry forward to 2007 the unallowed loss of $4,800 ($12,000 - $7,200).
If you have unallowed losses from more than one activity of the PTP or from the same activity of the PTP that must be reported
on different forms,
you must allocate the unallowed losses on a pro rata basis to figure the amount allowed from each activity or on each form.
To allocate and keep a record of the unallowed losses, use Worksheets 5, 6, and 7 of Form 8582. List each activity of the
PTP in Worksheet 5. Enter
the overall loss from each activity in column (a). Complete column (b) of Worksheet 5 according to its instructions. Multiply
the total unallowed loss
from the PTP by each ratio in column (b) and enter the result in column (c) of Worksheet 5. Then, complete Worksheet 6 if
all the loss from the same
activity is to be reported on one form or schedule. Use Worksheet 7 instead of Worksheet 6 if you have more than one loss
to be reported on different
forms or schedules for the same activity. Enter the net loss plus any prior year unallowed losses in column (a) of Worksheet
6 (or Worksheet 7 if
applicable). The losses in column (c) of Worksheet 6 (column (e) of Worksheet 7) are the allowed losses to report on the forms
or schedules. Report
both these losses and any income from the PTP on the forms and schedules you normally use.
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If you have an overall loss and you disposed of your entire interest in the PTP to an unrelated person in a fully taxable
transaction during
the year, your losses (including prior year unallowed losses) allocable to the activity for the year are not limited by the
passive loss rules. A
fully taxable transaction is one in which you recognize all your realized gain (loss). Report the income and losses on the
forms and schedules you
normally use.
Note.
For rules on the disposition of an entire interest reported using the installment method, see the Instructions for Form 8582.
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