Partner'S Instructions For Schedule K-1 (Form 1065-B) - Partner'S Share Of Income (Loss) From An Electing Large Partnership (For Partner'S Use Only) - 2001 Page 4
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10the instructions for the boxes in which
qualifying estate is treated as actively
1. Working interests in oil and gas
those items were reported.
participating for tax years ending less
wells.
than 2 years after the date of the
2. The rental of a dwelling unit any
If you determine that you did not
decedent’s death.
partner used for personal purposes during
materially participate in a trade or
the year for more than the greater of 14
business activity of the partnership or if
The maximum special allowance that
days or 10% of the number of days that
you have income (loss), deductions, or
single individuals and married individuals
the residence was rented at fair rental
credits from a rental activity of the
filing a joint return can qualify for is
value.
partnership (other than a rental real
$25,000. The maximum is $12,500 for
3. Trading personal property for the
estate activity in which you materially
married individuals who file separate
account of owners of interests in the
participated as a real estate professional),
returns and who lived apart all times
activity.
the amounts from that activity are
during the year. The maximum special
passive. Report passive income (losses),
allowance for which an estate can qualify
Publicly traded partnerships. The
deductions, and credits as follows:
is $25,000 reduced by the special
passive activity limitations are applied
allowance for which the surviving spouse
1. If you have an overall gain (the
separately for items (other than the
qualifies.
excess of income over deductions and
low-income housing credit and the
losses, including any prior year unallowed
If your modified adjusted gross income
rehabilitation credit) from each publicly
loss) from a passive activity, report the
(defined below) is $100,000 or less
traded partnership (PTP). Thus, a net
income, deductions, and losses from the
($50,000 or less if married filing
passive loss from a PTP may not be
activity as indicated in the instructions for
separately), your loss is deductible up to
deducted from other passive income.
the boxes in which those items were
the amount of the maximum special
Instead, a passive loss from a PTP is
reported.
allowance referred to in the preceding
suspended and carried forward to be
2. If you have an overall loss (the
paragraph. If your modified adjusted
applied against passive income from the
excess of deductions and losses,
gross income is more than $100,000
same PTP in later years. If the partner’s
including any prior year unallowed loss,
(more than $50,000 if married filing
entire interest in the PTP is completely
over income) or credits from a passive
separately), the special allowance is
disposed of, any unused losses are
activity, report the income, deductions,
limited to 50% of the difference between
allowed in full in the year of disposition.
losses, and credits from all passive
$150,000 ($75,000 if married filing
If you have an overall gain from a PTP,
activities using the Instructions for Form
separately) and your modified adjusted
the net gain is nonpassive income. In
8582 or Form 8582-CR (or Form 8810), to
gross income. When modified adjusted
addition, the nonpassive income is
see if your deductions, losses, and credits
gross income is $150,000 or more
included in investment income to figure
are limited under the passive activity
($75,000 or more if married filing
your investment interest expense
rules.
separately), there is no special allowance.
deduction.
Modified adjusted gross income is
Active participation in a rental real
Do not report passive income, gains,
your adjusted gross income figured
estate activity. If you actively
or losses from a PTP on Form 8582.
without taking into account:
participated in a rental real estate activity,
•
Instead, use the following rules to figure
Any passive activity loss.
you may be able to deduct up to $25,000
•
and report on the proper form or schedule
Any rental real estate loss allowed
of the loss from the activity from
your income, gains, and losses from
under section 469(c)(7) to real estate
nonpassive income. This “special
passive activities that you held through
professionals (as defined on page 3).
allowance” is an exception to the general
•
each PTP you owned during the tax year:
Any taxable social security or
rule disallowing losses in excess of
1. Combine any current year income,
equivalent railroad retirement benefits.
income from passive activities. The
•
gains and losses, and any prior year
Any deductible contributions to an IRA
special allowance is not available if you
unallowed losses to see if you have an
or certain other qualified retirement plans
were married, file a separate return for
overall gain or loss from the PTP. Include
under section 219.
the year, and did not live apart from your
•
only the same types of income and losses
The student loan interest deduction.
spouse at all times during the year.
•
you would include in your net income or
The deduction allowed under section
Only individuals and qualifying estates
loss from a non-PTP passive activity. See
164(f) for one-half of self-employment
can actively participate in a rental real
Pub. 925 for more details.
taxes.
estate activity. Estates (other than
•
2. If you have an overall gain, the net
The exclusion from income of interest
qualifying estates), trusts, and
gain portion (total gain minus total losses)
from Series EE and I U.S. Savings Bonds
corporations cannot actively participate.
is nonpassive income. On the form or
used to pay higher education expenses.
•
You are not considered to actively
schedule you normally use, report the net
The exclusion of amounts received
participate in a rental real estate activity if
gain portion as nonpassive income and
under an employer’s adoption assistance
at any time during the tax year your
the remaining income and the total losses
program.
interest (including your spouse’s interest)
as passive income and loss. To the left of
Special rules for certain other
in the activity was less than 10% (by
the entry space, write “From PTP.” It is
activities. If you have net income (loss),
value) of all interests in the activity.
important to identify the nonpassive
deductions, or credits from any activity to
Active participation is a less stringent
income because the nonpassive portion is
which special rules apply, the partnership
requirement than material participation.
included in modified adjusted gross
will identify the activity and all amounts
You may be treated as actively
income for purposes of figuring on Form
relating to it on Schedule K-1 or on an
participating if you participated, for
8582 the “special allowance” for active
attachment.
example, in making management
participation in a non-PTP rental real
If you have net income subject to
decisions or arranging for others to
estate activity. In addition, the nonpassive
recharacterization under Temporary
provide services (such as repairs) in a
income is included in investment income
Regulations section 1.469-2T(f) and
significant and bona fide sense.
when figuring your investment interest
Regulations section 1.469-2(f), report
Management decisions that can count as
expense deduction on Form 4952,
such amounts according to the
active participation include approving new
Investment Interest Expense Deduction.
Instructions for Form 8582 (or Form
tenants, deciding rental terms, approving
Example. If you have Schedule E
8810).
capital or repair expenditures, and other
income of $8,000, and a Form 4797 prior
similar decisions.
If you have net income (loss),
year unallowed loss of $3,500 from the
An estate is a qualifying estate if the
deductions, or credits from any of the
passive activities of a particular PTP, you
have a $4,500 overall gain ($8,000 −
decedent would have satisfied the active
following activities, treat such amounts as
participation requirement for the activity
nonpassive and report them as instructed
$3,500). On Schedule E, Part II, report
for the tax year the decedent died. A
in these instructions:
the $4,500 net gain as nonpassive
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