2004 Instructions for Form 1040 (ALL) - Supreme Law Firm
2004 Instructions for Form 1040 (ALL) - Supreme Law Firm
2004 Instructions for Form 1040 (ALL) - Supreme Law Firm
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A real property trade or business is any significant and bona fide sense. Such man- • Any transaction resulting in a tax<br />
real property development, redevelopment, agement decisions include: credit of more than $250,000, if you held<br />
construction, reconstruction, acquisition, • Approving new tenants,<br />
the asset generating the credit <strong>for</strong> 45 days<br />
conversion, rental, operation, management,<br />
or less.<br />
• Deciding on rental terms,<br />
leasing, or brokerage trade or business.<br />
• Approving capital or repair expendi- See the <strong>Instructions</strong> <strong>for</strong> <strong>Form</strong> 8886 <strong>for</strong><br />
Services you per<strong>for</strong>med as an employee are<br />
tures, and<br />
more details and exceptions.<br />
not treated as per<strong>for</strong>med in a real property<br />
trade or business unless you owned more • Other similar decisions.<br />
Tax Shelter Registration<br />
than 5% of the stock (or more than 5% of You are not considered to actively parthe<br />
capital or profits interest) in the em-<br />
Number<br />
ticipate if, at any time during the tax year,<br />
ployer.<br />
your interest (including your spouse’s inclaiming<br />
or reporting any income, deduc-<br />
Complete and attach <strong>Form</strong> 8271 if you are<br />
terest) in the activity was less than 10% by<br />
If you were a real estate professional <strong>for</strong><br />
value of all interests in the activity.<br />
tion, loss, credit, or other tax benefit, from<br />
<strong>2004</strong>, complete line 43 on page 2 of Schedan<br />
interest purchased or otherwise acquired<br />
ule E.<br />
Modified adjusted gross income. This is in a tax shelter required to be registered<br />
Other activities. The rental of your home your adjusted gross income from <strong>Form</strong> with the IRS.<br />
that you also used <strong>for</strong> personal purposes is <strong>1040</strong>, line 36, without taking into account:<br />
<strong>Form</strong> 8271 is used to report the name,<br />
not a passive activity. See the instructions • Any passive activity loss, tax shelter registration number, and identi<strong>for</strong><br />
line 2 on page E-3.<br />
• Rental real estate losses allowed fying number of the tax shelter. There is a<br />
A working interest in an oil or gas well under the exception <strong>for</strong> real estate profes- $250 penalty if you do not report the regis-<br />
that you held directly or through an entity sionals (explained on page E-1),<br />
tration number of the tax shelter on your tax<br />
that did not limit your liability is not a • Taxable social security or tier 1 railpassive<br />
activity even if you did not materi- road retirement benefits,<br />
return.<br />
ally participate.<br />
• Deductible contributions to a traditional<br />
IRA or certain other qualified retire-<br />
Royalty income not derived in the ordinary<br />
course of a trade or business reported ment plans under section 219,<br />
on Schedule E generally is not considered • The student loan interest deduction,<br />
Specific <strong>Instructions</strong><br />
income from a passive activity. • The tuition and fees deduction,<br />
Filers of <strong>Form</strong> 1041<br />
For more details on passive activities, • The deduction <strong>for</strong> one-half of self-emsee<br />
the <strong>Instructions</strong> <strong>for</strong> <strong>Form</strong> 8582 and Pub. ployment tax, and<br />
925. • Any excluded amounts under an<br />
Exception <strong>for</strong> Certain Rental Real employer’s adoption assistance program.<br />
Estate Activities<br />
However, if you file <strong>Form</strong> 8815, include<br />
If you meet all three of the following condisavings<br />
bond interest excluded on line 14<br />
in your modified adjusted gross income the<br />
tions, your rental real estate losses are not<br />
limited by the passive activity loss rules. If of that <strong>for</strong>m.<br />
you do not meet all three of these conditions,<br />
see the <strong>Instructions</strong> <strong>for</strong> <strong>Form</strong> 8582 to<br />
Reportable Transaction<br />
find out if you must complete and attach Disclosure Statement<br />
If you are a fiduciary filing Schedule E with<br />
<strong>Form</strong> 1041, enter the estate’s or trust’s employer<br />
identification number (EIN) in the<br />
space <strong>for</strong> “Your social security number.”<br />
Part I<br />
Income or Loss From<br />
<strong>Form</strong> 8582 to figure any losses allowed. Use <strong>Form</strong> 8886 to disclose in<strong>for</strong>mation <strong>for</strong> Rental Real Estate and<br />
1. Rental real estate activities are your each reportable transaction in which you<br />
only passive activities.<br />
participated. <strong>Form</strong> 8886 must be filed <strong>for</strong> Royalties<br />
2. You do not have any prior year unalliability<br />
is affected by your participation in • Income and expenses from rental real<br />
each tax year that your federal income tax Use Part I to report:<br />
lowed losses from any passive activities.<br />
the transaction. You may have to pay a<br />
3. All of the following apply if you have estate (including personal property leased<br />
penalty if you are required to file <strong>Form</strong><br />
an overall net loss from these activities:<br />
with real estate), and<br />
8886 but do not do so. The following are<br />
reportable transactions.<br />
• Royalty income and expenses.<br />
a. You actively participated (defined below)<br />
in all of the rental real estate activities; • Any transaction that is the same as or See the instructions <strong>for</strong> lines 3 and 4 to<br />
b. If married filing separately, you lived substantially similar to tax avoidance trans-<br />
determine if you should report your rental<br />
apart from your spouse all year;<br />
actions identified by the IRS.<br />
real estate and royalty income on Schedule<br />
• Any transaction offered under condic.<br />
Your overall net loss from these ac-<br />
C, Schedule C-EZ, or <strong>Form</strong> 4835 instead of<br />
tions of confidentiality <strong>for</strong> which you paid<br />
Schedule E.<br />
tivities is $25,000 or less ($12,500 or less if<br />
married filing separately);<br />
an advisor a minimum fee.<br />
If you own a part interest in a rental real<br />
• Any transaction <strong>for</strong> which you have estate property, report only your part of the<br />
d. You have no current or prior year<br />
contractual protection against disallowance income and expenses on Schedule E.<br />
unallowed credits from passive activities;<br />
and<br />
of the tax benefits.<br />
Complete lines 1 and 2 <strong>for</strong> each rental<br />
e. Your modified adjusted gross income • Any transaction resulting in a loss of real estate property. Leave these lines blank<br />
(defined later) is $100,000 or less ($50,000 at least $2 million in any single tax year or <strong>for</strong> each royalty property.<br />
or less if married filing separately). $4 million in any combination of tax years. If you have more than three rental real<br />
(At least $50,000 <strong>for</strong> a single tax year if the estate or royalty properties, complete and<br />
Active participation. You can meet the ac- loss arose from a <strong>for</strong>eign currency transac- attach as many Schedules E as you need to<br />
tive participation requirement without reg- tion defined in section 988(c)(1), whether list them. But fill in the “Totals” column on<br />
ular, continuous, and substantial or not the loss flows through from an S only one Schedule E. The figures in the<br />
involvement in real estate activities. But corporation or partnership.)<br />
“Totals” column on that Schedule E should<br />
you must have participated in making man- • Any transaction resulting in a be the combined totals of all your Schedagement<br />
decisions or arranging <strong>for</strong> others book-tax difference of more than $10 mil- ules E. If you are also using page 2 of<br />
to provide services (such as repairs) in a lion on a gross basis. Schedule E, use the same Schedule E on<br />
E-2