2004 Instructions for Form 1040 (ALL) - Supreme Law Firm

If your rental real estate loss is not from Partners and S corporation shareholders 2. You owned at least a 10% direct or
a passive activity or you meet the exception should get a separate statement of income, indirect interest in a foreign partnership
for certain rental real estate activities (exactivity
engaged in by the partnership and S ship.
expenses, deductions, and credits for each while U.S. persons controlled that partner-
plained on page E-2), you do not have to
complete Form 8582. Enter the loss from corporation. If you are subject to the at-risk 3. You had an acquisition, disposition,
line 22 on line 23.
rules for any activity, use Form 6198 to or change in proportional interest of a for-
figure the amount of any deductible loss. If eign partnership that:
the activity is nonpassive, enter any deducta.
Increased your direct interest to at
ible loss from Form 6198 on the approprileast
10% or reduced your direct interest of
ate line in Part II, column (h), of Schedule
Parts II and III
E.
at least 10% to less than 10%, or
• If you have a passive activity loss, you b. Changed your direct interest by at
If you need more space in Part II or III to
generally need to complete Form 8582 to least a 10% interest.
list your income or losses, attach a continuation
sheet using the same format as shown
figure the amount of the allowable loss to 4. You contributed property to a foreign
in Part II or III. However, be sure to cominterest
if:
enter in Part II, column (f), for that activity. partnership in exchange for a partnership
But if you are a general partner or an S
plete the “Totals” columns for lines 29a
corporation shareholder reporting your
and 29b, or lines 34a and 34b, as appropri-
a. Immediately after the contribution,
share of a partnership or an S corporation
ate. If you also completed Part I on more
you owned, directly or indirectly, at least a
loss from a rental real estate activity and
than one Schedule E, use the same Sched-
10% interest in the partnership, or
you meet all three of the conditions listed
ule E on which you entered the combined on page E-2 under Exception for Certain b. The fair market value of the property
totals in Part I.
Rental Real Estate Activities, you do not you contributed to the partnership in exhave
to complete Form 8582. Instead, enter change for a partnership interest, when ad-
Tax preference items. If you are a partner,
your allowable loss in Part II, column (f). ded to other contributions of property you
a shareholder in an S corporation, or a ben-
made to the partnership during the precedeficiary
of an estate or trust, you must take If you have passive activity income, ing 12-month period, exceeds $100,000.
into account your share of preferences and complete Part II, column (g), for that activ-
adjustments from these entities for the alreport
certain dispositions by a foreign
ity.
Also, you may have to file Form 8865 to
ternative minimum tax on Form 6251 or If you have nonpassive income or
Schedule I of Form 1041.
losses, complete Part II, columns (h) partnership of property you previously con-
through (j), as appropriate.
tributed to that partnership if you were a
partner at the time of the disposition.
Partnerships
For more details, including penalties for
See the Schedule K-1 instructions before failing to file Form 8865, see Form 8865
Part II entering on your return other partnership and its separate instructions.
Income or Loss From
items from a passive activity or income or
loss from any publicly traded partnership. S Corporations
Partnerships and S
You can deduct unreimbursed ordinary If you are a shareholder in an S corporation,
Corporations
and necessary expenses you paid on behalf your share of the corporation’s aggregate
If you are a member of a partnership or of the partnership if you were required to losses and deductions (combined income,
joint venture or a shareholder in an S corpojusted
basis of your corporate stock and any
pay these expenses under the partnership losses, and deductions) is limited to the ad-
ration, use Part II to report your share of the agreement. See the instructions for line 27
partnership or S corporation income (even on page E-6 for how to report these ex-
debt the corporation owes you. Any loss or
if not received) or loss.
penses.
deduction not allowed this year because of
Report allowable interest expense paid
the basis limitation can be carried forward
You should receive a Schedule K-1
or incurred from debt-financed acquisitions
and deducted in a later year subject to the
from the partnership or S corporation. You
in Part II or on Schedule A depending on
basis limitation for that year.
should also receive a copy of the Partner’s
or Shareholder’s Instructions for Schedule the type of expenditure to which the inter-
If you are claiming a deduction for your
K-1. Your copy of Schedule K-1 and its est is allocated. See Pub. 535 for details. share of an aggregate loss, attach to your
instructions will tell you where on your If you claimed a credit for federal tax on
return a computation of the adjusted basis
return to report your share of the items. If gasoline or other fuels on your 2003 Form
of your corporate stock and of any debt the
you did not receive these instructions with 1040 based on information received from
corporation owes you. See the Schedule
your Schedule K-1, see page 7 of the Form the partnership, enter as income in column
K-1 instructions for details.
1040 instructions for how to get a copy. Do (g) or column (j), whichever applies, the After applying the basis limitation, the
not attach Schedules K-1 to your return. amount of the credit claimed for 2003. deductible amount of your aggregate losses
Keep them for your records.
Part or all of your share of partnership
and deductions may be further reduced by
If you are treating items on your tax income or loss from the operation of the
the at-risk rules and the passive activity
return differently from the way the partner- business may be considered net earnings
loss rules. See page E-1.
ship (other than an electing large partner- from self-employment that must be reship)
or S corporation reported them on its ported on Schedule SE. Enter the amount earnings and profits of S corporations are
Distributions of prior year accumulated
return, you may have to file Form 8082. If from Schedule K-1 (Form 1065), box 14, dividends and are reported on Form 1040,
you are a partner in an electing large part- code A (or from Schedule K-1 (Form line 9a.
nership, you must report the items shown 1065-B), box 9 (code K1)), on Schedule Interest expense relating to the acquision
Schedule K-1 (Form 1065-B) on your SE, after you reduce this amount by any tion of shares in an S corporation may be
tax return the same way that the partnership allowable expenses attributable to that in- fully deductible on Schedule E. For details,
reported the items on Schedule K-1. come. see Pub. 535.
Special rules that limit losses. Please note Foreign partnerships. If you are a U.S. Your share of the net income of an S
the following. person, you may have to file Form 8865 if corporation is not subject to self-employany
of the following applies.
ment tax.
• If you have a current year loss, or a
prior year unallowed loss, from a partner-
1. You controlled a foreign partnership
ship or an S corporation, see At-Risk Rules
(that is, you owned more than a 50% direct
and Passive Activity Loss Rules on page
or indirect interest in the partnership).
E-1.
E-5