Shareholder s Share of Income, Deductions, Credits, etc.

Transcription

1 Schedule K-1 (Form 1120S) Department of the Treasury Internal Revenue Service 2010 For calendar year 2010, or tax year beginning, 2010 ending, 20 Shareholder s Share of Income, Deductions, Credits, etc. See back of form and separate instructions. Part I Information About the Corporation Final K-1 Amended K-1 OMB No Part III Shareholder s Share of Current Year Income, Deductions, Credits, and Other Items 1 Ordinary business income (loss) 13 Credits 2 Net rental real estate income (loss) 3 Other net rental income (loss) 4 Interest income A Corporation s employer identification number 5a Ordinary dividends B Corporation s name, address, city, state, and ZIP code 5b Qualified dividends 14 Foreign transactions 6 Royalties 7 Net short-term capital gain (loss) C IRS Center where corporation filed return 8a Net long-term capital gain (loss) Part II Information About the Shareholder 8b Collectibles (28%) gain (loss) D Shareholder s identifying number 8c Unrecaptured section 1250 gain E Shareholder s name, address, city, state, and ZIP code 9 Net section 1231 gain (loss) 10 Other income (loss) 15 Alternative minimum tax (AMT) items F Shareholder s percentage of stock ownership for tax year % 11 Section 179 deduction 16 Items affecting shareholder basis 12 Other deductions For IRS Use Only 17 Other information * See attached statement for additional information. For Paperwork Reduction Act Notice, see Instructions for Form 1120S. Cat. No D Schedule K-1 (Form 1120S) 2010

2 Schedule K-1 (Form 1120S) 2010 Page 2 This list identifies the codes used on Schedule K-1 for all shareholders and provides summarized reporting information for shareholders who file Form For detailed reporting and filing information, see the separate Shareholder s Instructions for Schedule K-1 and the instructions for your income tax return. Code Report on 1. Ordinary business income (loss). Determine whether the income (loss) is passive or nonpassive and enter on your return as follows: Report on Passive loss See the Shareholder s Instructions Passive income Schedule E, line 28, column (g) Nonpassive loss Schedule E, line 28, column (h) Nonpassive income Schedule E, line 28, column (j) 2. Net rental real estate income (loss) See the Shareholder s Instructions 3. Other net rental income (loss) Net income Schedule E, line 28, column (g) Net loss See the Shareholder s Instructions 4. Interest income Form 1040, line 8a 5a. Ordinary dividends Form 1040, line 9a 5b. Qualified dividends Form 1040, line 9b 6. Royalties Schedule E, line 4 7. Net short-term capital gain (loss) Schedule D, line 5, column (f) 8a. Net long-term capital gain (loss) Schedule D, line 12, column (f) 8b. Collectibles (28%) gain (loss) 28% Rate Gain Worksheet, line 4 (Schedule D instructions) 8c. Unrecaptured section 1250 gain See the Shareholder s Instructions 9. Net section 1231 gain (loss) See the Shareholder s Instructions 10. Other income (loss) Code A Other portfolio income (loss) See the Shareholder s Instructions B Involuntary conversions See the Shareholder s Instructions C Sec contracts & straddles Form 6781, line 1 D Mining exploration costs recapture See Pub. 535 E Other income (loss) See the Shareholder s Instructions 11. Section 179 deduction See the Shareholder s Instructions 12. Other deductions A Cash contributions (50%) B Cash contributions (30%) C Noncash contributions (50%) D Noncash contributions (30%) E Capital gain property to a 50% organization (30%) F Capital gain property (20%) G Contributions (100%) } See the Shareholder s Instructions H Investment interest expense Form 4952, line 1 I Deductions royalty income Schedule E, line 18 J Section 59(e)(2) expenditures See the Shareholder s Instructions K Deductions portfolio (2% floor) Schedule A, line 23 L Deductions portfolio (other) Schedule A, line 28 M Preproductive period expenses See the Shareholder s Instructions N Commercial revitalization deduction from rental real estate activities See Form 8582 instructions O Reforestation expense deduction See the Shareholder s Instructions P Domestic production activities information See Form 8903 instructions Q Qualified production activities income Form 8903, line 7b R Employer s Form W-2 wages Form 8903, line 17 S Other deductions See the Shareholder s Instructions 13. Credits A Low-income housing credit (section 42(j)(5)) from pre-2008 buildings See the Shareholder s Instructions B Low-income housing credit (other) from pre-2008 buildings See the Shareholder s Instructions C Low-income housing credit (section 42(j)(5)) from post-2007 buildings Form 8586, line 11 D Low-income housing credit (other) from post-2007 buildings Form 8586, line 11 E Qualified rehabilitation expenditures (rental real estate) See the Shareholder s F Other rental real estate credits } Instructions G Other rental credits H Undistributed capital gains credit Form 1040, line 71, box a I Alcohol and cellulosic biofuel fuels credit Form 6478, line 8 J Work opportunity credit Form 5884, line 3 K Disabled access credit See the Shareholder s Instructions L Empowerment zone and renewal communtiy employment credit Form 8844, line 3 M Credit for increasing research activities See the Shareholder s Instructions N Credit for employer social security and Medicare taxes Form 8846, line 5 O Backup withholding Form 1040, line 61 P Other credits See the Shareholder s Instructions 14. Foreign transactions A Name of country or U.S. } possession B Gross income from all sources Form 1116, Part I C Gross income sourced at shareholder level Foreign gross income sourced at corporate level D Passive category E General category } Form 1116, Part I F Other Deductions allocated and apportioned at shareholder level G Interest expense Form 1116, Part I H Other Form 1116, Part I Deductions allocated and apportioned at corporate level to foreign source income I Passive category J General category } Form 1116, Part I K Other Other information L Total foreign taxes paid Form 1116, Part II M Total foreign taxes accrued Form 1116, Part II N Reduction in taxes available for credit Form 1116, line 12 O Foreign trading gross receipts Form 8873 P Extraterritorial income exclusion Form 8873 Q Other foreign transactions See the Shareholder s Instructions 15. Alternative minimum tax (AMT) items A Post-1986 depreciation adjustment } See the Shareholder s Instructions and the Instructions for Form 6251 B Adjusted gain or loss C Depletion (other than oil & gas) D Oil, gas, & geothermal gross income E Oil, gas, & geothermal deductions F Other AMT items 16. Items affecting shareholder basis A Tax-exempt interest income Form 1040, line 8b B Other tax-exempt income } C Nondeductible expenses See D Distributions E Repayment of loans from shareholders the Shareholder s Instructions 17. Other information A Investment income Form 4952, line 4a B Investment expenses Form 4952, line 5 C Qualified rehabilitation expenditures (other than rental real estate) See the Shareholder s Instructions D Basis of energy property See the Shareholder s Instructions E Recapture of low-income housing credit (section 42(j)(5)) Form 8611, line 8 F Recapture of low-income housing credit (other) Form 8611, line 8 G Recapture of investment credit See Form 4255 H Recapture of other credits See the Shareholder s Instructions I Look-back interest completed long-term contracts See Form 8697 J Look-back interest income forecast } method See Form 8866 K Dispositions of property with section 179 deductions L Recapture of section 179 deduction M Section 453(l)(3) information N Section 453A(c) information O Section 1260(b) information P Interest allocable to production See the Shareholder s expenditures Instructions Q CCF nonqualified withdrawals R Depletion information oil and gas S Amortization of reforestation costs T Section 108(i) information U Other information

3 2010 Shareholder s Instructions for Schedule K-1 (Form 1120S) Shareholder s Share of Income, Deductions, Credits, etc. (For Shareholder s Use Only) Department of the Treasury Internal Revenue Service Section references are to the Internal corporation has not filed a return, file Elections Revenue Code unless otherwise noted. Form 8082, Notice of Inconsistent Treatment or Administrative Generally, the corporation decides how to figure taxable income from its General Instructions Adjustment Request (AAR), with your operations. However, certain original or amended return to identify elections are made by you separately Purpose of Schedule K-1 and explain any inconsistency (or to on your income tax return and not by The corporation uses Schedule K-1 to note that a corporate return has not the corporation. These elections are report your share of the corporation s been filed). made under the following code income (reduced by any tax the sections. corporation paid on the income), If you are required to file Form Section 59(e) (deduction of certain deductions, credits, etc. Keep it for 8082 but do not do so, you may be qualified expenditures ratably over your records. Do not file it with your subject to the accuracy-related the period of time specified in that tax return. The corporation has filed a penalty. This penalty is in addition to section). For details, see the copy with the IRS. any tax that results from making your instructions for code J in box 12. You are liable for tax on your share amount or treatment of the item Section 263A(d) (preproductive of the corporation s income, whether consistent with that shown on the expenses). See the instructions for or not distributed. Include your share corporation s return. Any deficiency code M in box 12. on your tax return if a return is that results from making the amounts Section 617 (deduction and required. Use these instructions to consistent may be assessed recapture of certain mining help you report the items shown on immediately. exploration expenditures). Schedule K-1 on your tax return. Section 901 (foreign tax credit). Your share of S corporation Errors income is not self-employment If you believe the corporation has Additional Information income and it is not subject to made an error on your Schedule K-1, self-employment tax. For more information on the notify the corporation and ask for a treatment of S corporation income, The amount of loss and deduction corrected Schedule K-1. Do not deductions, credits, etc., see Pub. you may claim on your tax return may change any items on your copy of 535, Business Expenses; Pub. 550, be less than the amount reported on Schedule K-1. Be sure that the Investment Income and Expenses; Schedule K-1. It is the shareholder s corporation sends a copy of the and Pub. 925, Passive Activity and responsibility to consider and apply corrected Schedule K-1 to the IRS. If At-Risk Rules. any applicable limitations. See you are unable to reach agreement Limitations on Losses, Deductions, with the corporation regarding the To get forms and publications, see and Credits beginning on this page inconsistency, file Form the instructions for your tax return or for more information. visit the IRS website at IRS.gov. Schedule K-1 does not show actual dividend distributions the International Boycotts Every corporation that had operations Limitations on Losses, corporation made to you. The corporation must report such in, or related to, a boycotting country, Deductions, and Credits amounts totaling $10 or more for the company, or a national of a country There are three potential limitations calendar year on Form 1099-DIV, must file Form 5713, International on corporate losses that you can Dividends and Distributions. Boycott Report. deduct on your return. These limitations and the order in which you Inconsistent Treatment If the corporation cooperated with must apply them are as follows: the an international boycott, it must give basis rules, the at-risk limitations, and of Items you a copy of its Form You the passive activity limitations. These Generally, you must report corporate must file your own Form 5713 to limitations are discussed below. items shown on your Schedule K-1 report the corporation s activities and (and any attached schedules) the any other boycott operations that you Other limitations may apply to same way that the corporation treated may have. You may lose certain tax specific deductions (for example, the the items on its return. benefits if the corporation participated section 179 expense deduction). If the treatment on your original or in, or cooperated with, an Generally, specific limitations apply amended return is inconsistent with international boycott. See Form 5713 before the basis, at-risk, and passive the corporation s treatment, or if the and its instructions for details. loss limitations. Cat. No O

4 Basis Rules reported on Schedule K-1 adjusted, if To make the election, attach a Generally, the deduction for your the corporation made a charitable statement to your timely filed original share of aggregate losses and contribution of property, by or amended return that states you deductions reported on Schedule K-1 subtracting the property s fair market agree to the carryover rule of is limited to the basis of your stock value and adding the property s Regulations section (g) and (determined with regard to adjusted basis. the name of the S corporation to distributions received during the tax which the rule applies. Once made, year) and loans from you to the the election applies to the year for corporation. For details and You may elect to decrease your which it is made and all future tax exceptions, see section 1366(d). The basis under (4) prior to decreasing years for that S corporation, unless basis of your stock is generally your basis under (3). If you make this the IRS agrees to revoke your figured at the end of the corporation s election, any amount described under election. tax year. Any losses and deductions (3) that exceeds the basis of your The basis of each share of stock not allowed this year because of the stock and debt owed to you by the is increased or decreased (but not basis limit can be carried forward corporation is treated as an amount below zero) based on its pro rata indefinitely and deducted in a later described under (3) for the following share of the above adjustments. If the year subject to the basis limit for that tax year. total decreases in basis attributable to year. You are responsible for keeping the information needed to figure the basis of your stock in the corporation. Worksheet for Figuring a Shareholder s Schedule K-1 provides information to Stock Basis Keep for Your Records help you figure your stock basis at the end of each corporate tax year. The 1. Your stock basis at the beginning of the year basis of your stock (generally, its cost) is adjusted as follows and, Increases: except as noted, in the order listed. In addition, basis may be adjusted 2. Money and your adjusted basis in property contributed to under other provisions of the Internal the corporation Revenue Code. You can generally 3. Your share of the corporation s income (including use the Worksheet for Figuring a tax-exempt income) reduced by any amount included in Shareholder s Stock Basis to figure income with respect to clean renewable energy, Midwestern your aggregate stock basis. tax credit, or (for bonds issued before October 4, 2008) 1. Basis is increased by (a) all qualified zone academy bonds income (including tax-exempt income) reported on Schedule K-1 4. Other increases to basis, including your share of the excess and (b) the excess of the deduction of the deductions for depletion (other than oil and gas for depletion (other than oil and gas depletion) over the basis of the property subject to depletion 4. depletion) over the basis of the Decreases: property subject to depletion. 5. Distributions of money and the fair market value of property You must report on your (excluding dividend distributions reportable on Form! return (if you are required to 1099-DIV and distributions in excess of basis (the sum of CAUTION file one) any amount required lines 1 through 4)) ( ) to be included in gross income for it to increase your basis. 6. Enter: (a) your share of the corporation s nondeductible expenses and the depletion deduction for any oil and gas Basis is not increased by property held by the corporation (but only to the extent your! income from discharge of your share of the property s adjusted basis exceeds the CAUTION indebtedness in the S depletion deduction) or (b) if the election under Regulations corporation (nor by any amount section (g) applies, your share of the corporation s included in income with respect to deductions and losses (include your entire share of the clean renewable energy, Midwestern section 179 expense deduction even if your allowable tax credit, or (for bonds issued before section 179 expense deduction is smaller) adjusted, if the October 4, 2008) qualified zone corporation made a charitable contribution of property, by academy bonds). subtracting your share of the fair market value of the 2. Basis is decreased by (a) contributed property and adding your share of the property distributions (including cash) property s adjusted basis ( ) made by the corporation reported on Schedule K-1, box 16, code D, minus 7. If the election under Regulations section (g) (b) the amount of such distributions in applies, enter the amount from 6(a) above. Otherwise enter excess of the basis in your stock. the amount from 6(b) ( ) 3. Basis is decreased by (a) 8. Enter the smaller of (a) the excess, as of the beginning of nondeductible expenses and (b) the the tax year, of the amount you are owed for loans you depletion deduction for any oil and made to the corporation over your basis in those loans or gas property held by the corporation, (b) the sum of lines 1 through 7. This amount increases but only to the extent your share of your loan basis ( ) the property s adjusted basis exceeds that deduction. 4. Basis is decreased by all deductible losses and deductions 9. Your stock basis in the corporation at the end of the year. Combine lines 1 through Instructions for Schedule K-1 (Form 1120S)

5 a share exceed that share s basis, of holding mineral property does not 1. Trade or business activities in the excess reduces (but not below qualify for this exception. The which you materially participated. zero) the remaining bases of all other corporation should identify on an 2. Rental real estate activities in shares of stock in proportion to the attachment to Schedule K-1 any which you materially participated if remaining basis of each of those losses that are not subject to the you were a real estate professional shares. at-risk limitations. for the tax year. You were a real Basis of loans. The basis of your Generally, you are not at risk for estate professional only if you met loans to the corporation is generally amounts such as the following. both of the following conditions. the balance the corporation owes The basis of your stock in the a. More than half of the personal you, adjusted for any reductions and corporation or the basis of your loans services you performed in trades or restorations of loan basis (see the to the corporation if the cash or other businesses were performed in real instructions for box 16, code E). Any property used to purchase the stock property trades or businesses in amounts described in (3) and (4) on or make the loans was from a source which you materially participated and page 2 not used to offset amounts in (a) covered by nonrecourse b. You performed more than 750 (1) on page 2, or reduce your stock indebtedness (except for certain hours of services in real property basis, are used to reduce your loan qualified nonrecourse financing, as trades or businesses in which you basis (to the extent of such basis defined in section 465(b)(6)); (b) materially participated. prior to such reduction). protected against loss by a For purposes of this rule, each When determining your basis guarantee, stop-loss agreement, or interest in rental real estate is a in loans to the corporation, other similar arrangement; or (c) that! separate activity, unless you elect to CAUTION remember that: is covered by indebtedness from a treat all interests in rental real estate Distributions do not reduce loan person who has an interest in the as one activity. For details on making basis, and activity or from a person related to a this election, see the Instructions for Loans that a shareholder person (except you) having such an Schedule E (Form 1040). guarantees or co-signs are not part of interest, other than a creditor. Any cash or property contributed to If you are married filing jointly, a shareholder s loan basis. a corporate activity, or your interest in either you or your spouse must See section 1367 and its the corporate activity, that is (a) separately meet both of the above regulations for more details. covered by nonrecourse conditions, without taking into Worksheet instructions. For lines indebtedness (except for certain account services performed by the 6 and 7, do not enter more than the qualified nonrecourse financing, as other spouse. aggregate sum of the preceding lines. defined in section 465(b)(6)); (b) A real property trade or business is Any excess of the amounts that protected against loss by a any real property development, would otherwise be entered on lines 6 guarantee, stop-loss agreement, or redevelopment, construction, and 7 without regard to this limit over other similar arrangement; or (c) that reconstruction, acquisition, the amounts actually entered on is covered by indebtedness from a conversion, rental, operation, those lines is a reduction to your person who has an interest in the management, leasing, or brokerage basis, if any, in loans you made to the activity or from a person related to a trade or business. Services you corporation (to the extent of such person (except you) having such an performed as an employee are not basis). Any portion of the excess not interest, other than a creditor. treated as performed in a real used to reduce your basis in stock Any loss from a section 465 property trade or business unless you and loans is not deductible in the activity not allowed for this tax year owned more than 5% of the stock (or current year and is carried over to will be treated as a deduction more than 5% of the capital or profits next year and subject to that year s allocable to the activity in the next tax interest) in the employer. basis limit. See the preceding year. 3. The rental of a dwelling unit any instructions for more details. shareholder used for personal You should get a separate At-Risk Limitations purposes during the year for more statement of income, expenses, etc., than the greater of 14 days or 10% of Generally, you will have to complete for each activity from the corporation. the number of days that the residence Form 6198, At-Risk Limitations, to Passive Activity Limitations was rented at fair rental value. figure your allowable loss, if you Section 469 provides rules that limit 4. Activities of trading personal have: the deduction of certain losses and property for the account of owners of A loss or other deduction from any credits. These rules apply to interests in the activities. activity carried on by the corporation as a trade or business or for the shareholders who: production of income, and Are individuals, estates, or trusts, If you have a passive activity loss Amounts in the activity for which and or credit, use Form 8582, Passive you are not at risk. Have a passive activity loss or Activity Loss Limitations, to figure credit for the tax year. your allowable passive losses and The at-risk rules generally limit the Form 8582-CR, Passive Activity amount of loss and other deductions Generally, passive activities Credit Limitations, to figure your that you can claim to the amount you include: allowable passive credits. See the could actually lose (your economic 1. Trade or business activities in instructions for these forms for loss) in the activity. These losses and which you did not materially details. deductions include a loss on the participate and disposition of assets and the section 2. Activities that meet the If the corporation had more than 179 expense deduction. However, if definition of rental activities under one activity, it will attach a statement you acquired your stock before 1987, Temporary Regulations section to your Schedule K-1 that identifies the at-risk rules do not apply to losses T(e)(3) and Regulations each activity (trade or business from an activity of holding real section (e)(3). activity, rental real estate activity, property placed in service before rental activity other than rental real 1987 by the corporation. The activity Passive activities do not include: estate, etc.) and specifies the income Instructions for Schedule K-1 (Form 1120S) -3-

6 (loss), deductions, and credits from engineering, architecture, accounting, activity, report the income, each activity. actuarial science, performing arts, deductions, and losses from the Material participation. You must consulting, or any other trade or activity as indicated in these determine if you materially business in which capital is not a instructions. participated (a) in each trade or material income-producing factor. 2. If you have an overall loss (the business activity held through the 7. Based on all the facts and excess of deductions and losses, corporation and (b) if you were a real circumstances, you participated in the including any prior year unallowed estate professional (defined on page activity on a regular, continuous, and loss, over income) or credits from a 3), in each rental real estate activity substantial basis during the tax year. passive activity, report the income, held through the corporation. All deductions, losses, and credits from Work counted toward material determinations of material all passive activities using the participation. Generally, any work participation are based on your Instructions for Form 8582 or Form that you or your spouse does in participation during the corporation s 8582-CR, to see if your deductions, connection with an activity held tax year. losses, and credits are limited under through an S corporation (where you the passive activity rules. Material participation standards for own your stock at the time the work is shareholders who are individuals are done) is counted toward material Special allowance for a rental real listed below. Special rules apply to participation. However, work in estate activity. If you actively certain retired or disabled farmers connection with the activity is not participated in a rental real estate and to the surviving spouses of counted toward material participation activity, you may be able to deduct up farmers. See the Instructions for if either of the following applies. to $25,000 of the loss (or credit Form 8582 for details. 1. The work is not the type of work equivalent to a $25,000 deduction) Individuals. If you are an that owners of the activity would from the activity from nonpassive individual, you materially participated usually do and one of the principal income. This special allowance is in an activity only if one or more of purposes of the work that you or your an exception to the general rule the following apply. spouse does is to avoid the passive disallowing losses in excess of loss or credit limitations. income from passive activities. The 1. You participated in the activity 2. You do the work in your special allowance is not available if for more than 500 hours during the capacity as an investor and you are you were married, file a separate tax year. not directly involved in the day-to-day return for the year, and did not live 2. Your participation in the activity operations of the activity. Examples apart from your spouse at all times for the tax year constituted of work done as an investor that during the year. substantially all the participation in the activity of all individuals (including would not count toward material Only individuals can actively individuals who are not owners of participation include: participate in a rental real estate interests in the activity). a. Studying and reviewing activity. However, a decedent s estate 3. You participated in the activity financial statements or reports on (including a qualified revocable trust for more than 100 hours during the operations of the activity, for which a section 645 election has tax year, and your participation in the b. Preparing or compiling been made) is treated as actively activity for the tax year was not less summaries or analyses of the participating for its tax years ending than the participation in the activity of finances or operations of the activity less than 2 years after the decedent s any other individual (including for your own use, and death, if the decedent would have individuals who were not owners of c. Monitoring the finances or satisfied the active participation interests in the activity) for the tax operations of the activity in a requirement for the activity for the tax year. nonmanagerial capacity. year the decedent died. 4. The activity was a significant Effect of determination. Income You are not considered to actively participation activity for the tax year, (loss), deductions, and credits from participate in a rental real estate and you participated in all significant an activity are nonpassive if you activity if, at any time during the tax participation activities (including determine that: year, your interest (including your activities outside the corporation) You materially participated in a spouse s interest) in the activity was during the year for more than 500 trade or business activity of the less than 10% (by value) of all hours. A significant participation corporation, or interests in the activity. activity is any trade or business You were a real estate professional activity in which you participated for Active participation is a less (defined on page 3) in a rental real more than 100 hours during the year stringent requirement than material estate activity of the corporation. and in which you did not materially participation. You may be treated as participate under any of the material If you determine that you did not actively participating if you participation tests (other than this materially participate in a trade or participated, for example, in making test). business activity of the corporation or management decisions or arranging 5. You materially participated in if you have income (loss), deductions, for others to provide services (such the activity for any 5 tax years or credits from a rental activity of the as repairs) in a significant and bona (whether or not consecutive) during corporation (other than a rental real fide sense. Management decisions the 10 tax years that immediately estate activity in which you materially that can count as active participation precede the tax year. participated as a real estate include approving new tenants, 6. The activity was a personal professional), the amounts from that deciding rental terms, approving service activity and you materially activity are passive. Report passive capital or repair expenditures, and participated in the activity for any 3 income (losses), deductions, and other similar decisions. tax years (whether or not credits as follows. Modified adjusted gross income consecutive) preceding the tax year. 1. If you have an overall gain (the limitation. The maximum special A personal service activity involves excess of income over deductions allowance that single individuals and the performance of personal services and losses, including any prior year married individuals filing a joint return in the fields of health, law, unallowed loss) from a passive can qualify for is $25,000. The -4- Instructions for Schedule K-1 (Form 1120S)

7 maximum is $12,500 for married the corporation will identify the activity 4. Any other limitations that must individuals who file separate returns and all amounts relating to it on be taken into account at the and who lived apart at all times during Schedule K-1 or on an attachment. shareholder level in figuring taxable the year. The maximum special If you have net income subject to income (for example, the section 179 allowance for which an estate can recharacterization under Temporary expense limitation). qualify is $25,000 reduced by the Regulations section T(f) and special allowance for which the For information on these Regulations section (f), report surviving spouse qualifies. provisions, see Limitations on such amounts according to the Losses, Deductions, and Credits If your modified adjusted gross Instructions for Form beginning on page 1. income (defined below) is $100,000 or less ($50,000 or less if married If you have net income (loss), If you are an individual, and the filing separately), your loss is deductions, or credits from either of above limitations do not apply to the deductible up to the maximum special the following activities, treat such amounts shown on your Schedule allowance referred to in the preceding amounts as nonpassive and report K-1, take the amounts shown and paragraph. If your modified adjusted them as indicated in these report them on the lines of your tax gross income is more than $100,000 instructions. return as indicated in the summarized (more than $50,000 if married filing 1. The rental of a dwelling unit any reporting information shown on page separately), the special allowance is shareholder used for personal 2 of the Schedule K-1. If any of the limited to 50% of the difference purposes during the year for more above limitations apply, adjust the between $150,000 ($75,000 if than the greater of 14 days or 10% of amounts on Schedule K-1 before you married filing separately) and your the number of days that the residence report them on your return. modified adjusted gross income. was rented at fair rental value. When applicable, the passive When modified adjusted gross 2. Trading personal property for activity limitations on losses are income is $150,000 or more ($75,000 the account of owners of interests in applied after the limitations on losses or more if married filing separately), the activity. for a shareholder s basis in stock and there is no special allowance. debt and the shareholder s at-risk Self-charged interest. The Modified adjusted gross income is amount. corporation will report any your adjusted gross income figured self-charged interest income or The line numbers in the without taking into account the expense that resulted from loans summarized reporting information on following amounts, if applicable. between you and the corporation (or page 2 of Schedule K-1 are Any passive activity loss. between the corporation and another references to forms in use for Any rental real estate loss allowed S corporation or partnership if both calendar year If you file your under section 469(c)(7) to real estate entities have the same owners with tax return on a calendar year basis, professionals (defined on page 3). the same proportional interest in each but the corporation files a return for a Any overall loss from a entity). If there was more than one fiscal year, report the amounts on publicly-traded partnership. activity, the corporation will provide a your tax return for the year in which Any taxable social security or statement allocating the interest the corporation s fiscal year ends. For equivalent railroad retirement income or expense with respect to example, if the corporation s tax year benefits. each activity. The self-charged ends in February 2011, report the Any deductible contributions to an interest rules do not apply to your amounts on your 2011 tax return. IRA or certain other qualified interest in the S corporation if the If you have losses, deductions, or retirement plans under section 219. corporation made an election under credits from a prior year that were not The domestic production activities Regulations section (g) to deductible or usable because of deduction. avoid the application of these rules. certain limitations, such as the basis The student loan interest See the Instructions for Form 8582 rules or the at-risk limitations, take deduction. for details. them into account in determining your The tuition and fees deduction. income, loss, or credits for this year. The deduction for one-half of However, except for passive activity self-employment taxes. losses and credits, do not combine The exclusion from income of Specific Instructions the prior-year amounts with any interest from Series EE or I U.S. amounts shown on this Schedule K-1 Savings Bonds used to pay higher Part III. Shareholder s to get a net figure to report on your education expenses. return. Instead, report the amounts on The exclusion of amounts received Share of Current Year your return on a year-by-year basis. under an employer s adoption assistance program. Income, Deductions, If you have amounts other Credits, and Other Items than those shown on Commercial revitalization CAUTION deduction. The special $25,000 The amounts shown in boxes 1 Schedule K-1 to report on allowance for the commercial through 17 reflect your share of Schedule E (Form 1040), enter each revitalization deduction from rental income, loss, deductions, credits, item separately on line 28 of real estate activities is not subject to etc., from corporate business or Schedule E (Form 1040). the active participation rules or rental activities without reference to Codes. In box 10 and boxes 12 modified adjusted gross income limits limitations on losses, credits, or other through 17, the corporation will discussed above. See the instructions items that may have to be adjusted identify each item by entering a code for box 12, code N for more because of: in the column to the left of the dollar information. 1. The adjusted basis of your amount entry space. These codes are Special rules for certain other stock and debt in the corporation, identified on page 2 of Schedule K-1 activities. If you have net income 2. The at-risk limitations, and in these instructions. (loss), deductions, or credits from any 3. The passive activity limitations, Attached statements. The activity to which special rules apply, or corporation will enter an asterisk (*) Instructions for Schedule K-1 (Form 1120S) -5-!

8 after the code, if any, in the column to determine where to report a box 2 Portfolio Income the left of the dollar amount entry amount. Portfolio income or loss (shown in space for each item for which it has 1. If you have a loss from a boxes 4 through 8b and in box 10, attached a statement providing passive activity in box 2 and you code A) is not subject to the passive additional information. For those meet all the following conditions, activity limitations. Portfolio income informational items that cannot be report the loss on Schedule E (Form includes income (not derived in the reported as a single dollar amount, 1040), line 28, column (f). ordinary course of a trade or the corporation will enter an asterisk a. You actively participated in the business) from interest, ordinary in the left column and enter STMT in corporate rental real estate activities. dividends, annuities, or royalties, and the dollar amount entry space to See Special allowance for a rental gain or loss on the sale of property indicate the information is provided real estate activity on page 4. that produces such income or is held on an attached statement. b. Rental real estate activities with for investment. active participation were your only Income (Loss) passive activities. Box 4. Interest Income c. You have no prior year Report interest income on line 8a of Box 1. Ordinary Business unallowed losses from these Form Income (Loss) activities. Box 5a. Ordinary Dividends The amount reported in box 1 is your d. Your total loss from the rental share of the ordinary income (loss) real estate activities was not more Report ordinary dividends on line 9a from trade or business activities of than $25,000 (not more than $12,500 of Form the corporation. Generally, where you if married filing separately and you report this amount on Form 1040 Box 5b. Qualified Dividends lived apart from your spouse all year). depends on whether the amount is Report any qualified dividends on line e. If you are a married person from an activity that is a passive 9b of Form filing separately, you lived apart from activity to you. If you are an individual your spouse all year. Note. Qualified dividends are shareholder filing a 2010 Form 1040, f. You have no current or prior excluded from investment income, find your situation below and report year unallowed credits from a passive but you may elect to include part or your box 1 income (loss) as activity. all of these amounts in investment instructed after applying the basis income. See the instructions for line and at-risk limitations on losses. If the g. Your modified adjusted gross 4g of Form 4952, Investment Interest corporation had more than one trade income was not more than $100,000 Expense Deduction, for important or business activity, it will attach a (not more than $50,000 if married information on making this election. statement identifying the income or filing separately and you lived apart loss from each activity. from your spouse all year). Box 6. Royalties 1. Report box 1 income (loss) 2. If you have a loss from a Report royalties on Schedule E (Form from corporate trade or business passive activity in box 2 and you do 1040), line 4. activities in which you materially not meet all the conditions in 1 above, participated on Schedule E (Form follow the Instructions for Form 8582 Box 7. Net Short-Term 1040), line 28, column (h) or (j). to figure how much of the loss you Capital Gain (Loss) 2. Report box 1 income (loss) can report on Schedule E (Form Report the net short-term capital gain from corporate trade or business 1040), line 28, column (f). (loss) on Schedule D (Form 1040), activities in which you did not 3. If you were a real estate line 5. materially participate, as follows. professional and you materially a. If income is reported in box 1, participated in the activity, report box Box 8a. Net Long-Term report the income on Schedule E 2 income (loss) on Schedule E (Form Capital Gain (Loss) (Form 1040), line 28, column (g). 1040), line 28, column (h) or (j). Report the net long-term capital gain b. If a loss is reported in box 1, 4. If you have income from a (loss) on Schedule D (Form 1040), follow the Instructions for Form 8582 passive activity in box 2, report the line 12. to figure how much of the loss can be income on Schedule E (Form 1040), reported on Schedule E (Form 1040), line 28, column (g). Box 8b. Collectibles (28%) line 28, column (f). Gain (Loss) Box 3. Other Net Rental Report collectibles gain or loss on line Box 2. Net Rental Real Estate Income (Loss) 4 of the 28% Rate Gain Income (Loss) Worksheet Line 18 in the The amount in box 3 is a passive Instructions for Schedule D (Form Generally, the income (loss) reported activity amount for all shareholders. If 1040). in box 2 is a passive activity amount the corporation had more than one for all shareholders. However, the rental activity, it will attach a Box 8c. Unrecaptured income (loss) in box 2 is not from a statement identifying the income or Section 1250 Gain passive activity if you were a real loss from each activity. Report the estate professional (defined on page income or loss as follows. There are three types of 3) and you materially participated in unrecaptured section 1250 gain. 1. If box 3 is a loss, follow the the activity. If the corporation had Report your share of this Instructions for Form 8582 to figure more than one rental real estate unrecaptured gain on the how much of the loss can be reported activity, it will attach a statement Unrecaptured Section 1250 Gain on Schedule E (Form 1040), line 28, identifying the income or loss from Worksheet Line 19 in the column (f). each activity. Instructions for Schedule D (Form 2. If income is reported in box 3, 1040) as follows. If you are filing a 2010 Form 1040, report the income on Schedule E Report unrecaptured section 1250 use the following instructions to (Form 1040), line 28, column (g). gain from the sale or exchange of the -6- Instructions for Schedule K-1 (Form 1120S)

9 corporation s business assets on line statement will also report your share extent of winnings on Schedule A 5. of any excess inclusion that you (Form 1040), line 28. Report unrecaptured section 1250 report on Schedule E (Form 1040), 2. If the corporation was engaged gain from the sale or exchange of an line 38, column (c), and your share of in the trade or business of gambling, interest in a partnership on line 10. section 212 expenses that you report (a) report gambling winnings on line Report unrecaptured section 1250 on Schedule E (Form 1040), line 38, 28 of Schedule E (Form 1040) and gain from an estate, trust, regulated column (e). If you itemize your (b) deduct gambling losses (to the investment company (RIC), or real deductions on Schedule A (Form extent of winnings) on Schedule E estate investment trust (REIT) on line 1040), you may also deduct these (Form 1040), line 28, column (h). 11. section 212 expenses as a Gain (loss) from the disposition of If the corporation reports only miscellaneous deduction subject to an interest in oil, gas, geothermal, or unrecaptured section 1250 gain from the 2% limit on Schedule A (Form other mineral properties. The the sale or exchange of its business 1040), line 23. corporation will attach a statement assets, it will enter a dollar amount in Code B. Involuntary conversions. that provides a description of the box 8c. If it reports the other two This is your net loss from involuntary property, your share of the amount types of unrecaptured gain, it will conversions due to casualty or theft. realized from the disposition, your provide an attached statement that The corporation will give you a share of the corporation s adjusted shows the amount for each type of schedule that shows the amounts to basis in the property (for other than unrecaptured section 1250 gain. be reported on Form 4684, oil or gas properties), and your share Casualties and Thefts, line 37, of the total intangible drilling costs, Box 9. Net Section 1231 Gain columns (b)(i), (b)(ii), and (c). development costs, and mining (Loss) If there was a gain (loss) from a exploration costs (section 59(e) The amount in box 9 is generally casualty or theft to property not used expenditures) passed through for the passive if it is from a: in a trade or business or for property. You must figure your gain or Rental activity, or income-producing purposes, the loss from the disposition by Trade or business activity in which corporation will provide you with the increasing your share of the adjusted you did not materially participate. information you need to complete basis by the intangible drilling costs, However, an amount from a rental Form development costs, or mine real estate activity is not from a exploration costs for the property that Code C. Section 1256 contracts passive activity if you were a real you capitalized (that is, costs that you and straddles. The corporation will estate professional (defined on page did not elect to deduct under section report any net gain or loss from 3) and you materially participated in 59(e)). Report a loss in Part I of Form section 1256 contracts. Report this the activity Report a gain in Part III of amount on Form 6781, Gains and Form 4797 in accordance with the If the amount is either (a) a loss Losses From Section 1256 Contracts instructions for line 28. See that is not from a passive activity or and Straddles. Regulations section for (b) a gain, report it on Form 4797, line Code D. Mining exploration costs details. 2, column (g). Do not complete recapture. The corporation will give Net short-term capital gain (loss) columns (b) through (f) on line 2 of you a schedule that shows the and net long-term capital gain (loss) Form Instead, enter From information needed to recapture from Schedule D (Form 1120S) that Schedule K-1 (Form 1120S) across certain mining exploration costs is not portfolio income. An example is these columns. (section 617). See Pub. 535 for gain or loss from the disposition of If the amount is a loss from a details. nondepreciable personal property passive activity, see Passive Loss Code E. Other income (loss). used in a trade or business activity of Limitations in the Instructions for Amounts with code E are other items the corporation. Report total net Form Report the loss following of income, gain, or loss not included short-term gain (loss) on Schedule D the Instructions for Form 8582 to in boxes 1 through 9 or in box 10 (Form 1040), line 5. Report the total figure how much of the loss is using codes A through D. The net long-term gain (loss) on Schedule allowed on Form If the corporation should give you a D (Form 1040), line 12. corporation had net section 1231 gain description and the amount of your Current year section 108(i) (loss) from more than one activity, it share for each of these items. cancellation of debt income. The will attach a statement that will corporation will provide your share of identify the section 1231 gain (loss) Report loss items that are passive the deferred amount that you must from each activity. activity amounts to you following the include in income in the current tax Instructions for Form Box 10. Other Income (Loss) year under section 108(i)(1) or Code E items may include the section 108(i)(5)(D)(i) or (ii). Code A. Other portfolio income following. Gain from the sale or exchange of (loss). The corporation will report Income from recoveries of tax qualified small business (QSB) stock portfolio income other than interest, benefit items. A tax benefit item is an (as defined in the Instructions for ordinary dividend, royalty, and capital amount you deducted in a prior tax Schedule D (Form 1040)) eligible for gain (loss) income, and attach a year that reduced your income tax. the partial section 1202 exclusion. statement to tell you what kind of Report this amount on Form 1040, The corporation should also give you portfolio income is reported. line 21, to the extent it reduced your (a) the name of the corporation that If the corporation held a residual tax. issued the QSB stock, (b) your share interest in a real estate mortgage Gambling gains and losses. of the corporation s adjusted basis investment conduit (REMIC), it will 1. If the corporation was not and sales price of the QSB stock, and report on the statement your share of engaged in the trade or business of (c) the dates the QSB stock was REMIC taxable income (net loss) that gambling, (a) report gambling bought and sold. The following you report on Schedule E (Form winnings on Form 1040, line 21 and additional limitations apply at the 1040), line 38, column (d). The (b) deduct gambling losses to the shareholder level. Instructions for Schedule K-1 (Form 1120S) -7-