Help for Schedule E - Parts II and III Income or Loss From Partnerships, S Corporations, Estates, or Trusts If you are a memeber of more than one partnership, a shareholder in more than one S corporation, or a beneficiary of more than one estate or trust, do not report information form more than one entity on the same line. If you need more space in Parts II and III to list you income or losses, attach a continuation sheet using the same format as shown in Parts II and III. However, be sure to complete the "Totals" columns for lines 31a and 31b, or lines 36a and 36b, as more than one Schedule E,use the same Schedule E which you entered the combined totals in Part I. Tax Shelter Registration Number If you are claiming or you are reporting any deduction, loss, redit, or other tax benefit, or reporting income from an interest purchased or otherwise acquired in a tax shelter, you must attach Form 8271 Investor Reporting of Tax Shelter Registration Number, to your return. This reports the tax shelter rebgistration number as well as other information about the tax shelter. There is a penalty if you fail to report this number on your tax return. Tax Preference Items If you are a partner, a shareholder in an S corporation, or a beneficiary of an estate or trust, you must take into account your share of tax preference items and adjustments from these entities on Form 6251, Alternative Minimum Tax - Individuals, of Form 8656 Alternative Minimum Tax - Fiduciaries. Aount(s) From 1987 Schedule(s) K-1 If you received a 1987 Schedule K-1 (Form 1065, 1120S, or 1041) for a short year, and you did not report all of the short-year income on your 1987 return, you must report 25% of the amounts shown on the short-year 1987 K-1 on the appropriate lines of your 1989 Form 1040 and related schedules. Write "PYA" (prior year amount) next to the entries. Partnerships and S Corporations If you are a member of a partnership or joint venture or a shareholder in an S corporation, use Part II ot report your share of the partnership or S corporation income (even if not received) or loss. You should receive a Schedule K-1 from the partnership of the S corporatoin. Do not attach Schedule K-1 ot your return. Keep them for your records. You should also receive a copy of the Partner's or Shareholder's Instructions for Schedule K-1. If you did not receive these instructions with your Schedule K-1, you can get a copy of Schedule K-1 and its intructions will tell you where on your return to report your share of items. Special rules apply that limit losses. Please note the following: * If you have a current year loss or a prior year unallowed loss form a partnership or an S corporation, see At-Risk Rules and the Passive Activity Loss Rules. Partners and S corporation shareholders should get a separate statement of income, expenses, deducitions, and credits for each activity engaged in by the partnership or an S corporation. If you are subject to the at-risk rules for any activity, use Form 6198 in Part II, column (i), of Schedule E. * If you have passive activity loss, you generally need to complete Form 8582 to figure the amount on the allowable loss to enter in Part II, column (g), for that activity. But if you are a general partner on a S corporation shareholder, reporting you share of partnership or S corporation loss from a rental real estate activity, and you meet ALL 3 of the conditions llisted in the instructions for line 24, you do not have to complete Form 8582. Instead, enter your allowable loss in Part II, column (g), and write at the top of Schedule E "Form 8582 not required because of $25,000 special allowance." * If you have passive activity income, complete Part II, column (h), for that activity. * If you have nonpassive income or loss, complete Part II, columns (i) through (k), as appropriate. If you are treating items on your tax return differently from the way the partnership or S corporation reported them on its return, you may have to file Form 8082, Notice of Incon- sistent Treatment or Amended Return. Limits on Section 179 Deductions The maximum yu can deduct on your return for recovery property, is $10,000. For example, if your received a Schedule K-1 allocating $1,000 of section 179 expenses in $9,000. This limit is reduced if the total cost of the section 179 property is more than $200,000., Your deduction is also limited to the total taxable income form all your trades or businesses. See Form 4562 and Pub. 534 for details. Partnerships If you have other partnership items relating to a passive activity, or income or loss from any publicly traded partnership, see the Form 8582 instructions before entering them on your return. If you have other partnership items, such as depletion, form ` a nonpassive activity, show each item on a separate line in Part Part II. Show unreimbursed partnership expenses form nonpassive activities on a separate line in column (i) of Part II. Unreim- bursed expenses that are itemized deducitns are entered on Schedule A (Form 1040). Report allowable interest expense paid or incurred form debt-financed acquisition in Part II, or on Schedule A, depending on the type of expenditure to which the interest is allocated. See Pub. 545 for details. If you claimed a credit for Federal tax on gasoline or other fuels on your 1988 Form 1040 (based on information received from the partnership), enter as income in column (h) or column (k), whichever applies,the amount of the credit claimed in 1988. Part or all of your share of partnership income or loss from the operation of the business may be considered net earnings reported on Schdedule SE (Form 1040), line 14a, on Schedule SE, after you reduce this amount by any allowable expnese attributable to that income. If you have losses or deductins form a prior year that you could not deduct because of the at-risk or basis rules, and the amounts are now deductible, do not combine the prior-year amounts with any current year amounts to arrive at a net figure to report on Schedule E. Instead, report on separate lines on Schedule E prior-year amounts and current-year amounts. S Corporations Your share of net income is NOT subject to self-employment tax. Distributions of prior-year accumulated earnings and profits of S corporations are dividends and are reported on Schedule B (Form 1040). For more details see Pub. 589, Tax Information on S corporations. Interest expense relating to the acquistion of shares in a S corporation may be fully deductible on Schedule E, for details see Pub. 545. As a shareholder in an S corporation, your share of the corporation's aggregate losses and deductions (combined income, losses, and deductions) is limited to the adjusted basis of your corporate stock and any debt the corporation owes you. Any loss or deduction not allowed this year because of the basis limitation may be carried forward and deducted in a later year subject to the basis limitation for that year. If you are claiming a deduction for your share of an aggregate loss, attach to your return a computation of the adjusted basis or your corporate stock and of any debt the corporation owes you. See Pub. 589 for more information. After applying the basis limitation, the deductible amount of your aggregate losses and deductions may be further reduced by the at-risk rules and the passive activity loss rules. If you have losses or deductions form a prior year that you could not deduct because of the basis, at-risk, or passive activity loss limitations, and the amounts are now deductible, do not combine the prior-year amounts with the current-year amounts to arrive at a net figure to report on Schedule E. Instead, report the priro-year amounts and the current-year amounts on separate lines of Schedule E. Estates and Trusts If you arfe a beneficiary of an estate or trust, use Part III to report your part of the income (even if not received) or loss. You should receive Schedule K-1 (Form 1040) form the fiduciary. Do not attach that schedule to your return. Keep it for your records. Your copy of Schedule K-1 and its instructions will tell you where on your return to report the items from Schedule K-1. Caution: Future regulations will explain how to determine whether you should show amounts reported to you on Schedule K-1 (Form 1040) as amounts from passive activities. If you have estimated taxes, credited ot you from a trust (Schedule K-1, line 12a), write "ES payment claimed" and the line amount on the dotted line next to line 39. Do not include this amount in the total on line 39. Instead enter the amount on Form 1040, line 57. A U.S. person who transferred property to a foreign trust may have to include in income the income received by the trust as a result of the transferred property if, during 1989, the trust had a U.S. beneficiary. For more information, get Form 3520-A Annual Return of Foreign Trust With U.S. Beneficiaries. Annual Return of Foreign Trust With U.S. Beneficiaries.