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Department of the Treasury 2020 Internal Revenue Service Shareholder's Instructions for Schedule K-1 (Form 1120-S) Shareholder's Share of Income, Deductions, Credits, etc. (For Shareholder's Use Only)
Section references are to the Internal Contents Page corporation stock is part of a Revenue Code unless otherwise noted. Box 19. More Than One decedent's estate. See Decedent's Contents Page Activity for Passive Schedule K-1, later. Activity Purposes ...... 23 Future Developments ...... 1 List of Codes ...... 24 Section 951A reporting. Notice What’s New ...... 1 2020-69 provides an election to be General Instructions ...... 1 Future Developments treated as an entity for purposes of Purpose of Schedule K-1 ...... 1 section 951A. See Statements Inconsistent Treatment of For the latest information about developments related to Required of Shareholders of Certain S Items ...... 2 Corporations Electing To Be Treated Errors ...... 2 Schedule K-1 (Form 1120-S) and its instructions, such as legislation as an Entity Under Notice 2020-69, Decedent's Schedule K-1 ...... 2 later. Sale of S Corporation Stock .....2 enacted after they were published, go International Boycotts ...... 2 to IRS.gov/Form1120S. Elections ...... 2 General Instructions Additional Information ...... 2 What’s New Purpose of Schedule K-1 Limitations on Losses, List of codes. Most loss, deduction, Deductions, and Credits .....3 The corporation uses Schedule K-1 to and credit items reported on the Basis Limitations ...... 3 report your share of the corporation's Schedule K-1 may require adjustment At-Risk Limitations ...... 9 income, deductions, credits, and other based on basis limitations, at-risk Passive Activity items. Keep it for your records. Don't limitations, and passive activity Limitations ...... 9 file it with your tax return unless limitations before being reported on a Specific Instructions ...... 11 backup withholding is reported in shareholder's tax return. It is no longer Box 1. Ordinary Business box 13 using code O. (See the Income (Loss) ...... 12 possible to provide useful reporting instructions for Code O. Backup Box 2. Net Rental Real information to taxpayers on one page. withholding, later.) The corporation Estate Income (Loss) ...... 12 The list of codes and descriptions files a copy of Schedule K-1 with the Box 3. Other Net Rental have been moved from the second Income (Loss) ...... 12 IRS. page of Schedule K-1 (Form 1120-S) Box 4. Interest Income ...... 12 to these instructions. See the List of Boxes 5a and 5b. Dividends ... 13 For your protection, Schedule K-1 Codes, later. Box 6. Royalties ...... 13 may show only the last four digits of Box 7. Net Short-Term Excess business loss. The excess your identifying number (social Capital Gain (Loss) ...... 13 business loss limitation rules were security number (SSN), employer Boxes 8a through 8c. Long- repealed for the 2020 tax year by the identification number (EIN), or Term Capital Gain (Loss) ... 13 Coronavirus Aid, Relief, and individual taxpayer identification Box 9. Net Section 1231 Economic Security Act (CARES Act), number (ITIN)). However, the Gain (Loss) ...... 13 corporation has reported your Box 10. Other Income (Loss) ... 13 which also retroactively repealed the rules for the 2018 and 2019 tax years. complete identifying number to the Box 11. Section 179 IRS. Deduction ...... 15 New items added to Part II of Box 12. Other Deductions ..... 15 Schedule K-1. Item G is added for You may be liable for tax on your Box 13. Credits ...... 17 the shareholder's number of shares share of the corporation's income, Box 14. Foreign Transactions ...... 18 for the beginning and end of the tax whether or not distributed. Include Box 15. AMT Items ...... 19 year. Item H is added for loans from your share on your tax return if a Box 16. Items Affecting the shareholder for the beginning and return is required. Use these Shareholder Basis ...... 19 end of the tax year. instructions to help you report the Box 17. Other Information ..... 20 Decedent's Schedule K-1. An items shown on Schedule K-1 on your Box 18. More Than One executor is responsible to notify the S tax return. Activity for At-Risk Purposes ...... 23 corporation of the name and tax Your share of S corporation income identification number of the isn't self-employment income and it decedent's estate when the S isn't subject to self-employment tax.
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The amount of loss and Decedent's Schedule K-1 operations. However, certain ! deduction you may claim on If you are the executor of an estate elections are made by you separately CAUTION your tax return may be less and you have received a decedent's on your income tax return and not by than the amount reported on Schedule K-1, then you have the the corporation. These elections are Schedule K-1. It is the shareholder's responsibility to notify the S made under the following code responsibility to consider and apply corporation of the name and tax sections. any applicable limitations. See identification number (TIN) of the • Section 59(e) (deduction of certain Limitations on Losses, Deductions, decedent’s estate if the S corporation qualified expenditures ratably over the and Credits, later, for more stock is part of a decedent’s estate. period of time specified in that information. This is information that the S section). For details, see the corporation must have to properly instructions for code J in box 12. Schedule K-1 doesn't show actual determine its eligibility to maintain • Section 263A(d) (preproductive dividend distributions the corporation status as a subchapter S corporation. expenses). See the instructions for made to you. The corporation must If a decedent died in a prior year and code M in box 12. report such amounts totaling $10 or the S corporation continues to send • Section 617 (deduction and more for the calendar year on Form the decedent a Schedule K-1 after recapture of certain mining 1099-DIV, Dividends and being notified of the decedent’s death, exploration expenditures). Distributions. then you should request that the S • Section 901 (foreign tax credit). corporation send a corrected Inconsistent Treatment of Schedule K-1. If you receive an Statements Required of Items interest in an S corporation by reason Shareholders of Certain S Generally, you must report corporate of a former shareholder’s death, you Corporations Electing To items shown on your Schedule K-1 must provide the S corporation with Be Treated as an Entity (and any attached statements) the your name and TIN. For treatment of same way that the corporation treated S corporation income upon the death Under Notice 2020-69 the items on its return. of a shareholder, see Pub. 559, If the corporation and all of its Survivors, Executors, and shareholders elect for the corporation If the treatment on your original or Administrators. to be treated as an entity for purposes amended return is inconsistent with of section 951A under Notice 2020-69 the corporation's treatment, or if the Sale of S Corporation for tax years of the corporation ending corporation hasn't filed a return, file Stock before September 1, 2020, and after Form 8082, Notice of Inconsistent June 21, 2019, you are required to Treatment or Administrative Gain or loss from the disposition of attach a statement to your timely filed Adjustment Request (AAR), with your your S corporation stock may be net (including extensions) original or original or amended return to identify investment income under section amended return for that year filed by and explain any inconsistency (or to 1411 and could be subject to the net March 15, 2021. The statement must: note that a corporate return hasn't investment income tax. See Form (i) identify the election for the been filed). 8960, Net Investment Income corporation to be treated as an entity Tax—Individuals, Estates, and Trusts, If you are required to file Form 8082 for purposes of section 951A pursuant and its instructions for information to the Notice; and (ii) include the but don't do so, you may be subject to about how to figure and report the tax. the accuracy-related penalty. This amount of the corporation's transition penalty is in addition to any tax that International Boycotts AE&P (as described in section 3.02(3) results from making your amount or of the Notice). The corporation should Every corporation that had operations notify you of this election so you can treatment of the item consistent with in, or related to, a boycotting country, that shown on the corporation's comply with this statement company, or a national of a boycotting requirement. return. Any deficiency that results country must file Form 5713, from making the amounts consistent International Boycott Report. may be assessed immediately. Additional Information If the corporation cooperated with For more information on the treatment Errors an international boycott, it must give of S corporation income, deductions, If you believe the corporation has you a copy of its Form 5713. You must credits, and other items, see Pub. made an error on your Schedule K-1, file your own Form 5713 to report the 535, Business Expenses; Pub. 550, notify the corporation and ask for a corporation's activities and any other Investment Income and Expenses; corrected Schedule K-1. Don't change boycott operations that you may have. and Pub. 925, Passive Activity and any items on your copy of You may lose certain tax benefits if At-Risk Rules. Schedule K-1. Be sure that the the corporation participated in, or To get forms and publications, see corporation sends a copy of the cooperated with, an international the instructions for your tax return or corrected Schedule K-1 to the IRS. If boycott. See Form 5713 and its visit the IRS website at IRS.gov. you are unable to reach an agreement instructions for details. with the corporation regarding the inconsistency, file Form 8082. Elections Generally, the corporation decides how to figure taxable income from its
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Limitations on Losses, distributions (including cash) made by When determining your basis Deductions, and Credits the corporation reported on in loans to the corporation, Schedule K-1, box 16, code D, minus remember that: There are potential limitations on (b) the amount of such distributions in • Distributions don't reduce loan corporate losses that you can deduct excess of the basis in your stock. on your return. These limitations and basis, and the order in which you must apply 3. Basis is decreased (but not • Loans that a shareholder them are as follows: the basis below zero) by (a) nondeductible guarantees or co-signs aren't part of a limitations, the at-risk limitations, and expenses, and (b) the depletion shareholder's loan basis. the passive activity limitations. These deduction for any oil and gas property Shareholders only obtain basis from limitations are discussed below. held by the corporation, but only to the acting as a guarantee or in a similar extent your share of the property's capacity to the extent the shareholder Other limitations may apply to adjusted basis exceeds that makes a payment pursuant to the specific deductions (for example, the deduction. guarantee. section 179 expense deduction). 4. Basis is decreased (but not Specific limitations apply before below zero) by all losses and at-risk and passive loss limitations. See Regulations section deductions reported on Schedule K-1. 1.1366-2(a) and section 1367 and its Basis Limitations You may elect to decrease your regulations for more details. Generally, the deduction for your basis under (4) prior to decreasing Worksheet Instructions for share of aggregate losses and your basis under (3). If you make this Figuring a Shareholder’s Stock deductions reported on Schedule K-1 election, any amount described under and Debt Basis is limited to the basis of your stock (3) that exceeds the basis of your and loans from you to the corporation. stock and debt owed to you by the Don’t use this worksheet if For details and exceptions, see corporation is treated as an amount you have made an election section 1366(d). The basis of your described under (3) for the following under Regulations section stock is generally figured at the end of tax year. 1.1367-1(g). the corporation's tax year. Any losses and deductions not allowed this year To make the election, attach a because of the basis limit can be statement to your timely filed original Part I. Shareholder Stock Basis carried forward indefinitely and or amended return that states you agree to the carryover rule of This worksheet addresses deducted in a later year subject to the adjustments to stock basis as basis limit for that year. Regulations section 1.1367-1(g) and the name of the S corporation to provided under section 1367. You are responsible for keeping the which the rule applies. Once made, Other code sections might also cause information needed to figure the basis the election applies to the year for a reduction in S corporation stock of your stock in the corporation. which it is made and all future tax basis. Schedule K-1 provides information to years for that S corporation, unless Line 1. Enter your basis in the stock help you figure your stock basis at the the IRS agrees to revoke your of the S corporation at the beginning end of each corporate tax year. The election. basis of your stock (generally, its cost) of the corporation’s tax year. Unless is adjusted annually as follows and, The basis of each share of stock is this is your initial year owning stock in except as noted, in the order listed. In increased or decreased (but not the S corporation, this amount should addition, basis may be adjusted under below zero) based on its pro rata be the same as your ending stock other provisions of the Internal share of the above adjustments. If the basis from the prior tax year. Revenue Code. You should generally total decreases in basis attributable to Stock basis can’t be less than zero. a share exceed that share's basis, the use the Worksheet for Figuring a Don’t include any basis from excess reduces (but not below zero) Shareholder’s Stock and Debt Basis indebtedness on this line. Stock basis the remaining bases of all other to figure your aggregate stock and and debt basis must be figured shares of stock in proportion to the debt basis. separately. Debt basis is addressed in remaining basis of each of those 1. Basis is increased by (a) all Part II of this worksheet. shares. income (including tax-exempt income) Line 2. Enter any additional Basis of loans. The basis of your reported on Schedule K-1, and (b) the contributions to the capital of the loans to the corporation is generally excess of the deduction for depletion S corporation or any additional the balance the corporation owes you, (other than oil and gas depletion) over acquisitions of stock. Don’t include adjusted for any reductions and the basis of the property subject to any loans to the S corporation. depletion. restorations of loan basis (see the instructions for box 16, code E). Any The basis of stock you purchased You must report on your amounts described in (3) and (4), is usually its cost. return (if you are required to ! earlier, not used to offset amounts in If you contributed property to the CAUTION file one) any amount required (1), earlier, or to reduce your stock S corporation in exchange for stock in to be included in gross income for it to basis, are used to reduce your loan a section 351 transaction, your stock increase your basis. basis (to the extent of such basis prior basis is generally figured by taking the 2. Basis is decreased (but not to such reduction). carryover basis of assets transferred below zero) by (a) property to the corporation, less the liabilities
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assumed by the corporation. If the separately reduce basis under Part III distributions in the Instructions for assumed liabilities exceed the of this worksheet. See Regulations Form 8949. adjusted tax basis of the contributed section 1.965-3(f)(2) for more Line 8a. Enter the amount from assets, see section 357(c). See information. Schedule K-1, box 16, code C. section 358 for more information on Line 3j. Enter the amount by which Line 8b. Enter the amount of oil and the basis of stock received in a your cumulative depletion deduction section 351 transaction. gas depletion claimed on your exceeds your proportionate share of personal return up to your The basis of inherited property is basis in the property subject to generally the fair market value (FMV) proportionate share of basis in the depletion. See information reported in property subject to depletion. Any at the date of death or the alternate Schedule K-1, box 15, using code C. valuation date. cumulative depletion in excess of your For oil and gas depletion, don’t proportionate share of basis in the The basis of stock acquired by gift enter an amount. See the instructions property subject to depletion won’t is generally the basis of the stock in for line 8b for the decrease to basis. reduce your basis. the hands of the donor. There are special rules if the FMV of the stock is Line 3k. Enter the sum of the Don’t enter an amount for depletion less than the donor’s adjusted basis. amounts from Schedule K-1, box 16, not related to oil and gas property. codes A and B. Also add the section See Regulations section 1.1015-1. Line 8c. Certain credits require the 965(c) deductions from Schedule K-1, reduction of both an S corporation's The basis for stock received as box 17, code AD. See Regulations assets as well as the shareholder's compensation is the FMV on the date section 1.965-3(f)(2) for more stock basis. See sections 50(c)(1) the compensation is included in information. income. See Pub. 551 for details. and (5) for details. Basis isn’t increased by Line 11. Use Part III to figure the total Line 3. Enter on lines 3a through 3m excluded discharge of all separately figured and ! allowable loss and deduction items CAUTION indebtedness income of the non-separately figured items of from stock basis. Enter the total from S corporation under sections 108(a) Part III, line 13, column (c). This income from the Schedule K-1. See and 108(d)(7)(A). below for special instructions. amount can’t exceed the amount on The income reported on line 3 should line 10. Reminder. Enter only positive be reported on the appropriate areas amounts from the Schedule K-1 on Line 12. Use Part II to figure the debt of your return. See specific basis restoration, if any. Enter the total line 3. Negative amounts (decreases instructions for Income (Loss), later. to stock basis) are entered on Part III. from Part II, line 8. Line 6. Enter the distributions Line 13. Enter any other decreases Line 3i. Enter the amount of other reported on Schedule K-1, box 16, income that increases basis. Special to stock basis not accounted for on code D. Don’t include any Form the lines above. This includes the rules apply to basis adjustments 1099-DIV distributions on this line. resulting from section 965 inclusions reduction to basis for the sale or and deductions. Report the section Note. If the amount of the distribution redemption of part of your stock. 965(a) inclusion reported on is more than the stock basis before If a portion of your stock is Schedule K-1, box 17, code AD, distributions, report the excess TIP redeemed, sold, or otherwise reduced by section 965(c) deductions amount as a capital gain on Form disposed of during the year, reported on Schedule K-1, box 17, 8949, Sales and Other Dispositions of attach two separate worksheets. Use code AD. The amount reported as Capital Assets, and Schedule D. Don’t the first to figure your stock basis at section 965(c) deductions on increase your stock basis for the the date of sale and the second to Schedule K-1, box 17, code AD, is not amount of capital gain reported for the figure your stock and debt basis at treated as a deduction that will excess. See Nondividend year end.
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Worksheet for Figuring a Shareholder’s Stock and Debt Basis Part I—Shareholder Stock Basis
1. Stock basis at the beginning of the corporation’s tax year ...... 1.
2. Basis from any capital contributions made or additional stock acquired during the tax year ...... 2.
3a. Ordinary business income (enter losses in Part III) ...... 3a.
b. Net rental real estate income (enter losses in Part III) ...... 3b.
c. Other net rental income (enter losses in Part III) ...... 3c.
d. Interest income ...... 3d.
e. Ordinary dividends ...... 3e.
f. Royalties ...... 3f.
g. Net capital gains (enter losses in Part III) ...... 3g.
h. Net section 1231 gain (enter losses in Part III) ...... 3h.
i. Other income (enter losses in Part III) ...... 3i.
j. Excess depletion adjustment ...... 3j.
k. Tax-exempt income ...... 3k.
l. Recapture of business credits ...... 3l.
m. Other items that increase stock basis ...... 3m.
4. Add lines 3a through 3m ...... 4.
5. Stock basis before distributions. Add lines 1, 2, and 4 ...... 5.
6. Distributions (excluding dividend distributions) ...... 6.
Note. If line 6 is larger than line 5, subtract line 5 from line 6 and report the result as a capital gain on Form 8949 and Schedule D. See instructions.
7. Stock basis after distributions. Subtract line 6 from line 5. If the result is zero or less, enter -0-, skip lines 8 through 14, and enter -0- on line 15 ...... 7.
8a. Nondeductible expenses ...... 8a.
b. Depletion for oil and gas ...... 8b.
c. Business credits (sections 50(c)(1) and (5)) ...... 8c.
9. Add lines 8a through 8c ...... 9.
10. Stock basis before loss and deduction items. Subtract line 9 from line 7. If the result is zero or less, enter -0-, skip lines 11 through 14, and enter -0- on line 15 ...... 10.
11. Allowable loss and deduction items. Enter the amount from Part III, line 13, column (c) ...... 11.
12. Debt basis restoration (see net increase in instructions for Part II, line 8) ...... 12.
13. Other items that decrease stock basis ...... 13.
14. Add lines 11, 12, and 13 ...... 14.
15. Stock basis at the end of the corporation’s tax year. Subtract line 14 from line 10. If the result is zero or less, enter -0- ...... 15.
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Part II. Shareholder Debt Basis under the same column as the open limited to the amount needed to account debt. If this is the first year of restore debt basis to the face of the If you have more than three the open account debt, enter the net loan. TIP debts , use additional copies advance in its own column on line 2. of Part II. If you have multiple debts, the Any debt that exceeded net increase is applied first to You must complete this section if you $25,000 at the end of the prior restore the reduction of basis have personally loaned money to the year is treated as a formal in any debt repaid in the tax year to corporation. note for purposes of calculating the the extent necessary to offset any gain on loan repayment. See gain that would otherwise be realized. You must account for each formal Regulations section 1.1367-2(a)(2)(ii). Any remaining net increase is applied note (notes with a written instrument) to each debt in proportion to its made to your S corporation by Line 4. For a formal note, enter the reduced basis. See Regulations entering it separately in its own amount of principal repayment section 1.1367-2(c)(2). column. You can’t aggregate multiple specific to each loan. loans into a single column. If you have For open account debt, if the Line 13. Enter the smaller of the more than three loans, use additional nondeductible expenses and oil and copies of Part II. repayments exceed the advances for the tax year, the net repayment should gas depletion deductions in excess of Loans made to the S corporation be entered on line 4. stock basis (Part I, line 9 minus line 7) or Part II, line 12. that aren’t evidenced by a written Line 6. Enter the debt basis of your Nondeductible expenses in excess instrument are referred to as an open loan(s) to the S corporation at the of stock and debt basis don’t carry account debt and aren’t separately beginning of the corporation’s tax tracked. If an open account debt has a year. forward (unless an election under year-end balance of more than Regulations section 1.1367-1(g) is $25,000, it will be classified as a Line 7. Enter the amount from line 2 made. As noted earlier, don’t use this formal note at the beginning of the on line 7. worksheet if that election has been next tax year and must be separately Line 8. You have reduced debt basis made). tracked. if line 6 is less than line 1. Line 15. Enter the amount from Part Loans that a shareholder Per section 1367(b)(2)(B), if debt III, line 13(d), in the total column on ! guarantees or co-signs aren’t basis has been reduced, it can only line 15. CAUTION part of a shareholder’s loan be restored with a net increase. The If you have more than one basis except to the extent the net increase is the amount by which loan to the corporation, any shareholder makes a payment on the the items that increase stock basis per allocated reduction is prorated loan guaranteed or co-signed. section 1367(a)(1) (for example, to the loans based on the ratio that income, tax exempt income, and each individual loan basis bears to the Line 1. Enter the balance of each excess depletion) exceed the items aggregate bases of the loans. See loan to the S corporation at the that decrease stock basis per section Regulations section 1.1367-2(b)(3). beginning of the corporation’s tax year 1367(a)(2) (for example, losses, in a separate column. deductions, nondeductibles, Line 19. The character of the gain on Line 2. Enter any new loans made nondividend distributions, etc.). See repayment is dependent on whether during the tax year and evidenced by Regulations section 1.1367-2(c)(1). the debt is evidenced by a formal note a formal note in a separate column. If The net increase is figured as or is an open account. a formal note is refinanced, any follows: Debt evidenced by a formal note increase should be entered on line 2 Part I, line 4 will result in capital gain and should under the same column as the original Minus Part I, line 6 be reported on Form 8949 and loan. Schedule D. Minus Part I, line 9 Advances and repayments made Any open account debt will result in during the S corporation’s tax year on Minus Part I, line 13 (as applicable) ordinary gain and should be reported an open account are netted at the Minus Part III, line 13(a) on Form 4797, Sales of Business close of the S corporation’s tax year to Minus Part III, line 13(b) Property. determine the amount of any net If the net increase figured exceeds advance or net repayment. See Gain recognized on loan the total reduction in debt basis (line 1 Regulations section 1.1367-2(d)(2). repayment doesn’t increase minus line 6), then the restoration is Enter any net advances on line 2 basis.
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Part II—Shareholder Debt Basis
Section A—Amount of Debt (If more than three debts, see instructions.)
Debt 1 Debt 2 Debt 3 Formal note Formal note Formal note Description Total Open account Open account Open account debt debt debt
1. Loan balance at the beginning of the corporation’s tax year ......
2. Additional loans (see instructions) ......
3. Loan balance before repayment. Combine lines 1 and 2 ......
4. Principal portion of debt repayment (this line doesn’t ( ) ( ) ( ) ( ) include interest) ......
5. Loan balance at the end of the corporation’s tax year. Combine lines 3 and 4 ......
Section B—Adjustments to Debt Basis
6. Debt basis at the beginning of the corporation’s tax year ......
7. Enter the amount, if any, from line 2 ......
8. Debt basis restoration (see instructions) ......
9. Debt basis before repayment. Combine lines 6, 7, and 8 ......
10. Divide line 9 by line 3 ......
11. Nontaxable debt repayment. Multiply line 10 by line 4 ......
12. Debt basis before nondeductible expenses and losses. Subtract line 11 from line 9 ......
13. Nondeductible expenses and oil and gas depletion deductions in excess of stock basis ......
14. Debt basis before losses and deductions. Subtract line 13 from line 12. If the result is zero or less, enter -0- ......
15. Allowable losses in excess of stock basis. Enter the amount from Part III, line 13, column (d) ......
16. Debt basis at the end of the corporation’s tax year. Subtract line 15 from line 14. If the result is zero or less, enter -0- ......
Section C—Gain on Loan Repayment
17. Repayment. Enter the amount from line 4 ......
18. Nontaxable repayments. Enter the amount from line 11 ......
19. Reportable gain. Subtract line 18 from line 17 ...
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Part III. Shareholder Allowable basis limitations in prior years that column (b) minus column (c), line 13, Loss and Deduction Items were carried forward. enter column (a) plus column (b) minus column (c), in column (d) for The corporate losses and other Column (c). If Part I, line 10, is zero, skip column (c). each line item. If debt basis, as deduction items are limited to the sum reported on Part II, line 14, is less than of your stock and debt basis. When If stock basis, as reported on Part I, column (a) plus column (b) minus stock and debt basis is insufficient, line 10, is greater than the sum of column (c), line 13, enter the pro rata and there is more than one type of column (a) and column (b), line 13, amount on the corresponding line in loss or deduction item that reduces enter the sum of each line for column column (d). The total allocation basis, the amounts allowed as a loss (a) plus column (b) in column (c). If amount reported in column (d), or deduction are allocated on a pro stock basis, as reported on Part I, line 13, can’t exceed the amount rata basis. See Regulations sections line 10, is less than the sum of column reported on Part II, line 14. 1.1366-2(a)(4) and (5). (a) and column (b), line 13, enter the The allowable losses and pro rata amount on the corresponding deductions from columns (c) and (d) Loss and deductions in excess of line in column (c). The total allocation should be reported on the appropriate basis are suspended and carried amount reported in column (c), areas of your return (subject to any forward indefinitely and the character line 13, can’t exceed the amount additional limitations). of the loss and deduction items is reported on Part I, line 10. retained. Column (e). If the sum of column (a) Column (d). If Part II, line 14, is zero, plus column (b) exceeds the sum of Part III shows the pro rata skip column (d). column (c) plus column (d), enter the allocation and tracks any loss or If column (c), line 13, is less than excess in column (e) for each line deduction carryforward. Part I, line 10, skip column (d). item. If you disposed of all your stock, Column (a). Enter the loss and If debt basis, as reported on Part II, see Regulations section 1.1366-2(a) deduction amounts for each item as line 14, is greater than column (a) plus (6). reported on your Schedule K-1. Column (b). Enter any loss or deduction items disallowed due to
Part III—Shareholder Allowable Loss and Deduction Items
(b) Carryover (a) Current year amounts (column (c) Allowable loss (d) Allowable loss (e) Carryover Description losses and (e)) from the from stock basis from debt basis amounts deductions previous year
1. Ordinary business loss ......
2. Net rental real estate loss ......
3. Other net rental loss ......
4. Net capital loss ......
5. Net section 1231 loss ......
6. Other loss ......
7. Section 179 deductions ......
8. Charitable contributions ......
9. Investment interest expense ......
10. Section 59(e)(2) expenditures .....
11. Other deductions ......
12. Foreign taxes paid or accrued .....
13. Total loss. Combine lines 1 through 12 for each column. Enter the total loss in column (c) on line 11 of Part I and enter the total loss in column (d) on line 15 of Part II ......
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At-Risk Limitations Since at-risk limitations apply for performed as an employee aren't Generally, if you have (a) a loss or each activity, you should get a treated as performed in a real other deduction from any activity separate statement of income, property trade or business unless you carried on as a trade or business or expenses, and other items, for each owned more than 5% of the stock (or for the production of income by the activity from the corporation. more than 5% of the capital or profits corporation, and (b) amounts in the interest) in the employer. Note. Schedule K-1, box 18, will be activity for which you aren't at risk, you 3. The rental of a dwelling unit any checked when a statement is will have to complete Form 6198, shareholder used for personal attached. At-Risk Limitations, to figure your purposes during the year for more allowable loss for the activity. Passive Activity Limitations than the greater of 14 days or 10% of Section 469 provides rules that limit the number of days that the residence The at-risk rules generally limit the was rented at fair rental value. amount of loss and other deductions the deduction of certain losses and that you can claim to the amount you credits. These rules apply to 4. Activities of trading personal could actually lose in the activity. shareholders who: property for the account of owners of These losses and deductions include • Are individuals, estates, or trusts; interests in the activities. and a loss on the disposition of assets and If you have a passive activity loss Have a passive activity loss or the section 179 expense deduction. • or credit, use Form 8582, Passive credit for the tax year. However, if you acquired your stock Activity Loss Limitations, to figure your before 1987, the at-risk rules don't Generally, passive activities allowable passive losses, and Form apply to losses from an activity of include: 8582-CR, Passive Activity Credit holding real property placed in service 1. Trade or business activities in Limitations, to figure your allowable before 1987 by the corporation. The which you didn't materially participate, passive credits. See the instructions activity of holding mineral property and for these forms for details. doesn't qualify for this exception. 2. Activities that meet the If the corporation has more than Generally, you aren't at risk for definition of rental activities under one activity, it will attach a statement amounts such as the following. Temporary Regulations section to your Schedule K-1 that identifies • The basis of your stock in the 1.469-1T(e)(3) and Regulations each activity (trade or business corporation or the basis of your loans section 1.469-1(e)(3). activity, rental real estate activity, to the corporation if the cash or other rental activity other than rental real property used to purchase the stock Passive activities don't include the following. estate, portfolio income) and specifies or make the loans was from a source the income (loss), deductions, and (a) covered by nonrecourse 1. Trade or business activities in credits from each activity. indebtedness (except for certain which you materially participated. qualified nonrecourse financing, as 2. Rental real estate activities in Note. Schedule K-1, box 19, will be defined in section 465(b)(6)); (b) which you materially participated if checked when a statement is protected against loss by a guarantee, you were a real estate professional for attached. stop-loss agreement, or other similar the tax year. You were a real estate Material participation. You must arrangement; or (c) that is covered by professional only if you met both of determine if you materially indebtedness from a person who has the following conditions. participated (a) in each trade or an interest in the activity or from a a. More than half of the personal business activity held through the person related to a person (except services you performed in trades or corporation, and (b) if you were a real you) having such an interest, other businesses were performed in real estate professional (defined earlier), than a creditor. property trades or businesses in in each rental real estate activity held Any cash or property contributed to • which you materially participated. through the corporation. a corporate activity, or your interest in the corporate activity, that is (a) b. You performed more than 750 Each interest in rental real estate is covered by nonrecourse hours of services in real property a separate activity, unless you elect to indebtedness (except for certain trades or businesses in which you treat all interests in rental real estate qualified nonrecourse financing, as materially participated. as one activity. For details on making this election, see the Instructions for defined in section 465(b)(6)); (b) If you are married filing jointly, Schedule E (Form 1040), protected against loss by a guarantee, either you or your spouse must Supplemental Income and Loss. stop-loss agreement, or other similar separately meet both (a) and (b) of arrangement; or (c) covered by the above conditions, without taking All determinations of material indebtedness from a person who has into account services performed by participation are based on your an interest in the activity or from a the other spouse. participation during the corporation's person related to a person (except tax year. A real property trade or business is you) having such an interest, other any real property development, Material participation standards for than a creditor. redevelopment, construction, shareholders who are individuals are Any loss from a section 465 activity reconstruction, acquisition, listed below. Special rules apply to not allowed for this tax year will be conversion, rental, operation, certain retired or disabled farmers and treated as a deduction allocable to the management, leasing, or brokerage to the surviving spouses of farmers. activity in the next tax year. trade or business. Services you
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See the Instructions for Form 8582 for Work counted toward material deductions, and losses from the details. participation. Generally, any work activity as indicated in these that you or your spouse does in instructions. Individuals. If you are an connection with an activity held individual, you materially participated 2. If you have an overall loss (the through an S corporation (where you in an activity only if one or more of the excess of deductions and losses, own your stock at the time the work is following apply. including any prior year unallowed done) is counted toward material loss, over income) or credits from a 1. You participated in the activity participation. However, work in passive activity, report the income, for more than 500 hours during the tax connection with the activity isn't deductions, losses, and credits from year. counted toward material participation all passive activities using the 2. Your participation in the activity if either of the following applies. Instructions for Form 8582 or Form for the tax year constituted 1. The work isn't the type of work 8582-CR, to see if your deductions, substantially all the participation in the that owners of the activity would losses, and credits are limited under activity of all individuals (including usually do, and one of the principal the passive activity rules. individuals who aren't owners of purposes of the work that you or your interests in the activity). spouse does is to avoid the passive Special allowance for a rental real 3. You participated in the activity loss or credit limitations. estate activity. If you actively participated in a rental real estate for more than 100 hours during the tax 2. You do the work in your activity, you may be able to deduct up year, and your participation in the capacity as an investor and you aren't to $25,000 of the loss (or credit activity for the tax year wasn't less directly involved in the day-to-day equivalent to a $25,000 deduction) than the participation in the activity of operations of the activity. Examples of from the activity from nonpassive any other individual (including work done as an investor that wouldn't income. This “special allowance” is an individuals who weren’t owners of count toward material participation exception to the general rule interests in the activity) for the tax include: year. disallowing losses in excess of a. Studying and reviewing income from passive activities. The 4. The activity was a significant financial statements or reports on special allowance isn't available if you participation activity for the tax year, operations of the activity, were married, file a separate return for and you participated in all significant b. Preparing or compiling the year, and didn't live apart from participation activities (including summaries or analyses of the your spouse at all times during the activities outside the corporation) finances or operations of the activity year. during the year for more than 500 for your own use, and hours. A significant participation Only individuals can actively activity is any trade or business c. Monitoring the finances or participate in a rental real estate activity in which you participated for operations of the activity in a activity. However, a decedent's estate more than 100 hours during the year nonmanagerial capacity. (including a qualified revocable trust for which a section 645 election has and in which you didn't materially Effect of determination. Income been made) is treated as actively participate under any of the material (loss), deductions, and credits from participating for its tax years ending participation tests (other than this an activity are nonpassive if you less than 2 years after the decedent's test). determine that: death, if the decedent would have 5. You materially participated in You materially participated in a • satisfied the active participation the activity for any 5 tax years trade or business activity of the requirement for the activity for the tax (whether or not consecutive) during corporation, or year the decedent died. the 10 tax years that immediately • You were a real estate professional precede the tax year. (defined earlier) in a rental real estate You aren't considered to actively participate in a rental real estate 6. The activity was a personal activity of the corporation. activity if, at any time during the tax service activity and you materially If you determine that you didn't year, your interest (including your participated in the activity for any 3 tax materially participate in a trade or spouse's interest) in the activity was years (whether or not consecutive) business activity of the corporation or less than 10% (by value) of all preceding the tax year. A personal if you have income (loss), deductions, interests in the activity. service activity involves the or credits from a rental activity of the performance of personal services in corporation (other than a rental real Active participation is a less the fields of health, law, engineering, estate activity in which you materially stringent requirement than material architecture, accounting, actuarial participated as a real estate participation. You may be treated as science, performing arts, consulting, professional), the amounts from that actively participating if you or any other trade or business in activity are passive. Report passive participated, for example, in making which capital isn't a material income (losses), deductions, and management decisions or arranging income-producing factor. credits as follows. for others to provide services (such as repairs) in a significant and bona fide 7. Based on all the facts and 1. If you have an overall gain (the sense. Management decisions that circumstances, you participated in the excess of income over deductions can count as active participation activity on a regular, continuous, and and losses, including any prior year include approving new tenants, substantial basis during the tax year. unallowed loss) from a passive deciding rental terms, approving activity, report the income,
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capital or repair expenditures, and Commercial revitalization other similar decisions. deduction. The special $25,000 Specific Instructions allowance for the commercial Modified adjusted gross income revitalization deduction from rental Part III. Shareholder's limitation. The maximum special real estate activities isn't subject to the Share of Current Year allowance that single individuals and active participation rules or modified married individuals filing a joint return Income, Deductions, adjusted gross income limits can qualify for is $25,000. The Credits, and Other Items discussed above. See section 469(i) maximum is $12,500 for married (3)(C) as in effect before March 23, The amounts shown in boxes 1 individuals who file separate returns 2018, and the instructions for box 12, through 17 reflect your share of and who lived apart at all times during code N, for more information. income, loss, deductions, credits, and the year. The maximum special other items, from corporate business allowance for which an estate can Special rules for certain other ac- or rental activities without reference to qualify is $25,000 reduced by the tivities. If you have net income limitations on losses, credits, or other special allowance for which the (loss), deductions, or credits from any items that may have to be adjusted surviving spouse qualifies. activity to which special rules apply, because of: If your modified adjusted gross the corporation will identify the activity 1. The adjusted basis of your income (defined below) is $100,000 and all amounts relating to it on stock and debt in the corporation, Schedule K-1 or on an attached or less ($50,000 or less if married 2. The at-risk limitations, and filing separately), your loss is statement. deductible up to the maximum special If you have net income subject to 3. The passive activity limitations. allowance referred to in the preceding recharacterization under Temporary For information on these paragraph. If your modified adjusted Regulations section 1.469-2T(f) and provisions, see Limitations on Losses, gross income is more than $100,000 Regulations section 1.469-2(f), report Deductions, and Credits, earlier. (more than $50,000 if married filing such amounts according to the separately), the special allowance is Instructions for Form 8582. Other limitations may apply to specific deductions (for example, the limited to 50% of the difference If you have net income (loss), section 179 expense deduction). between $150,000 ($75,000 if married deductions, or credits from either of Generally, specific limitations apply filing separately) and your modified the following activities, treat such before the at-risk and passive loss adjusted gross income. When amounts as nonpassive and report limitations. modified adjusted gross income is them as indicated in these $150,000 or more ($75,000 or more if instructions. If you are an individual, and the married filing separately), there is no 1. The rental of a dwelling unit any above limitations don't apply to the special allowance. shareholder used for personal amounts shown on your Modified adjusted gross income is purposes during the year for more Schedule K-1, take the amounts your adjusted gross income figured than the greater of 14 days or 10% of shown and report them on the without taking into account the the number of days that the residence appropriate lines of your tax return. If following amounts, if applicable. was rented at fair rental value. any of the above limitations apply, • Any passive activity loss. 2. Trading personal property for adjust the amounts on Schedule K-1 • Any rental real estate loss allowed the account of owners of interests in before you report them on your return. under section 469(c)(7) to real estate the activity. professionals (defined earlier). When applicable, the passive activity limitations on losses are • Any overall loss from a publicly Self-charged interest. The traded partnership. applied after the limitations on losses corporation will report any for a shareholder's basis in stock and • Any taxable social security or “self-charged” interest income or equivalent railroad retirement debt and the shareholder's at-risk expense that resulted from loans amount. benefits. between you and the corporation (or • Any deductible contributions to an between the corporation and another If you file your tax return on a IRA or certain other qualified S corporation or partnership if both calendar year basis, but the retirement plans under section 219. entities have the same owners with corporation files a return for a fiscal • The domestic production activities the same proportional interest in each year, report the amounts on your tax deduction. entity). If there was more than one return for the year in which the • The student loan interest deduction. activity, the corporation will provide a corporation's fiscal year ends. For • The tuition and fees deduction. statement allocating the interest example, if the corporation's tax year • The deductible part of income or expense with respect to ends in February 2021, report the self-employment taxes. each activity. The self-charged amounts on your 2021 tax return. • The exclusion from income of interest rules don't apply to your If you have losses, deductions, or interest from Series EE or I U.S. interest in the S corporation if the credits from a prior year that weren’t Savings Bonds used to pay higher corporation made an election under deductible or usable because of education expenses. Regulations section 1.469-7(g) to certain limitations, such as the basis • The exclusion of amounts received avoid the application of these rules. limitations or the at-risk limitations, under an employer's adoption See the Instructions for Form 8582 for take them into account in determining assistance program. details. your income, loss, or credits for this
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year. However, except for passive Schedule E (Form 1040), line 28, g. Your modified adjusted gross activity losses and credits, don't column (i) or (k). income wasn't more than $100,000 combine the prior year amounts with 2. Report box 1 income (loss) from (not more than $50,000 if married any amounts shown on this corporate trade or business activities filing separately and you lived apart Schedule K-1 to get a net figure to in which you didn't materially from your spouse all year). report on your return. Instead, report participate, as follows. 2. If you have a loss from a the amounts on your return on a a. If income is reported in box 1, passive activity in box 2 and you don't year-by-year basis. report the income on Schedule E meet all the conditions in (1) above, If you have amounts other (Form 1040), line 28, column (h). follow the Instructions for Form 8582 to figure how much of the loss you can ! than those shown on b. If a loss is reported in box 1, CAUTION report on Schedule E (Form 1040), Schedule K-1 to report on follow the Instructions for Form 8582 line 28, column (g). Schedule E (Form 1040), enter each to figure how much of the loss can be item separately on Schedule E (Form reported on Schedule E (Form 1040), 3. If you were a real estate 1040), line 28. line 28, column (g). professional and you materially participated in the activity, report Codes. In box 10 and boxes 12 Box 2. Net Rental Real Estate box 2 income (loss) on Schedule E through 17, the corporation will Income (Loss) (Form 1040), line 28, column (i) or (k). identify each item by entering a code Generally, the income (loss) reported 4. If you have income from a in the column to the left of the dollar in box 2 is a passive activity amount passive activity in box 2, report the amount entry space. See List of for all shareholders. However, the income on Schedule E (Form 1040), Codes, later. income (loss) in box 2 isn't from a line 28, column (h). Attached statements. The passive activity if you were a real corporation will enter an asterisk (*) estate professional (defined earlier) Box 3. Other Net Rental Income after the code, if any, in the column to and you materially participated in the (Loss) the left of the dollar amount entry activity. If the corporation had more The amount in box 3 is a passive space for each item for which it has than one rental real estate activity, it activity amount for all shareholders. If attached a statement providing will attach a statement identifying the the corporation had more than one additional information. For those income or loss from each activity. rental activity, it will attach a statement informational items that can't be identifying the income or loss from If you are filing a 2020 Form 1040 reported as a single dollar amount, each activity. After applying the or 1040-SR, use the following the corporation will enter an asterisk in limitations on losses and deductions, instructions to determine where to the left column and enter “STMT” in report the income or loss as follows. the dollar amount entry space to report a box 2 amount after applying the basis and at-risk limitations on 1. If box 3 is a loss, follow the indicate the information is provided on Instructions for Form 8582 to figure an attached statement. losses. See Limitations on Losses, Deductions, and Credits, earlier. how much of the loss can be reported on Schedule E (Form 1040), line 28, 1. If you have a loss from a Income (Loss) column (g). passive activity in box 2 and you meet Box 1. Ordinary Business all the following conditions, report the 2. If income is reported in box 3, Income (Loss) loss on Schedule E (Form 1040), report the income on Schedule E The amount reported in box 1 is your line 28, column (g). (Form 1040), line 28, column (h). share of the ordinary income (loss) a. You actively participated in the See Limitations on Losses, from trade or business activities of the corporate rental real estate activities. Deductions, and Credits, earlier. corporation. Generally, where you See Special allowance for a rental real report this amount on Form 1040 or estate activity, earlier. Portfolio Income Portfolio income or loss (shown in 1040-SR depends on whether the b. Rental real estate activities with boxes 4 through 8b and in box 10, amount is from an activity that is a active participation were your only code A) isn't subject to the passive passive activity to you. If you are an passive activities. individual shareholder filing a 2020 activity limitations. Portfolio income Form 1040 or 1040-SR, find your c. You have no prior year includes income (not derived in the situation below and report your box 1 unallowed losses from these ordinary course of a trade or income (loss) as instructed after activities. business) from interest, ordinary applying the basis and at-risk d. If you are a married person filing dividends, annuities, or royalties, and limitations on losses. See Limitations separately, you lived apart from your gain or loss on the sale of property on Losses, Deductions, and Credits, spouse all year. that produces such income or is held earlier. If the corporation had more e. Your total loss from the rental for investment. than one trade or business activity, it real estate activities wasn't more than Box 4. Interest Income will attach a statement identifying the $25,000 (not more than $12,500 if Report interest income on Form 1040 income or loss from each activity. married filing separately). or 1040-SR, line 2b. 1. Report box 1 income (loss) from f. You have no current or prior corporate trade or business activities year unallowed credits from a passive in which you materially participated on activity.
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Box 5a. Ordinary Dividends Box 8b. Collectibles (28%) Gain and at-risk limitations on losses. See Report ordinary dividends on Form (Loss) Limitations on Losses, Deductions, and Credits, earlier. Don't complete 1040 or 1040-SR, line 3b. The amount After applying the limitations on losses columns (b) through (f) on line 2 of in box 5a may be attributable to and deductions, report collectibles Form 4797. Instead, enter “From previously taxed earnings and profits gain or loss on line 4 of the 28% Rate Schedule K-1 (Form 1120-S)” across (PTEP) in annual PTEP accounts that Gain Worksheet—Line 18 in the these columns. you have with respect to a foreign Instructions for Schedule D (Form corporation. You will need to 1040). See Limitations on Losses, If the amount is a loss from a determine the amount of the ordinary Deductions, and Credits, earlier. passive activity, see Passive Loss dividends that are attributable to Box 8c. Unrecaptured Section Limitations in the Instructions for Form PTEP in your annual PTEP accounts. 4797. After applying the limitations on 1250 Gain Box 5b. Qualified Dividends losses and deductions, report the loss There are three types of unrecaptured following the Instructions for Form Report any qualified dividends on section 1250 gain. Report your share 8582 to figure how much of the loss is Form 1040 or 1040-SR, line 3a. The of this unrecaptured gain on the allowed on Form 4797. If the amount in box 5b may be attributable Unrecaptured Section 1250 Gain corporation had net section 1231 gain to PTEP in annual PTEP accounts Worksheet—Line 19 in the (loss) from more than one activity, it that you have with respect to a foreign Instructions for Schedule D (Form will attach a statement that will identify corporation. You will need to 1040) as follows. the section 1231 gain (loss) from each determine the amount of the qualified • Report unrecaptured section 1250 activity. dividends that are attributable to gain from the sale or exchange of the If you have any foreign source PTEP in your annual PTEP accounts. corporation's business assets on net section 1231 gain (loss), line 5. Qualified dividends are see the instructions for • Report unrecaptured section 1250 TIP excluded from investment box 14, later. income, but you may elect to gain from the sale or exchange of an interest in a partnership on line 10. include part or all of these amounts in Box 10. Other Income (Loss) investment income. See the • Report unrecaptured section 1250 instructions for line 4g of Form 4952, gain from an estate, trust, regulated See List of Codes, later. Investment Interest Expense investment company (RIC), or real Losses reported in box 10 Deduction, for important information estate investment trust (REIT) on may be limited. See on making this election. line 11. Limitations on Losses, If the corporation reports only Deductions, and Credits, earlier. If you have any foreign source unrecaptured section 1250 gain from qualified dividends, see the ! the sale or exchange of its business Code A. Other portfolio income CAUTION instructions for box 14, later. assets, it will enter a dollar amount in (loss). The corporation will report portfolio income other than interest, Box 6. Royalties box 8c. If it reports the other two types of unrecaptured gain, it will provide an ordinary dividend, royalty, and capital Report royalties on Schedule E (Form attached statement that shows the gain (loss) income, and attach a 1040), line 4. amount for each type of unrecaptured statement to tell you what kind of portfolio income is reported. Box 7. Net Short-Term Capital section 1250 gain. If the corporation held a residual Gain (Loss) If you have any foreign source interest in a real estate mortgage After applying the limitations on losses unrecaptured section 1250 investment conduit (REMIC), it will and deductions, report the net gain, see the instructions for report on the statement your share of short-term capital gain (loss) on box 14, later. REMIC taxable income (net loss) that Schedule D (Form 1040), line 5. See you report on Schedule E (Form Limitations on Losses, Deductions, Box 9. Net Section 1231 Gain 1040), line 38, column (d). The and Credits, earlier. (Loss) statement will also report your share Box 8a. Net Long-Term Capital The amount in box 9 is generally of any “excess inclusion” that you passive if it is from a: report on Schedule E (Form 1040), Gain (Loss) • Rental activity, or line 38, column (c), and your share of After applying the limitations on losses • Trade or business activity in which section 212 expenses that you report and deductions, report the net you didn't materially participate. on Schedule E (Form 1040), line 38, long-term capital gain (loss) on column (e). Schedule D (Form 1040), line 12. See However, an amount from a rental Limitations on Losses, Deductions, real estate activity isn't from a passive Code B. Involuntary conversions. and Credits, earlier. activity if you were a real estate This is your net loss from involuntary professional (defined earlier) and you conversions due to casualty or theft. If you have any foreign source materially participated in the activity. The corporation will give you a net long-term capital gain statement that shows the amounts to (loss), see the instructions for If the amount is either (a) a loss that be reported on Form 4684, Casualties box 14, later. isn't from a passive activity, or (b) a and Thefts, line 34, columns (b)(i), (b) gain, report it on Form 4797, line 2, (ii), and (c). column (g), after applying the basis
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If there was a gain (loss) from a figure your section 951(a) inclusions 4797 in accordance with the casualty or theft to property not used on line 17, code AD. instructions for line 28. See in a trade or business or for Regulations section 1.1254-4 for income-producing purposes, the Code H. Other income (loss). details. corporation will provide you with the Amounts with code H are other items • Net short-term capital gain (loss) information you need to complete of income, gain, or loss not included in and net long-term capital gain (loss) Form 4684. boxes 1 through 9 or in box 10 using from Schedule D (Form 1120-S) that codes A through G. The corporation Code C. Section 1256 contracts isn't portfolio income. An example is should give you a description and the and straddles. The corporation will gain or loss from the disposition of amount of your share for each of report any net gain or loss from nondepreciable personal property these items. section 1256 contracts. Report this used in a trade or business activity of amount on Form 6781, Gains and Report loss items that are passive the corporation. Report total net Losses From Section 1256 Contracts activity amounts to you following the short-term gain (loss) on Schedule D and Straddles. Instructions for Form 8582. (Form 1040), line 5. Report the total Code H items may include the net long-term gain (loss) on Code D. Mining exploration costs following. Schedule D (Form 1040), line 12. recapture. The corporation will give Income from recoveries of tax • Gain from the sale or exchange of you a statement that shows the • benefit items. A tax benefit item is an qualified small business (QSB) stock information needed to recapture amount you deducted in a prior tax (as defined in the Instructions for certain mining exploration costs year that reduced your income tax. Schedule D (Form 1040)) eligible for (section 617). See Pub. 535 for Report this amount on Schedule 1 the section 1202 exclusion. The details. (Form 1040), line 8, to the extent it corporation should also give you (a) Code E. Section 951A income. If reduced your tax in the prior year. the name of the corporation that the corporation (and its shareholders, • Gambling gains and losses. issued the QSB stock, (b) your share as applicable) has elected under of the corporation's adjusted basis 1. If the corporation wasn't and sales price of the QSB stock, and Notice 2020-69 to be treated as an engaged in the trade or business of entity for purposes of section 951A, (c) the dates the QSB stock was gambling, (a) report gambling bought and sold. The following this is your share of the corporation's winnings on Schedule 1 (Form 1040), global intangible low-taxed income additional limitations apply at the line 8, and (b) deduct gambling losses shareholder level. amount. Report this amount on to the extent of winnings on Schedule 1 (Form 1040), line 8, or the Schedule A (Form 1040), line 16. 1. You must have held an interest comparable line of your income tax in the corporation when the return, as an addition to any amount 2. If the corporation was engaged corporation acquired the QSB stock of global intangible low-taxed income in the trade or business of gambling, and at all times thereafter until the (GILTI) under section 951A otherwise (a) report gambling winnings on corporation disposed of the QSB computed on Form 8992. Schedule E (Form 1040), line 28, and stock. (b) deduct gambling losses (to the This information will be extent of winnings) on Schedule E 2. Your share of the eligible ! provided on line 10 using (Form 1040), line 28, column (i). section 1202 gain can't exceed the CAUTION code E only if the corporation • Gain (loss) from the disposition of amount that would have been (and its shareholders, if applicable) an interest in oil, gas, geothermal, or allocated to you based on your has elected to be treated as an entity other mineral properties. The interest in the corporation at the time for purposes of section 951A under corporation will attach a statement the QSB stock was acquired. Notice 2020-69. If no election has that provides a description of the See Form 8949, Schedule D (Form been made under the Notice, see property, your share of the amount 1040), and the related instructions for instructions for line 17d, code AD. realized from the disposition, your details on how to report the gain and share of the corporation's adjusted the amount of the allowable exclusion. Code F. Reserved for future use. basis in the property (for other than oil • Gain eligible for section 1045 Code G. Income under subpart F or gas properties), and your share of rollover (replacement stock (other than inclusions under sec- the total intangible drilling costs, purchased by the corporation). The tion 951A). The corporation will development costs, and mining corporation should also give you (a) provide your share of its section exploration costs (section 59(e) the name of the corporation that 951(a) inclusions. Report this amount expenditures) passed through for the issued the qualified small business on your Form 1040, 1040-SR, or property. You must figure your gain or (QSB) stock, (b) your share of the relevant income tax return. loss from the disposition by increasing corporation's adjusted basis and sales your share of the adjusted basis by price of the QSB stock, and (c) the If the corporation has chosen the intangible drilling costs, dates the QSB stock was bought and to apply the provisions of development costs, or mine sold. To qualify for the section 1045 Proposed Regulations section exploration costs for the property that rollover: 1.958-1(d) for the tax year, no you capitalized (that is, costs that you 1. You must have held an interest information will be provided on line 10 didn't elect to deduct under section using code G. Instead, the corporation in the corporation during the entire 59(e)). Report a loss in Part I of Form period in which the corporation held will provide information needed to 4797. Report a gain in Part III of Form
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the QSB stock (more than 6 months Box 11. Section 179 Deduction your passive activity loss for the year. prior to the sale), and Use this amount, along with the total Don't enter them on Form 8582. 2. Your share of the gain eligible cost of section 179 property placed in Form 8283. If you received a copy of for the section 1045 rollover can't service during the year from other Form 8283, Noncash Charitable exceed the amount that would have sources, to complete Part I of Form Contributions, from the corporation, been allocated to you based on your 4562, Depreciation and Amortization. attach the copy to your tax return. Use interest in the corporation at the time The corporation will report on an the amount shown on your the QSB stock was acquired. attached statement your share of the Schedule K-1, not the amount shown cost of any qualified enterprise zone See Form 8949, Schedule D (Form on the Form 8283, to figure your property or qualified real property it 1040), and the related instructions for deduction. placed in service during its tax year. details on how to report the gain and Code A. Cash contributions (60%). Report the amount from line 12 of the amount of the allowable Report this amount, subject to the Form 4562 allocable to a passive postponed gain. 60% AGI limitation, on Schedule A activity using the Instructions for Form • Gain eligible for section 1045 (Form 1040), line 11. 8582. If the amount isn't a passive rollover (replacement stock not activity deduction, report it on Code B. Cash contributions (30%). purchased by the corporation). The Schedule E (Form 1040), line 28, Report this amount, subject to the corporation should also give you (a) column (j), after applying the basis 30% AGI limitation, on Schedule A the name of the corporation that and at-risk limitations on losses. See (Form 1040), line 11. issued the qualified small business Limitations on Losses, Deductions, (QSB) stock, (b) your share of the Code C. Noncash contributions and Credits, earlier. corporation's adjusted basis and sales (50%). Report this amount, subject to price of the QSB stock, and (c) the Box 12. Other Deductions the 50% AGI limitation, on Schedule A dates the QSB stock was bought and See List of Codes, later. (Form 1040), line 12. sold. To qualify for the section 1045 Food inventory contributions. rollover: Deductions reported in box 12 may be limited. See The corporation will report on an 1. You must have held an interest Limitations on Losses, attached statement your share of in the corporation during the entire Deductions, and Credits, earlier. qualified food inventory contributions. period in which the corporation held The food inventory contribution isn't the QSB stock (more than 6 months Contributions. Codes A through G. included in the amount reported in prior to the sale), The corporation will give you a box 12 using code C. The corporation 2. Your share of the gain eligible statement that shows charitable will also report your share of the for the section 1045 rollover can't contributions subject to the 100%, corporation's net income from the exceed the amount that would have 60%, 50%, 30%, and 20% adjusted business activities that made the food been allocated to you based on your gross income (AGI) limitations. inventory contribution(s). Your interest in the corporation at the time If the corporation made a property deduction for food inventory the QSB stock was acquired, and contribution, it will report on an contributions made during 2020 or 3. You must purchase other QSB attached statement your share of both 2021 can't exceed 25% of your stock (as defined in the Instructions the fair market value (FMV) and aggregate net income for the tax year for Schedule D (Form 1040)) during adjusted basis of the property. Use from the business activities from the 60-day period that began on the these amounts to adjust your stock which the food inventory contribution date the QSB stock was sold by the basis. If the corporation made a was made (including your share of net corporation. qualified conservation contribution, it income from partnership or S corporation businesses that made See Form 8949, Schedule D (Form will report the FMV of the underlying property before and after the food inventory contributions). 1040), and the related instructions for Amounts that exceed the 25% details on how to report the gain and donation, the type of legal interest contributed, and a description of the limitation may be carried over for up to the amount of the allowable 5 years. Report this amount, subject postponed gain. conservation purpose furthered by the donation. If the corporation made a to the 50% AGI limitation, on Schedule A (Form 1040), line 12. Deductions contribution of real property located in a registered historic district, it will Code D. Noncash contributions There are potential limitations report any information you will need to (30%). Report this amount, subject to ! on corporate losses you can take a deduction. the 30% AGI limitation, on Schedule A CAUTION deduct on your return. These For more details, see Pub. 526, (Form 1040), line 12. limitations and the order in which you Charitable Contributions, and the must apply them are as follows: the Code E. Capital gain property to a Instructions for Schedule A (Form 50% organization (30%). Report basis limitations, the at-risk 1040). If your contributions are subject limitations, and the passive activity this amount, subject to the 30% AGI to more than one of the AGI limitation, on Schedule A (Form limitations. See Limitations on Losses, limitations, see Pub. 526. Deductions, and Credits, earlier. 1040), line 12. See Worksheet 2. Charitable contribution deductions Applying the Deduction Limits in Pub. aren't taken into account in figuring 526.
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Code F. Capital gain property Code H. Investment interest ex- current year amortization of section (20%). Report this amount, subject to pense. Report this amount on Form 59(e) expenditures from Part VI of the 20% AGI limitation, on Schedule A 4952, line 1. Form 4562 on Schedule E (Form 1040), line 28. If you don't make the (Form 1040), line 12. If the corporation has investment election, report the section 59(e)(2) income or other investment expense, Code G. Contributions (100%). expenditures on Schedule E (Form it will report your share of these items The corporation will use code G to 1040), line 28, and figure the resulting in box 17 using codes A and B. report the following contributions. adjustment or tax preference item Include investment income and (see Form 6251, Alternative Minimum Disaster relief. The corporation expenses from other sources to figure Tax—Individuals). Whether you will report your share of qualified cash how much of your total investment deduct the expenditures or elect to contributions that were donated for interest is deductible. relief efforts in certain disaster areas amortize them, report the amount on a For more information on the special and made before February 19, 2020. separate line in column (i) of line 28 if provisions that apply to investment You can elect to deduct 100% of you materially participated in the interest expense, see Form 4952 and these contributions on Schedule A activity. If you didn't materially Pub. 550. (Form 1040), line 11, or, if you are not participate, follow the Instructions for filing Schedule A, on Form 1040 or Code I. Deductions—Royalty in- Form 8582 to figure how much of the 1040-SR, line 10b, subject to the $300 come. Report deductions allocable to deduction can be reported in column limit. If you don’t make this election, royalties on Schedule E (Form 1040), (g). add this amount to the cash line 19. For this type of expense, enter Code K. Reserved for future use. contributions reported in box 12 using “From Schedule K-1 (Form 1120-S).” Code L. Deductions—Portfolio code A and enter the total amount, These deductions aren't taken into subject to a 60% AGI limitation, as (other). Generally, you should report account in figuring your passive these amounts on Schedule A (Form discussed in the earlier code A activity loss for the year. Don't enter instructions. 1040), line 16. See the instructions for them on Form 8582. Schedule A (Form 1040), line 16, for Other cash contributions made Code J. Section 59(e)(2) expendi- details. in 2020 or 2021. The corporation will tures. The corporation will show on These deductions aren't taken into report your share of qualified cash an attached statement the type and account in figuring your passive contributions that were made in 2020 the amount of qualified expenditures activity loss for the year. Don't enter or 2021. You can elect to deduct for which you may make a section them on Form 8582. 100% of these contributions on 59(e) election. The statement will also Schedule A (Form 1040), line 11, or, if identify the property for which the Code M. Preproductive period ex- you are not filing Schedule A, on Form expenditures were paid or incurred. If penses. You may be able to deduct 1040 or 1040-SR, line 10b, subject to there is more than one type of these expenses currently or you may the $300 limit. If you don’t make this expenditure, the amount of each type need to capitalize them under section election, add this amount to the cash will also be listed. 263A. See Pub. 225, Farmer's Tax contributions reported in box 12 using Guide, and Regulations section If you deduct these expenditures in code A and enter the total amount, 1.263A-4 for details. full in the current year, they are subject to a 60% AGI limitation, as treated as adjustments or tax Code N. Commercial revitalization discussed in the earlier code A preference items for purposes of deduction from rental real estate instructions. alternative minimum tax. However, activities. Follow the Instructions for Qualified conservation you may elect to amortize these Form 8582 to figure how much of the contributions of property used in expenditures over the number of deduction can be reported on agriculture or livestock years in the applicable period rather Schedule E (Form 1040), line 28, production. The corporation will than deduct the full amount in the column (g). report on an attached statement your current year. If you make this election, Code O. Reforestation expense de- share of qualified conservation these items aren't treated as duction. The corporation will provide contributions of property used in adjustments or tax preference items. a statement that describes the agriculture or livestock production. Under the election, you can deduct qualified timber property for these This contribution isn't included in the circulation expenditures ratably over a reforestation expenses. The expense amount reported in box 12 using code 3-year period. Research and deduction is limited to $10,000 C or G. If you are a farmer or rancher, experimental expenditures and mining ($5,000 if married filing separately) for you qualify for a 100% AGI limitation exploration and development costs each qualified timber property, for this contribution. Otherwise, your can be amortized over a 10-year including your share of the deduction for this contribution is period. Intangible drilling and corporation's expense and any subject to a 50% AGI limitation. development costs can be amortized reforestation expenses you separately Report this amount, subject to your over a 60-month period. The paid or incurred during the tax year. applicable limitation, on Schedule A amortization periods begin with the If you didn't materially participate in (Form 1040), line 12. See Pub. 526 for month in which such costs were paid the activity, use Form 8582 to figure more information on qualified or incurred. the amount to report on Schedule E conservation contributions. Make the election on Form 4562. If (Form 1040), line 28, column (g). If you make the election, report the you materially participated in the
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reforestation activity, report the • Film, television, and live theatrical building was placed in service. Any deduction on Schedule E (Form production expenses. The corporation allowable low-income housing credit 1040), line 28, column (i). will provide a statement that describes reported using code A or code B is Codes P through R. Reserved for the film, television, or live theatrical reported on line 4 of Form 8586, future use. production generating these Low-Income Housing Credit, or Form expenses. If you didn't materially 3800, Part III, line 1d (see TIP, Code S. Other deductions. participate in the activity, use Form earlier). Any allowable low-income Amounts with this code may include 8582 to determine the amount that housing credit reported using code C the following. can be reported on Schedule E (Form or code D is reported on line 11 of • Itemized deductions that Form 1040), line 28, column (g). If you Form 8586 or Form 3800, Part III, 1040 or 1040-SR filers report on materially participated in the line 4d (see TIP, earlier). Schedule A (Form 1040). production activity, report the Keep a separate record of the • Soil and water conservation deduction on Schedule E (Form low-income housing credit from each expenditures and endangered 1040), line 28, column (i). separate source so that you can species recovery expenditures. See The corporation will give you a correctly figure any recapture of section 175 for limitations on the description and the amount of your low-income housing credit that may amount you are allowed to deduct. share for each of these items. result from the disposition of all or part • Expenditures for the removal of of your stock in the corporation. For architectural and transportation Box 13. Credits more information on recapture, see barriers to the elderly and disabled See List of Codes, later. the Instructions for Form 8611, that the corporation elected to treat as If you have credits that are passive Recapture of Low-Income Housing a current expense. The deductions Credit. are limited by section 190(c) to activity credits to you, you must $15,000 per year from all sources. complete Form 8582-CR in addition to Code E. Qualified rehabilitation ex- • Interest expense allocated to the credit forms identified below. See penditures (rental real estate). The debt-financed distributions. The Passive Activity Limitations, earlier, corporation will report your share of manner in which you report such and the Instructions for Form the qualified rehabilitation interest expense depends on your use 8582-CR for details. expenditures and other information of the distributed debt proceeds. If the In general, shareholders you need to complete Form 3468 proceeds were used in a trade or TIP whose only sources for a related to rental real estate activities business activity, report the interest credit listed on Form 3800, using code E. Your share of qualified on Schedule E (Form 1040), line 28. General Business Credit, Part III, are rehabilitation expenditures from In column (a) enter the name of the partnerships, S corporations, estates, property not related to rental real corporation and “interest expense.” If trusts, and cooperatives, aren't estate activities will be reported in you materially participated in the trade required to complete the applicable box 17 using code C. See the or business activity, enter the interest credit form or attach it to their return. Instructions for Form 3468 for details. expense in column (i). If you didn't Instead, they can report the credit If the corporation is reporting materially participate in the activity, amounts reported to them by these expenditures from more than one follow the Instructions for Form 8582 pass-through entities directly on Form activity, an attached statement will to figure the interest expense you can 3800, Part III, and enter the EIN of the separately identify the expenditures report in column (g). Material entity in column (b) of Part III. from each activity. participation is defined earlier under However, when applicable, all Combine the expenditures (for Passive Activity Limitations. If the shareholders must complete and Form 3468 reporting) from box 13, proceeds were used in an investment attach the following credit forms to code E, and from box 17, code C. The activity, report the interest on Form their return. expenditures related to rental real 4952. If the proceeds are used for estate activities (box 13, code E) are • Form 3468, Investment Credit personal purposes, the interest is reported on Schedule K-1 separately (Form 3800, Part III, line 1a). generally not deductible. from other qualified rehabilitation • Form 8864, Biodiesel and • Contributions to a capital expenditures (box 17, code C) Renewable Diesel Fuels Credit (Form construction fund (CCF). The because they are subject to different 3800, Part III, line 1l). deduction for a CCF investment isn't passive activity limitation rules. See taken on Schedule E (Form 1040). See the Instructions for Form 3800 for the Instructions for Form 8582-CR for Instead, you subtract the deduction more details. details. from the amount that would normally Code F. Other rental real estate be entered as taxable income on Codes A, B, C, and D. Low-income credits. The corporation will identify Form 1040 or 1040-SR, line 15. In the housing credit. If section 42(j)(5) the type of credit and any other margin to the left of line 15, enter applies, the corporation will report information you need to figure these “CCF” and the amount of the your share of the low-income housing credits from rental real estate deduction. credit using code A or code C, activities (other than the low-income • Penalty on early withdrawal of depending on the date the building housing credit and qualified savings. Report this amount on was placed in service. If section 42(j) rehabilitation expenditures). These Schedule 1 (Form 1040), line 17. (5) doesn't apply, your share of the credit will be reported using code B or credits may be limited by the passive code D, depending on the date the activity limitations. If the credits are
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from more than one activity, the line 4i. For more information, see the • Biodiesel and renewable diesel corporation will identify the credits Instructions for Form 3800. fuels credit. If this credit includes the from each activity on an attached • All others, report the credit on small agri-biodiesel producer credit, statement. See Passive Activity line 1c. the corporation will provide additional Limitations, earlier, and the Code N. Credit for employer social information on an attached statement. Instructions for Form 8582-CR for security and Medicare taxes. If no statement is attached, report this details. Report this amount on line 5 of Form amount on Form 8864, line 9. If a Code G. Other rental credits. The 8846, Credit for Employer Social statement is attached, see the corporation will identify the type of Security and Medicare Taxes Paid on instructions for Form 8864, line 9. New markets credit (Form 8874). credit and any other information you Certain Employee Tips, or Form 3800, • Credit for small employer pension need to figure these rental credits. Part III, line 4f (see TIP, earlier). • plan startup costs and These credits may be limited by the Code O. Backup withholding. This auto-enrollment (Form 8881). passive activity limitations. If the is your share of the credit for backup Credit for employer-provided credits are from more than one • withholding on dividends, interest childcare facilities and services (Form activity, the corporation will identify income, and other types of income. 8882). the credits from each activity on an Include this amount in the total you Low sulfur diesel fuel production attached statement. See Passive • enter on Form 1040 or 1040-SR, credit (Form 8896). Activity Limitations, earlier, and the line 25c, and attach a copy of your Qualified railroad track Instructions for Form 8582-CR for • Schedule K-1 to your tax return. maintenance credit (Form 8900). details. Instead of attaching a copy of your • Credit for oil and gas production Code H. Undistributed capital Schedule K-1 to your tax return, you from marginal wells (Form 8904). gains credit. Code H represents can include a statement with your • Distilled spirits credit (Form 8906). taxes paid on undistributed capital return that provides the corporation's • Energy efficient home credit (Form gains by a regulated investment name, address, EIN, and backup 8908). company or real estate investment withholding amount. • Alternative motor vehicle credit trust. Report these taxes on Schedule Code P. Other credits. On a (Form 8910). 3 (Form 1040), line 12a. Reduce the statement attached to Schedule K-1, • Alternative fuel vehicle refueling basis of your stock by this tax. the corporation will identify the type of property credit (Form 8911). Code I. Biofuel producer credit. credit and any other information you • Qualified zone academy bond Report this amount on line 3 of Form need to figure credits other than those credit. Report this amount on Form 6478, Biofuel Producer Credit, or reported with codes A through O. 8912. Form 3800, Part III, line 4c (see TIP, Most credits identified by code P will • Clean renewable energy bond earlier). be reported on Form 3800, Part III credit. Report this amount on Form (see TIP, earlier). 8912. Code J. Work opportunity credit. • New clean renewable energy bond Report this amount on line 3 of Form Credits that may be reported with credit. Report this amount on Form 5884, Work Opportunity Credit, or code P include the following. 8912. Form 3800, Part III, line 4b (see TIP, • Unused investment credit from the • Qualified energy conservation bond earlier). qualifying advanced coal project credit. Report this amount on Form credit, qualifying gasification project Code K. Disabled access credit. 8912. credit, or qualifying advanced energy • Build America bond credit. Report Report this amount on line 7 of Form project credit allocated from 8826, Disabled Access Credit, or this amount on Form 8912. cooperatives (Form 3468, line 9). • Qualified school construction bond Form 3800, Part III, line 1e (see TIP, • Unused investment credit from the earlier). credit. Report this amount on Form rehabilitation credit or energy credit 8912. Code L. Empowerment zone em- allocated from cooperatives (Form • Mine rescue team training credit ployment credit. Report this amount 3468, line 13). (Form 8923). on line 3 of Form 8844, Empowerment • Employee retention credit (Form • Credit for employer differential Zone Employment Credit, or Form 5884-A). wage payments (Form 8932). 3800, Part III, line 3 (see TIP, earlier). • Orphan drug credit (Form 8820). • Carbon oxide sequestration credit Enhanced oil recovery credit (Form Code M. Credit for increasing re- • (Form 8933). 8830). search activities. Report this • Qualified plug-in electric drive Renewable electricity, refined coal, amount on line 37 of Form 6765, • motor vehicle credit (Form 8936). and Indian coal production credit Credit for Increasing Research • Qualified two-wheeled plug-in (Form 8835). The corporation will Activities, or in Part III of Form 3800 electric vehicle credit (Form 8936). provide a statement showing the (see TIP, earlier) as follows. • Credit for small employer health allocation of the credit for production The S corporation will provide insurance premiums (Form 8941). • during the 4-year period beginning on information necessary to determine if • Employer credit for paid family and the date the facility was placed in it is an eligible small business under medical leave (Form 8994). service and for production after that section 38(c)(5)(A). If you and the period. Box 14. Foreign Transactions S corporation are eligible small Indian employment credit (Form businesses, report the credit on • See List of Codes, later. 8845).
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Codes A through R, U, and V. Use When asked for, the amounts to help you figure the net the information identified by codes A TIP corporation should furnish you amount to enter on Form 6251, line 2t. through R, code U, code V, and any a copy of the corporation's Code F. Other AMT items. Report attached statements to figure your Form 8873 if there is a reduction for the information on the statement foreign tax credit. international boycott operations, attached by the corporation on the illegal bribes, kickbacks, or similar The amounts used to figure your applicable lines of Form 6251 or items. foreign tax credit or deduction may be Schedule I (Form 1041). limited. See Limitations on Losses, Code U. Reserved for future use. Box 16. Items Affecting Deductions, and Credits, earlier. Code V. Other foreign transac- Shareholder Basis If you have any qualified tions. On a statement attached to See List of Codes, later. ! dividends, capital gains Schedule K-1, the corporation will CAUTION Code A. Tax-exempt interest in- (including any capital gain report any other information on foreign come. Report on your return, as an distributions), capital losses, net transactions that you may need using item of information, your share of the section 1231 gains, or net section code V. 1231 losses, you may have to make tax-exempt interest received or certain adjustments to those amounts Box 15. Alternative Minimum accrued by the corporation during the before taking them into account on Tax (AMT) Items year. Individual shareholders include Form 1116, Foreign Tax Credit. See List of Codes, later. this amount on Form 1040 or 1040-SR, line 2a. Generally, you must For details, see Form 1116 and its Use the information reported in increase the basis of your stock by separate instructions and Pub. 514, box 15 (as well as your adjustments this amount. and tax preference items from other Foreign Tax Credit for Individuals. Code B. Other tax-exempt income. sources) to prepare your Form 6251, Codes S and T. Extraterritorial in- Generally, you must increase the Alternative Minimum come exclusion. basis of your stock by the amount Tax—Individuals, or Schedule I (Form shown, but don't include it in income 1. Corporation didn't claim the 1041), Alternative Minimum on your tax return. exclusion. If the corporation reports Tax—Estates and Trusts. your share of foreign trading gross Code C. Nondeductible expenses. Code A. Post-1986 depreciation receipts (code S) and the The nondeductible expenses paid or adjustment. This amount is your extraterritorial income exclusion (code incurred by the corporation aren't share of the corporation's post-1986 T), the corporation wasn't entitled to deductible on your tax return. depreciation adjustment. If you are an claim the exclusion because it didn't Generally, you must decrease the individual shareholder, report this meet the foreign economic process basis of your stock by this amount. requirements. You may still qualify for amount on Form 6251, line 2l. Code D. Distributions. Reduce the your share of this exclusion if the Code B. Adjusted gain or loss. basis of your stock (as explained corporation's foreign trading gross This amount is your share of the earlier) by distributions, not reported receipts for the tax year were $5 corporation's adjusted gain or loss. If on Form 1099-DIV, of property or million or less. To qualify for this you are an individual shareholder, money. This amount will include any exclusion, your foreign trading gross report this amount on Form 6251, amounts included in income with receipts from all sources for the tax line 2k. year must also have been $5 million respect to new clean renewable or less. If you qualify for the exclusion, Code C. Depletion (other than oil & energy, qualified energy conservation, report the exclusion amount in gas). This amount is your share of qualified school construction, build accordance with the instructions for the corporation's depletion America, or (for bonds issued after box 1, 2, or 3, whichever applies. See adjustment. If you are an individual October 3, 2008) qualified zone Form 8873, Extraterritorial Income shareholder, report this amount on academy bonds. If these distributions Exclusion, for details. Form 6251, line 2d. exceed the basis of your stock, the Codes D and E. Oil, gas, & geo- excess is treated as capital gain from 2. Corporation claimed the the sale or exchange of property and exclusion. If the corporation reports thermal properties—Gross income and deductions. The amounts is reported on Form 8949 and your share of foreign trading gross Schedule D (Form 1040). receipts but not the amount of the reported on these lines include only extraterritorial income exclusion, the the gross income (code D) from, and Code E. Repayment of loans from corporation met the foreign economic deductions (code E) allocable to, oil, shareholders. If these payments are process requirements and claimed gas, and geothermal properties made on a loan with a reduced basis, the exclusion when figuring your included in box 1 of Schedule K-1. the repayments must be allocated in share of corporate income. You may The corporation should have attached part to a return of your basis in the also need to know your share of a statement that shows any income loan and in part to the receipt of foreign trading gross receipts from from, or deductions allocable to, such income. See Regulations section this corporation to determine if you properties that are included in boxes 2 1.1367-2 for information on reduction met the $5 million or less exception through 12, 16, and 17 of in basis of a loan and restoration in discussed above for purposes of Schedule K-1. Use the amounts basis of a loan with a reduced basis. qualifying for an extraterritorial income reported here and any other reported See Rev. Rul. 64-162, 1964-1 (Part 1) exclusion from other sources.
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C.B. 304, and Rev. Rul. 68-537, recapture that may result from the passed through to shareholders with 1968-2 C.B. 372, for details. disposition of all or part of your code K. If the corporation passed corporate stock. For details, see Form through a section 179 expense Box 17. Other Information 8611. deduction for the property, you must See List of Codes, later. Code G. Recapture of investment report the gain or loss, if any, and any Code A. Investment income. credit. The corporation will provide recapture of the section 179 expense Report this amount on Form 4952, any information you need to figure deduction for the property on your line 4a. your recapture tax on Form 4255, income tax return (see the Instructions for Form 4797 for details). The Code B. Investment expenses. Recapture of Investment Credit. See the Form 3468 on which you took the corporation will provide all the Report this amount on Form 4952, following information. line 5. original credit for other information you need to complete Form 4255. 1. Description of the property. Code C. Qualified rehabilitation ex- You may also need Form 4255 if 2. Date the property was acquired penditures (other than rental real and placed in service. estate). The corporation will report your proportionate stock interest in your share of qualified rehabilitation the corporation is reduced by more 3. Date of the sale or other expenditures and other information than one-third after you were disposition of the property. you need to complete Form 3468 for allocated part of an investment credit. 4. Your share of the gross sales property not related to rental real Code H. Recapture of other cred- price or amount realized. estate activities in box 17 using code its. On a statement attached to 5. Your share of the cost or other C. Your share of qualified Schedule K-1, the corporation will basis plus the expense of sale. rehabilitation expenditures related to report any information you need to 6. Your share of the depreciation rental real estate activities is reported figure the recapture of other credits allowed or allowable. in box 13 using code E. See the including the new markets credit, Instructions for Form 3468 for details. Indian employment credit, credit for 7. Your share of the section 179 If the corporation is reporting employer-provided childcare facilities expense deduction (if any) passed expenditures from more than one and services, alternative motor through for the property and the activity, the attached statement will vehicle credit, alternative fuel vehicle corporation's tax year(s) in which the separately identify the expenditures refueling property credit, and qualified amount was passed through. from each activity. plug-in electric drive motor vehicle To figure the depreciation allowed Combine the expenditures (for credit. or allowable for Form 4797, line 22, add to the amount from item (6) above Form 3468 reporting) from box 13, Code I. Look-back interest—Com- the amount of your share of the code E, and from box 17, code C. The pleted long-term contracts. The section 179 expense deduction, expenditures related to rental real corporation will report any information reduced by any unused carryover of estate activities (box 13, code E) are you need to figure the interest due or the deduction for this property. This reported on Schedule K-1 separately to be refunded under the look-back amount may be different than the from other qualified rehabilitation method of section 460(b)(2) on certain amount of section 179 expense you expenditures (box 17, code C) long-term contracts. Use Form 8697, deducted for the property if your because they are subject to different Interest Computation Under the interest in the corporation has passive activity limitation rules. See Look-Back Method for Completed changed. the Instructions for Form 8582-CR for Long-Term Contracts, to report any details. such interest. 8. If the disposition is due to a Code D. Basis of energy property. casualty or theft, any information you Code J. Look-back interest—In- need to complete Form 4684. If the corporation provides an come forecast method. The attached statement for code D, use corporation will report any information 9. If the sale was an installment the information on the statement to you need to figure the interest due or sale, any information you need to complete the applicable energy credit to be refunded under the look-back complete Form 6252, Installment Sale on line 12 of Form 3468. See the method of section 167(g)(2) for Income. The corporation will Instructions for Form 3468 for details. certain property placed in service after separately report your share of all payments received for the property in Codes E and F. Recapture of September 13, 1995, and depreciated under the income forecast method. the following tax years. See the low-income housing credit. The Instructions for Form 6252 for details. corporation will identify by code E Use Form 8866, Interest Computation your share of any recapture of a Under the Look-Back Method for Code L. Recapture of section 179 low-income housing credit from its Property Depreciated Under the deduction. The corporation will investment in partnerships to which Income Forecast Method, to report report your share of any recapture of the provisions of section 42(j)(5) any such interest. section 179 expense deduction if apply. All other recapture of Code K. Dispositions of property business use of any property for low-income housing credits will be with section 179 deductions. The which the section 179 expense identified by code F. corporation will report your share of deduction was passed through to Keep a separate record of each gain or loss on the sale, exchange, or shareholders dropped to 50% or less type of recapture so that you will be other disposition of property for which before the end of the recapture able to correctly figure any credit a section 179 expense deduction was period. If this occurs, the corporation
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must provide the following Deferred obligation income from the property, share of information. computation. For each Form 6252 production for the tax year, and other 1. Your share of the depreciation where line 5 is greater than $150,000, information needed to figure your allowed or allowable (not including the figure the Schedule K-1 deferred depletion deduction for oil and gas section 179 expense deduction). obligation as follows. wells. The corporation should also • Line (4) from the list above, less the allocate to you a proportionate share 2. Your share of the section 179 sum of lines (7) and (8). This equals of the adjusted basis of each expense deduction (if any) passed the Schedule K deferred obligation. corporate oil or gas property. See through for the property and the • Multiply the Schedule K deferred Pub. 535 for details on how to figure corporation's tax year(s) in which the obligation by the shareholder's current your depletion deduction. amount was passed through. Reduce year allocation percentage. This this amount by the portion, if any, of Reduce the basis of your stock by equals the shareholder's share of the your unused (carryover) section 179 the amount of this deduction up to the deferred obligation. expense deduction for this property. extent of your adjusted basis in the Report the interest on Schedule 2 property. Code M. Section 453(l)(3) informa- (Form 1040), line 8. Check box “c” Codes S and T. Reserved for future tion. The corporation will report any and enter “453A(c)” and the amount of use. information you need to figure the the interest in the space next to that interest due under section 453(l)(3) box. See section 453A(c) for details Code U. Net investment income. with respect to the disposition of on how to figure the interest. The corporation may use code U to report information you may need to certain timeshares and residential lots Code O. Section 1260(b) informa- on the installment method. Report the determine your net investment income tion. The corporation will report any tax under section 1411, including interest on Schedule 2 (Form 1040), information you need to figure the line 8. Check box “c” and enter “453(l) information regarding income from interest due under section 1260(b). If controlled foreign corporations (3)” and the amount of the interest in the corporation had gain from certain the space next to that box. See (CFCs) and passive foreign constructive ownership transactions, investment companies (PFICs), the section 453(l)(3) for details on how to your tax liability must be increased by figure the interest. stock of which is owned by the the interest charge on any deferral of corporation. Any information not Code N. Section 453A(c) informa- gain recognition under section provided elsewhere on Schedule K-1 tion. The corporation will report any 1260(b). Report the interest on (or an attachment to Schedule K-1) is information you need to figure the Schedule 2 (Form 1040), line 8. Enter provided using code U. For CFCs and interest due under section 453A(c) “1260(b)” and the amount of the PFICs that you treat as qualified with respect to certain installment interest in the space to the left of electing funds (QEFs), the information sales. This information shall include line 8. See section 1260(b) for details that is relevant to you will depend on the following from each Form 6252 on how to figure the interest. whether you, the corporation, or a where line 5 is greater than $150,000. Code P. Interest allocable to pro- subsidiary pass-through entity has 1. Description of property. duction expenditures. The made an election under Regulations 2. Date acquired. corporation will report any information section 1.1411-10(g) with respect to 3. Date property sold. you need relating to interest you are the CFC or QEF. For example, if the required to capitalize under section corporation made an election under 4. Selling price, including 263A for production expenditures. Regulations section 1.1411-10(g) for mortgages and other debts (not See Regulations sections 1.263A-8 a CFC, the stock of which is owned by including interest, whether stated or through 1.263A-15 for details. the corporation, and the relevant unstated), less mortgages, debts and income and deduction items derived Code Q. CCF nonqualified with- other liabilities the buyer assumed or from that CFC are reported elsewhere drawals. The corporation will report took the property subject to. on Schedule K-1, you will not need your share of nonqualified 5. Gross profit. the information provided using code U withdrawals from a capital to complete your Form 8960. 6. Gross profit percentage. construction fund (CCF). These 7. Contract price less (4) above, withdrawals are taxed separately from Follow the Instructions for Form plus payments received during the your other gross income at the highest 8960 to figure and report your net year, not including interest, whether marginal ordinary income or capital investment income and adjusted stated or unstated. gains tax rate. Attach a statement to gross income or modified adjusted gross income. See Regulations 8. Payments received in prior your federal income tax return to show sections 1.1411-1 through 1.1411-10 years, not including interest whether your computation of both the tax and for more details. stated or unstated. interest for a nonqualified withdrawal. Include the tax and interest on 9. Installment sale income. Code V. Section 199A information. Schedule 2 (Form 1040), line 10. In Generally, you may be allowed a 10. Character of the the space to the left of line 10, enter deduction of up to 20% of your net income—capital or ordinary. the amount of tax and interest and qualified business income (QBI) plus 11. Shareholder’s share of the “CCF.” See Pub. 595 for details. 20% of your qualified REIT dividends, deferred obligation. See computation Code R. Depletion information—Oil also known as section 199A below. and gas. This is your share of gross dividends, and qualified publicly
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traded partnership (PTP) income from property of each qualified trade or Form 8990, Limitation on Business your S corporation. The S corporation business, or aggregation. See the Interest Expense Under Section will provide the information you need instructions for Form 8995 or Form 163(j), it may determine it has excess to figure your deduction. You will use 8995-A. taxable income. Report this amount of one of these two forms to figure your excess taxable income on Form 8990, Section 199A dividends. The QBI deduction. Schedule B, line 45(c), if you are amount reported reflects your pro rata required to file Form 8990. See the 1. Use Form 8995, Qualified share of the S corporation’s net Instructions for Form 8990 for details. Business Income Deduction section 199A dividends. See the Simplified Computation, if: instructions for Form 8995 or Form Code AB. Excess business interest a. You have QBI, section 199A 8995-A. income. If the S corporation is dividends, or PTP income (defined required to file Form 8990, Limitation Patrons of specified agricultural below), on Business Interest Expense Under and horticultural cooperatives. If Section 163(j), it may determine it has b. Your 2020 taxable income the S corporation was a patron of an before the QBI deduction is equal to excess business interest income. agricultural or horticultural cooperative Report this amount of excess or less than $163,300 ($326,600 if (specified cooperative), you must use married filing jointly), and business interest income on Form Form 8995-A to figure your QBI 8990, Schedule B, line 45(d), if you c. You aren’t a patron in a deduction. In addition, you must are required to file Form 8990. See specified agricultural or horticultural complete Schedule D (Form 8995-A), the Instructions for Form 8990 for cooperative. Special Rules for Patrons of details. 2. Use Form 8995-A, Qualified Agricultural or Horticultural Business Income Deduction, if you Cooperatives, to determine your Code AC. Gross receipts for sec- don’t meet all three of these patron reduction. tion 448(c) Use the gross receipts requirements. amount to figure the business interest QBI items allocable to qualified expense you can deduct, if QBI pass-through entity payments from specified applicable. See section 163(j) and the reporting information. Use the cooperatives subject to Instructions for Form 8990 for details. information provided to you by your S shareholder-specific Code AD. Other information. The corporation to complete the determinations. The amounts corporation will use code AD to report appropriate form identified above. reported to you reflect your pro rata share of items from the S the following to shareholders. QBI or qualified PTP items corporation’s trade(s) or business(es), 1. Any information you need to subject to shareholder-specific or aggregation(s), and include items complete a disclosure statement for determinations. The amounts that may not be includible in your reportable transactions in which the reported to you reflect your pro rata calculation of the QBI deduction and corporation participates. If the share of items from the S patron reduction. When determining corporation participates in a corporation’s trade(s) or business(es), QBI items allocable to qualified transaction that must be disclosed on or aggregation(s), and may include payments, you must include only Form 8886, Reportable Transaction items that aren’t includible in your qualified items that are included or Disclosure Statement, both you and calculation of the QBI deduction. allowed in determining taxable the corporation may be required to file When determining QBI or qualified income for the tax year. To determine Form 8886 for the transaction. The PTP income, you must include only your QBI items allocable to qualified determination of whether you are those items that are qualified items of payments, see the Instructions for required to disclose a transaction of income, gain, deduction, and loss Form 8995-A. the corporation is based on the included or allowed in determining category(ies) under which the W-2 wages allocable to qualified taxable income for the tax year. To transaction qualifies for disclosure payments from specified determine your QBI or your qualified and is determined by you and the cooperatives. The amounts reported PTP income amounts and for corporation. You may have to pay a reflect your pro rata share of the S information on where to report them, penalty if you are required to file Form corporation’s W-2 wages allocable to see the instructions for Form 8995 or 8886 and don't do so. See the qualified payments of each qualified Form 8995-A. Instructions for Form 8886 for details. trade or business, or aggregation. See W-2 wages. The amounts the Instructions for Form 8995-A. 2. Gross farming and fishing reported reflect your pro rata share of income. If you are an individual the S corporation’s W-2 wages Section 199A(g) deduction from shareholder, report this income, as an allocable to the QBI of each qualified specified cooperatives. The item of information, on Schedule E trade or business, or aggregation. See amount reported reflects your pro rata (Form 1040), Part V, line 42. Don't the instructions for Form 8995 or Form share of the S corporation’s net report this income elsewhere on Form 8995-A. section 199A(g) deduction. See the 1040 or 1040-SR. Instructions for Form 8995-A. Unadjusted basis immediately For a shareholder that is an estate after acquisition (UBIA) of Codes W through Z. Reserved for or trust, report this income to the qualified property. The amounts future use. beneficiaries, as an item of reported reflect your pro rata share of Code AA. Excess taxable income. information, on Schedule K-1 (Form the S corporation’s UBIA of qualified If the S corporation is required to file
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1041). Don't report it elsewhere on corporation provides you to figure the section 951A income. Use this Form 1041. amount to report on Form 3468, line 7. information to fill out Form 8992 and 3. The amount included in gross 8. Inversion gain. The corporation determine your GILTI amount. income with respect to qualified zone will provide a statement showing the 11. If the corporation has chosen to academy bonds issued before amounts of each type of income or apply the provisions of Proposed October 4, 2008. Income with respect gain that is included in inversion gain. Regulations section 1.958-1(d) for the to these qualified zone academy The corporation has included tax year, it will provide you with bonds can't be used to increase your inversion gain in income elsewhere on information on the CFCs held through stock basis. Because this amount is Schedule K-1. Inversion gain is also the corporation needed to figure your already included in income elsewhere reported under code AD because your section 951(a) inclusion. Report this on Schedule K-1, you must reduce taxable income and alternative amount on your Form 1040, 1040-SR, your stock basis by this amount. See minimum taxable income can't be less or relevant income tax return. Part I, line 13, of the Worksheet for than the inversion gain. Also, your 12. Any other information you may Figuring a Shareholder's Stock and inversion gain (a) isn't taken into need to file your return not shown Debt Basis. account in figuring the net operating elsewhere on Schedule K-1. 4. The amount included in gross loss (NOL) for the tax year or the NOL The corporation should give you a income with respect to clean that can be carried over to each tax description and the amount of your renewable energy bonds. Income with year, (b) may limit your credits, and share for each of these items. respect to clean renewable energy (c) is treated as income from sources bonds can't be used to increase your within the United States for the foreign Box 18. More Than One Activity stock basis. Because this amount is tax credit. See section 7874 for for At-Risk Purposes already included in income elsewhere details. When the corporation has more than on Schedule K-1, you must reduce 9. The corporation will provide one activity for at-risk purposes, it will your stock basis by this amount. See your share of section 965(a) check this box and attach a Part I, line 13, of the Worksheet for inclusions and section 965(c) statement. Use the information in the Figuring a Shareholder's Stock and deductions. Subtract section 965(c) attached statement to correctly Debt Basis. deductions from section 965(a) determine your at-risk limitations. For inclusions, if applicable. Report the 5. Qualified investment in more information, see At-Risk net amount on Schedule 1 (Form qualifying advanced coal project Limitations, earlier. property. Use the amounts the 1040), line 8. If the corporation had a corporation provides you to figure the section 965(a) inclusion, it will attach Box 19. More Than One Activity amounts to report on Form 3468, lines a copy of the Form 965, including for Passive Activity Purposes 5a, 5b, and 5c. Schedules F and H, to your When the corporation has more than Schedule K-1. See the Instructions for 6. Qualified investment in one activity for passive activity Forms 1040 and 1040-SR, the qualifying gasification property. Use purposes, it will check this box and Instructions for Form 965, and the the amounts the corporation provides attach a statement. Use the Instructions for Form 965-A for details. you to figure the amounts to report on information in the attached statement Form 3468, lines 6a and 6b. 10. If the corporation has not to correctly determine your passive elected to be treated as an entity for 7. Qualified investment in activity limitations. For more purposes of section 951A under qualifying advanced energy project information, see Passive Activity Notice 2020-69, it will provide credit property. Use the amounts the Limitations, earlier. information you need to figure your
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List of Codes
This list identifies the codes O Reforestation expense Deductions allocated and Box 17. Other informa- used on Schedule K-1 for deduction apportioned at shareholder tion all shareholders. For P Reserved for future use level: detailed reporting and filing Q Reserved for future use I Interest expense A Investment income information, see the specific R Reserved for future use J Other B Investment expenses line instructions, earlier, and S Other deductions Deductions allocated and C Qualified rehabilitation the instructions for your apportioned at corporate level expenditures (other than to foreign source income: rental real estate) income tax return. Box 13. Credits K Section 951A category D Basis of energy property Box 10. Other income A Low-income housing foreign source income E Recapture of (loss) credit (section 42(j)(5)) L Foreign branch category low-income housing from pre-2008 buildings M Passive category credit (section 42(j)(5)) Code B Low-income housing N General category F Recapture of A Other portfolio income credit (other) from O Other low-income housing credit (other) (loss) pre-2008 buildings Other information: G Recapture of investment B Involuntary conversions C Low-income housing P Total foreign taxes paid credit C Section 1256 contracts credit (section 42(j)(5)) Q Total foreign taxes H Recapture of other & straddles from post-2007 buildings accrued credits D Mining exploration costs D Low-income housing R Reduction in taxes I Look-back recapture credit (other) from available for credit interest—completed E Section 951A income post-2007 buildings S Foreign trading gross long-term contracts F Reserved for future use E Qualified rehabilitation receipts J Look-back G Income under subpart F expenditures (rental real T Extraterritorial income interest—income (other than inclusions estate) exclusion forecast method under section 951A) F Other rental real estate U Reserved for future use credits K Dispositions of property H Other income (loss) V Other foreign G Other rental credits with section 179 transactions deductions Box 12. Other deduc- H Undistributed capital gains credit L Recapture of section tions Box 15. Alternative mini- 179 deduction I Biofuel producer credit mum tax (AMT) items M Section 453(l)(3) A Cash contributions J Work opportunity credit information (60%) K Disabled access credit A Post-1986 depreciation N Section 453A(c) B Cash contributions L Empowerment zone adjustment information (30%) employment credit B Adjusted gain or loss O Section 1260(b) C Noncash contributions M Credit for increasing C Depletion (other than oil information (50%) research activities & gas) P Interest allocable to D Noncash contributions N Credit for employer D Oil, gas, & production expenditures (30%) social security and geothermal—gross Q CCF nonqualified E Capital gain property to Medicare taxes income withdrawals a 50% organization O Backup withholding E Oil, gas, & R Depletion (30%) P Other credits geothermal—deductions information—oil and gas F Capital gain property F Other AMT items S Reserved for future use (20%) Box 14. Foreign transac- T Reserved for future use G Contributions (100%) tions Box 16. Items affecting U Net investment income H Investment interest shareholder basis V Section 199A expense A Name of country or U.S. information I Deductions—royalty possession A Tax-exempt interest income W Reserved for future use B Gross income from all income J Section 59(e)(2) X Reserved for future use sources B Other tax-exempt expenditures Y Reserved for future use C Gross income sourced income K Reserved for future use Z Reserved for future use at shareholder level C Nondeductible expenses L Deductions—portfolio AA Excess taxable income Foreign gross income D Distributions (other) sourced at corporate level: AB Excess business E Repayment of loans M Preproductive period interest income D Section 951A category from shareholders expenses E Foreign branch category AC Gross receipts for section 448(c) N Commercial F Passive category AD Other information revitalization deduction G General category from rental real estate H Other activities
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