Page 250 - Individual Forms & Instructions Guide

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Line 27 not combine these expenses with, or net entity in column (a) and the amount in
column (g).
them against, any other amounts from
If you answered “Yes” on line 27, fol- the partnership. For interest allocated to investment
low the instructions below. If you do not • If the expenses are from a passive use, enter the interest on Form 4952.
follow these instructions, the IRS may activity and you are not required to file Carry any deductible amount allocated
send you a notice of additional tax due Form 8582, enter the expenses related to to royalties to a separate line of your
because the amounts reported by the a passive activity on a separate line in Schedule E, Part II. Enter "investment
partnership or S corporation on Sched- column (g) of line 28. Do not combine interest" and the name of the entity in
ule K-1 do not match the amounts you these expenses with, or net them against, column (a) and the amount in column
reported on your tax return. any other amounts from the partnership. (i). Carry the balance of the deductible
• Enter “UPE” in column (a) of the amount to Schedule A, line 9.
Losses Not Allowed in Prior Years same line. Any interest allocated to proceeds
Due to the Basis or At-Risk Rules Line 28 used for personal purposes is generally

• Enter your total prior year unal- not deductible.
lowed losses that are now deductible on For nonpassive income or loss and pas- For more information on allocating
a separate line in column (i) of line 28. sive income or losses for which you are and reporting these interest expenses,
Do not combine these losses with, or net not filing Form 8582, enter in the appli- see Notice 88-37 in Cumulative Bulletin
them against, any current year amounts cable column of line 28 your current 1988-1. Also, see Notice 89-35 in Cu-
from the partnership or S corporation. year ordinary income or loss (after ap- mulative Bulletin 1989-1.
• Enter “PYA” in column (a) of the plying any special rules that limit losses) Owners of S corporation stock and
same line. from the partnership or S corporation.
Report each related item required to be debt. If you report a loss, receive a dis-
Prior Year Unallowed Losses reported on Schedule E (including items tribution, dispose of stock, or receive a
loan repayment from an S corporation,
From a Passive Activity Not of income or loss stated separately on you must check the box in column (e) on
Reported on Form 8582 Schedule K-1) in the applicable column line 28 and attach the required basis
of a separate line following the line on
• Enter on a separate line in column which you reported the current year or- computation. For more information, see
(g) of line 28 your total prior year unal- dinary income or loss. Also, enter a de- Basis rules for S corporations, earlier.
lowed losses not reported on Form 8582. scription of the related item (for exam-
Such losses include prior year unal- ple, depletion) in column (a) of the same
lowed losses now deductible because line. Part III
you did not have an overall loss from all
passive activities or you disposed of If you are required to file Form 8582, Income or Loss From
your entire interest in a passive activity see the Instructions for Form 8582 be- Estates and Trusts
in a fully taxable transaction. Do not fore completing Schedule E.
combine these losses with, or net them Debt-financed acquisition. A debt-fi- If you are a beneficiary of an estate or
against, any current year amounts from nanced acquisition is the use of loan trust, use Part III to report your part of
the partnership or S corporation. proceeds to buy an interest in, or to the income (even if not received) or loss.
• Enter “PYA” in column (a) of the make a contribution to the capital of, a You should receive a Schedule K-1
same line. partnership or S corporation. You must (Form 1041) from the fiduciary. Your
allocate the loan proceeds and the rela- copy of Schedule K-1 and its instruc-
Unreimbursed Partnership ted interest expense among all the assets tions will tell you where on your return
Expenses of the entity. You can use any reasona- to report the items from Schedule K-1.
ble method. Do not attach Schedule K-1 to your re-
You can deduct unreimbursed ordinary turn. Keep it for your records.
and necessary partnership expenses you For interest allocated to trade or busi-
paid on behalf of the partnership on ness assets (or expenditures), report the If you are treating items on your tax
Schedule E if you were required to pay interest on a separate line of your Sched- return differently from the way the es-
these expenses under the partnership ule E, Part II. Enter "business interest" tate or trust reported them on its return,
agreement. You can only deduct unreim- and the name of the partnership or S cor- you may have to file Form 8082.
bursed expenses on Schedule E that are poration in column (a) and the amount If you have estimated taxes credited
trade or business expenses under section in column (i). to you from a trust (Schedule K-1 (Form
162. Don't report unreimbursed partner- For interest allocated to passive activ- 1041), box 13, code A), enter “ES pay-
ship expenses separately if the expenses ity use, enter the interest on Form 8582 ment claimed” and the amount on the
are from a passive activity and you are as a deduction from the passive activity dotted line next to line 37. Do not in-
required to file Form 8582; otherwise, of the partnership or S corporation. clude this amount in the total on line 37.
do the following. Show any deductible amount on a sepa- Instead, enter the amount on Form 1040,
• Enter unreimbursed partnership rate line on your Schedule E, Part II. En- 1040-SR, or 1040-NR, line 26.
expenses from nonpassive activities on a ter "passive interest" and the name of the
separate line in column (i) of line 28. Do

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