Page 161 - BusinessStructures & Forms

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If the corporation made a qualified conservation contribution Line 12c. Section 59(e)(2) Expenditures
under section 170(h), also include the FMV of the underlying
property before and after the donation, as well as the type of Generally, section 59(e) allows each shareholder to make an
legal interest contributed, and describe the conservation election to deduct their pro rata share of the corporation's
purpose furthered by the donation. Give a copy of this otherwise deductible qualified expenditures ratably over 10
information to each shareholder. years (3 years for circulation expenditures). The deduction is
If the corporation made a contribution of real property located taken beginning with the tax year in which the expenditures were
in a registered historic district, restrictions apply. Generally, no made (or for intangible drilling and development costs, over the
deductions are allowed for structures or land (deductions are 60-month period beginning with the month in which such costs
only allowed for buildings), and the charitable contribution may were paid or incurred).
be reduced if rehabilitation credits were claimed for the building.
A $500 filing fee may apply to certain deductions over $10,000. The term “qualified expenditures” includes only the following
See Pub. 526 for details. types of expenditures paid or incurred during the tax year.
Nondeductible contributions. Certain contributions made to • Circulation expenditures.
an organization conducting lobbying activities aren't deductible. • Research and experimental expenditures.
See section 170(f)(9) for more details. Also see Contributions • Intangible drilling and development costs.
You Can’t Deduct in Pub. 526 for more examples of • Mining exploration and development costs.
nondeductible contributions. If a shareholder makes the election, these items aren't treated
An accrual basis S corporation can't elect to treat a as alternative minimum tax (AMT) tax preference items.
! contribution as having been paid in the tax year the
CAUTION board of directors authorizes the payment if the Because the shareholders make this election, the corporation
contribution isn't actually paid until the next tax year. can't deduct these amounts or include them as AMT items on
Contributions (100%) (code G). If the corporation is a Schedule K-1. Instead, the corporation passes through the
information the shareholders need to figure their separate
qualified farmer or rancher (farm income is more than 50% of deductions.
gross income), attach a statement to Schedule K-1 that shows
the shareholder's pro rata share of qualified conservation On the dotted line to the left of the entry space for line 12c,
contributions of property used in agriculture or livestock enter the type of expenditures claimed on line 12c. Enter on
production (or available for such production). Don’t include these line 12c the qualified expenditures paid or incurred during the tax
contributions in the amounts reported in box 12 of Schedule K-1 year for which a shareholder may make an election under
because shareholders must separately determine if they qualify section 59(e). Enter this amount for all shareholders whether or
for the 50% or 100% AGI limitation for these contributions. The not any shareholder makes an election under section 59(e).
contribution must be subject to a restriction that the property
remain available for such production. See section 170(b) for
On an attached statement, identify the property for which the
details. expenditures were paid or incurred. If the expenditures were for
Schedule K-1. Report each shareholder's pro rata share of intangible drilling or development costs for oil and gas
charitable contributions in box 12 of Schedule K-1 using codes A properties, identify the month(s) in which the expenditures were
through G for each of the contribution categories shown earlier. paid or incurred. If there is more than one type of expenditure or
See Contributions of property, earlier, for information on more than one property, provide the amounts (and the months
statements you may be required to attach to Schedule K-1. The paid or incurred, if required) for each type of expenditure
corporation must attach a copy of its Form 8283 to the separately for each property.
Schedule K-1 of each shareholder receiving an allocation of the
contribution deduction shown in Section A or Section B of its Schedule K-1. Report each shareholder's pro rata share of
Form 8283. section 59(e) expenditures in box 12 of Schedule K-1 using code
J. Identify the following information on an attached statement.
Line 12b. Investment Interest Expense • The type of expenditure.
• The property for which the expenditures are paid or incurred.
• For oil and gas properties only, the month in which intangible
Include on this line the interest properly allocable to debt on drilling costs and development costs were paid or incurred.
property held for investment purposes. Property held for If there is more than one type of expenditure or the
investment includes property that produces income (unless expenditures are for more than one property, provide each
derived in the ordinary course of a trade or business) from
interest, dividends, annuities, or royalties; and gains from the shareholder's pro rata share of the amounts (and the months
disposition of property that produces those types of income or is paid or incurred for oil and gas properties) for each type of
held for investment. expenditure separately for each property.

Investment interest expense doesn't include interest expense Line 12d. Other Deductions
allocable to a passive activity.
Enter deductions not included on line 11, 12a, 12b, 12c, or 16f.
Investment income and investment expenses other than On the line to the left of the entry space for line 12d, identify the
interest are reported on lines 17a and 17b, respectively. This type of deduction. If there is more than one type of deduction,
information is needed by shareholders to determine the attach a statement to Form 1120-S that separately identifies the
investment interest expense limitation (see Form 4952 for type and amount of each deduction for the following categories.
details). The codes needed for Schedule K-1 reporting are provided for
Schedule K-1. Report each shareholder's pro rata share of each category.
investment interest expense in box 12 of Schedule K-1 using Deductions—Royalty income (code I). Enter deductions
code H. related to royalty income.
Code K. Reserved for future use.

Instructions for Form 1120-S (2022) -31-