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Irs Tax Form 2012 1040a

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Irs Tax Form 2012 1040a

Irs tax form 2012 1040a 34. Irs tax form 2012 1040a   Crédito Tributario por Hijos Table of Contents Introduction Useful Items - You may want to see: Hijo Calificado Cantidad de CréditoLímites del Crédito Cómo Reclamar el Crédito Crédito Tributario Adicional por Hijos Cómo Completar el Anexo 8812 (Formulario 1040A o Formulario 1040)Parte I Partes II a IV Introduction El crédito tributario por hijos es un crédito que puede reducir su impuesto hasta $1,000 por cada uno de sus hijos calificados. Irs tax form 2012 1040a El crédito tributario adicional por hijos es un crédito que podría tomar en el caso de que no pueda reclamar la cantidad completa del crédito tributario por hijos. Irs tax form 2012 1040a Este capítulo le explica lo siguiente: Quién es un hijo calificado. Irs tax form 2012 1040a La cantidad del crédito. Irs tax form 2012 1040a Cómo se puede reclamar el crédito. Irs tax form 2012 1040a El crédito tributario por hijos y el crédito tributario adicional por hijos no deben confundirse con el crédito por gastos del cuidado de menores y dependientes, el cual se explica en el capítulo 32. Irs tax form 2012 1040a Si no está sujeto al pago de impuestos. Irs tax form 2012 1040a   Algunos créditos, tales como el crédito tributario por hijos o el crédito por gastos del cuidado de menores y dependientes, se usan para reducir el impuesto. Irs tax form 2012 1040a Si la cantidad del impuesto en la línea 46 del Formulario 1040 o en la línea 28 del Formulario 1040A es cero, no calcule el crédito tributario por hijos ya que no hay impuesto que se pueda reducir. Irs tax form 2012 1040a Sin embargo, podría reunir los requisitos para el crédito tributario adicional por hijos en la línea 65 (Formulario 1040) o en la línea 39 (Formulario 1040A). Irs tax form 2012 1040a Useful Items - You may want to see: Publicación 972 Child Tax Credit (Crédito tributario por hijos), en inglés Formulario (e Instrucciones) Anexo 8812   (Formulario 1040A o 1040) Child Tax Credit (Crédito tributario por hijos), en inglés W-4(SP) Certificado de Exención de Retenciones del Empleado W-4 Employee's Withholding Allowance Certificate (Certificado de exención de retenciones del empleado), en inglés Hijo Calificado Un hijo calificado, para propósitos del crédito tributario por hijos, es aquél que: Es su hijo o hija, hijastro o hijastra, hijo de crianza, hermano o hermana, hermanastro o hermanastra o descendiente de cualquiera de ellos (por ejemplo, su nieto, nieta, sobrina o sobrino), Tenía menos de 17 años de edad al finalizar el año 2013, No proveyó más de la mitad de su propia manutención durante el año 2013, Vivió con usted durante más de la mitad del año 2013 (vea Excepciones al tiempo vivido con usted , más adelante), Fue reclamado como dependiente en la declaración de usted, No presenta una declaración conjunta para el año (o la presenta solamente para reclamar un reembolso), y Era ciudadano, nacional o residente de los Estados Unidos. Irs tax form 2012 1040a Si el hijo fue adoptado, vea Hijo adoptivo , más adelante. Irs tax form 2012 1040a Para cada hijo calificado, tiene que marcar el recuadro que aparece en la línea 6c del Formulario 1040 o del Formulario 1040A. Irs tax form 2012 1040a Ejemplo 1. Irs tax form 2012 1040a Su hijo cumplió 17 años de edad el día 30 de diciembre del año 2013. Irs tax form 2012 1040a Él es ciudadano de los Estados Unidos y usted lo declara como dependiente en la declaración de impuestos. Irs tax form 2012 1040a Su hijo no es hijo calificado para el crédito tributario por hijos porque no tenía menos de 17 años de edad al finalizar el año 2013. Irs tax form 2012 1040a Ejemplo 2. Irs tax form 2012 1040a Su hija cumplió 8 años en el año 2013. Irs tax form 2012 1040a Ella no es ciudadana de los Estados Unidos, tiene un ITIN y vivió en México durante todo el año 2013. Irs tax form 2012 1040a Ella no es un hijo calificado para el crédito tributario por hijos debido a que no fue residente de los Estados Unidos en 2013. Irs tax form 2012 1040a Contribuyentes que tienen determinados hijos dependientes con un número de identificación personal del contribuyente (ITIN, por sus siglas en inglés). Irs tax form 2012 1040a   Si está reclamando un crédito tributario por hijos o un crédito tributario adicional por hijos basándose en un hijo que identificó en su declaración de impuestos con un número de identificación personal del contribuyente (ITIN, por sus siglas en inglés), en lugar de un número de Seguro Social (SSN, por sus siglas en inglés), tiene que completar la Parte I del Anexo 8812 (Formulario 1040A o 1040). Irs tax form 2012 1040a   Aun si su hijo es dependiente suyo, sólo puede reclamar un crédito tributario por hijos o un crédito tributario adicional por hijos basándose en un dependiente que sea ciudadano, nacional o residente de los Estados Unidos. Irs tax form 2012 1040a Para ser tratado como residente de los Estados Unidos, un hijo normalmente tiene que cumplir el requisito de presencia sustancial. Irs tax form 2012 1040a Para más información sobre el requisito de presencia sustancial, vea la Publicación 519, U. Irs tax form 2012 1040a S. Irs tax form 2012 1040a Tax Guide for Aliens (Guía sobre los impuestos federales estadounidenses para extranjeros), en inglés. Irs tax form 2012 1040a Hijo adoptivo. Irs tax form 2012 1040a   A un hijo adoptivo siempre se le trata como si fuera su hijo. Irs tax form 2012 1040a Un hijo adoptivo incluye un niño colocado en su hogar por una agencia autorizada, con la intención de que sea legalmente adoptado. Irs tax form 2012 1040a   Si usted es ciudadano o nacional de los EE. Irs tax form 2012 1040a UU. Irs tax form 2012 1040a y su hijo adoptivo vivió con usted como integrante de su unidad familiar durante todo el año en 2013, dicho hijo cumple el requisito (7), anteriormente, para ser un hijo calificado para propósitos del crédito tributario por hijos. Irs tax form 2012 1040a Excepciones al tiempo vivido con usted. Irs tax form 2012 1040a   Se considera que un hijo vivió con usted más de la mitad del año 2013 si nació o murió en el año 2013, y su hogar (el de usted) fue el hogar del hijo más de la mitad del tiempo en el cual estuvo vivo. Irs tax form 2012 1040a Las ausencias temporales por usted o su hijo debidas a circunstancias especiales, tales como las ausencias por educación, vacaciones, negocios, atención médica, servicio militar o estancia en un centro de detención para delincuentes juveniles cuentan como tiempo que el hijo vivió con usted. Irs tax form 2012 1040a   También hay excepciones para hijos secuestrados e hijos de padres divorciados o separados. Irs tax form 2012 1040a Para detalles, vea Requisito de Residencia , en el capítulo 3. Irs tax form 2012 1040a Hijo calificado de más de una persona. Irs tax form 2012 1040a   Se aplica una regla especial si su hijo calificado es el hijo calificado de más de una persona. Irs tax form 2012 1040a Para detalles, vea Requisito Especial para el Hijo Calificado de Más de una Persona , en el capítulo 3. Irs tax form 2012 1040a Cantidad de Crédito La cantidad máxima de crédito que puede reclamar es $1,000 por cada hijo calificado. Irs tax form 2012 1040a Límites del Crédito Usted tiene que reducir su crédito tributario por hijos si la condición (1) o la condición (2) le corresponde: La cantidad de la línea 46 (Formulario 1040) o de la línea 28 (Formulario 1040A) es menor que el crédito. Irs tax form 2012 1040a Si esta cantidad es cero, no puede reclamar este crédito porque no hay impuesto que se pueda reducir. Irs tax form 2012 1040a Sin embargo, es posible que pueda tomar el crédito tributario adicional por hijos. Irs tax form 2012 1040a Vea Crédito Tributario Adicional por Hijos , más adelante. Irs tax form 2012 1040a Su ingreso bruto ajustado (AGI, por sus siglas en inglés) modificado es mayor que la cantidad que se indica a continuación para su estado civil para efectos de la declaración. Irs tax form 2012 1040a Casados que presentan una declaración conjunta: $110,000. Irs tax form 2012 1040a Soltero, cabeza de familia o viudo que reúne los requisitos: $75,000. Irs tax form 2012 1040a Casados que presentan la declaración por separado: $55,000. Irs tax form 2012 1040a Ingresos brutos ajustados modificados. Irs tax form 2012 1040a   Para propósitos del crédito tributario por hijos, su ingreso bruto ajustado (AGI, por sus siglas en inglés) modificado es su ingreso bruto ajustado más las cantidades siguientes que puedan ser aplicables en su caso: Toda cantidad excluida del ingreso debido a la exclusión de ingresos de fuentes de  Puerto Rico. Irs tax form 2012 1040a En la línea de puntos directamente al lado de la línea 38 del Formulario 1040, anote la cantidad excluida e indentifíquela como “ EPRI. Irs tax form 2012 1040a ” Además, adjunte una copia de todo Formulario 499R-2/W-2PR a su declaración. Irs tax form 2012 1040a Toda cantidad de las líneas 45 ó 50 del Formulario 2555, Foreign Earned Income (Ingreso devengado en el extranjero), en inglés. Irs tax form 2012 1040a Toda cantidad de la línea 18 del Formulario 2555-EZ, Foreign Earned Income Exclusion (Exclusión de ingreso devengado en el extranjero), en inglés. Irs tax form 2012 1040a Toda cantidad de la línea 15 del Formulario 4563, Exclusion of Income for Bona Fide Residents of American Samoa (Exclusión del ingreso para residentes bona fide de la Samoa Estadounidense), en inglés. Irs tax form 2012 1040a   Si no tiene ninguna de las cantidades mencionadas anteriormente, su ingreso bruto ajustado modificado es igual a su ingreso bruto ajustado. Irs tax form 2012 1040a Ingreso bruto ajustado. Irs tax form 2012 1040a   El ingreso bruto ajustado (AGI, por sus siglas en inglés) es la cantidad de la línea 38 del Formulario 1040 o de la línea 22 del Formulario 1040A. Irs tax form 2012 1040a Cómo Reclamar el Crédito Para reclamar el crédito tributario por hijos, tiene que presentar el Formulario 1040 o el Formulario 1040A. Irs tax form 2012 1040a No puede reclamar el crédito tributario por hijos en el Formulario 1040EZ. Irs tax form 2012 1040a Tiene que proveer el nombre y número de identificación (normalmente el número de Seguro Social) de cada hijo calificado en su declaración de impuestos. Irs tax form 2012 1040a Si reclama el crédito tributario por hijos con un hijo identificado por un ITIN, usted también tiene que presentar el Anexo 8812. Irs tax form 2012 1040a Para calcular el crédito, primero revise la Child Tax Credit Worksheet (Hoja de trabajo del crédito tributario por hijos), en las Instrucciones para el Formulario 1040 o el Formulario 1040A. Irs tax form 2012 1040a Si se le indica que consulte la Publicación 972, Child Tax Credit (Crédito tributario por hijos), en inglés, no puede utilizar la Hoja de trabajo de las instrucciones en la declaración de impuestos; en su lugar, usted tiene que utilizar la Publicación 972, en inglés, para calcular el crédito. Irs tax form 2012 1040a Si no se le indica que utilice la Publicación 972, puede usar la Hoja de trabajo del crédito tributario por hijos, que se encuentra en las Instrucciones para el Formulario 1040 o las Instrucciones para el Formulario 1040A o la Publicación 972, todas en inglés, para calcular el crédito. Irs tax form 2012 1040a Crédito Tributario Adicional por Hijos Este crédito es para determinadas personas que reciban menos de la cantidad total del crédito tributario por hijos. Irs tax form 2012 1040a El crédito tributario adicional por hijos puede darle un reembolso aunque no adeude ningún impuesto. Irs tax form 2012 1040a Cómo se reclama el crédito tributario adicional por hijos. Irs tax form 2012 1040a   Para reclamar el crédito tributario adicional por hijos, siga los pasos que aparecen a continuación: Asegúrese de haber calculado la cantidad, si existe, de su crédito tributario por hijos. Irs tax form 2012 1040a Vea anteriormente el tema titulado Cómo Reclamar el Crédito . Irs tax form 2012 1040a Use las Partes II a la IV del Anexo 8812 para determinar si puede reclamar el crédito tributario adicional por hijos si usted contestó “Yes” (Sí) en la línea 9 ó 10 de la Child Tax Credit Worksheet (Hoja de trabajo del crédito tributario por hijos) en las Instrucciones para el Formulario 1040 o en las Instrucciones para el Formulario 1040A, o en la línea 13 de la Child Tax Credit Worksheet (Hoja de trabajo del crédito tributario por hijos) en la Publicación 972, todas en inglés. Irs tax form 2012 1040a Si tiene un crédito tributario adicional por hijos en la línea 13 del Anexo 8812, anótelo en la línea 65 del Formulario 1040 o en la línea 39 del Formulario 1040A. Irs tax form 2012 1040a Cómo Completar el Anexo 8812 (Formulario 1040A o Formulario 1040) El Anexo 8812 tiene cuatro partes, pero se puede considerar como que consta de dos secciones. Irs tax form 2012 1040a La Parte I es independiente de las Partes II a la IV. Irs tax form 2012 1040a Si todos sus hijos tienen números de Seguro Social o números de identificación del contribuyente para adopción del IRS(ATIN, por sus siglas en inglés),y usted no reclama el crédito tributario adicional por hijos, no necesita completar ni adjuntar el Anexo 8812 a su declaración de impuestos. Irs tax form 2012 1040a Parte I Usted sólo necesitará completar la Parte I si está reclamando el crédito tributario por hijos para un hijo que aparece identificado con un número de identificación personal del contribuyente del IRS (ITIN, por sus siglas en inglés). Irs tax form 2012 1040a Si todos los hijos por los cuales usted marcó la casilla en la columna 4 de la línea 6c de su Formulario 1040 o Formulario 1040A tienen números de Seguro Social (SSN, por sus siglas en inglés) o números de identificación del contribuyente para adopción del IRS (ATIN, por sus siglas en inglés), no tiene que completar la Parte I del Anexo 8812. Irs tax form 2012 1040a Partes II a IV Las Partes II a la IV le ayudan a calcular el crédito adicional por hijos que le corresponde a usted. Irs tax form 2012 1040a Por lo general, deberá completar las Partes II a la IV únicamente si se le indica luego de que completa la Hoja de trabajo del crédito tributario por hijos que aparece en las instrucciones de su declaración de impuestos o en la Publicación 972. Irs tax form 2012 1040a Vea Cómo se reclama el crédito tributario adicional por hijos , anteriormente. Irs tax form 2012 1040a Prev  Up  Next   Home   More Online Publications
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The Irs Tax Form 2012 1040a

Irs tax form 2012 1040a Publication 925 - Main Content Table of Contents Passive Activity LimitsWho Must Use These Rules? Passive Activity Loss Passive Activity Credit Publicly Traded Partnership Excess Farm Loss Passive Activities Activities That Are Not Passive Activities Passive Activity Income and Deductions Grouping Your Activities Recharacterization of Passive Income Dispositions How To Report Your Passive Activity Loss Comprehensive ExampleGeneral Information At-Risk LimitsWho Is Affected? Activities Covered by the At-Risk Rules At-Risk Amounts Amounts Not At Risk Reductions of Amounts At Risk Recapture Rule How To Get Tax HelpLow Income Taxpayer Clinics Passive Activity Limits Who Must Use These Rules? The passive activity rules apply to: Individuals, Estates, Trusts (other than grantor trusts), Personal service corporations, and Closely held corporations. Irs tax form 2012 1040a Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. Irs tax form 2012 1040a For information about personal service corporations and closely held corporations, including definitions and how the passive activity rules apply to these corporations, see Form 8810 and its instructions. Irs tax form 2012 1040a Before applying the passive activity limits, you must first determine the amount of the deductions disallowed under the basis, excess farm loss, or at-risk rules. Irs tax form 2012 1040a See Passive Activity Deductions, later. Irs tax form 2012 1040a Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. Irs tax form 2012 1040a However, there is a special allowance under which some or all of your passive activity loss may be allowed. Irs tax form 2012 1040a See Special $25,000 allowance , later. Irs tax form 2012 1040a Definition of passive activity loss. Irs tax form 2012 1040a    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. Irs tax form 2012 1040a See Passive Activity Income and Deductions , later. Irs tax form 2012 1040a   For a closely held corporation, the passive activity loss is the excess of passive activity deductions over the sum of passive activity gross income and net active income. Irs tax form 2012 1040a For details on net active income, see the Instructions for Form 8810. Irs tax form 2012 1040a For the definition of passive activity gross income, see Passive Activity Income , later. Irs tax form 2012 1040a For the definition of passive activity deductions, see Passive Activity Deductions , later. Irs tax form 2012 1040a Identification of Disallowed Passive Activity Deductions If all or a part of your passive activity loss is disallowed for the tax year, you may need to allocate the disallowed passive activity loss among different passive activities and among different deductions within a passive activity. Irs tax form 2012 1040a Allocation of disallowed passive activity loss among activities. Irs tax form 2012 1040a   If all or any part of your passive activity loss is disallowed for the tax year, a ratable portion of the loss (if any) from each of your passive activities is disallowed. Irs tax form 2012 1040a The ratable portion of a loss from an activity is computed by multiplying the passive activity loss that is disallowed for the tax year by the fraction obtained by dividing: The loss from the activity for the tax year; by The sum of the losses for the tax year from all activities having losses for the tax year. Irs tax form 2012 1040a Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. Irs tax form 2012 1040a Loss from an activity. Irs tax form 2012 1040a   The term “loss from an activity” means: The amount by which the passive activity deductions (defined later) from the activity for the tax year exceed the passive activity gross income (defined later) from the activity for the tax year; reduced by Any part of such amount that is allowed under the Special $25,000 Allowance , later. Irs tax form 2012 1040a   If your passive activity gross income from significant participation passive activities (defined later) for the tax year is more than your passive activity deductions from those activities for the tax year, those activities shall be treated, solely for purposes of figuring your loss from the activity, as a single activity that does not have a loss for such taxable year. Irs tax form 2012 1040a See Significant Participation Passive Activities , later. Irs tax form 2012 1040a Example. Irs tax form 2012 1040a John Pine holds interests in three passive activities, A, B, and C. Irs tax form 2012 1040a The gross income and deductions from these activities for the taxable year are as follows:   A B C Total Gross income $7,000 $4,000 $12,000 $23,000 Deductions (16,000) (20,000) (8,000) (44,000)           Net income (loss) ($9,000) ($16,000) $4,000 ($21,000)   John Pine’s $21,000 passive activity loss for the taxable year is disallowed. Irs tax form 2012 1040a Therefore, a ratable portion of the losses from activities A and B is disallowed. Irs tax form 2012 1040a He figures the disallowed portion of each loss as follows: A: $21,000 x $9,000/$25,000 $7,560 B: $21,000 x $16,000/$25,000 13,440     Total $21,000 Allocation within loss activities. Irs tax form 2012 1040a   If all or any part of your loss from an activity is disallowed under Allocation of disallowed passive activity loss among activities for the tax year, a ratable portion of each of your passive activity deductions (defined later), other than an excluded deduction (defined below) from such activity is disallowed. Irs tax form 2012 1040a The ratable portion of a passive activity deduction is the amount of the disallowed portion of the loss from the activity for the tax year multiplied by the fraction obtained by dividing: The amount of such deduction; by The sum of all of your passive activity deductions (other than excluded deductions) from that activity from the tax year. Irs tax form 2012 1040a Excluded deductions. Irs tax form 2012 1040a    “Excluded deduction” means any passive activity deduction that is taken into account in computing your net income from an item of property for a taxable year in which an amount of the taxpayer's gross income from such item of property is treated as not from a passive activity. Irs tax form 2012 1040a See Recharacterization of Passive Income , later. Irs tax form 2012 1040a Separately identified deductions. Irs tax form 2012 1040a   In identifying the deductions from an activity that are disallowed, you do not need to account separately for a deduction unless such deduction may, if separately taken into account, result in an income tax liability for any tax year different from that which would result were such deduction not taken into account separately. Irs tax form 2012 1040a   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. Irs tax form 2012 1040a   Deductions that must be accounted for separately include (but are not limited to) the following deductions. Irs tax form 2012 1040a Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. Irs tax form 2012 1040a See Active participation , later. Irs tax form 2012 1040a Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. Irs tax form 2012 1040a See Active participation , later. Irs tax form 2012 1040a Losses from sales or exchanges of capital assets. Irs tax form 2012 1040a Section 1231 losses. Irs tax form 2012 1040a See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. Irs tax form 2012 1040a Carryover of Disallowed Deductions In the case of an activity with respect to which any deductions or credits are disallowed for a taxable year (the loss activity), the disallowed deductions are allocated among your activities for the next tax year in a manner that reasonably reflects the extent to which each activity continues the loss activity. Irs tax form 2012 1040a The disallowed deductions or credits allocated to an activity under the preceding sentence are treated as deductions or credits from the activity for the next tax year. Irs tax form 2012 1040a For more information, see Regulations section 1. Irs tax form 2012 1040a 469-1(f)(4). Irs tax form 2012 1040a Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. Irs tax form 2012 1040a The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. Irs tax form 2012 1040a Credits that are included in figuring the general business credit are subject to the passive activity rules. Irs tax form 2012 1040a See the Instructions for Form 8582-CR for more information. Irs tax form 2012 1040a Publicly Traded Partnership You must apply the rules in this part separately to your income or loss from a passive activity held through a publicly traded partnership (PTP). Irs tax form 2012 1040a You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. Irs tax form 2012 1040a You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. Irs tax form 2012 1040a Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. Irs tax form 2012 1040a This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. Irs tax form 2012 1040a For more information on how to apply the passive activity loss rules to PTPs, and on how to apply the limit on passive activity credits to PTPs, see Publicly Traded Partnerships (PTPs) in the Instructions for Forms 8582 and 8582-CR, respectively. Irs tax form 2012 1040a Excess Farm Loss If you receive an applicable subsidy for any tax year and you have an excess farm loss for the tax year, special rules apply. Irs tax form 2012 1040a These rules do not apply to C corporations. Irs tax form 2012 1040a For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. Irs tax form 2012 1040a Passive Activities There are two kinds of passive activities. Irs tax form 2012 1040a Trade or business activities in which you do not materially participate during the year. Irs tax form 2012 1040a Rental activities, even if you do materially participate in them, unless you are a real estate professional. Irs tax form 2012 1040a Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . Irs tax form 2012 1040a Treatment of former passive activities. Irs tax form 2012 1040a   A former passive activity is an activity that was a passive activity in any earlier tax year, but is not a passive activity in the current tax year. Irs tax form 2012 1040a You can deduct a prior year's unallowed loss from the activity up to the amount of your current year net income from the activity. Irs tax form 2012 1040a Treat any remaining prior year unallowed loss like you treat any other passive loss. Irs tax form 2012 1040a   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. Irs tax form 2012 1040a The allocable part of your current year tax liability is that part of this year's tax liability that is allocable to the current year net income from the former passive activity. Irs tax form 2012 1040a You figure this after you reduce your net income from the activity by any prior year unallowed loss from that activity (but not below zero). Irs tax form 2012 1040a Trade or Business Activities A trade or business activity is an activity that: Involves the conduct of a trade or business (that is, deductions would be allowable under section 162 of the Internal Revenue Code if other limitations, such as the passive activity rules, did not apply), Is conducted in anticipation of starting a trade or business, or Involves research or experimental expenditures that are deductible under Internal Revenue Code section 174 (or that would be deductible if you chose to deduct rather than capitalize them). Irs tax form 2012 1040a A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment. Irs tax form 2012 1040a You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. Irs tax form 2012 1040a Rental Activities A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. Irs tax form 2012 1040a See Real Estate Professional under Activities That Are Not Passive Activities, later. Irs tax form 2012 1040a An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. Irs tax form 2012 1040a It does not matter whether the use is under a lease, a service contract, or some other arrangement. Irs tax form 2012 1040a Exceptions. Irs tax form 2012 1040a   Your activity is not a rental activity if any of the following apply. Irs tax form 2012 1040a The average period of customer use of the property is 7 days or less. Irs tax form 2012 1040a You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. Irs tax form 2012 1040a If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. Irs tax form 2012 1040a The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. Irs tax form 2012 1040a The activity's average period of customer use will equal the sum of the amounts for each class. Irs tax form 2012 1040a The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. Irs tax form 2012 1040a Significant personal services include only services performed by individuals. Irs tax form 2012 1040a To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. Irs tax form 2012 1040a Significant personal services do not include the following. Irs tax form 2012 1040a Services needed to permit the lawful use of the property, Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental, and Services that are similar to those commonly provided with long-term rentals of real estate, such as cleaning and maintenance of common areas or routine repairs. Irs tax form 2012 1040a You provide extraordinary personal services in making the rental property available for customer use. Irs tax form 2012 1040a Services are extraordinary personal services if they are performed by individuals and the customers' use of the property is incidental to their receipt of the services. Irs tax form 2012 1040a The rental is incidental to a nonrental activity. Irs tax form 2012 1040a The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income from the property is less than 2% of the smaller of the property's unadjusted basis or fair market value. Irs tax form 2012 1040a The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. Irs tax form 2012 1040a The rental of property is incidental to a trade or business activity if all of the following apply. Irs tax form 2012 1040a You own an interest in the trade or business activity during the year. Irs tax form 2012 1040a The rental property was used mainly in that trade or business activity during the current year, or during at least 2 of the 5 preceding tax years. Irs tax form 2012 1040a Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. Irs tax form 2012 1040a Lodging provided to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services if the lodging is furnished for the employer's convenience. Irs tax form 2012 1040a You customarily make the rental property available during defined business hours for nonexclusive use by various customers. Irs tax form 2012 1040a You provide the property for use in a nonrental activity in your capacity as an owner of an interest in the partnership, S corporation, or joint venture conducting that activity. Irs tax form 2012 1040a    If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity. Irs tax form 2012 1040a Special $25,000 allowance. Irs tax form 2012 1040a   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that is disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. Irs tax form 2012 1040a This special allowance is an exception to the general rule disallowing the passive activity loss. Irs tax form 2012 1040a Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Irs tax form 2012 1040a   If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. Irs tax form 2012 1040a If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income. Irs tax form 2012 1040a   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. Irs tax form 2012 1040a See Phaseout rule , later. Irs tax form 2012 1040a Example. Irs tax form 2012 1040a Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and is not subject to the modified adjusted gross income phaseout rule. Irs tax form 2012 1040a She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. Irs tax form 2012 1040a She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages). Irs tax form 2012 1040a Commercial revitalization deduction (CRD). Irs tax form 2012 1040a   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. Irs tax form 2012 1040a Any remaining part of the special allowance is available for the CRD from the rental real estate activities and is not subject to the active participation rules or the phaseout based on modified adjusted gross income. Irs tax form 2012 1040a You cannot claim a CRD for a building placed in service after December 31, 2009. Irs tax form 2012 1040a Active participation. Irs tax form 2012 1040a   Active participation is not the same as material participation (defined later). Irs tax form 2012 1040a Active participation is a less stringent standard than material participation. Irs tax form 2012 1040a For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. Irs tax form 2012 1040a Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. Irs tax form 2012 1040a   Only individuals can actively participate in rental real estate activities. Irs tax form 2012 1040a However, a decedent's estate is treated as actively participating for its tax years ending less than 2 years after the decedent's death, if the decedent would have satisfied the active participation requirement for the activity for the tax year the decedent died. Irs tax form 2012 1040a   A decedent's qualified revocable trust can also be treated as actively participating if both the trustee and the executor (if any) of the estate choose to treat the trust as part of the estate. Irs tax form 2012 1040a The choice applies to tax years ending after the decedent's death and before: 2 years after the decedent's death if no estate tax return is required, or 6 months after the estate tax liability is finally determined if an estate tax return is required. Irs tax form 2012 1040a   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). Irs tax form 2012 1040a   Limited partners are not treated as actively participating in a partnership's rental real estate activities. Irs tax form 2012 1040a   You are not treated as actively participating in a rental real estate activity unless your interest in the activity (including your spouse's interest) was at least 10% (by value) of all interests in the activity throughout the year. Irs tax form 2012 1040a   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. Irs tax form 2012 1040a Example. Irs tax form 2012 1040a Mike, a single taxpayer, had the following income and loss during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss came from a house Mike owned. Irs tax form 2012 1040a He advertised and rented the house to the current tenant himself. Irs tax form 2012 1040a He also collected the rents and did the repairs or hired someone to do them. Irs tax form 2012 1040a Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated. Irs tax form 2012 1040a Phaseout rule. Irs tax form 2012 1040a   The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that is more than $100,000 ($50,000 if you are married filing separately). Irs tax form 2012 1040a If your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), you generally cannot use the special allowance. Irs tax form 2012 1040a    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. Irs tax form 2012 1040a Taxable social security and tier 1 railroad retirement benefits. Irs tax form 2012 1040a Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. Irs tax form 2012 1040a The exclusion from income of interest from qualified U. Irs tax form 2012 1040a S. Irs tax form 2012 1040a savings bonds used to pay qualified higher education expenses. Irs tax form 2012 1040a The exclusion from income of amounts received from an employer's adoption assistance program. Irs tax form 2012 1040a Passive activity income or loss included on Form 8582. Irs tax form 2012 1040a Any rental real estate loss allowed because you materially participated in the rental activity as a Real Estate Professional (as discussed later, under Activities That Are Not Passive Activities). Irs tax form 2012 1040a Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). Irs tax form 2012 1040a The deduction for the employer-equivalent portion of self-employment tax. Irs tax form 2012 1040a The deduction for domestic production activities. Irs tax form 2012 1040a The deduction allowed for interest on student loans. Irs tax form 2012 1040a The deduction for qualified tuition and related expenses. Irs tax form 2012 1040a Example. Irs tax form 2012 1040a During 2013, John was unmarried and was not a real estate professional. Irs tax form 2012 1040a For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. Irs tax form 2012 1040a His modified adjusted gross income is $120,000. Irs tax form 2012 1040a When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. Irs tax form 2012 1040a He must carry over the remaining $16,000 passive activity loss to 2014. Irs tax form 2012 1040a He figures his deduction and carryover as follows: Adjusted gross income, modified as required $120,000       Minus amount not subject to phaseout 100,000 Amount subject to phaseout rule $20,000 Multiply by 50% × 50% Required reduction to special allowance $10,000 Maximum special allowance $25,000 Minus required reduction (see above) 10,000 Adjusted special allowance $15,000 Passive loss from rental real estate $31,000 Deduction allowable/Adjusted  special allowance (see above) 15,000       Amount that must be carried forward $16,000 Exceptions to the phaseout rules. Irs tax form 2012 1040a   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. Irs tax form 2012 1040a For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you are a married individual filing a separate return and living apart at all times during the year). Irs tax form 2012 1040a   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. Irs tax form 2012 1040a Ordering rules. Irs tax form 2012 1040a   If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order. Irs tax form 2012 1040a The portion of passive activity losses not attributable to the CRD. Irs tax form 2012 1040a The portion of passive activity losses attributable to the CRD. Irs tax form 2012 1040a The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. Irs tax form 2012 1040a The portion of passive activity credits attributable to the rehabilitation credit. Irs tax form 2012 1040a The portion of passive activity credits attributable to the low-income housing credit. Irs tax form 2012 1040a Activities That Are Not Passive Activities The following are not passive activities. Irs tax form 2012 1040a Trade or business activities in which you materially participated for the tax year. Irs tax form 2012 1040a A working interest in an oil or gas well which you hold directly or through an entity that does not limit your liability (such as a general partner interest in a partnership). Irs tax form 2012 1040a It does not matter whether you materially participated in the activity for the tax year. Irs tax form 2012 1040a However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. Irs tax form 2012 1040a  See Temporary Regulations section 1. Irs tax form 2012 1040a 469-1T(e)(4)(ii). Irs tax form 2012 1040a The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental. Irs tax form 2012 1040a An activity of trading personal property for the account of those who own interests in the activity. Irs tax form 2012 1040a See Temporary Regulations section 1. Irs tax form 2012 1040a 469-1T(e)(6). Irs tax form 2012 1040a Rental real estate activities in which you materially participated as a real estate professional. Irs tax form 2012 1040a See Real Estate Professional , later. Irs tax form 2012 1040a You should not enter income and losses from these activities on Form 8582. Irs tax form 2012 1040a Instead, enter them on the forms or schedules you would normally use. Irs tax form 2012 1040a Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. Irs tax form 2012 1040a Material participation tests. Irs tax form 2012 1040a    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. Irs tax form 2012 1040a You participated in the activity for more than 500 hours. Irs tax form 2012 1040a Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. Irs tax form 2012 1040a You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. Irs tax form 2012 1040a The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. Irs tax form 2012 1040a A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests, other than this test. Irs tax form 2012 1040a See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. Irs tax form 2012 1040a You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. Irs tax form 2012 1040a The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. Irs tax form 2012 1040a An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. Irs tax form 2012 1040a Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. Irs tax form 2012 1040a   You did not materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. Irs tax form 2012 1040a Your participation in managing the activity does not count in determining whether you materially participated under this test if: Any person other than you received compensation for managing the activity, or Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services). Irs tax form 2012 1040a Participation. Irs tax form 2012 1040a   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. Irs tax form 2012 1040a Work not usually performed by owners. Irs tax form 2012 1040a   You do not treat the work you do in connection with an activity as participation in the activity if both of the following are true. Irs tax form 2012 1040a The work is not work that is customarily done by the owner of that type of activity. Irs tax form 2012 1040a One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules. Irs tax form 2012 1040a Participation as an investor. Irs tax form 2012 1040a   You do not treat the work you do in your capacity as an investor in an activity as participation unless you are directly involved in the day-to-day management or operations of the activity. Irs tax form 2012 1040a Work you do as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and Monitoring the finances or operations of the activity in a nonmanagerial capacity. Irs tax form 2012 1040a Spouse's participation. Irs tax form 2012 1040a   Your participation in an activity includes your spouse's participation. Irs tax form 2012 1040a This applies even if your spouse did not own any interest in the activity and you and your spouse do not file a joint return for the year. Irs tax form 2012 1040a Proof of participation. Irs tax form 2012 1040a You can use any reasonable method to prove your participation in an activity for the year. Irs tax form 2012 1040a You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. Irs tax form 2012 1040a For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary. Irs tax form 2012 1040a Limited partners. Irs tax form 2012 1040a   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. Irs tax form 2012 1040a However, you are treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year. Irs tax form 2012 1040a   You are not treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest). Irs tax form 2012 1040a Retired or disabled farmer and surviving spouse of a farmer. Irs tax form 2012 1040a   If you are a retired or disabled farmer, you are treated as materially participating in a farming activity if you materially participated for 5 or more of the 8 years before your retirement or disability. Irs tax form 2012 1040a Similarly, if you are a surviving spouse of a farmer, you are treated as materially participating in a farming activity if the real property used in the activity meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and you actively manage the farm. Irs tax form 2012 1040a Corporations. Irs tax form 2012 1040a   A closely held corporation or a personal service corporation is treated as materially participating in an activity only if one or more shareholders holding more than 50% by value of the outstanding stock of the corporation materially participate in the activity. Irs tax form 2012 1040a   A closely held corporation can also satisfy the material participation standard by meeting the first two requirements for the qualifying business exception from the at-risk limits. Irs tax form 2012 1040a See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. Irs tax form 2012 1040a Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. Irs tax form 2012 1040a However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Irs tax form 2012 1040a For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. Irs tax form 2012 1040a See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. Irs tax form 2012 1040a If you qualified as a real estate professional for 2013, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). Irs tax form 2012 1040a If you also have an unallowed loss from these activities from an earlier year when you did not qualify, see Treatment of former passive activities under Passive Activities, earlier. Irs tax form 2012 1040a Qualifications. Irs tax form 2012 1040a   You qualified as a real estate professional for the year if you met both of the following requirements. Irs tax form 2012 1040a More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. Irs tax form 2012 1040a You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. Irs tax form 2012 1040a   Do not count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. Irs tax form 2012 1040a You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest. Irs tax form 2012 1040a   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. Irs tax form 2012 1040a However, you can count your spouse's participation in an activity in determining if you materially participated. Irs tax form 2012 1040a Real property trades or businesses. Irs tax form 2012 1040a   A real property trade or business is a trade or business that does any of the following with real property. Irs tax form 2012 1040a Develops or redevelops it. Irs tax form 2012 1040a Constructs or reconstructs it. Irs tax form 2012 1040a Acquires it. Irs tax form 2012 1040a Converts it. Irs tax form 2012 1040a Rents or leases it. Irs tax form 2012 1040a Operates or manages it. Irs tax form 2012 1040a Brokers it. Irs tax form 2012 1040a Closely held corporations. Irs tax form 2012 1040a   A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated. Irs tax form 2012 1040a Passive Activity Income and Deductions In figuring your net income or loss from a passive activity, take into account only passive activity income and passive activity deductions. Irs tax form 2012 1040a Self-charged interest. Irs tax form 2012 1040a   Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity. Irs tax form 2012 1040a   Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. Irs tax form 2012 1040a This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. Irs tax form 2012 1040a   It also includes loans from one partnership or S corporation to another partnership or S corporation if each owner in the borrowing entity has the same proportional ownership interest in the lending entity. Irs tax form 2012 1040a    Exception. Irs tax form 2012 1040a The self-charged interest rules do not apply to your interest in a partnership or S corporation if the entity made an election under Regulations section 1. Irs tax form 2012 1040a 469-7(g) to avoid the application of these rules. Irs tax form 2012 1040a For more details on the self-charged interest rules, see Regulations section 1. Irs tax form 2012 1040a 469-7. Irs tax form 2012 1040a Passive Activity Income Passive activity income includes all income from passive activities and generally includes gain from disposition of an interest in a passive activity or property used in a passive activity. Irs tax form 2012 1040a Passive activity income does not include the following items. Irs tax form 2012 1040a Income from an activity that is not a passive activity. Irs tax form 2012 1040a These activities are discussed under Activities That Are Not Passive Activities , earlier. Irs tax form 2012 1040a Portfolio income. Irs tax form 2012 1040a This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. Irs tax form 2012 1040a It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. Irs tax form 2012 1040a The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. Irs tax form 2012 1040a For more information on self-charged interest, see Self-charged interest , earlier. Irs tax form 2012 1040a Personal service income. Irs tax form 2012 1040a This includes salaries, wages, commissions, self-employment income from trade or business activities in which you materially participated, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. Irs tax form 2012 1040a Income from positive section 481 adjustments allocated to activities other than passive activities. Irs tax form 2012 1040a (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. Irs tax form 2012 1040a ) Income or gain from investments of working capital. Irs tax form 2012 1040a Income from an oil or gas property if you treated any loss from a working interest in the property for any tax year beginning after 1986 as a nonpassive loss, as discussed in item (2) under Activities That Are Not Passive Activities , earlier. Irs tax form 2012 1040a This also applies to income from other oil and gas property the basis of which is determined wholly or partly by the basis of the property in the preceding sentence. Irs tax form 2012 1040a Any income from intangible property, such as a patent, copyright, or literary, musical, or artistic composition, if your personal efforts significantly contributed to the creation of the property. Irs tax form 2012 1040a Any other income that must be treated as nonpassive income. Irs tax form 2012 1040a See Recharacterization of Passive Income , later. Irs tax form 2012 1040a Overall gain from any interest in a publicly traded partnership. Irs tax form 2012 1040a See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. Irs tax form 2012 1040a State, local, and foreign income tax refunds. Irs tax form 2012 1040a Income from a covenant not to compete. Irs tax form 2012 1040a Reimbursement of a casualty or theft loss included in gross income to recover all or part of a prior year loss deduction, if the loss deduction was not a passive activity deduction. Irs tax form 2012 1040a Alaska Permanent Fund dividends. Irs tax form 2012 1040a Cancellation of debt income, if at the time the debt is discharged the debt is not allocated to passive activities under the interest expense allocation rules. Irs tax form 2012 1040a See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. Irs tax form 2012 1040a Disposition of property interests. Irs tax form 2012 1040a   Gain on the disposition of an interest in property generally is passive activity income if, at the time of the disposition, the property was used in an activity that was a passive activity in the year of disposition. Irs tax form 2012 1040a The gain generally is not passive activity income if, at the time of disposition, the property was used in an activity that was not a passive activity in the year of disposition. Irs tax form 2012 1040a An exception to this general rule may apply if you previously used the property in a different activity. Irs tax form 2012 1040a Exception for more than one use in the preceding 12 months. Irs tax form 2012 1040a   If you used the property in more than one activity during the 12-month period before its disposition, you must allocate the gain between the activities on a basis that reasonably reflects the property's use during that period. Irs tax form 2012 1040a Any gain allocated to a passive activity is passive activity income. Irs tax form 2012 1040a   For this purpose, an allocation of the gain solely to the activity in which the property was mainly used during that period reasonably reflects the property's use if the fair market value of your interest in the property is not more than the lesser of: $10,000, or 10% of the total of the fair market value of your interest in the property and the fair market value of all other property used in that activity immediately before the disposition. Irs tax form 2012 1040a Exception for substantially appreciated property. Irs tax form 2012 1040a   The gain is passive activity income if the fair market value of the property at disposition was more than 120% of its adjusted basis and either of the following conditions applies. Irs tax form 2012 1040a You used the property in a passive activity for 20% of the time you held your interest in the property. Irs tax form 2012 1040a You used the property in a passive activity for the entire 24-month period before its disposition. Irs tax form 2012 1040a If neither condition applies, the gain is not passive activity income. Irs tax form 2012 1040a However, it is treated as portfolio income only if you held the property for investment for more than half of the time you held it in nonpassive activities. Irs tax form 2012 1040a   For this purpose, treat property you held through a corporation (other than an S corporation) or other entity whose owners receive only portfolio income as property held in a nonpassive activity and as property held for investment. Irs tax form 2012 1040a Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. Irs tax form 2012 1040a   If you used the property in more than one activity during the 12-month period before its disposition, this exception applies only to the part of the gain allocated to a passive activity under the rules described in the preceding discussion. Irs tax form 2012 1040a Disposition of property converted to inventory. Irs tax form 2012 1040a   If you disposed of property that you had converted to inventory from its use in another activity (for example, you sold condominium units you previously held for use in a rental activity), a special rule may apply. Irs tax form 2012 1040a Under this rule, you disregard the property's use as inventory and treat it as if it were still used in that other activity at the time of disposition. Irs tax form 2012 1040a This rule applies only if you meet all of the following conditions. Irs tax form 2012 1040a At the time of disposition, you held your interest in the property in a dealing activity (an activity that involves holding the property or similar property mainly for sale to customers in the ordinary course of a trade or business). Irs tax form 2012 1040a Your other activities included a nondealing activity (an activity that does not involve holding similar property for sale to customers in the ordinary course of a trade or business) in which you used the property for more than 80% of the period you held it. Irs tax form 2012 1040a You did not acquire or hold your interest in the property for the main purpose of selling it to customers in the ordinary course of a trade or business. Irs tax form 2012 1040a Passive Activity Deductions Generally, a deduction is a passive activity deduction for a taxable year if and only if such deduction either: Arises in connection with the conduct of an activity that is a passive activity for the tax year; or Is treated as a deduction from an activity for the tax year because it was disallowed by the passive activity rules in the preceding year and carried forward to the tax year. Irs tax form 2012 1040a For purposes of item (1), above, an item of deduction arises in the taxable year in which the item would be allowable as a deduction under the taxpayer's method of accounting if taxable income for all taxable years were determined without regard to the passive activity rules and without regard to the basis, excess farm loss, and at-risk limits. Irs tax form 2012 1040a See Coordination with other limitations on deductions that apply before the passive activity rules , later. Irs tax form 2012 1040a Passive activity deductions generally include losses from dispositions of property used in a passive activity at the time of the disposition and losses from a disposition of less than your entire interest in a passive activity. Irs tax form 2012 1040a Exceptions. Irs tax form 2012 1040a   Passive activity deductions do not include the following items. Irs tax form 2012 1040a Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. Irs tax form 2012 1040a Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. Irs tax form 2012 1040a For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. Irs tax form 2012 1040a Losses from dispositions of property that produce portfolio income or property held for investment. Irs tax form 2012 1040a State, local, and foreign income taxes. Irs tax form 2012 1040a Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. Irs tax form 2012 1040a Charitable contribution deductions. Irs tax form 2012 1040a Net operating loss deductions. Irs tax form 2012 1040a Percentage depletion carryovers for oil and gas wells. Irs tax form 2012 1040a Capital loss carrybacks and carryovers. Irs tax form 2012 1040a Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. Irs tax form 2012 1040a See Coordination with other limitations on deductions that apply before the passive activity rules , later. Irs tax form 2012 1040a Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. Irs tax form 2012 1040a Net negative section 481 adjustments allocated to activities other than passive activities. Irs tax form 2012 1040a (Section 481 adjustments are adjustments required due to changes in accounting methods. Irs tax form 2012 1040a ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. Irs tax form 2012 1040a The deduction for the employer-equivalent portion of self-employment tax. Irs tax form 2012 1040a Coordination with other limitations on deductions that apply before the passive activity rules. Irs tax form 2012 1040a   An item of deduction from a passive activity that is disallowed for a tax year under the basis or at-risk limitations is not a passive activity deduction for the tax year. Irs tax form 2012 1040a The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations. Irs tax form 2012 1040a Proration of deductions disallowed under basis limitations. Irs tax form 2012 1040a   If any amount of your distributive share of a partnership's loss for the tax year is disallowed under the basis limitation, a ratable portion of your distributive share of each item of deduction or loss of the partnership is disallowed for the tax year. Irs tax form 2012 1040a For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your distributive share of partnership loss that is disallowed for the taxable year; by The sum of your distributive shares of all items of deduction and loss of the partnership for the tax year. Irs tax form 2012 1040a   If any amount of your pro rata share of an S corporation's loss for the tax year is disallowed under the basis limitation, a ratable portion of your pro rata share of each item of deduction or loss of the S corporation is disallowed for the tax year. Irs tax form 2012 1040a For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your share of S corporation loss that is disallowed for the tax year; by The sum of your pro rata shares of all items of deduction and loss of the corporation for the tax year. Irs tax form 2012 1040a Proration of deductions disallowed under at-risk limitation. Irs tax form 2012 1040a   If any amount of your loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) is disallowed under the at-risk rules for the tax year, a ratable portion of each item of deduction or loss from the activity is disallowed for the tax year. Irs tax form 2012 1040a For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of the loss from the activity that is disallowed for the tax year; by The sum of all deductions from the activity for the taxable year. Irs tax form 2012 1040a Coordination of basis and at-risk limitations. Irs tax form 2012 1040a   The portion of any item of deduction or loss that is disallowed for the tax year under the basis limitations is not taken into account for the taxable year in determining the loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) for purposes of applying the at-risk rules. Irs tax form 2012 1040a Separately identified items of deduction and loss. Irs tax form 2012 1040a   In identifying the items of deduction and loss from an activity that are not disallowed under the basis and at-risk limitations (and that therefore may be treated as passive activity deductions), you need not account separately for any item of deduction or loss unless such item may, if separately taken into account, result in an income tax liability different from that which would result were such item of deduction or loss taken into account separately. Irs tax form 2012 1040a   Items of deduction or loss that must be accounted for separately include (but are not limited to) items of deduction or loss that: Are attributable to separate activities. Irs tax form 2012 1040a See Grouping Your Activities , later. Irs tax form 2012 1040a Arise in a rental real estate activity in tax years in which you actively participate in such activity; Arise in a rental real estate activity in taxable years in which you do not actively participate in such activity; Arose in a taxable year beginning before 1987 and were not allowed for such taxable year under the basis or at-risk limitations; Are taken into account under section 613A(d) (relating to limitations on certain depletion deductions); Are taken into account under section 1211 (relating to the limitation on capital losses); Are taken into account under section 1231 (relating to property used in a trade or business and involuntary conversions). Irs tax form 2012 1040a See Section 1231 Gains and Losses in Publication 544 for more information. Irs tax form 2012 1040a Are attributable to pre-enactment interests in activities. Irs tax form 2012 1040a See Regulations section 1. Irs tax form 2012 1040a 469-11T(c). Irs tax form 2012 1040a Grouping Your Activities You can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules. Irs tax form 2012 1040a Grouping is important for a number of reasons. Irs tax form 2012 1040a If you group two activities into one larger activity, you need only show material participation in the activity as a whole. Irs tax form 2012 1040a But if the two activities are separate, you must show material participation in each one. Irs tax form 2012 1040a On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. Irs tax form 2012 1040a But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity. Irs tax form 2012 1040a Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. Irs tax form 2012 1040a Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. Irs tax form 2012 1040a You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. Irs tax form 2012 1040a The following factors have the greatest weight in determining whether activities form an appropriate economic unit. Irs tax form 2012 1040a All of the factors do not have to apply to treat more than one activity as a single activity. Irs tax form 2012 1040a The factors that you should consider are: The similarities and differences in the types of trades or businesses, The extent of common control, The extent of common ownership, The geographical location, and The interdependencies between or among activities, which may include the extent to which the activities: Buy or sell goods between or among themselves, Involve products or services that are generally provided together, Have the same customers, Have the same employees, or Use a single set of books and records to account for the activities. Irs tax form 2012 1040a Example 1. Irs tax form 2012 1040a John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. Irs tax form 2012 1040a Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. Irs tax form 2012 1040a For example, John may be able to group the movie theaters and the bakeries into: One activity, A movie theater activity and a bakery activity, A Baltimore activity and a Philadelphia activity, or Four separate activities. Irs tax form 2012 1040a Example 2. Irs tax form 2012 1040a Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. Irs tax form 2012 1040a Betty is also a partner in DEF (a trucking business). Irs tax form 2012 1040a ABC and DEF are under common control. Irs tax form 2012 1040a The main part of DEF's business is transporting goods for ABC. Irs tax form 2012 1040a DEF is the only trucking business in which Betty is involved. Irs tax form 2012 1040a Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. Irs tax form 2012 1040a Consistency and disclosure requirement. Irs tax form 2012 1040a   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. Irs tax form 2012 1040a You must meet any disclosure requirements of the IRS when you first group your activities and when you add or dispose of any activities in your groupings. Irs tax form 2012 1040a   However, if the original grouping is clearly inappropriate or there is a material change in the facts and circumstances that makes the original grouping clearly inappropriate, you must regroup the activities and comply with any disclosure requirements of the IRS. Irs tax form 2012 1040a   See Disclosure Requirement , later. Irs tax form 2012 1040a Regrouping by the IRS. Irs tax form 2012 1040a   If any of the activities resulting from your grouping is not an appropriate economic unit and one of the primary purposes of your grouping (or failure to regroup) is to avoid the passive activity rules, the IRS may regroup your activities. Irs tax form 2012 1040a Rental activities. Irs tax form 2012 1040a   In general, you cannot group a rental activity with a trade or business activity. Irs tax form 2012 1040a However, you can group them together if the activities form an appropriate economic unit and: The rental activity is insubstantial in relation to the trade or business activity, The trade or business activity is insubstantial in relation to the rental activity, or Each owner of the trade or business activity has the same ownership interest in the rental activity, in which case the part of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity. Irs tax form 2012 1040a Example. Irs tax form 2012 1040a Herbert and Wilma are married and file a joint return. Irs tax form 2012 1040a Healthy Food, an S corporation, is a grocery store business. Irs tax form 2012 1040a Herbert is Healthy Food's only shareholder. Irs tax form 2012 1040a Plum Tower, an S corporation, owns and rents out the building. Irs tax form 2012 1040a Wilma is Plum Tower's only shareholder. Irs tax form 2012 1040a Plum Tower rents part of its building to Healthy Food. Irs tax form 2012 1040a Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. Irs tax form 2012 1040a Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. Irs tax form 2012 1040a The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). Irs tax form 2012 1040a If the grouping forms an appropriate economic unit, as discussed earlier, Herbert and Wilma can group Plum Tower's grocery store rental and Healthy Food's grocery business into a single trade or business activity. Irs tax form 2012 1040a Grouping of real and personal property rentals. Irs tax form 2012 1040a   In general, you cannot treat an activity involving the rental of real property and an activity involving the rental of personal property as a single activity. Irs tax form 2012 1040a However, you can treat them as a single activity if you provide the personal property in connection with the real property or the real property in connection with the personal property. Irs tax form 2012 1040a Certain activities may not be grouped. Irs tax form 2012 1040a   In general, if you own an interest as a limited partner or a limited entrepreneur in one of the following activities, you may not group that activity with any other activity in another type of business. Irs tax form 2012 1040a Holding, producing, or distributing motion picture films or video tapes. Irs tax form 2012 1040a Farming. Irs tax form 2012 1040a Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). Irs tax form 2012 1040a For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. Irs tax form 2012 1040a Exploring for, or exploiting, oil and gas resources. Irs tax form 2012 1040a Exploring for, or exploiting, geothermal deposits. Irs tax form 2012 1040a   If you own an interest as a limited partner or a limited entrepreneur in an activity described in the list above, you may group that activity with another activity in the same type of business if the grouping forms an appropriate economic unit as discussed earlier. Irs tax form 2012 1040a Limited entrepreneur. Irs tax form 2012 1040a   A limited entrepreneur is a person who: Has an interest in an enterprise other than as a limited partner, and Does not actively participate in the management of the enterprise. Irs tax form 2012 1040a Activities conducted through another entity. Irs tax form 2012 1040a   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. Irs tax form 2012 1040a Once the entity groups its activities, you, as the partner or shareholder of the entity, may group those activities (following the rules of this section): With each other, With activities conducted directly by you, or With activities conducted through other entities. Irs tax form 2012 1040a    You may not treat activities grouped together by the entity as separate activities. Irs tax form 2012 1040a Personal service and closely held corporations. Irs tax form 2012 1040a   You may group an activity conducted through a personal service or closely held corporation with your other activities only to determine whether you materially or significantly participated in those other activities. Irs tax form 2012 1040a See Material Participation , earlier, and Significant Participation Passive Activities , later. Irs tax form 2012 1040a Publicly traded partnership (PTP). Irs tax form 2012 1040a   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. Irs tax form 2012 1040a Partial dispositions. Irs tax form 2012 1040a   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. Irs tax form 2012 1040a However, you can do this only if you can show with reasonable certainty: The amount of deductions and credits disallowed in prior years under the passive activity rules that is allocable to the part of the activity disposed of, and The amount of gross income and any other deductions and credits for the current tax year that is allocable to the part of the activity disposed of. Irs tax form 2012 1040a Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. Irs tax form 2012 1040a You are required to report certain changes to your groupings that occur during the tax year to the IRS. Irs tax form 2012 1040a If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. Irs tax form 2012 1040a You will be considered to have made a timely disclosure if you filed all affected income tax returns consistent with the claimed grouping and make the required disclosure on the income tax return for the year in which you first discovered the failure to disclose. Irs tax form 2012 1040a If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. Irs tax form 2012 1040a New grouping. Irs tax form 2012 1040a   You must file a written statement with your original income tax return for the first tax year in which two or more activities are originally grouped into a single activity. Irs tax form 2012 1040a The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. Irs tax form 2012 1040a In addition, the statement must contain a declaration that the grouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. Irs tax form 2012 1040a Addition to an existing grouping. Irs tax form 2012 1040a   You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. Irs tax form 2012 1040a The statement must provide the name, address, and EIN, if applicable, for the activity that is being added and for the activities in the existing group. Irs tax form 2012 1040a In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. Irs tax form 2012 1040a Regrouping. Irs tax form 2012 1040a   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. Irs tax form 2012 1040a The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. Irs tax form 2012 1040a If two or more activities are being regrouped into a single activity, the statement must contain a declaration that the regrouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. Irs tax form 2012 1040a In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. Irs tax form 2012 1040a Groupings by partnerships and S corporations. Irs tax form 2012 1040a   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. Irs tax form 2012 1040a Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. Irs tax form 2012 1040a S. Irs tax form 2012 1040a Return of Partnership Income, or Form 1120S, U. Irs tax form 2012 1040a S. Irs tax form 2012 1040a Income Tax Return for an S Corporation, whichever is applicable. Irs tax form 2012 1040a   The partner or shareholder is not required to make a separate disclosure of the groupings disclosed by the entity unless the partner or shareholder: Groups together any of the activities that the entity does not group together, Groups the entity's activities with activities conducted directly by the partner or shareholder, or Groups an entity's activities with activities conducted through another entity. Irs tax form 2012 1040a   A partner or shareholder may not treat activities grouped together by the entity as separate activities. Irs tax form 2012 1040a Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. Irs tax form 2012 1040a Significant participation passive activities, Rental of property when less than 30% of the unadjusted basis of the property is subject to depreciation, Equity-financed lending activities, Rental of property incidental to development activities, Rental of property to nonpassive activities, and Licensing of intangible property by  pass-through entities. Irs tax form 2012 1040a If you are engaged in or have an interest in one of these activities during the tax year (either directly or through a partnership or an S corporation), combine the income and losses from the activity to determine if you have a net loss or net income from that activity. Irs tax form 2012 1040a If the result is a net loss, treat the income and losses the same as any other income or losses from that type of passive activity (trade or business activity or rental activity). Irs tax form 2012 1040a If the result is net income, do not enter any of the income or losses from the activity or property on Form 8582 or its worksheets. Irs tax form 2012 1040a Instead, enter income or losses on the form and schedules you normally use. Irs tax form 2012 1040a However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity. Irs tax form 2012 1040a Limit on recharacterized passive income. Irs tax form 2012 1040a   The total amount that you treat as nonpassive income under the rules described later in this discussion for significant participation passive activities, rental of nondepreciable property, and equity-financed lending activities cannot exceed the greatest amount that you treat as nonpassive income under any one of these rules. Irs tax form 2012 1040a Investment income and investment expense. Irs tax form 2012 1040a   To figure your investment interest expense limitation on Form 4952, treat as investment income any net passive income recharacterized as nonpassive income from rental of nondepreciable property, equity-financed lending activity, or licensing of intangible property by a pass-through entity. Irs tax form 2012 1040a Significant Participation Passive Activities A significant participation passive activity is any trade or business activity in which you participated for more than 100 hours during the tax year but did not materially participate. Irs tax form 2012 1040a If your gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income. Irs tax form 2012 1040a Corporations. Irs tax form 2012 1040a   An activity of a personal service corporation or closely held corporation is a significant participation passive activity if both of the following statements are true. Irs tax form 2012 1040a The corporation is not treated as materially participating in the activity for the year. Irs tax form 2012 1040a One or more individuals, each of whom is treated as significantly participating in the activity, directly or indirectly hold (in total) more than 50% (by value) of the corporation's outstanding stock. Irs tax form 2012 1040a Worksheet A. Irs tax form 2012 1040a   Complete Worksheet A. Irs tax form 2012 1040a Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. Irs tax form 2012 1040a Begin by entering the name of each activity in the left column. Irs tax form 2012 1040a Column (a). Irs tax form 2012 1040a   Enter the number of hours you participated in each activity and total the column. Irs tax form 2012 1040a   If the total is more than 500, do not complete Worksheet A or B. Irs tax form 2012 1040a None of the activities are passive activities because you satisfy test 4 for material participation. Irs tax form 2012 1040a (See Material participation tests , earlier. Irs tax form 2012 1040a ) Report all the income and losses from these activities on the forms and schedules you normally use. Irs tax form 2012 1040a Do not include the income and losses on Form 8582. Irs tax form 2012 1040a Column (b). Irs tax form 2012 1040a   Enter the net loss, if any, from the activity. Irs tax form 2012 1040a Net loss from an activity means either: The activity's current year net loss (if any) plus prior year unallowed losses (if any), or The excess of prior year unallowed losses over the current year net income (if any). Irs tax form 2012 1040a Enter -0- here if the prior year unallowed loss is the same as the current year net income. Irs tax form 2012 1040a Column (c). Irs tax form 2012 1040a   Enter net income (if any) from the activity. Irs tax form 2012 1040a Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. Irs tax form 2012 1040a Column (d). Irs tax form 2012 1040a   Combine amounts in the Totals row for columns (b) and (c) and enter the total net income or net loss in the Totals row of column (d). Irs tax form 2012 1040a If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. Irs tax form 2012 1040a Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88