File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

2010 1040ez Tax Form

1040x Amended FormH R Block OnlineHow Do You Amend A Tax ReturnInstructions For Filing An Amended Tax ReturnFree Efile Tax ReturnH&r Block Free Tax FileAmend 2011 Tax Return FormCan I E File 1040xH And R Block Free Tax FilingFree Tax Preparation SitesFree Turbo Tax 2008Form 1040 2010Instructions For 1040ezForm 1040File Form 1040x FreeE File 20122012 Irs Forms 1040Www Free1040taxreturn ComFiling A Tax Return OnlineAmending My 2011 Tax ReturnTax Software ReviewsWww.irs.gov/form 1040xAmended Returns1040ez Form 2012Irs1040Www Freefilefillableforms Com Ffa Freefileforms HtmFile State Taxes Free 2013Irs TaxFederal Tax Extension OnlineFile 2007 Taxes1040x Amendment FormFree TaxNj 1040 NrFree Federal Tax ReturnFile Back Taxes1040ez2012File State Tax Return Online FreeWho Can File 1040ezForm 1040x 2013Tax Forms 1040 Ez

2010 1040ez Tax Form

2010 1040ez tax form 17. 2010 1040ez tax form   How To Get Tax Help Table of Contents Go online, use a smart phone, call or walk in to an office near you. 2010 1040ez tax form Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. 2010 1040ez tax form Free help with your tax return. 2010 1040ez tax form   Free help in preparing your return is available nationwide from IRS-certified volunteers. 2010 1040ez tax form The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. 2010 1040ez tax form The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. 2010 1040ez tax form Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2010 1040ez tax form Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. 2010 1040ez tax form To find the nearest VITA or TCE site, visit IRS. 2010 1040ez tax form gov or call 1-800-906-9887. 2010 1040ez tax form   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2010 1040ez tax form To find the nearest AARP Tax-Aide site, visit AARP's website at www. 2010 1040ez tax form aarp. 2010 1040ez tax form org/money/taxaide or call 1-888-227-7669. 2010 1040ez tax form   For more information on these programs, go to IRS. 2010 1040ez tax form gov and enter “VITA” in the search box. 2010 1040ez tax form Internet. 2010 1040ez tax form IRS. 2010 1040ez tax form gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. 2010 1040ez tax form Apply for an Employer Identification Number (EIN). 2010 1040ez tax form Go to IRS. 2010 1040ez tax form gov and enter Apply for an EIN in the search box. 2010 1040ez tax form Request an Electronic Filing PIN by going to IRS. 2010 1040ez tax form gov and entering Electronic Filing PIN in the search box. 2010 1040ez tax form Download forms, instructions, and publications, including some accessible versions. 2010 1040ez tax form Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. 2010 1040ez tax form gov or IRS2Go. 2010 1040ez tax form Tax return and tax account transcripts are generally available for the current year and past three years. 2010 1040ez tax form Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. 2010 1040ez tax form gov or IRS2Go. 2010 1040ez tax form Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. 2010 1040ez tax form An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. 2010 1040ez tax form Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. 2010 1040ez tax form If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. 2010 1040ez tax form Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 2010 1040ez tax form Locate the nearest volunteer help site with the VITA Locator Tool on IRS. 2010 1040ez tax form gov. 2010 1040ez tax form Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 2010 1040ez tax form The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 2010 1040ez tax form Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. 2010 1040ez tax form AARP offers the Tax-Aide counseling program as part of the TCE program. 2010 1040ez tax form Visit AARP's website to find the nearest Tax-Aide location. 2010 1040ez tax form Research your tax questions. 2010 1040ez tax form Search publications and instructions by topic or keyword. 2010 1040ez tax form Read the Internal Revenue Code, regulations, or other official guidance. 2010 1040ez tax form Read Internal Revenue Bulletins. 2010 1040ez tax form Sign up to receive local and national tax news by email. 2010 1040ez tax form Phone. 2010 1040ez tax form You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 2010 1040ez tax form   Call the Business and Specialty Tax line for questions at 1-800-829-4933. 2010 1040ez tax form Download the free IRS2Go mobile app from the iTunes app store or from Google Play. 2010 1040ez tax form Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 2010 1040ez tax form Call to locate the nearest volunteer help site, 1-800-906-9887. 2010 1040ez tax form Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 2010 1040ez tax form The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. 2010 1040ez tax form Most VITA and TCE sites offer free electronic filing. 2010 1040ez tax form Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 2010 1040ez tax form Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 2010 1040ez tax form Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). 2010 1040ez tax form You should receive your order within 10 business days. 2010 1040ez tax form Call to order transcripts of your tax returns or tax account, 1-800-908-9946. 2010 1040ez tax form Follow the prompts to provide your Employer Identification Number, street address and ZIP code. 2010 1040ez tax form Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. 2010 1040ez tax form Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 2010 1040ez tax form The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 2010 1040ez tax form These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. 2010 1040ez tax form gsa. 2010 1040ez tax form gov/fedrelay. 2010 1040ez tax form Walk-in. 2010 1040ez tax form You can find a selection of forms, publications and services — in-person, face-to-face. 2010 1040ez tax form   Products. 2010 1040ez tax form You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 2010 1040ez tax form Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 2010 1040ez tax form Services. 2010 1040ez tax form You can walk in to your local TAC most business days for personal, face-to-face tax help. 2010 1040ez tax form An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. 2010 1040ez tax form If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. 2010 1040ez tax form No appointment is necessary—just walk in. 2010 1040ez tax form Before visiting, check www. 2010 1040ez tax form irs. 2010 1040ez tax form gov/localcontacts for hours of operation and services provided. 2010 1040ez tax form Mail. 2010 1040ez tax form You can send your order for forms, instructions, and publications to the address below. 2010 1040ez tax form You should receive a response within 10 days after your request is received. 2010 1040ez tax form  Internal Revenue Service 1201 N. 2010 1040ez tax form Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. 2010 1040ez tax form   The Taxpayer Advocate Service (TAS) is your voice at the IRS. 2010 1040ez tax form Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 2010 1040ez tax form What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. 2010 1040ez tax form We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 2010 1040ez tax form You face (or your business is facing) an immediate threat of adverse action. 2010 1040ez tax form You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 2010 1040ez tax form   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 2010 1040ez tax form Here's why we can help: TAS is an independent organization within the IRS. 2010 1040ez tax form Our advocates know how to work with the IRS. 2010 1040ez tax form Our services are free and tailored to meet your needs. 2010 1040ez tax form We have offices in every state, the District of Columbia, and Puerto Rico. 2010 1040ez tax form How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. 2010 1040ez tax form irs. 2010 1040ez tax form gov/advocate, or call us toll-free at 1-877-777-4778. 2010 1040ez tax form How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 2010 1040ez tax form If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. 2010 1040ez tax form irs. 2010 1040ez tax form gov/sams. 2010 1040ez tax form Low Income Taxpayer Clinics. 2010 1040ez tax form   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. 2010 1040ez tax form Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. 2010 1040ez tax form Visit www. 2010 1040ez tax form TaxpayerAdvocate. 2010 1040ez tax form irs. 2010 1040ez tax form gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. 2010 1040ez tax form Small Business and Self-Employed Tax Center. 2010 1040ez tax form This online guide is a must for every small business owner or any taxpayer about to start a business. 2010 1040ez tax form  The information is updated during the year. 2010 1040ez tax form Visit www. 2010 1040ez tax form irs. 2010 1040ez tax form gov/Businesses/Small-Businesses-&-Self-Employed. 2010 1040ez tax form Prev  Up  Next   Home   More Online Publications
Español

Native American and Tribal Cultural Resources

Find history, census, recreation, and other resources for and about Native Americans.

The 2010 1040ez Tax Form

2010 1040ez tax form 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. 2010 1040ez tax form Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form See Passive Activity Deductions, later. 2010 1040ez tax form Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. 2010 1040ez tax form However, there is a special allowance under which some or all of your passive activity loss may be allowed. 2010 1040ez tax form See Special $25,000 allowance , later. 2010 1040ez tax form Definition of passive activity loss. 2010 1040ez tax form    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. 2010 1040ez tax form See Passive Activity Income and Deductions , later. 2010 1040ez tax form   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. 2010 1040ez tax form For details on net active income, see the Instructions for Form 8810. 2010 1040ez tax form For the definition of passive activity gross income, see Passive Activity Income , later. 2010 1040ez tax form For the definition of passive activity deductions, see Passive Activity Deductions , later. 2010 1040ez tax form 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. 2010 1040ez tax form Allocation of disallowed passive activity loss among activities. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. 2010 1040ez tax form Loss from an activity. 2010 1040ez tax form   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. 2010 1040ez tax form   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. 2010 1040ez tax form See Significant Participation Passive Activities , later. 2010 1040ez tax form Example. 2010 1040ez tax form John Pine holds interests in three passive activities, A, B, and C. 2010 1040ez tax form 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. 2010 1040ez tax form Therefore, a ratable portion of the losses from activities A and B is disallowed. 2010 1040ez tax form 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. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Excluded deductions. 2010 1040ez tax form    “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. 2010 1040ez tax form See Recharacterization of Passive Income , later. 2010 1040ez tax form Separately identified deductions. 2010 1040ez tax form   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. 2010 1040ez tax form   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. 2010 1040ez tax form   Deductions that must be accounted for separately include (but are not limited to) the following deductions. 2010 1040ez tax form Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. 2010 1040ez tax form See Active participation , later. 2010 1040ez tax form Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. 2010 1040ez tax form See Active participation , later. 2010 1040ez tax form Losses from sales or exchanges of capital assets. 2010 1040ez tax form Section 1231 losses. 2010 1040ez tax form See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form For more information, see Regulations section 1. 2010 1040ez tax form 469-1(f)(4). 2010 1040ez tax form Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. 2010 1040ez tax form 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. 2010 1040ez tax form Credits that are included in figuring the general business credit are subject to the passive activity rules. 2010 1040ez tax form See the Instructions for Form 8582-CR for more information. 2010 1040ez tax form 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). 2010 1040ez tax form You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. 2010 1040ez tax form You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. 2010 1040ez tax form Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. 2010 1040ez tax form This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form These rules do not apply to C corporations. 2010 1040ez tax form For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. 2010 1040ez tax form Passive Activities There are two kinds of passive activities. 2010 1040ez tax form Trade or business activities in which you do not materially participate during the year. 2010 1040ez tax form Rental activities, even if you do materially participate in them, unless you are a real estate professional. 2010 1040ez tax form Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . 2010 1040ez tax form Treatment of former passive activities. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Treat any remaining prior year unallowed loss like you treat any other passive loss. 2010 1040ez tax form   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. 2010 1040ez tax form 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. 2010 1040ez tax form 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). 2010 1040ez tax form 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). 2010 1040ez tax form 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. 2010 1040ez tax form You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. 2010 1040ez tax form 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. 2010 1040ez tax form See Real Estate Professional under Activities That Are Not Passive Activities, later. 2010 1040ez tax form 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. 2010 1040ez tax form It does not matter whether the use is under a lease, a service contract, or some other arrangement. 2010 1040ez tax form Exceptions. 2010 1040ez tax form   Your activity is not a rental activity if any of the following apply. 2010 1040ez tax form The average period of customer use of the property is 7 days or less. 2010 1040ez tax form 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. 2010 1040ez tax form If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. 2010 1040ez tax form 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. 2010 1040ez tax form The activity's average period of customer use will equal the sum of the amounts for each class. 2010 1040ez tax form 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. 2010 1040ez tax form Significant personal services include only services performed by individuals. 2010 1040ez tax form 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. 2010 1040ez tax form Significant personal services do not include the following. 2010 1040ez tax form 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. 2010 1040ez tax form You provide extraordinary personal services in making the rental property available for customer use. 2010 1040ez tax form 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. 2010 1040ez tax form The rental is incidental to a nonrental activity. 2010 1040ez tax form 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. 2010 1040ez tax form The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. 2010 1040ez tax form The rental of property is incidental to a trade or business activity if all of the following apply. 2010 1040ez tax form You own an interest in the trade or business activity during the year. 2010 1040ez tax form 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. 2010 1040ez tax form Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. 2010 1040ez tax form 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. 2010 1040ez tax form You customarily make the rental property available during defined business hours for nonexclusive use by various customers. 2010 1040ez tax form 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. 2010 1040ez tax form    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. 2010 1040ez tax form Special $25,000 allowance. 2010 1040ez tax form   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. 2010 1040ez tax form This special allowance is an exception to the general rule disallowing the passive activity loss. 2010 1040ez tax form 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. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. 2010 1040ez tax form See Phaseout rule , later. 2010 1040ez tax form Example. 2010 1040ez tax form 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. 2010 1040ez tax form She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. 2010 1040ez tax form 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). 2010 1040ez tax form Commercial revitalization deduction (CRD). 2010 1040ez tax form   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. 2010 1040ez tax form 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. 2010 1040ez tax form You cannot claim a CRD for a building placed in service after December 31, 2009. 2010 1040ez tax form Active participation. 2010 1040ez tax form   Active participation is not the same as material participation (defined later). 2010 1040ez tax form Active participation is a less stringent standard than material participation. 2010 1040ez tax form For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. 2010 1040ez tax form Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. 2010 1040ez tax form   Only individuals can actively participate in rental real estate activities. 2010 1040ez tax form 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. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). 2010 1040ez tax form   Limited partners are not treated as actively participating in a partnership's rental real estate activities. 2010 1040ez tax form   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. 2010 1040ez tax form   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. 2010 1040ez tax form Example. 2010 1040ez tax form 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. 2010 1040ez tax form He advertised and rented the house to the current tenant himself. 2010 1040ez tax form He also collected the rents and did the repairs or hired someone to do them. 2010 1040ez tax form 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. 2010 1040ez tax form Phaseout rule. 2010 1040ez tax form   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). 2010 1040ez tax form 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. 2010 1040ez tax form    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. 2010 1040ez tax form Taxable social security and tier 1 railroad retirement benefits. 2010 1040ez tax form Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. 2010 1040ez tax form The exclusion from income of interest from qualified U. 2010 1040ez tax form S. 2010 1040ez tax form savings bonds used to pay qualified higher education expenses. 2010 1040ez tax form The exclusion from income of amounts received from an employer's adoption assistance program. 2010 1040ez tax form Passive activity income or loss included on Form 8582. 2010 1040ez tax form 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). 2010 1040ez tax form Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). 2010 1040ez tax form The deduction for the employer-equivalent portion of self-employment tax. 2010 1040ez tax form The deduction for domestic production activities. 2010 1040ez tax form The deduction allowed for interest on student loans. 2010 1040ez tax form The deduction for qualified tuition and related expenses. 2010 1040ez tax form Example. 2010 1040ez tax form During 2013, John was unmarried and was not a real estate professional. 2010 1040ez tax form For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. 2010 1040ez tax form His modified adjusted gross income is $120,000. 2010 1040ez tax form When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. 2010 1040ez tax form He must carry over the remaining $16,000 passive activity loss to 2014. 2010 1040ez tax form 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. 2010 1040ez tax form   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. 2010 1040ez tax form 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). 2010 1040ez tax form   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. 2010 1040ez tax form Ordering rules. 2010 1040ez tax form   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. 2010 1040ez tax form The portion of passive activity losses not attributable to the CRD. 2010 1040ez tax form The portion of passive activity losses attributable to the CRD. 2010 1040ez tax form The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. 2010 1040ez tax form The portion of passive activity credits attributable to the rehabilitation credit. 2010 1040ez tax form The portion of passive activity credits attributable to the low-income housing credit. 2010 1040ez tax form Activities That Are Not Passive Activities The following are not passive activities. 2010 1040ez tax form Trade or business activities in which you materially participated for the tax year. 2010 1040ez tax form 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). 2010 1040ez tax form It does not matter whether you materially participated in the activity for the tax year. 2010 1040ez tax form 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. 2010 1040ez tax form  See Temporary Regulations section 1. 2010 1040ez tax form 469-1T(e)(4)(ii). 2010 1040ez tax form 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. 2010 1040ez tax form An activity of trading personal property for the account of those who own interests in the activity. 2010 1040ez tax form See Temporary Regulations section 1. 2010 1040ez tax form 469-1T(e)(6). 2010 1040ez tax form Rental real estate activities in which you materially participated as a real estate professional. 2010 1040ez tax form See Real Estate Professional , later. 2010 1040ez tax form You should not enter income and losses from these activities on Form 8582. 2010 1040ez tax form Instead, enter them on the forms or schedules you would normally use. 2010 1040ez tax form Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. 2010 1040ez tax form Material participation tests. 2010 1040ez tax form    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. 2010 1040ez tax form You participated in the activity for more than 500 hours. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. 2010 1040ez tax form 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. 2010 1040ez tax form See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. 2010 1040ez tax form You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. 2010 1040ez tax form The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. 2010 1040ez tax form 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. 2010 1040ez tax form Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. 2010 1040ez tax form   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. 2010 1040ez tax form 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). 2010 1040ez tax form Participation. 2010 1040ez tax form   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. 2010 1040ez tax form Work not usually performed by owners. 2010 1040ez tax form   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. 2010 1040ez tax form The work is not work that is customarily done by the owner of that type of activity. 2010 1040ez tax form 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. 2010 1040ez tax form Participation as an investor. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Spouse's participation. 2010 1040ez tax form   Your participation in an activity includes your spouse's participation. 2010 1040ez tax form 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. 2010 1040ez tax form Proof of participation. 2010 1040ez tax form You can use any reasonable method to prove your participation in an activity for the year. 2010 1040ez tax form You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. 2010 1040ez tax form 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. 2010 1040ez tax form Limited partners. 2010 1040ez tax form   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. 2010 1040ez tax form 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. 2010 1040ez tax form   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). 2010 1040ez tax form Retired or disabled farmer and surviving spouse of a farmer. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Corporations. 2010 1040ez tax form   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. 2010 1040ez tax form   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. 2010 1040ez tax form See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. 2010 1040ez tax form Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. 2010 1040ez tax form However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. 2010 1040ez tax form 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. 2010 1040ez tax form See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. 2010 1040ez tax form 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). 2010 1040ez tax form 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. 2010 1040ez tax form Qualifications. 2010 1040ez tax form   You qualified as a real estate professional for the year if you met both of the following requirements. 2010 1040ez tax form 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. 2010 1040ez tax form You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. 2010 1040ez tax form However, you can count your spouse's participation in an activity in determining if you materially participated. 2010 1040ez tax form Real property trades or businesses. 2010 1040ez tax form   A real property trade or business is a trade or business that does any of the following with real property. 2010 1040ez tax form Develops or redevelops it. 2010 1040ez tax form Constructs or reconstructs it. 2010 1040ez tax form Acquires it. 2010 1040ez tax form Converts it. 2010 1040ez tax form Rents or leases it. 2010 1040ez tax form Operates or manages it. 2010 1040ez tax form Brokers it. 2010 1040ez tax form Closely held corporations. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Self-charged interest. 2010 1040ez tax form   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. 2010 1040ez tax form   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. 2010 1040ez tax form This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. 2010 1040ez tax form   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. 2010 1040ez tax form    Exception. 2010 1040ez tax form 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. 2010 1040ez tax form 469-7(g) to avoid the application of these rules. 2010 1040ez tax form For more details on the self-charged interest rules, see Regulations section 1. 2010 1040ez tax form 469-7. 2010 1040ez tax form 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. 2010 1040ez tax form Passive activity income does not include the following items. 2010 1040ez tax form Income from an activity that is not a passive activity. 2010 1040ez tax form These activities are discussed under Activities That Are Not Passive Activities , earlier. 2010 1040ez tax form Portfolio income. 2010 1040ez tax form This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. 2010 1040ez tax form It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. 2010 1040ez tax form The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. 2010 1040ez tax form For more information on self-charged interest, see Self-charged interest , earlier. 2010 1040ez tax form Personal service income. 2010 1040ez tax form 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. 2010 1040ez tax form Income from positive section 481 adjustments allocated to activities other than passive activities. 2010 1040ez tax form (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. 2010 1040ez tax form ) Income or gain from investments of working capital. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form Any other income that must be treated as nonpassive income. 2010 1040ez tax form See Recharacterization of Passive Income , later. 2010 1040ez tax form Overall gain from any interest in a publicly traded partnership. 2010 1040ez tax form See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. 2010 1040ez tax form State, local, and foreign income tax refunds. 2010 1040ez tax form Income from a covenant not to compete. 2010 1040ez tax form 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. 2010 1040ez tax form Alaska Permanent Fund dividends. 2010 1040ez tax form 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. 2010 1040ez tax form See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. 2010 1040ez tax form Disposition of property interests. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form An exception to this general rule may apply if you previously used the property in a different activity. 2010 1040ez tax form Exception for more than one use in the preceding 12 months. 2010 1040ez tax form   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. 2010 1040ez tax form Any gain allocated to a passive activity is passive activity income. 2010 1040ez tax form   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. 2010 1040ez tax form Exception for substantially appreciated property. 2010 1040ez tax form   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. 2010 1040ez tax form You used the property in a passive activity for 20% of the time you held your interest in the property. 2010 1040ez tax form You used the property in a passive activity for the entire 24-month period before its disposition. 2010 1040ez tax form If neither condition applies, the gain is not passive activity income. 2010 1040ez tax form 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. 2010 1040ez tax form   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. 2010 1040ez tax form Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. 2010 1040ez tax form   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. 2010 1040ez tax form Disposition of property converted to inventory. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form This rule applies only if you meet all of the following conditions. 2010 1040ez tax form 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). 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form See Coordination with other limitations on deductions that apply before the passive activity rules , later. 2010 1040ez tax form 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. 2010 1040ez tax form Exceptions. 2010 1040ez tax form   Passive activity deductions do not include the following items. 2010 1040ez tax form Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. 2010 1040ez tax form Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. 2010 1040ez tax form For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. 2010 1040ez tax form Losses from dispositions of property that produce portfolio income or property held for investment. 2010 1040ez tax form State, local, and foreign income taxes. 2010 1040ez tax form Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. 2010 1040ez tax form Charitable contribution deductions. 2010 1040ez tax form Net operating loss deductions. 2010 1040ez tax form Percentage depletion carryovers for oil and gas wells. 2010 1040ez tax form Capital loss carrybacks and carryovers. 2010 1040ez tax form Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. 2010 1040ez tax form See Coordination with other limitations on deductions that apply before the passive activity rules , later. 2010 1040ez tax form Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. 2010 1040ez tax form Net negative section 481 adjustments allocated to activities other than passive activities. 2010 1040ez tax form (Section 481 adjustments are adjustments required due to changes in accounting methods. 2010 1040ez tax form ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. 2010 1040ez tax form The deduction for the employer-equivalent portion of self-employment tax. 2010 1040ez tax form Coordination with other limitations on deductions that apply before the passive activity rules. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Proration of deductions disallowed under basis limitations. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Proration of deductions disallowed under at-risk limitation. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Coordination of basis and at-risk limitations. 2010 1040ez tax form   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. 2010 1040ez tax form Separately identified items of deduction and loss. 2010 1040ez tax form   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. 2010 1040ez tax form   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. 2010 1040ez tax form See Grouping Your Activities , later. 2010 1040ez tax form 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). 2010 1040ez tax form See Section 1231 Gains and Losses in Publication 544 for more information. 2010 1040ez tax form Are attributable to pre-enactment interests in activities. 2010 1040ez tax form See Regulations section 1. 2010 1040ez tax form 469-11T(c). 2010 1040ez tax form 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. 2010 1040ez tax form Grouping is important for a number of reasons. 2010 1040ez tax form If you group two activities into one larger activity, you need only show material participation in the activity as a whole. 2010 1040ez tax form But if the two activities are separate, you must show material participation in each one. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. 2010 1040ez tax form Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. 2010 1040ez tax form You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. 2010 1040ez tax form The following factors have the greatest weight in determining whether activities form an appropriate economic unit. 2010 1040ez tax form All of the factors do not have to apply to treat more than one activity as a single activity. 2010 1040ez tax form 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. 2010 1040ez tax form Example 1. 2010 1040ez tax form John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. 2010 1040ez tax form Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. 2010 1040ez tax form 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. 2010 1040ez tax form Example 2. 2010 1040ez tax form Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. 2010 1040ez tax form Betty is also a partner in DEF (a trucking business). 2010 1040ez tax form ABC and DEF are under common control. 2010 1040ez tax form The main part of DEF's business is transporting goods for ABC. 2010 1040ez tax form DEF is the only trucking business in which Betty is involved. 2010 1040ez tax form Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. 2010 1040ez tax form Consistency and disclosure requirement. 2010 1040ez tax form   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. 2010 1040ez tax form 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. 2010 1040ez tax form   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. 2010 1040ez tax form   See Disclosure Requirement , later. 2010 1040ez tax form Regrouping by the IRS. 2010 1040ez tax form   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. 2010 1040ez tax form Rental activities. 2010 1040ez tax form   In general, you cannot group a rental activity with a trade or business activity. 2010 1040ez tax form 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. 2010 1040ez tax form Example. 2010 1040ez tax form Herbert and Wilma are married and file a joint return. 2010 1040ez tax form Healthy Food, an S corporation, is a grocery store business. 2010 1040ez tax form Herbert is Healthy Food's only shareholder. 2010 1040ez tax form Plum Tower, an S corporation, owns and rents out the building. 2010 1040ez tax form Wilma is Plum Tower's only shareholder. 2010 1040ez tax form Plum Tower rents part of its building to Healthy Food. 2010 1040ez tax form Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. 2010 1040ez tax form Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. 2010 1040ez tax form The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). 2010 1040ez tax form 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. 2010 1040ez tax form Grouping of real and personal property rentals. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form Certain activities may not be grouped. 2010 1040ez tax form   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. 2010 1040ez tax form Holding, producing, or distributing motion picture films or video tapes. 2010 1040ez tax form Farming. 2010 1040ez tax form Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). 2010 1040ez tax form For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. 2010 1040ez tax form Exploring for, or exploiting, oil and gas resources. 2010 1040ez tax form Exploring for, or exploiting, geothermal deposits. 2010 1040ez tax form   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. 2010 1040ez tax form Limited entrepreneur. 2010 1040ez tax form   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. 2010 1040ez tax form Activities conducted through another entity. 2010 1040ez tax form   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. 2010 1040ez tax form 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. 2010 1040ez tax form    You may not treat activities grouped together by the entity as separate activities. 2010 1040ez tax form Personal service and closely held corporations. 2010 1040ez tax form   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. 2010 1040ez tax form See Material Participation , earlier, and Significant Participation Passive Activities , later. 2010 1040ez tax form Publicly traded partnership (PTP). 2010 1040ez tax form   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. 2010 1040ez tax form Partial dispositions. 2010 1040ez tax form   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. 2010 1040ez tax form 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. 2010 1040ez tax form Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. 2010 1040ez tax form You are required to report certain changes to your groupings that occur during the tax year to the IRS. 2010 1040ez tax form If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. 2010 1040ez tax form 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. 2010 1040ez tax form If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. 2010 1040ez tax form New grouping. 2010 1040ez tax form   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. 2010 1040ez tax form The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. 2010 1040ez tax form 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. 2010 1040ez tax form Addition to an existing grouping. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form Regrouping. 2010 1040ez tax form   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. 2010 1040ez tax form The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. 2010 1040ez tax form 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. 2010 1040ez tax form In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. 2010 1040ez tax form Groupings by partnerships and S corporations. 2010 1040ez tax form   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. 2010 1040ez tax form Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. 2010 1040ez tax form S. 2010 1040ez tax form Return of Partnership Income, or Form 1120S, U. 2010 1040ez tax form S. 2010 1040ez tax form Income Tax Return for an S Corporation, whichever is applicable. 2010 1040ez tax form   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. 2010 1040ez tax form   A partner or shareholder may not treat activities grouped together by the entity as separate activities. 2010 1040ez tax form Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form 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). 2010 1040ez tax form 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. 2010 1040ez tax form Instead, enter income or losses on the form and schedules you normally use. 2010 1040ez tax form 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. 2010 1040ez tax form Limit on recharacterized passive income. 2010 1040ez tax form   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. 2010 1040ez tax form Investment income and investment expense. 2010 1040ez tax form   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. 2010 1040ez tax form 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. 2010 1040ez tax form 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. 2010 1040ez tax form Corporations. 2010 1040ez tax form   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. 2010 1040ez tax form The corporation is not treated as materially participating in the activity for the year. 2010 1040ez tax form 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. 2010 1040ez tax form Worksheet A. 2010 1040ez tax form   Complete Worksheet A. 2010 1040ez tax form Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. 2010 1040ez tax form Begin by entering the name of each activity in the left column. 2010 1040ez tax form Column (a). 2010 1040ez tax form   Enter the number of hours you participated in each activity and total the column. 2010 1040ez tax form   If the total is more than 500, do not complete Worksheet A or B. 2010 1040ez tax form None of the activities are passive activities because you satisfy test 4 for material participation. 2010 1040ez tax form (See Material participation tests , earlier. 2010 1040ez tax form ) Report all the income and losses from these activities on the forms and schedules you normally use. 2010 1040ez tax form Do not include the income and losses on Form 8582. 2010 1040ez tax form Column (b). 2010 1040ez tax form   Enter the net loss, if any, from the activity. 2010 1040ez tax form 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). 2010 1040ez tax form Enter -0- here if the prior year unallowed loss is the same as the current year net income. 2010 1040ez tax form Column (c). 2010 1040ez tax form   Enter net income (if any) from the activity. 2010 1040ez tax form Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. 2010 1040ez tax form Column (d). 2010 1040ez tax form   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). 2010 1040ez tax form If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. 2010 1040ez tax form Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88