Get documents about "i1040se 1998
Document Sample
Use Schedule E (Form 1040) to report income or loss from rental real estate,
1998 royalties, partnerships, S corporations, estates, trusts, and residual interests in
REMICs.
Instructions for You may attach your own schedule(s) to report income or loss from any of these
sources. Use the same format as on Schedule E.
Schedule E, Enter separately on Schedule E the total income and the total loss for each part.
Enclose loss figures in (parentheses).
Supplemental
Income and Loss
a fair rental price to that person as his
Part I Filers of Form 1041 or her main home.
If you are a fiduciary filing Schedule E ● Anyone who pays less than a fair
rental price for the unit.
Income or Loss From Rental with Form 1041, enter the estate’s or
trust’s employer identification number ● Anyone under an agreement that
Real Estate and Royalties lets you use some other unit.
(EIN) in the block for “Your social secu-
Use Part I to report: rity number.”
● Income and expenses from rentals Do not count as personal use:
of real estate (including personal prop- ● Any day you spent working sub-
erty leased with real estate), and Line 1 stantially full time repairing and main-
● Royalty income and expenses. taining the unit, even if family members
For rental real estate property only, used it for recreational purposes on that
See the instructions for lines 3 and 4 show: day.
to determine if you should report your
rental real estate and royalty income on ● The kind of property you rented out ● The days you used the unit as your
Schedule C, Schedule C-EZ, or Form (for example, brick duplex). main home before or after renting it or
4835 instead. ● The street address, city or town, offering it for rent, if you rented or tried
and state. You do not have to give the to rent it for at least 12 consecutive
If you own a part interest in a rental months (or for a period of less than 12
real estate property, report only your ZIP code.
● Your percentage of ownership in consecutive months at the end of which
part of the income and expenses on you sold or exchanged it).
Schedule E. this property, if less than 100%.
If you checked “No,” you can deduct
If you have more than three rental real all your expenses for the rental part,
estate or royalty properties, complete subject to the At-Risk Rules and the
and attach as many Schedules E as you Line 2 Passive Activity Loss Rules explained
need to list them. Complete lines 1 and on pages E-3 and E-4.
2 for each property. But fill in the If you rented out a dwelling unit that you
“Totals” column only on one Schedule also used for personal purposes during If you checked “Yes” and rented the
E. The figures in the “Totals” column on the year, you may not be able to deduct unit out for fewer than 15 days, do not
that Schedule E should be the com- all the expenses for the rental part. report the rental income and do not
bined totals of all your Schedules E. “Dwelling unit” (unit) means a house, deduct any rental expenses. If you item-
apartment, condominium, or similar ize deductions on Schedule A, you may
If you are also using page 2 of Sched- property. deduct allowable interest, taxes, and
ule E, use the same Schedule E on casualty losses.
which you entered the combined totals Check “Yes” if you or your family used
for Part I. the unit for personal purposes in 1998 If you checked “Yes” and rented the
more than the greater of: unit out for at least 15 days, you may
Personal Property. Do not use Sched- 1. 14 days; or NOT be able to deduct all your rental
ule E to report income and expenses 2. 10% of the total days it was rented expenses.
from the rental of personal property, to others at a fair rental price. You can deduct all of the following
such as equipment or vehicles. Instead, Otherwise, check “No.” expenses for the rental part on Sched-
use Schedule C or C-EZ if you are in the ule E:
business of renting personal property. What Is Personal Use? A day of per- ● Mortgage interest.
You are in the business of renting per- sonal use is any day, or part of a day, ● Real estate taxes.
sonal property if the primary purpose for that the unit was used by:
renting the property is income or profit, ● Casualty losses.
● You for personal purposes. ● Other rental expenses not related
and you are involved in the rental activ-
ity with continuity and regularity. ● Any other person for personal pur- to your use of the unit as a home, such
poses, if that person owns part of the as advertising expenses and rental
If your rental of personal property is
unit (unless rented to that person under agents’ fees.
not a business, see the Instructions for
a “shared equity” financing agreement). If any income is left after deducting
Form 1040, lines 21 and 32, to find out
how to report the income and expenses. ● Anyone in your family (or in the these expenses, you can then deduct
family of someone else who owns part other expenses, including depreciation.
of the unit), unless the unit is rented at But you cannot deduct more expenses
E-1
Cat. No. 24332T
than the income that is left. You can report your royalty income and ex- either your actual expenses or take the
carry over the amounts you cannot penses on Schedule C or C-EZ. standard mileage rate. You must use
deduct to 1999. You may be able to treat amounts actual expenses if you use more than
See Pub. 527 for more details. received as “royalties” for transfer of a one vehicle simultaneously in your
patent or amounts received on the dis- rental activities (as in fleet operations).
posal of coal and iron ore as the sale of If you deduct actual auto expenses:
Line 3 a capital asset. For details, see Pub. ● Include on line 6 the rental activity
544. portion of the cost of gasoline, oil, re-
If you were not in the real estate sales Enter on line 4 the gross amount of pairs, insurance, tires, etc., and
business but you received rental income royalty income, even if state or local ● Show auto rental or lease payments
from real estate (including personal taxes were withheld from oil or gas pay- on line 18 and depreciation on line 20.
property leased with real estate), report ments you received. Include taxes with-
it on line 3. Include room and other If you want to take the standard mile-
held by the producer on line 16.
space rentals. If you received services age rate, multiply the number of miles
or property instead of money as rent, you drove your auto in connection with
report its fair market value. your rental activities by 32.5 cents a
Be sure to enter your total rents in the
General Instructions for mile. Include this amount and your park-
Lines 5 Through 21 ing fees and tolls on line 6.
“Totals” column even if you have only
one property. If you claim any auto expenses (actual
Enter your rental and royalty expenses or the standard mileage rate), you must
If you provided significant services to for each property in the appropriate provide the information requested in
the renter, such as maid service, report column. You can deduct all ordinary and Part V of Form 4562 and attach Form
the rental on Schedule C or C-EZ, not necessary expenses, such as taxes, in- 4562 to your return.
on Schedule E. Significant services do terest, repairs, insurance, management
not include the furnishing of heat and fees, agents’ commissions, and depre- See Pub. 527 and Pub. 463 for more
light, cleaning of public areas, trash col- ciation. details.
lection, etc. Do not deduct the value of your own
If you were in the real estate sales labor or amounts paid for capital invest-
business, include on line 3 only the rent ments or capital improvements. Line 10
received from real estate (including per- Enter your total expenses for mort- Include on line 10 fees for tax advice
sonal property leased with real estate) gage interest (line 12), total expenses related to your rental real estate or roy-
you held for investment or speculation. before depreciation expense or deple- alty properties and for preparation of the
Do not use Schedule E to report income tion (line 19), and depreciation expenses tax forms related to those properties.
and expenses from rentals of real estate or depletion (line 20) in the “Totals”
held for sale to customers in the ordi- Do not deduct legal fees paid or in-
column even if you have only one prop- curred to defend or protect title to prop-
nary course of your real estate sales erty.
business. Instead, use Schedule C or erty, to recover property, or to develop
C-EZ for these rentals. or improve property. Instead, you must
Renting Out Part of Your Home. If you capitalize these fees and add them to
For more details on rental income, rent out only part of your home or other the property’s basis.
use TeleTax topic 414 (see page 9 of property, deduct the part of your ex-
the Form 1040 instructions) or see Pub. penses that applies to the rented part.
527.
Credit or Deduction for Access Ex- Lines 12 and 13
Rental Income From Farm Production penditures. You may be able to claim
In general, to determine the interest ex-
or Crop Shares. Report farm rental a tax credit for eligible expenditures
pense allocable to your rental activities,
income and expenses on Form 4835 if: paid or incurred in 1998 to provide
you must have records to show how the
● You received rental income based access to your business for individuals
proceeds of each debt were used. Spe-
on crops or livestock produced by the with disabilities. See Form 8826 for de-
cific tracing rules apply for allocating
tenant, and tails.
debt proceeds and repayment. See
● You did not manage or operate the You can also deduct up to $15,000 Pub. 535 for details.
farm to any great extent. of qualified costs paid or incurred in
If you have a mortgage on your rental
1998 to remove architectural or trans-
property, enter on line 12 the interest
portation barriers to individuals with dis-
you paid for 1998 to banks or other fi-
abilities and the elderly.
Line 4 You cannot take both the credit and
nancial institutions. Be sure to fill in the
“Totals” column.
Report on line 4 royalties from oil, gas, the deduction for the same expendi-
or mineral properties (not including op- Do not deduct prepaid interest when
tures. See Pub. 535 for details.
erating interests); copyrights; and pat- you paid it. You can deduct it only in
ents. Enter your total royalties in the the year to which it is properly allocable.
“Totals” column. Points (including loan origination fees)
Line 6 charged only for the use of money must
If you received $10 or more in royal- be deducted over the life of the loan.
ties during 1998, you should receive a You may deduct ordinary and neces-
Form 1099-MISC or similar statement, sary auto and travel expenses related to If you paid $600 or more in interest
showing them. The payer must send this your rental activities, including 50% of on a mortgage, the recipient should
statement to you by February 1, 1999. meal expenses incurred while traveling send you a Form 1098 or similar state-
away from home. If you own or lease ment by February 1, 1999, showing the
If you are in business as a self- total interest received from you during
employed writer, inventor, artist, etc., your auto, you generally can deduct
1998.
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If you paid more mortgage interest regardless of the date it was placed in person (other than you) having such an
than is shown on your Form 1098 or service, or interest.
similar statement, see Pub. 535 to find ● You are claiming a section 179 ex- Qualified nonrecourse financing is
out if you can deduct the additional in- pense deduction or amortization of treated as an amount at risk if it is se-
terest. If you can, enter the entire costs that began in 1998. cured by real property used in an activity
amount on line 12. Attach a statement of holding real property that is subject
See Pub. 527 for more information on
to your return explaining the difference. to the at-risk rules. Qualified nonre-
depreciation of residential rental prop-
Write “See attached” in the left margin course financing is financing for which
erty. See Pub. 946 for a more compre-
next to line 12. no one is personally liable for repayment
hensive guide to depreciation.
and is:
Note: If the recipient was not a financial If you own mineral property or an oil,
institution or you did not receive a Form gas, or geothermal well, you may be ● Borrowed by you in connection
1098 from the recipient, report your de- able to take a deduction for depletion. with holding real property,
ductible mortgage interest on line 13. See Pub. 535 for details. ● Not convertible from a debt obliga-
tion to an ownership interest, and
If you and at least one other person
(other than your spouse if you file a joint ● Loaned or guaranteed by any Fed-
return) were liable for and paid interest Line 22 eral, state, or local government, or bor-
on the mortgage, and the other person rowed by you from a qualified person.
received Form 1098, report your share At-Risk Rules A qualified person is a person who
of the interest on line 13. Attach a state- actively and regularly engages in the
Generally, you must complete Form business of lending money, such as a
ment to your return showing the name 6198 to figure your allowable loss if you
and address of the person who received bank or savings and loan association. A
have: qualified person cannot be:
Form 1098. In the left margin next to line
13, write “See attached.” ● A loss from an activity carried on as ● Related to you (unless the nonre-
a trade or business or for the production course financing obtained is commer-
of income, and cially reasonable and on the same terms
● Amounts in the activity for which as loans involving unrelated persons), or
Line 17 you are not at risk. ● The seller of the property (or a
You may deduct the actual cost of or- The at-risk rules generally limit the person related to the seller), or
dinary and necessary telephone calls amount of loss (including loss on the
that are related to your rental activities ● A person who receives a fee due to
disposition of assets) you can claim to your investment in real property (or a
or royalty income (e.g., calls to the the amount you could actually lose in
renter). However, the base rate (includ- person related to that person).
the activity. However, the at-risk rules
ing taxes and other charges) for local do not apply to losses from an activity If you have amounts for which you are
telephone service for the first telephone of holding real property, if you acquired not at risk, use Form 6198 to determine
line into your residence is a personal your interest in the activity before 1987 the amount of your deductible loss.
expense and is not deductible. and the property was placed in service Enter that amount in the appropriate
before 1987. The activity of holding min- column of Schedule E, line 22. In the
eral property does not qualify for this space to the left of line 22, write “Form
6198.” Attach Form 6198 to your return.
Line 20 exception.
In most cases, you are not at risk for
Depreciation is the annual deduction
amounts such as:
you must take to recover the cost or Line 23
other basis of business or investment ● Nonrecourse loans used to finance
property with a useful life of more than the activity, to acquire property used in Note: Do not complete line 23 if the
1 year. Land is not depreciable. the activity, or to acquire your interest amount on line 22 is from royalty prop-
in the activity that are not secured by erties.
Depreciation starts when you first use
your own property (other than property If you have a rental real estate loss
the property in your business or for the
used in the activity). However, there is from a passive activity (defined later),
production of income. It ends when you
an exception for certain nonrecourse fi- the amount of loss you can deduct may
take the property out of service, deduct
nancing borrowed by you in connection be limited by the passive activity loss
all your depreciable cost or other basis,
with holding real property. See Quali- rules. You may need to complete Form
or no longer use the property in your
fied nonrecourse financing below. 8582 to figure the amount of loss, if any,
business or for the production of
income. ● Cash, property, or borrowed to enter on line 23.
amounts used in the activity (or contrib- If your rental real estate loss is not
See the Instructions for Form 4562 to
uted to the activity, or used to acquire from a passive activity OR you meet the
figure the amount of depreciation to
your interest in the activity) that are pro- following exception, you do not have to
enter on line 20. Be sure to fill in the
tected against loss by a guarantee, complete Form 8582. Enter the loss
“Totals” column.
stop-loss agreement, or other similar ar- from line 22 on line 23.
You must complete and attach Form rangement (excluding casualty insur-
4562 only if: ance and insurance against tort liability). Exception for Certain Rental Real
● You are claiming depreciation on ● Amounts borrowed for use in the Estate Activities. If you meet ALL
property first placed in service during activity from a person who has an inter- THREE of the following conditions, your
1998, or est in the activity (other than as a cred- rental real estate losses are not limited
● You are claiming depreciation on itor) or who is related, under Internal by the passive activity loss rules. If you
listed property (defined in the Instruc- Revenue Code section 465(b)(3), to a do not meet ALL THREE of these con-
tions for Form 4562), including a vehicle, ditions, see the Instructions for Form
E-3
8582 to find out if you must complete ● The deduction for one-half of self- 1. More than half of the personal serv-
and attach Form 8582. employment tax. ices you performed in trades or busi-
1. Rental real estate activities are your ● The exclusion of amounts received nesses were performed in real property
only passive activities. under an employer’s adoption assis- trades or businesses in which you ma-
tance program. terially participated, and
2. You do not have any prior year un-
allowed losses from any passive activi- However, if you file Form 8815, in- 2. You performed more than 750
ties. clude in your modified adjusted gross hours of services in real property trades
income the savings bond interest ex- or businesses in which you materially
3. All of the following apply if you have
cluded on line 14 of that form. participated.
an overall net loss from these activities:
For purposes of this rule, each inter-
● You actively participated (defined Passive Activity Loss Rules est in rental real estate is a separate
later) in all of the rental real estate ac-
The passive activity loss rules may limit activity, unless you elect to treat all your
tivities; and
the amount of losses you can deduct. interests in rental real estate as one ac-
● If married filing separately, you lived tivity. To make this election, attach a
apart from your spouse all year; and These rules apply to losses in Parts I, II,
and III, and line 39 of Schedule E. statement to your original tax return that
● Your overall net loss from these ac- declares you are a qualifying taxpayer
tivities is $25,000 or less ($12,500 or Losses from passive activities may be for the year and you are making the
less if married filing separately); and subject first to the at-risk rules. Losses election under Internal Revenue Code
deductible under the at-risk rules are
● You have no current or prior year section 469(c)(7)(A). The election ap-
then subject to the passive activity loss plies for the year made and all later
unallowed credits from passive activi-
rules. years in which you are a real estate pro-
ties; and
You generally can deduct losses from fessional. You may revoke the election
● Your modified adjusted gross
passive activities only to the extent of only if your facts and circumstances
income (defined later) is $100,000 or
income from passive activities. An ex- materially change.
less ($50,000 or less if married filing
ception applies to certain rental real If you are married filing jointly, either
separately).
estate activities (as previously ex- you or your spouse must separately
Active Participation. You can meet the plained). meet both of the above conditions,
active participation requirement without without taking into account services
Passive Activity. A passive activity is performed by the other spouse.
regular, continuous, and substantial in-
any business activity in which you do
volvement in real estate activities. But A real property trade or business is
not materially participate and any rental
you must have participated in making any real property development, redevel-
activity, except as provided on this
management decisions or arranging for opment, construction, reconstruction,
page. If you are a limited partner, you
others to provide services (such as re- acquisition, conversion, rental, opera-
generally are not treated as having ma-
pairs) in a significant and bona fide tion, management, leasing, or broker-
terially participated in the partnership’s
sense. Such management decisions in- age trade or business. Services you
activities for the year.
clude: performed as an employee are not treat-
The rental of real or personal property
● Approving new tenants. ed as performed in a real property trade
is generally a rental activity under the or business unless you owned more
● Deciding on rental terms. passive activity loss rules, but excep- than 5% of the stock (or more than 5%
● Approving capital or repair expen- tions apply. If your rental of property is of the capital or profits interest) in the
ditures. not treated as a rental activity, you must employer.
● Other similar decisions. determine whether it is a trade or busi-
ness activity, and if so, whether you ma- If you were a real estate professional
You are not considered to actively for 1998, complete line 42 on page 2 of
terially participated in the activity for the
participate if, at any time during the tax Schedule E.
tax year.
year, your interest (including your
spouse’s interest) in the activity was See the Instructions for Form 8582 to Other Exceptions. The rental of your
less than 10% by value of all interests determine whether you materially par- home that you also used for personal
in the activity. ticipated in the activity and for the def- purposes is not a passive activity. See
inition of “rental activity.” the instructions for line 2.
Modified Adjusted Gross Income. See Pub. 925 for special rules that A working interest in an oil or gas well
This is your adjusted gross income from apply to rentals of: that you hold directly or through an
Form 1040, line 33, without taking into ● Substantially nondepreciable prop- entity that does not limit your liability is
account: erty. not a passive activity even if you do not
● Any passive activity loss. ● Property incidental to development materially participate.
● Rental real estate losses allowed activities. Royalty income not derived in the or-
under the exception for real estate pro- ● Property to activities in which you dinary course of a trade or business re-
fessionals (explained on this page). materially participate. ported on Schedule E generally is not
● Taxable social security or equiva- considered income from a passive ac-
lent railroad retirement benefits. Exception for Real Estate Profession- tivity.
● Deductible contributions to an IRA als. If you were a real estate profession- For more details on passive activities,
or certain other qualified retirement al in 1998, any rental real estate activity see the Instructions for Form 8582 and
plans under Internal Revenue Code sec- in which you materially participated is Pub. 925.
tion 219. not a passive activity. You were a real
estate professional only if you met
● The student loan interest deduc-
both of the following conditions:
tion.
E-4
on its return, you may have to file Form depending on the type of expenditure
8082. to which the interest is allocated. See
Parts II and III Pub. 535 for details.
If you need more space in Part II or III Special Rules Apply That Limit If you claimed a credit for Federal tax
to list your income or losses, attach a Losses. Please note the following: on gasoline or other fuels on your 1997
continuation sheet using the same ● If you have a current year loss, or Form 1040 based on information re-
format as shown in Part II or III. How- a prior year unallowed loss, from a part- ceived from the partnership, enter as
ever, be sure to complete the “Totals” nership or an S corporation, see At- income in column (h) or column (k),
columns for lines 28a and 28b, or lines Risk Rules and Passive Activity Loss whichever applies, the amount of the
33a and 33b, as appropriate. If you also Rules on pages E-3 and E-4. credit claimed in 1997.
completed Part I on more than one Partners and S corporation share- If you have losses or deductions from
Schedule E, use the same Schedule E holders should get a separate statement a prior year that you could not deduct
on which you entered the combined of income, expenses, deductions, and because of the at-risk or basis rules,
totals in Part I. credits for each activity engaged in by and the amounts are now deductible,
the partnership and S corporation. If you do not combine the prior year amounts
Tax Shelter Registration Number. are subject to the at-risk rules for any with any current year amounts to arrive
Complete and attach Form 8271 if you activity, use Form 6198 to figure the at a net figure to report on Schedule E.
are reporting any deduction, loss, amount of any deductible loss. If the Instead, report the prior year amounts
credit, other tax benefit, or income from activity is nonpassive, enter any deduct- and the current year amounts on sepa-
an interest purchased or otherwise ac- ible loss from Form 6198 on the appro- rate lines of Schedule E.
quired in a tax shelter. priate line in Part II, column (i), of Part or all of your share of partnership
Form 8271 is used to report the name, Schedule E. income or loss from the operation of the
tax shelter registration number, and ● If you have a passive activity loss, business may be considered net earn-
identifying number of the tax shelter. you generally need to complete Form ings from self-employment that must be
There is a $250 penalty if you do not 8582 to figure the amount of the allow- reported on Schedule SE. Enter the
report the registration number of the tax able loss to enter in Part II, column (g), amount from Schedule K-1 (Form 1065),
shelter on your tax return. for that activity. But if you are a general line 15a, on Schedule SE, after you
partner or an S corporation shareholder reduce this amount by any allowable ex-
Tax Preference Items. If you are a part- reporting your share of a partnership or penses attributable to that income.
ner, a shareholder in an S corporation, an S corporation loss from a rental real
or a beneficiary of an estate or trust, you estate activity, and you meet ALL S Corporations
must take into account your share of THREE of the conditions listed in the
preferences and adjustments from If you are a shareholder in an S corpo-
instructions for line 23, you do not have
these entities for the alternative mini- ration, your share of the corporation’s
to complete Form 8582. Instead, enter
mum tax on Form 6251 or Schedule I aggregate losses and deductions (com-
your allowable loss in Part II, column (g).
of Form 1041. bined income, losses, and deductions)
If you have passive activity income, is limited to the adjusted basis of your
complete Part II, column (h), for that ac- corporate stock and any debt the cor-
tivity. poration owes you. Any loss or deduc-
Part II If you have nonpassive income or
losses, complete Part II, columns (i)
tion not allowed this year because of the
basis limitation may be carried forward
Income or Loss From through (k), as appropriate. and deducted in a later year subject to
Partnerships and the basis limitation for that year.
Partnerships If you are claiming a deduction for
S Corporations
See the Schedule K-1 instructions your share of an aggregate loss, attach
If you are a member of a partnership or before entering on your return other to your return a computation of the ad-
joint venture or a shareholder in an S partnership items from a passive activity justed basis of your corporate stock and
corporation, use Part II to report your or income or loss from any publicly of any debt the corporation owes you.
share of the partnership or S corpora- traded partnership. See the Schedule K-1 instructions for
tion income (even if not received) or more information.
If you have other partnership items,
loss. After applying the basis limitation, the
such as depletion, from a nonpassive
You should receive a Schedule K-1 activity, show each item on a separate deductible amount of your aggregate
from the partnership or the S corpora- line in Part II. You may deduct unreim- losses and deductions may be further
tion. You should also receive a copy of bursed ordinary and necessary ex- reduced by the at-risk rules and the
the Partner’s or Shareholder’s Instruc- penses you paid on behalf of the passive activity loss rules explained ear-
tions for Schedule K-1. Your copy of partnership if you were required to pay lier.
Schedule K-1 and its instructions will tell these expenses under the partnership If you have losses or deductions from
you where on your return to report your agreement. Enter deductible unreim- a prior year that you could not deduct
share of the items. If you did not receive bursed partnership expenses from because of the basis or at-risk limita-
these instructions with your Schedule nonpassive activities on a separate line tions, and the amounts are now deduct-
K-1, see page 6 of the Form 1040 in- in Part II, column (i). However, enter on ible, do not combine the prior year
structions for how to get a copy. Do not Schedule A any unreimbursed partner- amounts with any current year amounts
attach Schedules K-1 to your return. ship expenses deductible as itemized to arrive at a net figure to report on
Keep them for your records. deductions. Schedule E. Instead, report the prior
If you are treating items on your tax Report allowable interest expense year amounts and the current year
return differently from the way the part- paid or incurred from debt-financed ac- amounts on separate lines of Schedule
nership or S corporation reported them quisitions in Part II or on Schedule A E.
E-5
Distributions of prior year accumulat- the REMIC reported them on its return,
ed earnings and profits of S corpora- you may have to file Form 8082.
tions are dividends and are reported on If you are the holder of a residual in-
Part V
Form 1040, line 9. terest in more than one REMIC, attach
Interest expense relating to the acqui- a continuation sheet using the same
Summary
sition of shares in an S corporation may format as in Part IV. Enter the totals of
be fully deductible on Schedule E. For columns (d) and (e) on line 38 of Sched-
details, see Pub. 535. ule E. If you also completed Part I on Line 41
Your share of the net income of an S more than one Schedule E, use the
You will not be charged a penalty for
corporation is NOT subject to self- same Schedule E on which you entered
underpayment of estimated tax if:
employment tax. the combined totals in Part I.
1. Your gross farming or fishing
REMIC income or loss is not income
income for 1997 or 1998 is at least two-
or loss from a passive activity.
thirds of your gross income, and
Part III Note: If you are the holder of a regular 2. You file your 1998 tax return and
pay the tax due by March 1, 1999.
interest in a REMIC, do not use Sched-
Income or Loss From ule E to report the income you received.
Estates and Trusts Instead, report it on Form 1040, line 8a.
If you are a beneficiary of an estate or Column (c). Report the total of the
trust, use Part III to report your part of amounts shown on Schedule(s) Q, line
the income (even if not received) or loss. 2c. This is the smallest amount you are
You should receive a Schedule K-1 allowed to report as your taxable
(Form 1041) from the fiduciary. Your income (Form 1040, line 39). It is also
copy of Schedule K-1 and its instruc- the smallest amount you are allowed to
tions will tell you where on your return report as your alternative minimum tax-
to report the items from Schedule K-1. able income (AMTI) (Form 6251, line 21).
Do not attach Schedule K-1 to your If the amount in column (c) is larger
return. Keep it for your records. than your taxable income would other-
If you are treating items on your tax wise be, enter the amount from column
return differently from the way the (c) on Form 1040, line 39. Similarly, if
estate or trust reported them on its the amount in column (c) is larger than
return, you may have to file Form 8082. your AMTI would otherwise be, enter the
If you have estimated taxes credited amount from column (c) on Form 6251,
to you from a trust (Schedule K-1, line line 21. Write “Sch. Q” on the dotted
14a), write “ES payment claimed” and line to the left of this amount on Forms
the amount on the dotted line next to 1040 and 6251.
line 36. Do not include this amount in
the total on line 36. Instead, enter the Note: These rules also apply to estates
amount on Form 1040, line 58. and trusts that hold a residual interest
in a REMIC. Be sure to make the appro-
A U.S. person who transferred prop- priate entries on the comparable lines
erty to a foreign trust may have to report on Form 1041.
the income received by the trust as a
result of the transferred property if, Caution: Do not include the amount
during 1998, the trust had a U.S. ben- shown in column (c) in the total on line
eficiary. For details, see Form 3520. 38 of Schedule E.
Column (e). Report the total of the
amounts shown on Schedule(s) Q, line
Part IV 3b. If you itemize your deductions on
Schedule A, include this amount on line
Income or Loss From Real 22.
Estate Mortgage Investment
Conduits (REMICs)
If you are the holder of a residual interest
in a real estate mortgage investment
conduit (REMIC), use Part IV to report
your total share of the REMIC’s taxable
income or loss for each quarter included
in your tax year. You should receive
Schedule Q (Form 1066) and instruc-
tions from the REMIC for each quarter.
Do not attach Schedules Q to your
return. Keep them for your records.
If you are treating REMIC items on
your tax return differently from the way
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