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Basis rules for S corporations. Generally, the deduction for
your share of aggregate losses and deductions reported on
Schedule K-1 (Form 1120-S) is limited to the basis of your
stock (determined with regard to distributions received during
the tax year) and loans from you to the corporation. The basis
of your stock is generally figured at the end of the corporation's
tax year. Any losses and deductions not allowed this year be-
cause of the basis limit can be carried forward indefinitely and
deducted in a later year subject to the basis limit for that year.
To figure your aggregated stock basis, you can generally use
Form 7203. For more details on the basis rules for S corpora-
tions, see the Instructions for Form 7203.
If you are claiming a deduction for your share of an aggre-
gate loss (or you receive a distribution, dispose of stock, or re-
ceive a loan repayment from an S corporation), check the box
on the appropriate line in Part III, column (e), and attach Form
7203 to your return.
If you had a loss from an S corporation that was not allowed
last year because of the basis rules, but all or part is allowed
this year, see Line 27, later, for how to report it.
After applying the basis rules, the loss you report on Sched-
ule E may be further reduced by the at-risk rules and passive
activity loss rules.
At-risk rules. If you have (a) a loss or other deduction from
any activity carried on as a trade or business or for the produc-
tion of income by the partnership or S corporation, and (b)
amounts in the activity for which you are not at risk, your loss
may be limited. For more information, see At-Risk Rules, earli-
er.
If you are subject to the at-risk rules for any activity, check
the box on the appropriate line in Part II, column (f), of Sched-
ule E, and use Form 6198 to figure the amount of any deducti-
ble loss. If the activity is nonpassive, enter any deductible loss
from Form 6198 on the appropriate line in Part II, column (i),
of Schedule E.
If you had a loss from the partnership or S corporation that
was not allowed last year because of the at-risk rules, but all or
part is allowed this year, see Line 27, later, for how to report it.
After applying the at-risk rules, the loss you report on
Schedule E may be further reduced by the passive activity loss
rules.
Passive activity loss rules. For more information about pas-
sive activity losses, see Passive Activity Loss Rules, earlier.
If you have a passive activity loss, in most cases you need to
complete Form 8582 to figure the amount of the loss to enter in
Part II, column (g), for that activity. But if you are a general
partner or an S corporation shareholder reporting your share of
a partnership or an S corporation loss from a rental real estate
activity and you meet all of the conditions listed earlier under
Exception for Certain Rental Real Estate Activities, you do not
have to complete Form 8582. Instead, enter your (loss) in Part
II, column (g).
If you have passive activity income, complete Part II, col-
umn (h), for that activity. If you have nonpassive income or
losses, complete Part II, columns (i) through (k), as appropri-
ate.
If you had a loss from the partnership or S corporation that
was not allowed last year because of the passive activity loss
rules, but all or part is allowed this year, see Line 27, later, for
how to report it.
Excess business loss rules. If you report a loss on Schedule E
from a partnership or S corporation engaged in a trade or busi-
ness, use Form 461 to figure your excess business loss. Your
excess business loss will not be reflected on your Schedule E;
instead, it will be added to your income on Form 1040 and car-
ried forward to a subsequent year as a net operating loss. For
more information, see the Instructions for Form 461.
Domestic Partnerships
See the Schedule K-1 instructions before entering on your re-
turn other partnership items from a passive activity or income
or loss from any publicly traded partnership.
You can deduct unreimbursed ordinary and necessary ex-
penses you paid on behalf of the partnership if you were re-
quired to pay these expenses under the partnership agreement.
See Line 27, later, for how to report these expenses.
If you used loan proceeds to buy an interest in, or make a
contribution to the capital of, a partnership (debt-financed ac-
quisition), report your share of deductible partnership interest
expense on either Schedule A or Schedule E, depending on the
type of asset (or expenditure if the allocation is based on the
tracing of loan proceeds) to which the interest expense is allo-
cated. See Line 28, later, for more information about reporting
these interest expenses.
If you claimed a credit for federal tax on gasoline or other
fuels on your 2022 Form 1040, 1040-SR, or 1040-NR based on
information received from the partnership, enter as income in
column (h) or column (k), whichever applies, the amount of the
credit claimed for 2022.
Part or all of your share of partnership income or loss from
the operation of the business may be considered net earnings
from self-employment that must be reported on Schedule SE.
Enter the amount from Schedule K-1 (Form 1065), box 14,
code A, on Schedule SE after you reduce this amount by any
allowable expenses attributable to that income.
Foreign Partnerships
Follow the instructions below in addition to the instructions
earlier under Domestic Partnerships.
If you are a U.S. person, you may have received Forms
1099-B, 1099-DIV, and 1099-INT reporting your share of cer-
tain partnership income, because payors of income to the for-
eign partnership in most cases are required to allocate and re-
port payments of that income directly to each of the partners of
the foreign partnership. If you received both Schedule K-1 and
Form 1099 for the same type and source of partnership income,
report only the income shown on Schedule K-1 in accordance
with its instructions.
If you are not a U.S. person, you may have received Forms
1042-S reporting your share of certain partnership income, be-
cause payors of income to the foreign partnership in most cases
are required to allocate and report payments of that income di-
rectly to each of the partners of the foreign partnership. If you
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