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Federal input screens

Screen C-3 - Profit or Loss From Business - Passive, Other (1040)

If the following are true, select
Allocation
 to access the spreadsheet: Client has at least one state return; you are viewing Client Organizer or input screen data entry; in the 4835 and F screens, the
Description
 field has data; in the C screen, the
Principal business
 field has data; in the Rent screen, the
Property kind/location
 field has data.
Two methods (percentage or amount) of allocation can be used to allocate federal unit net income to the applicable states displayed in the State allocation spreadsheet.
  • Percentage:
     Enter a percentage in XXX.XX format in the first field available in the State allocation spreadsheet. Select the state to which this percentage applies from the fieldview. Select the Apply button. The application will automatically calculate the amounts attributable to that state and display the amounts in the spreadsheet. The percentage entered for that particular state will appear below the state name for easy reference. If enabled, individual item amounts can be changed (overwritten) on the spreadsheet from the amount automatically calculated.
  • Amount:
     In cases where a percentage of the federal amounts do not apply, individual item amounts, if enabled, may be entered in the spreadsheet for the applicable state. Zero (0) is a valid entry and will prevent the state amount from defaulting to the federal calculated amount. If an individual item amount field is left blank, the federal amount, if present, will be used in the state's calculation.
Build-up states that report or otherwise calculate income from these Schedules C, F, E and Form 4835 activities on an amount by amount basis may be allocated using a percentage only, while passive carryover amounts may be allocated by entering the state-specific carryover amounts within the State allocation spreadsheet.
Other states, which are typically AGI states that require net activity amounts only, may be allocated by percentage or by entering the net amount of activity income/(allowable loss) attributable to the specific state.
The State allocation spreadsheet may be printed in a report format for future reference. Click the Print or Preview button in the lower portion of the spreadsheet. If licensed, you can also print to FileCabinet CS.
Enter
X
 if the trade or business is a specified service business for purposes of the Qualified Business Income Deduction. The trade or business status is not determined automatically. The specified service business status is used when the Qualified Business Deduction – Simplified Worksheet is not used.
To calculate the Qualified Business Income Deduction, the application starts with the Schedule C, line 31 - Net profit then includes various additions and deductions, such as self-employment related deductions from qualified business income. To view the calculated amount, see the Qualified Business Income Calculation Worksheet for Schedule C. To use an amount other than the default, enter an amount in this field. Enter zero if the activity does not have any qualified income.
The calculation for the Qualified Business Income Deduction uses the Schedule C, line 26 - Wages and line 37 - Cost of Labor. Enter an amount in this field to use an amount different than the default. W-2 wages for the trade or business are used only when the Qualified Business Deduction – Simplified Worksheet is not used.
Enter the amount of the unadjusted basis of qualified property used in this trade or business. When you use the asset module, the amount calculates and transfers to this field. This amount is used only when the Qualified Business Deduction – Simplified Worksheet is not used.
Enter a group number to include this trade or business in a grouping for the Qualified Business Income Deduction under the rules of Proposed Regulation Section 1.199A-4. All trade/businesses in the same group must use the same code. The Qualified Business Income Deduction Worksheet groups the trade/business into one component worksheet. The QBID – Schedule B – Aggregation of Business Operations Worksheet is produced only when the Qualified Business Deduction – Simplified Worksheet is not used. The Prop Reg 1.199A(c)(2)(i) Aggregate Group Disclosure grouping statement is included in the required statements.
Enter the appropriate activity type code in the field provided. The available codes are listed in the table that follows and in the fieldview.
Code
Result
Return treatment
1
Other passive activity
Form 8582, Worksheet 3, All Other Passive Activities
3
No limitation applied (default)
No Form 8582 treatment
Entities coded
1
 are treated as passive and
3
 as non-passive. If you enter passive carryovers for entities coded
3
, the application considers them to be former passive activities. Income and losses are considered passive or active as follows:
  • If the current-year net income is less than the prior-year suspended losses, both prior-year suspended losses and current-year net income report on Form 8582.
  • If the current-year net income is equal to or greater than the prior-year suspended losses, neither amount is reported on Form 8582.
  • If there is a current-year net loss, only the prior-year suspended losses are reported on Form 8582.
The passive portion of entities with a passive code of
3
 are treated as other passives.
To include this activity in a passive grouping, enter the aggregation group number in this field. The application reports units with the same aggregation number as one item on the statement worksheets for Form 8582. All of the entities in an aggregation must have the same passive code.
Enter a unique group number to include this activity in a Regulation 1.469-4(d)(1) grouping of a rental activity within a trade or business activity. When grouping activities under Reg. 1.469-4(d)(1), do not use a number that has been used in the Aggregation group field.
The entire group is nonpassive for reporting purposes. Each member of the activity must use passive activity code 3, that is nonpassive. Since the group is nonpassive, the group income does not report on Form 8582 and is not considered net investment income for Form 8960 purposes. The income or loss reports on the appropriate forms and schedules used regularly.
Enter the appropriate code applicable to this member of a passive activity aggregation group or Reg. 1.469-4(d)(1) group.
The application uses the code and the Aggregation group to produce the statement required by Rev. Proc. 2010-13. Under Rev. Proc. 2010-13, written disclosure statements are required to be filed with the tax return for the year in which two or more activities are grouped together for the first time (essentially serving as the election to group those activities), or for a year in which changes are made to existing groupings, including when a new activity is added to an existing group.
Enter significant participation hours, if applicable, in this field.
  • If significant participation hours are less than 100 for an activity, the activity is considered passive. It is not considered to be a significant participation activity.
  • If total significant participation activity hours on the return are greater than 100 but less than 500, the overall losses from the SPAs are treated as passive. Overall income from these activities is recharacterized as non-passive.
  • If total significant participation activity hours on the return are over 500, the calculation for the
    Significant participation hours
     field is not performed. The determination of the passive or non-passive character of the entity or business is not determined by the application. You must code the activities' character.
Use the attached statement to record details about the elections taken for this Schedule C unit. The statement includes the following fields.
  • Description:
     Enter a brief description of the election taken.
  • Tax Year:
     Enter the tax year the election was taken.
  • Effective Period:
     Enter the election's effective period. Some elections are perpetual, while others only cover the tax year taken.
  • Comments:
     Enter any additional information about the election. For example, enter information about an election that was revoked.
Enter last year's regular and AMT passive-loss carryovers for this activity. This information proforma'd from last year's data, if applicable. If the AMT fields are blank, the application assumes there are no AMT carryovers. To enter state-related passive activity carryover amounts, use the St CO screen or use the State allocation spreadsheet.
Enter last year's section 179 carryover for this activity. In future years, this information will proforma automatically. To enter state-related passive activity carryover amounts, use the St CO screen or select the Allocation button in the C-3 screen and use the State allocation spreadsheet.
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