Other issues for passive activities (1120)

Show expandable text

The following items are other issues related to passive activities in UltraTax CS/1120.

UltraTax CS treats passive farm activities as tax shelter passive farms. Enter passive farm activities in the following sets of input screens: F, F-2, and F-3; and 4835, 4835-2, and 4835-3. Passthrough activities in Screens K1-1, K1-2, K1-3, K1-4, K1-5, and K1-6 with a code 5 (Farm partnership) in the Type of entity field are also treated as tax shelter passive farms.

Enter significant participation hours, if applicable, in the Significant participation hours field of the entity's input screen(s). This field is located in the Passive Activity General Information (C Corp) section of Screen K1-6 and in the General Information section of Screen F-3. UltraTax CS treats significant participation activities based on hours entered as follows:

  • If significant participation hours are less than 100 for an activity, UltraTax CS considers the activity passive. It is not considered a significant participation activity.
  • If total significant participation activity hours on the return are 500 or less, UltraTax CS treats overall losses from SPAs with 100 or more hours as passive. Overall income from these activities is recharacterized as non-passive.
  • If total significant participation activity hours on the return are greater then 500, UltraTax CS treats all income and losses from SPAs with 100 or more hours as non-passive.

Enter X in the Subject to recharacterization rules field in Screen Rent-2 to indicate a passive activity subject to recharacterization. UltraTax CS does not need this entry for significant participation activities. Activities with an overall net loss will be treated as a passive activity. Activities with an overall net income are not treated as a passive activity. UltraTax CS recharacterizes significant participation activities based on SPA hours as discussed in the previous section.


Related articles

Passive activities overview

Was this article helpful?

Thank you for the feedback!