If there is a "Y" in column 1 of the Passive Activity Computation chart and if the value in column 6 of the Passive Activity Computation chart is less than zero (i.e., there is an allowed passive activity loss), we place "PAL" (for Passive Activity Loss) next to line 31 .
If you X the "Yes" box in response to the question (on line G in the top section) whether you materially participated in the operation of the business, we automatically place an "N" in the first column of the Passive Activity Computation chart.
If you X the "No" box in response to the question (on line G in the top section) whether you materially participated in the operation of the business, we automatically place a "Y" in the first column of the Passive Activity Computation chart.
If you enter an amount on the line for "gain or loss on disposition" of the activity, you must also manually enter the amount of the gain or loss from a complete disposition on Schedule D or Form 4797.
We automatically place an "N" here because you would typically use our Rentals and Royalties Worksheet for real estate income.
If you have a passive activity loss, none of it will be allowed as a loss in the current year. The amount of unallowed losses from prior years is added to the current passive activity loss to give the total unallowed losses for the current year.
If you have passive activity income in the current year, you will have to pay tax on the amount of that income minus the amount of any unallowed losses (up to the amount of the current passive activity income) from prior years.
The "Y" or "N" appearing here comes from the corresponding column of the Passive Activity Computation chart.
The "Y" or "N" appearing here comes from the corresponding column of the Passive Activity Computation chart.
This calculation works the same way as the Passive Activity Loss calculation except that the determination of the income or loss from the activity in question takes into account the alternative minimum tax adjustments from the Depreciation Worksheets and Form 8829 (Expenses for Business Use of Your Home). The allowed income or loss is carried to Form 6251 (Alternative Minimum Tax), line 19.