Schedule F is used to report income or loss from farming businesses that are not incorporated and that also are not partnerships.
If you X the "Yes" box in response to the question (on line E above) 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 E above) 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 have a gain or loss on disposition of the activity, you should complete Form 4797 to determine the amount of the gain or loss.
Gross income on line 11 is usually calculated as the sum of lines 3 through 10b, but if you selected the accrual method on line C, then we use the income as calculated in Part III, which totals on line 51 instead.
Standard mileage is entered on our Vehicle Worksheet, so that you can easily perform "what if" comparisons of standard mileage to the actual expense method. (If you placed the car in service this year, you may also be able to choose between standard mileage and actual expenses, on our Vehicle Worksheet.) Your standard mileage will carry from our Vehicle Worksheet to line 12a.
We place "PAL" (for Passive Activity Loss) next to line 36 if there is a "Y" in column 1 of the Passive Activity Computation chart at the bottom of this form and if the value in column 6 of the Passive Activity Computation chart is either less than zero (i.e., there is an allowed passive activity loss) or different from the amount of the net farm profit or loss in line 36 (you have current year income and a prior year passive activity loss).
If you have a net passive activity loss (from all passive activities), 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 net 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.
We automatically place an "N" in the passive activity computation chart at "Rental Real Estate With Active Participation" because farm activities typically are not activities in which you actively participate in the rental of real estate. If this is an active participation rental real estate activity, you should probably use our rental activities worksheet.
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, with one exception: the determination of the income or loss from the activity in question takes into account the alternative minimum tax adjustments from the Depreciation Worksheet. The allowed income or loss is carried to Form 6251 (Alternative Minimum Tax), line 19.