In determining the income tax of a partner of an electing large partnership, such partner shall take into account separately such partner’s distributive share of the partnership’s—
(1)taxable income or loss from passive loss limitation activities,
(2)taxable income or loss from other activities,
(3)net capital gain (or net capital loss)—
(A)to the extent allocable to passive loss limitation activities, and
(B)to the extent allocable to other activities,
(5)applicable net AMT adjustment separately computed for—
(A)passive loss limitation activities, and
(7)low-income housing credit determined under section
(8)rehabilitation credit determined under section
(9)foreign income taxes, and
(10)other items to the extent that the Secretary determines that the separate treatment of such items is appropriate.
(b) Separate computations
In determining the amounts required under subsection (a) to be separately taken into account by any partner, this section and section
773 shall be applied separately with respect to such partner by taking into account such partner’s distributive share of the items of income, gain, loss, deduction, or credit of the partnership.
(c) Treatment at partner level
(1) In general
Except as provided in this subsection, rules similar to the rules of section
702(b) shall apply to any partner’s distributive share of the amounts referred to in subsection (a).
(2) Income or loss from passive loss limitation activities
For purposes of this chapter, any partner’s distributive share of any income or loss described in subsection (a)(1) shall be treated as an item of income or loss (as the case may be) from the conduct of a trade or business which is a single passive activity (as defined in section
469). A similar rule shall apply to a partner’s distributive share of amounts referred to in paragraphs (3)(A) and (5)(A) of subsection (a).
(3) Income or loss from other activities
(A) In general
For purposes of this chapter, any partner’s distributive share of any income or loss described in subsection (a)(2) shall be treated as an item of income or expense (as the case may be) with respect to property held for investment.
(B) Deductions for loss not subject to section
The deduction under section
212 for any loss described in subparagraph (A) shall not be treated as a miscellaneous itemized deduction for purposes of section
(4) Treatment of net capital gain or loss
For purposes of this chapter, any partner’s distributive share of any gain or loss described in subsection (a)(3) shall be treated as a long-term capital gain or loss, as the case may be.
(5) Minimum tax treatment
In determining the alternative minimum taxable income of any partner, such partner’s distributive share of any applicable net AMT adjustment shall be taken into account in lieu of making the separate adjustments provided in sections
58 with respect to the items of the partnership. Except as provided in regulations, the applicable net AMT adjustment shall be treated, for purposes of section
53, as an adjustment or item of tax preference not specified in section
(6) General credits
A partner’s distributive share of the amount referred to in paragraph (6) of subsection (a) shall be taken into account as a current year business credit.
(d) Operating rules
For purposes of this section—
(1) Passive loss limitation activity
The term “passive loss limitation activity” means—
(A)any activity which involves the conduct of a trade or business, and
(B)any rental activity.
For purposes of the preceding sentence, the term “trade or business” includes any activity treated as a trade or business under paragraph (5) or (6) of section
(2) Tax-exempt interest
The term “tax-exempt interest” means interest excludable from gross income under section
(3) Applicable net AMT adjustment
(A) In general
The applicable net AMT adjustment is—
(i)with respect to taxpayers other than corporations, the net adjustment determined by using the adjustments applicable to individuals, and
(ii)with respect to corporations, the net adjustment determined by using the adjustments applicable to corporations.
(B) Net adjustment
The term “net adjustment” means the net adjustment in the items attributable to passive loss activities or other activities (as the case may be) which would result if such items were determined with the adjustments of sections
(4) Treatment of certain separately stated items
(A) Exclusion for certain purposes
In determining the amounts referred to in paragraphs (1) and (2) of subsection (a), any net capital gain or net capital loss (as the case may be), and any item referred to in subsection (a)(11), shall be excluded.
(B) Allocation rules
The net capital gain shall be treated—
(i)as allocable to passive loss limitation activities to the extent the net capital gain does not exceed the net capital gain determined by only taking into account gains and losses from sales and exchanges of property used in connection with such activities, and
(ii)as allocable to other activities to the extent such gain exceeds the amount allocated under clause (i).
A similar rule shall apply for purposes of allocating any net capital loss.
(C) Net capital loss
The term “net capital loss” means the excess of the losses from sales or exchanges of capital assets over the gains from sales or exchange of capital assets.
(5) General credits
The term “general credits” means any credit other than the low-income housing credit, the rehabilitation credit, and the foreign tax credit.
(6) Foreign income taxes
The term “foreign income taxes” means taxes described in section
901 which are paid or accrued to foreign countries and to possessions of the United States.
(e) Special rule for unrelated business tax
In the case of a partner which is an organization subject to tax under section
511, such partner’s distributive share of any items shall be taken into account separately to the extent necessary to comply with the provisions of section
(f) Special rules for applying passive loss limitations
If any person holds an interest in an electing large partnership other than as a limited partner—
(1)paragraph (2) of subsection (c) shall not apply to such partner, and
(2)such partner’s distributive share of the partnership items allocable to passive loss limitation activities shall be taken into account separately to the extent necessary to comply with the provisions of section
The preceding sentence shall not apply to any items allocable to an interest held as a limited partner.
2005—Subsec. (a)(9) to (11). Pub. L. 109–58, § 1322(a)(3)(I), inserted “and” at end of par. (9), redesignated par. (11) as (10), and struck out former par. (10) which read as follows: “the credit allowable under section
Subsec. (d)(5). Pub. L. 109–58, § 1322(a)(3)(J), substituted “and the foreign tax credit” for “the foreign tax credit, and the credit allowable under section
Effective Date of 2005 Amendment
Amendment by Pub. L. 109–58applicable to credits determined under the Internal Revenue Code of 1986 for taxable years ending after Dec. 31, 2005, see section 1322(c)(1) ofPub. L. 109–58, set out as a note under section
45K of this title.
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
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