Conference nyoss1::market_investing

    
    
      Don't do it!
    
      I own an EF/hutton ltd partnership which pays about $60/year
    in "spendable" cash and generages about $150 in passive losses,
    mostly due to depreciation.
    
      Ever since TEFRA,  it's been a tax nightmare.
    
      The $60 gets treated as "ordinary income" (in my case) and
    gets listed on the "Dividends" line of form 1040. (I don't
    have to file schedule B.)
    
      You also have to fill out "Schedule E" (Income from a 
    partnership)  and something called form 8582, which basically
    dis-allows any passive losses (unless they offset passive gains)
    in the current year,  and keeps a running tally of these
    losses from year to year.    (Apparantly you can take all
    the disallowed losses the year you liquidate your interest
    in the partnership.)  I shudder to think about what's going
    to happen the year it liquidates and I have to figure out
    how to re-capture all the depreciation losses I couldn't
    deduct...
    
      The paperwork is a major headache to figure out,  and the 
    instructions are full of things you can't do,  but very little
    help on how to actually fill out the forms.  
    (In my case,  the LTD partnership is the _only_ reason I can't 
    file a 1040 EZ, so it's a major hassle,  and not worth the
    paperwork hassles,  and doesn't generate enough cash to make
    it worth paying a professional preparer.
    
      This is my first year filling out the Mass (non-resident)
    tax forms.  I think it requires filling out a Mass schedule
    E,  listing the "Non-mass differences" (I.E. they don't do
    business in Mass, and I don't live there,  so it doesn't
    affect my Mass tax liability,  but I've still gotta figure
    out the $%^& schedule E stuff,  and attach a copy of my
    federal Sched E and form 8582...
    
      There's apparantly a move afoot to simplify the schedule K
    reporting requirements for people with less than $1k of income,
    but it's buried in a bigger tax package in congress which isn't
    considered likely to pass...
    
      In short,  I'd happilly give up any income/deductible losses
    to just get out from under the paperwork,  but salvation doesn't
    appear to be in sight...  :^(
    
    
    						-al

I've been going through this headache ever since invested in a limited
partnership (which was a mistake on its own).

The good news (?) this year is that unless you've got offsetting gains,
you can't take a loss on passive activities (it's been phased out over
the last few years).  I dutifully filled out my form 8582 and found that
I couldn't take the loss, so I just didn't file it.

Of course, if you've got a gain (I wish!), you'll have to file 8582 and
schedule E.

    
    
      re -.1
    
    
      Don't you _still_  have to file the schedule "E"  even if
    the losses aren't deductible?
    
      I think the fact that you got a schedule K-1 gets reported to
    the IRS,  and you have to file the supporting paperwork whether
    you want to or not,  even if it has no immediate effect on your
    tax situation.
    
     (In a similar manner,  could one simply "not" file schedule D
    in the case of a stock transaction which results in a loss?)
    
    
    							-al
    

Not the way I read the instructions.

    There are two lines on Schedule D for short and long term gains from
    limited partnerships. Are you folks suggesting that if you only have
    gains from the LP, that its not adequet to simply post them there and
    not file Schedule E and/or 85xx?

    
    
      I believe the "Schedule D" stuff is either for "Publicly traded
    partnerships",  or perhapse for use when you finally sell your
    "units" - it does not deal with the "dividend" income that you
    recieve every year from the partnership's operations.
    
    
    						-al
    

There are also boxes on the K-1 that say "enter in line xx of 8582."
If these numbers are non-zero, you may have to file an 8582.  If you
file an 8582, you have to file a schedule E.

    Gerald: Al: Mr/Ms Flemming:
    
    Before we get to how to fill out the tax forms, maybe you could help
    me (and the readers of this note) understand the fundamentals of
    such investments.
    For simplicity, assume that the investment is in a publicly traded
    Limited Partnership (I'm looking over a publicly traded Real Estate L.P. 
    that supposedly reported a 42% "dividend yield" for the 12 months
    ending Spet 91. These ARE seductive, but there must me several things
    wrong. However, let's focus on the tax implications of L.P
    Distributions.
    The distribution listed is actual cash you receive? I know
    depreciation is an accounting device and that part of the distribution
    is due to depreciation on the assests of the Partnership, but you
    do receive in the "dividend check" actual money, right?
    Two cases: (1) $100 in distributions for the tax year, $30 from the
    earnings of the L.P and $70 from the depreciation of the assets.
               (2) $100 in dsitributions for the tax year, $30 from 
    "somewhere" (return of capital?) because the L.P had NEGATIVE earnings
    and $70 from the depreciation of assests.
    
    Note, my investment goal is earning 3X money market on my
    investment, while awaiting gain in the price of the L.P units for a
    sale for captial gains. I will likely have other Short Term and Long
    Term capitial gains with which to offset passive losses on the L.P,
    so the restriction from deducting losses against earned income is
    not a significant constraint for me. Also, if there is a rational
    basis for the tax forms, I don't mind filling them out (with Taxcut
    1040 software).
    Comments?
    
    John K
     
    
    

    Re: 98.8
    Now I'm really confused. I thought you only filed schedule E if you
    were an active partner.
    

    Re: .10
    Schedule E covers *any* partnership activity: active, passive, limited,
    or otherwise.  "Active" partners handle losses differently, as they
    (sometimes) classify the loss as "non-passive".
    
    Re: .9
    Capital gain/loss doesn't help you offset *passive* losses.  Only
    "passive" income can be used to offset passive loss.  Otherwise, it
    just accumulates forever until you have some passive income to wash it
    with.  Capital gains can only offset capital losses.
    
    "For most every loophole, there is a corresponding loop.  If you don't
    notice it at first, check your neck..."
    
    SteveSov

    
    >Passive losses just accumulate forever until you have active
    >income to wash it with...
    
    
      Just a nit - I think _all_ accumulated passive losses are allowable
    in the year you finally  liquidate your interest in a Ltd. partnership,
    regardless of whether you made or lost money in the sale of the units.
    
    
    							-al
    

    Oh.  Yup, I think you're right.  (Subject to "at-risk limitations")  I
    have to keep reminding myself to remember the endpoints...
    
    SteveSov