Separately stated item(S corporation and partnership)

Separately stated item is below

1)net income or loss from rental real estate activity 

2)net income or loss from other rental activity 

→Rent expense is not treated as separately stated item

3)interest, dividend, royalty income 

→Passive income 

4)capital gain or loss

→Limitation:  (3,000) per year. Remaining loss is carry forward indefinitely

5)section 1231 gains and losses

→Loss: ordinary loss/ Gain: capital gain(long-term)

6)section 179 expense deduction

→IRS gives us to elect the deduction or capitalization when section 179 is applicable.  Because section 179 expense is personally election, it is treated as separated stated item.

7)charitable contribution

→Limitation of celling bases on adjusted gross income

8)investment interest expense

→Individual can be deductible by the amount of net investment income in itemized deduction

9)foreign income taxes 

→individual can choose whether the foreign income taxes are treated as tax credit item or itemized deduction

10)tax-exempt income

→EX) interest from municipal bonds 

Be careful to treat the Separately stated items when you prepare the tax return.