Schedule E

Facts

Enter the following information for a sample client:

Program Considerations

• The program accepts an unlimited number of rental and royalty activities per return. Rental activities are assumed to be passive with active participation, and royalty income is assumed to be nonpassive portfolio income. Input fields are available to change these assumptions. Vacation home rentals are not treated as passive, but are subject to the vacation home rules.
• Do not enter rent and royalty income on the same property. If the same property has rent and royalty income, enter it as two separate properties.
• If a rental activity has suspended passive losses or current passive losses, the program calculates and prints Form 8582 when required.
• Enter 1 in 1=nonpassive activity, 2=passive royalty to force the net income or loss to bypass the Form 8582 calculation. Enter 2 to indicate a passive royalty property. The program automatically determines treatment of passive royalty properties with net income.
• Check the Did not actively participate box to indicate that the rental does not qualify for the $25,000 special allowance.
• Check the Real estate professional box to indicate the activity is non-passive in the current year and prior year suspended losses are allowed to reduce income from that rental activity.
• Check the Rental other than real estate box to force the activity to print on line 2 of Form 8582
  instead of line 1. This will not, however, make a rental nonpassive.
• Use the Percentage of ownership if not 100% (.xxxx) field if ownership percentage is less than 100%. The program applies the percentage to reduce the net profit or loss on line 22 of the Schedule E. If you have depreciation associated with this asset then you do not need to make an entry in Percentage of Business Use in Screen 22, Depreciation for the program to correctly calculate the appropriate expense.
• Use the Percentage of tenant occupancy if not 100% (.xxxx) field if the percentage of tenant occupancy is less than 100%. The program allows the full amount from Rents Received and all direct expenses. The program limits indirect expenses to the percentage entered. If you enter depreciation related to this activity in the depreciation screen, you must enter the percentage related to the tenant occupancy in Percentage of Business Use input in Screen 22, Depreciation. The program carries the disallowed portion of Interest: Mortgage-Banks, etc. and Taxes: Real Estate expenses to Schedule A.

How?

To enter a rental property:

1. Open the sample client.
2. Open the Rental and Royalty Inc (Sch. E) screen from the Contents tab.
   
3. Enter the information from the Schedule E table above in the appropriate input fields.

To view the input for a different Schedule E:

1. Click the schedule in the Schedule list.
   

To add a new property:

1. Click the Add button at the bottom of the Schedule list.
   

To delete a Schedule E:

1. Click the schedule in the Schedule list.
2. Click the Delete button at the bottom of the Schedule list.
   

Tips & Shortcuts

You can press [Ctrl]+[A] to add another rental or royalty property.

Review

You should have entered the information for a rental activity and produced the following results on Schedule E:

• Line 26 - Total rental real estate and royalty income: $16,000

Troubleshooting

Problem: I do not see a place to enter "Bank charges."

Solution: Use the Other expenses (Ctrl+E) field to enter other expenses.

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