Ordinary
business income and expenses are listed on Page 1 of Form 1120S, and the
net income or loss is passed through to each Subchapter S corporation shareholder on a pro rata
basis (similar to a partnership). Other items must be separately stated on
Schedule K because the tax treatment and limitations may apply differently
on each Subchapter S corporation shareholder’s individual return.
List of items that must be separately
stated includes, but is not limited to:
• Net income or loss from rental real
estate activity.
• Net income or loss from other rental activity.
• Portfolio income or loss.
– Interest income
– Dividend income
– Royalty income
– Capital gain or loss
• Section 1231 gain or loss.
• Charitable contributions.
• Section 179 expense deduction.
• Expenses related to portfolio income or loss.
• Credits.
– Low-income housing credit.
– Qualified rehabilitation expenses.
– Other credits.
• Investment interest expense.
• Tax preference and adjustment items needed to figure shareholder’s
AMT.
