Line E

Material participation. For the definition of “material participation” for purposes of the passive activity rules, see the instructions for Schedule C (Form 1040), line G. If you meet any of the material participation tests described in those instructions, check the “Yes” box.

If you are a retired or disabled farmer, you are treated as materially participating in a farming business if you materially participated 5 or more of the 8 years preceding your retirement or disability. Also, a surviving spouse is treated as materially participating in a farming activity if the surviving spouse actively manages the farm and the real property used for farming meets the estate tax rules for special valuation of farm property passed from a qualifying decedent.

Check the “No” box if you didn’t materially participate. If you checked “No” and you have a loss from this business, see Limit on passive losses next. If you have a profit from this business activity but have current-year losses from other passive activities or prior-year unallowed passive activity losses, see the Instructions for Form 8582.

Limit on passive losses. If you checked the “No” box and you have a loss from this business, you may have to use Form 8582 to figure your allowable loss, if any, to enter on Schedule F (Form 1040), line 34. In most cases, you can deduct losses from passive activities only to the extent of income from passive activities. For details, see Pub. 925.

Note: Form 1040-SS filers, skip this line.

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