Worksheet 5

Complete Worksheet 5 before completing Part II. Use Worksheet 5 to figure the amounts to enter on Form 8810, lines 5a and 5b.

Column (a). Convert any current year qualified expenditures into credits and complete Form 3800, General Business

Example. The corporation has one passive activity. The activity has an unallowed loss of $18,000 in Worksheet 3, column (c), and the following net losses and net gain.

Form 1120 Gross receipts $100,000 Deductions 120,000

Net loss ($20,000)

Form 8949 Form 4797 Gain $1,000 Gain $5,000 Loss (2,000) Loss (2,000)

Net loss ($1,000) Net gain $3,000

Add the net losses of $20,000 and $1,000, for a total of $21,000. Divide the net loss reported on each form by the total of the net losses, and multiply the result by the unallowed loss of $18,000, as shown below.

Form $20,000 x $18,000 = $17,143 1120: $21,000

Form $1,000 x $18,000 = $857 8949: $21,000

On Form 4797, report the $2,000 loss and the $5,000 gain. On Worksheet 4, enter the $17,143 of unallowed deductions allocated to Form 1120 in column (c) on the line for total Form 1120 deductions. Enter the $857 of unallowed Form 8949 losses in column (c) of line 2. Use Worksheet 4 to allocate the $17,143 to the Form 1120 deductions and show the allowed and unallowed Form 8949 loss.

Line 1, column (a). Enter the current year deductions for each Form 1120 expense (Worksheet 1, lines 6a through 6l) plus any prior year unallowed Form 1120 deduction for that activity. For example, if Worksheet 1, line 6i, shows current year depreciation for the activity of $2,200, and the activity had prior year unallowed depreciation of $1,200, enter $3,400 on Worksheet 4, line 1i, column (a).

Line 2, column (a). Enter any Form 8949 losses (or any Schedule D (Form 1120) losses, as applicable) from Worksheet 1, line 8, plus any prior year unallowed losses from the 2024 Form 8949 for that activity.

Line 3, column (a). Enter any Form 4797 losses from Worksheet 1, line 9, plus any prior year unallowed Form 4797 losses for that activity.

Line 1, column (b). Divide each of the individual Form 1120 deductions shown in

column (a) by the total of all of the Form 1120 deductions in column (a) and enter the ratio for each of the deductions in column (b). The total of the ratios must equal 1.00.

Column (c). Allocate the portion of the loss in Worksheet 3, column (c), among the Form 1120 deductions by multiplying the unallowed loss attributable to the total Form 1120 deductions by each of the ratios in column (b). Enter the portion of the unallowed loss in Worksheet 3, column (c), that is attributable to a Form 8949 (or Schedule D (Form 1120)) or Form 4797 loss in column (c) of this worksheet.

Column (d). Subtract column (c) from column (a) and enter the results in this column. Enter the deductions allowed for Form 1120 on the proper lines of Form 1120. Enter the allowed losses on the appropriate forms.