§ 772. Simplified flow-through
(a)
General rule
In determining the income tax of a partner of an electing large partnership, such partner shall take into account separately such partner’s distributive share of the partnership’s—
(b)
Separate computations
In determining the amounts required under subsection (a) to be separately taken into account by any partner, this section and section
773 shall be applied separately with respect to such partner by taking into account such partner’s distributive share of the items of income, gain, loss, deduction, or credit of the partnership.
(c)
Treatment at partner level
(2)
Income or loss from passive loss limitation activities
For purposes of this chapter, any partner’s distributive share of any income or loss described in subsection (a)(1) shall be treated as an item of income or loss (as the case may be) from the conduct of a trade or business which is a single passive activity (as defined in section
469). A similar rule shall apply to a partner’s distributive share of amounts referred to in paragraphs (3)(A) and (5)(A) of subsection (a).
(3)
Income or loss from other activities
(4)
Treatment of net capital gain or loss
For purposes of this chapter, any partner’s distributive share of any gain or loss described in subsection (a)(3) shall be treated as a long-term capital gain or loss, as the case may be.
(5)
Minimum tax treatment
In determining the alternative minimum taxable income of any partner, such partner’s distributive share of any applicable net AMT adjustment shall be taken into account in lieu of making the separate adjustments provided in sections
56,
57, and
58 with respect to the items of the partnership. Except as provided in regulations, the applicable net AMT adjustment shall be treated, for purposes of section
53, as an adjustment or item of tax preference not specified in section
53
(d)(1)(B)(ii).
(d)
Operating rules
For purposes of this section—
(2)
Tax-exempt interest
The term “tax-exempt interest” means interest excludable from gross income under section
103.
(3)
Applicable net AMT adjustment
(4)
Treatment of certain separately stated items
(A)
Exclusion for certain purposes
In determining the amounts referred to in paragraphs (1) and (2) of subsection (a), any net capital gain or net capital loss (as the case may be), and any item referred to in subsection (a)(11), shall be excluded.
(B)
Allocation rules
The net capital gain shall be treated—
(i)
as allocable to passive loss limitation activities to the extent the net capital gain does not exceed the net capital gain determined by only taking into account gains and losses from sales and exchanges of property used in connection with such activities, and
(ii)
as allocable to other activities to the extent such gain exceeds the amount allocated under clause (i).
A similar rule shall apply for purposes of allocating any net capital loss.
(5)
General credits
The term “general credits” means any credit other than the low-income housing credit, the rehabilitation credit, and the foreign tax credit.
(6)
Foreign income taxes
The term “foreign income taxes” means taxes described in section
901 which are paid or accrued to foreign countries and to possessions of the United States.
(f)
Special rules for applying passive loss limitations
If any person holds an interest in an electing large partnership other than as a limited partner—
(2)
such partner’s distributive share of the partnership items allocable to passive loss limitation activities shall be taken into account separately to the extent necessary to comply with the provisions of section
469.
The preceding sentence shall not apply to any items allocable to an interest held as a limited partner.