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California online Form 1099-PATR: What You Should Know
How Much Is the 1099-PATR? Who Is Eligible for the 1099-PATR? The IRS does not require information returns filed for Schedule C to be included in 1099-PATR. To report the distribution, you may want to include it in your Form 1099-B or report it on line 11 of the return. The 1099-PATR is a non-electronic form that must be filed on paper, and may only be filed for taxable distributions received from a qualified cooperative. Generally the distribution must be taxable. However, it may be exempt. What is a qualified cooperative? A qualified cooperative is a corporation, trust entity, or other entity, with 50 or more shareholders, that operates a series of eligible low-income housing for low-income persons as part of a comprehensive low-income housing program administered as directed by the Secretary. All qualified cooperatives must be in good standing. Qualified cooperatives that have previously made, made not more than one prior taxable distribution, or both, must file a Form 1090-E with the IRS. The taxpayer filing the Schedule C must show a reasonable basis for the portion of the distribution that exceeds 500 (500 and 125, whichever is less). The purpose of the income testing is to ensure the taxpayer will earn enough income to be eligible for the low-income housing subsidy at the subsidized or market rate. It is important only to test this income during the subsidy period to ensure the taxpayer will receive sufficient income to repay and satisfy the loan. If the test indicates that the taxpayer is not eligible for the housing subsidy, then the return would not need to provide information on amounts received from the qualified cooperative for other expenses. The income that would be considered taxable is the amount of the taxpayer's qualified cooperative dividends plus all other amounts (excluding the amount of the qualified cooperative's capital contribution to the qualified cooperative) received from that qualified cooperative as income or capital. The amount of income or capital that is not tax-free cannot increase after a qualified cooperative or qualifying person is terminated. What Are the Qualified Cooperative Dividends? Qualified cooperative dividends are dividends that are paid to shareholders of any qualified cooperative for the purpose of building an income-producing housing unit. Generally, the dividend will be the difference between the property valuation, as determined by the cooperative, and the market value, as determined by an appraisal report provided to the IRS by the qualified cooperative. Qualified cooperative dividends are treated exactly the same as ordinary income.
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