Reporting S corporation income, deductions, and credits. You must report your distributive share of the S corporation's income, gain, loss, deductions, or credits on the appropriate lines and schedules of your Form 1040. Limit on losses and deductions. Any loss or deduction not allowed because of this limit is carried over and treated as a loss or deduction in the next tax year. Passive activity losses.
Rules apply that limit losses from passive activities.
Your copy of Schedule K-1 and its instructions will explain the limits and tell you where on your return to report your share of S corporation items from passive activities. If you have a passive activity loss from an S corporation, you must complete Form 8582, Passive Activity Loss Limitations, to figure the amount of the allowable loss to enter on your return. See Publication 925 for more information.