Use Schedule E (Form 1040) to report income or loss from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests in REMICs.

You can attach your own schedule(s) to report income or loss from any of these sources. Use the same format as on Schedule E.

Enter separately on Schedule E the total income and the total loss for each part. Enclose loss figures in (parentheses).

You may now deduct up to $500,000 of the cost of section 179 property placed in service in 2010. This deduction is phased out if the cost of the property exceeds $2,000,000. The cost of certain qualified real property placed in service in 2010 may also be deducted but is limited to $250,000. For more details, see Pub. 527 and Pub. 946.

The special first-year depreciation allowance has been extended to property placed in service in 2010. See Pub. 527 and Pub. 946 for details on which property is eligible for the special allowance.

The penalties for failure to disclose a reportable transaction have changed. See Pub. 550 and the Instructions for Form 8886 for more details.

If you file Schedule E because you have an interest in a partnership or S corporation involved in a farming business, any losses you have from farming businesses may be reduced or eliminated. See page E-6 and the Instructions for Schedule F for more details.