REG Pass-Through Tax · Updated November 2026
Why Are Some Partnership and S Corp Items Reported Separately?
Some tax items must stay separate because they affect each owner differently.
Ordinary business income
Generally includes normal operating revenues and deductible operating expenses that do not need separate owner-level treatment.
Separately stated items
Items such as capital gains, charitable contributions, Section 1231 items, tax-exempt income, and certain investment items can retain special character.
Why separate them
Owners can have different carryovers, limitations, passive status, and basis, so combining everything could produce the wrong owner-level tax result.
The takeaway
If tax treatment depends on the owner's individual circumstances, expect separate reporting.
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FAQ
Is charitable contribution usually included in ordinary business income?
No.
Can interest income be separately stated?
Yes.
Why does character matter?
Owner-level limitations and tax rates can differ.