For a significant participation passive activity (greater than 100 hours but didn't materially participate), and if the gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income (I believe under Regs. Sec. 1.469-2T(f)(2)).

The instructions for recharacterizing are in Pub 925 and involves two worksheets (A and B) for which results end up on Worksheet 3 of Form 8582.

I cannot figure out how to recharacterize the income from an SPA to non-passive and generate these worksheets in ProConnect.  Entering greater than 100 hours in Part II of Shareholder info for the K-1 in  "Number of significant participation hours" does not trigger it.

The only way I can get the income to show up as non-passive is to check "not a passive activity" but that isn't correct as it does not recharacterize it properly or generate Form 8582.

I need to figure out how to do this for a return as it significantly affects the net investment income tax on Form 8960.

If anyone is aware of how to do this in ProConnect please let me know.  Thanks.