U.S. Return of Partnership Income

Other Forms, Returns, and Statements That May Be Required

• Forms W-2 and W-3, Wage and Tax Statement; and Transmittal of Wage and Tax Statements. Use these forms to report wages, tips, other compensation, and withheld income, social security and Medicare taxes for employees.
• Form 720, Quarterly Federal Excise Tax Return. Use Form 720 to report environmental excise taxes, communications and air transportation taxes, fuel taxes, luxury tax on passenger vehicles, manufacturers' taxes, ship passenger tax, and certain other excise taxes.
• Form 940 or Form 940-EZ, Employer's Annual Federal Unemployment (FUTA) Tax Return. The partnership may be liable for FUTA tax and may have to file Form 940 or Form 940-EZ if it paid wages of $1,500 or more in any calendar quarter during the calendar year (or the preceding calendar year) or one or more employees worked for the partnership for some part of a day in any 20 different weeks during the calendar year (or the preceding calendar year).
• Form 941, Employer's Quarterly Federal Tax Return. Employers must file this form quarterly to report income tax withheld on wages and employer and employee social security and Medicare taxes. Agricultural employers must file Form 943, Employer's Annual Tax Return for Agricultural Employees, instead of Form 941, to report income tax withheld and employer and employee social security and Medicare taxes on farmworkers.
• Form 945, Annual Return of Withheld Federal Income Tax. Use this form to report income tax withheld from nonpayroll payments, including pensions, annuities, individual retirement accounts (IRAs), gambling winnings, and backup withholding.

  See Trust Fund Recovery Penalty on page 5.

  
  

  
  

• Forms 1042 and 1042-S, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons; and Foreign Person's U.S. Source Income Subject to Withholding. Use these forms to report and send withheld tax on payments or distributions made to nonresident alien individuals, foreign partnerships, or foreign corporations to the extent these payments or distributions constitute gross income from sources within the United States that is not effectively connected with a U.S. trade or business. A domestic partnership must also withhold tax on a foreign partner's distributive share of such income, including amounts that are not actually distributed. Withholding on amounts not previously distributed to a foreign partner must be made and paid over by the earlier of (a) the date on which Schedule K-1 is sent to that partner or (b) the 15th day of the 3rd month after the end of the partnership's tax year. For more information, see sections 1441 and 1442 and Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Corporations.
• Form 1096, Annual Summary and Transmittal of U.S. Information Returns.
• Form 1098, Mortgage Interest Statement. Use this form to report the receipt from any individual of $600 or more of mortgage interest (including points) in the course of the partnership's trade or business.
• Forms 1099-A, B, INT, LTC, MISC, MSA, OID, R, and S. You may have to file these information returns to report acquisitions or abandonments of secured property; proceeds from broker and barter exchange transactions; interest payments; payments of long-term care and accelerated death benefits; miscellaneous income payments; distributions from an Archer MSA; original issue discount; distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc.; and proceeds from real estate transactions. Also, use certain of these returns to report amounts that were received as a nominee on behalf of another person.

  For more information, see the Instructions for Forms 1099, 1098, 5498, and W-2G.

  Important: Every partnership must file Forms 1099-MISC if, in the course of its trade or business, it makes payments of rents, commissions, or other fixed or determinable income (see section 6041) totaling $600 or more to any one person during the calendar year.

• Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. A partnership may have to file Form 5471 if it (a) controls a foreign corporation; or (b) acquires, disposes of, or owns 5% or more in value of the outstanding stock of a foreign corporation; or (c) owns stock in a corporation that is a controlled foreign corporation for an uninterrupted period of 30 days or more during any tax year of the foreign corporation, and it owned that stock on the last day of that year.
• Form 5713, International Boycott Report, is used by persons having operations in, or related to, a boycotting country, company, or national of a country, to report those operations and figure the loss of certain tax benefits. The partnership must give each partner a copy of the Form 5713 filed by the partnership if there has been participation in, or cooperation with, an international boycott.
• Form 8264, Application for Registration of a Tax Shelter. Tax shelter organizers must file Form 8264 to get a tax shelter registration number from the IRS.
• Form 8271, Investor Reporting of Tax Shelter Registration Number. Partnerships that have acquired an interest in a tax shelter that is required to be registered use Form 8271 to report the tax shelter's registration number. Attach Form 8271 to any return on which a deduction, credit, loss, or other tax benefit attributable to a tax shelter is taken or any income attributable to a tax shelter is reported.
• Form 8275, Disclosure Statement. File Form 8275 to disclose items or positions, except those contrary to a regulation, that are not otherwise adequately disclosed on a tax return. The disclosure is made to avoid the parts of the accuracy-related penalty imposed for disregard of rules or substantial understatement of tax. Form 8275 is also used for disclosures relating to preparer penalties for understatements due to unrealistic positions or disregard of rules.
• Form 8275-R, Regulation Disclosure Statement, is used to disclose any item on a tax return for which a position has been taken that is contrary to Treasury regulations.
• Forms 8288 and 8288-A, U.S. Withholding Tax Return for Dispositions by Foreign Persons of U.S. Real Property Interests; and Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests. Use these forms to report and send withheld tax on the sale of U.S. real property by a foreign person. See section 1445 and the related regulations for additional information.
• Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. File this form to report the receipt of more than $10,000 in cash or foreign currency in one transaction or a series of related transactions.
• Form 8308, Report of a Sale or Exchange of Certain Partnership Interests, is used by a partnership to report the sale or exchange by a partner of all or part of a partnership interest where any money or other property received in exchange for the interest is attributable to unrealized receivables or inventory items.
• Form 8594, Asset Allocation Statement Under Sections 338 and 1060. Both the seller and buyer of a group of assets that makes up a trade or business must use this form to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the buyer's basis in the assets is determined only by the amount paid for the assets.
• Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts. Partnerships that are not closely held use this form to figure the interest due or to be refunded under the look-back method of section 460(b)(2) on certain long-term contracts that are accounted for under either the percentage of completion-capitalized cost method or the percentage of completion method. Closely held partnerships should see the instructions on page 30 for line 25, item 10, of Schedule K-1 for details on the Form 8697 information they must provide to their partners.
• Forms 8804, 8805, and 8813, Annual Return for Partnership Withholding Tax (Section 1446); Foreign Partner's Information Statement of Section 1446 Withholding Tax; and Partnership Withholding Tax Payment (Section 1446). File Forms 8804 and 8805 if the partnership had effectively connected gross income and foreign partners for the tax year. Use Form 8813 to send installment payments of withheld tax based on effectively connected taxable income allocable to foreign partners.

  Exception: Publicly traded partnerships that do not elect to pay tax based on effectively connected taxable income do not file these forms. They must instead withhold tax on distributions to foreign partners and report and send payments using Forms 1042 and 1042-S. See section 1446 for more information.

• Form 8832, Entity Classification Election. Except for a business entity automatically classified as a corporation, a business entity with at least two members may choose to be classified either as a partnership or an association taxable as a corporation. A domestic eligible entity with at least two members that does not file Form 8832 is classified under the default rules as a partnership. However, a foreign eligible entity with at least two members is classified under the default rules as a partnership only if at least one member does not have limited liability. File Form 8832 only if the entity does not want to be classified under these default rules or if it wants to change its classification.
• Form 8865, Return of U.S. Person With Respect To Certain Foreign Partnerships. A domestic partnership may have to file Form 8865 if it:
  1. Controlled a foreign partnership (for example, it owned more than a 50% direct or indirect interest in the partnership).
  2. Owned at least a 10% direct or indirect interest in a foreign partnership while U.S. persons controlled that partnership.
  3. Had an acquisition, disposition, or change in proportional interest of a foreign partnership that:
     1. Increased its direct interest to at least 10% or reduced its direct interest of at least 10% to less than 10%.
     2. Changed its direct interest by at least a 10% interest.
  4. Contributed property to a foreign partnership in exchange for a partnership interest if:
     1. Immediately after the contribution, the partnership owned, directly or indirectly, at least a 10% interest in the foreign partnership; or
     2. The fair market value of the property the partnership contributed to the foreign partnership in exchange for a partnership interest, when added to other contributions of property made to the foreign partnership during the preceding 12-month period, exceeds $100,000.

     Also, the domestic partnership may have to file Form 8865 to report certain dispositions by a foreign partnership of property it previously contributed to that foreign partnership if it was a partner at the time of the disposition.

  For more details, including penalties for failing to file Form 8865, see Form 8865 and its separate instructions.

• Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method. Partnerships that are not closely held use this form to figure the interest due or to be refunded under the look-back method of section 167(g)(2) for certain property placed in service after September 13, 1995, depreciated under the income forecast method. Closely held partnerships should see the instructions on page 31 for line 25, item 19, of Schedule K-1 for details on the Form 8866 information they must provide to their partners.
• Statement of section 743(b) basis adjustments. If the partnership is required to adjust the bases of partnership properties under section 743(b) because of a section 754 election on the sale or exchange of a partnership interest or on the death of a partner, the partnership must attach a statement to its return for the year of the transfer. The statement must list:
  1. The name and identifying number of the transferee partner,
  2. The computation of the adjustment, and
  3. The partnership properties to which the adjustment has been allocated.

Assembling the Return

When submitting Form 1065, organize the pages of the return in the following order:

• Pages 1-4,
• Schedule F (if required),
• Form 8825 (if required),
• Any other schedules in alphabetical order, and
• Any other forms in numerical order.

To assist us in processing the return, complete every applicable entry space on Form 1065 and Schedule K-1. If you attach statements, do not write See attached instead of completing the entry spaces on the forms. Penalties may be assessed if the partnership files an incomplete return.

If you need more space on the forms or schedules, attach separate sheets and place them at the end of the return. Use the same size and format as on the printed forms. But show your totals on the printed forms. Be sure to put the partnership's name and EIN on each sheet.

Separately Stated Items

Partners must take into account separately (under section 702(a)) their distributive shares of the following items (whether or not they are actually distributed):

1. Ordinary income or loss from trade or business activities.
2. Net income or loss from rental real estate activities.
3. Net income or loss from other rental activities.
4. Gains and losses from sales or exchanges of capital assets.
5. Gains and losses from sales or exchanges of property described in section 1231.
6. Charitable contributions.
7. Dividends (passed through to corporate partners) that qualify for the dividends-received deduction.
8. Taxes described in section 901 paid or accrued to foreign countries and to possessions of the United States.
9. Other items of income, gain, loss, deduction, or credit, to the extent provided by regulations. Examples of such items include nonbusiness expenses, intangible drilling and development costs, amortizable basis of reforestation expenses, and soil and water conservation expenditures.

Elections Made by the Partnership

Generally, the partnership decides how to figure taxable income from its operations. For example, it chooses the accounting method and depreciation methods it will use. The partnership also makes elections under the following sections:

1. Section 179 (election to expense certain tangible property).
2. Section 614 (definition of property - mines, wells, and other natural deposits). This election must be made before the partners figure their individual depletion allowances under section 613A(c)(7)(D).
3. Section 1033 (involuntary conversions).
4. Section 754 (manner of electing optional adjustment to basis of partnership property).

   Under section 754, a partnership may elect to adjust the basis of partnership property when property is distributed or when a partnership interest is transferred. If the election is made with respect to a transfer of a partnership interest (section 743(b)) and the assets of the partnership constitute a trade or business for purposes of section 1060(c), then the value of any goodwill transferred must be determined in the manner provided in Regulations section 1.1060-1. Once an election is made under section 754, it applies both to all distributions and to all transfers made during the tax year and in all subsequent tax years unless the election is revoked. See Regulations section 1.754-1(c).

   This election must be made in a statement that is filed with the partnership's timely filed return (including any extension) for the tax year during which the distribution or transfer occurs. The statement must include:

   • The name and address of the partnership.
   • A declaration that the partnership elects under section 754 to apply the provisions of section 734(b) and section 743(b).
   • The signature of the general partner authorized to sign the partnership return.

   The partnership can get an automatic 12-month extension to make the section 754 election provided corrective action is taken within 12 months of the original deadline for making the election. For details, see Regulations section 301.9100-2.

   See section 754 and the related regulations for more information.

   If there is a distribution of property consisting of an interest in another partnership, see section 734(b).

   The partnership is required to attach a statement for any section 743(b) basis adjustments. See page 7 for details.

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