Partner's Instructions for Schedule K-1 (Form 1065-B)

Publicly Traded Partnership

If the publicly traded partnership box is checked, you are a partner in a publicly traded partnership and must follow the rules starting on page 4 under Publicly traded partnerships.

Partner's Share of Liabilities

The partnership will show your share of the partnership's nonrecourse liabilities, partnership-level qualified nonrecourse financing, and other liabilities as of the end of the partnership's tax year. If you terminated your interest in the partnership during the tax year, the amounts should reflect the share that existed immediately before the total disposition. A partner's other liability is any partnership liability for which a partner is personally liable.

Use the total of the three amounts for computing the adjusted basis of your partnership interest.

Generally, you may use only the amounts shown next to Qualified nonrecourse financing and Other to compute your amount at risk. Do not include any amounts that are not at risk if such amounts are included in either of these categories.

If your partnership is engaged in two or more different types of activities subject to the at-risk provisions, or a combination of at-risk activities and any other activity, the partnership should give you a statement showing your share of nonrecourse liabilities, partnership-level qualified nonrecourse financing, and other liabilities for each activity.

Qualified nonrecourse financing secured by real property used in an activity of holding real property that is subject to the at-risk rules is treated as an amount at risk. Qualified nonrecourse financing generally includes financing for which no one is personally liable for repayment that is borrowed for use in an activity of holding real property and that is loaned or guaranteed by a Federal, state, or local government or borrowed from a qualified person.

Qualified persons include any persons actively and regularly engaged in the business of lending money, such as a bank or savings and loan association. Qualified persons generally do not include related parties (unless the nonrecourse financing is commercially reasonable and on substantially the same terms as loans involving unrelated persons), the seller of the property, or a person who receives a fee for the partnership's investment in the real property.

See Pub. 925 for more information on qualified nonrecourse financing.

Both the partnership and you must meet the qualified nonrecourse rules on this debt before you can include the amount shown next to Qualified nonrecourse financing in your at-risk computation.

See Limitations on Losses, Deductions, and Credits beginning on page 2 for more information on the at-risk limitations.

Tax Shelter Registration Number

If the partnership is a registration-required tax shelter or has invested in a registration-required tax shelter, it should have entered a tax shelter registration number in this box. If you claim or report any income, loss, deduction, or credit from a tax shelter, you must attach Form 8271, Investor Reporting of Tax Shelter Registration Number, to your tax return. If the partnership has invested in a tax shelter, it must give you a copy of its Form 8271 with your Schedule K-1. Use the information on this Form 8271 to complete your Form 8271.

If the partnership itself is a registration-required tax shelter, use the information on Schedule K-1 (name of the partnership, partnership identifying number, and tax shelter registration number) to complete your Form 8271.

Boxes 1 Through 9

The amounts shown in boxes 1 through 9 reflect your share of income, loss, credits, deductions, etc., from the partnership. These amounts do not take into consideration the following limitations:

1. The adjusted basis of your partnership interest,
2. The amount for which you are at risk, or
3. The passive activity limitations.

For information on these provisions, see Limitations on Losses, Deductions, and Credits beginning on page 2.

If you are an individual, the following instructions will tell you how to report the amounts shown in the boxes. If you are not an individual, report the amounts in the boxes as instructed on your tax return.

The line numbers in these instructions are references to forms in use for calendar year 2001. If you file your tax return on a calendar year basis, but your partnership files a return for a fiscal year, enter the amounts shown in the boxes on your tax return for the year in which the partnership's fiscal year ends. For example, if the partnership's tax year ends in February 2002, report the amounts in the boxes on your 2002 tax return.

If you have losses, deductions, or credits from a prior year that were not deductible or usable because of certain limitations, such as the basis rules or the at-risk limitations, take them into account in determining your net income, loss, or credits for this year. However, except for passive activity losses and credits, do not combine the prior-year amounts with any amounts shown on this Schedule K-1 to get a net figure to report on any supporting schedules, statements, or forms attached to your return. Instead, report the amounts separately on the attached schedule, statement, or form on a year-by-year basis.

If you have amounts other than those shown on Schedule K-1 to report on Schedule E (Form 1040), enter each item on a separate line of Part II of Schedule E.

Box 1 - Taxable Income (Loss) From Passive Activities

Limited partners only. The amount reported in box 1 is treated as being from a trade or business that is a single passive activity. Report this amount as follows:

• If income is reported in box 1, report the income on Schedule E (Form 1040), Part II, column (h). However, if the publicly traded partnership box is checked, report the income following the rules for Publicly traded partnerships starting on page 4.
• If a loss is reported in box 1, follow the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule E, Part II, column (g). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Box 2 - Taxable Income (Loss) From Other Activities

The amount reported in box 2 is your share of the income from other activities. It is not subject to the passive activity limitations. Report the amount in box 2 as follows:

• If the amount in box 2 is income, report it on Schedule E, Part II, column (k).
• If the amount in box 2 is a loss, report it on Schedule E, Part II, column (i).

Box 3 - Net Capital Gain (Loss) From Passive Activities

Limited partners only. The net capital gain (loss) reported in box 3 is treated as being from a trade or business that is a single passive activity. If a net capital gain is reported in box 3, report the gain on Schedule D (Form 1040), line 12, column (f). If a loss is reported in box 3, report the loss following the Form 8582 instructions to figure how much of the loss can be reported on Schedule D, line 12, column (f). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Box 4 - Net Capital Gain (Loss) From Other Activities

Net capital gain (loss) from other activities is not subject to the passive activity limitations. Report the gain (loss) on Schedule D (Form 1040), line 12, column (f).

Box 5 - Net Passive AMT Adjustment

Limited partners only. Use the amount reported in box 5 (as well as your adjustments and tax preference items from other sources) to prepare your Form 6251, Alternative Minimum Tax - Individuals; Form 4626, Alternative Minimum Tax - Corporations; or Schedule I of Form 1041, U.S. Income Tax Return for Estates and Trusts. The adjustment is treated as being from a trade or business that is a single passive activity.

Individuals should enter the amount on line 11 of Form 6251, where it is taken into account with adjustments and preferences from other passive activities.

Box 6 - Net Other AMT Adjustment

Individual general and limited partners should enter the amount from box 6 on line 14f of Form 6251.

Box 7 - General Credits

Limited partners only. Enter the amount from box 7 on line 1p of Form 3800, General Business Credit. Because general credits are treated as being from a trade or business that is a single passive activity, you must also include the box 7 amount on line 3 of Form 3800.

Box 8 - Low-Income Housing Credit

Limited partners only. Enter the amount from box 8 on line 5 of Form 8586, Low-Income Housing Credit. This credit is for property placed in service after 1989 and is treated as being from a single passive activity.

Box 9 - Other

Codes A Through C

General partners in an electing large partnership must separately account for any items attributable to passive loss limitation activities to the extent necessary to comply with the section 469 passive loss rules. Therefore, the partnership is required to report income (loss), capital gain (loss), 28% rate gain (loss), credits, and the alternative minimum tax adjustment separately for all trade or business activities, rental real estate activities, and rental activities other than rental real estate.

Code A1 - General partner's taxable income (loss) from trade or business activities. Report Code A1 income (loss) from partnership trade or business activities in which you materially participated on Schedule E, Part II, column (i) or (k). See the instructions beginning on page 3 to determine whether you materially participated in a trade or business activity.

Report Code A1 income (loss) from partnership trade or business activities in which you did not materially participate as follows:

1. Report income on Schedule E, Part II, column (h). However, if the publicly traded partnership box on Schedule K-1 is checked, report the income following the rules for Publicly traded partnerships starting on page 4.
2. Report a loss following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule E, Part II, column (g). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code A2 - General partner's net capital gain (loss) from trade or business activities. If you did not materially participate in the trade or business activity, the net capital gain (loss) is a passive activity amount. If the amount is either (a) a loss that is not from a passive activity or (b) a gain, report it on Schedule D (Form 1040), line 12, column (f). If the amount is a loss from a passive activity, report it following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule D, line 12, column (f). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code A3 - General partner's 28% rate gain (loss) from trade or business activities. If you did not materially participate in the trade or business activity, the 28% rate gain (loss) is a passive activity amount. If the amount is either (a) a loss that is not from a passive activity or (b) a gain, report it on Schedule D (Form 1040), line 12, column (g). If the amount is a loss from a passive activity, report it following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule D, line 12, column (g). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code A4 - General partner's general credits from trade or business activities. Report the general credits on line 1p of Form 3800. If you did not materially participate in the trade or business activity, you must also include the general credits on line 3 of Form 3800.

Code A5 - General partner's nonconventional source fuel credit from trade or business activities. Report the credit for producing fuel from a nonconventional source on line 51 of Form 1040 or line 6c of Schedule J, Form 1120. If you did not materially participate in the trade or business activity, the nonconventional source fuel credit is a passive activity credit. If the credit is from a passive activity, complete Form 8582-CR (or Form 8810 for corporations) to figure how much of the credit is allowable. Enter the allowable amount on line 51 of Form 1040 or line 6c of Schedule J, Form 1120.

Code A6 - General partner's alternative minimum tax adjustment from trade or business activities. An AMT adjustment must be reported on line 14f of Form 6251. However, if the AMT adjustment is from a passive activity, it must be taken into account on line 11 with adjustments and preferences from other passive activities instead of being reported on line 14f.

Code B1 - General partner's taxable income (loss) from rental real estate activities. Generally, the income (loss) reported in box 9, Code B1, is a passive activity amount for all general partners. However, the income (loss) in box 9 is not from a passive activity if you were a real estate professional (defined on page 3) and you materially participated in the activity.

Use the following instructions to determine where to enter the Code B1 amount:

1. If you have a loss from a passive activity in box 9, Code B1, and you meet all of the following conditions, enter the loss on Schedule E (Form 1040), Part II, column (g):
   1. You actively participated in the partnership rental real estate activities. See Active participation in a rental real estate activity on page 4.
   2. Rental real estate activities with active participation were your only passive activities.
   3. You have no prior year unallowed losses from these activities.
   4. Your total loss from the rental real estate activities was not more than $25,000 (not more than $12,500 if married filing separately and you lived apart from your spouse all year).
   5. If you are a married person filing separately, you lived apart from your spouse all year.
   6. You have no current or prior year unallowed credits from a passive activity.
   7. Your modified adjusted gross income was not more than $100,000 (not more than $50,000 if married filing separately and you lived apart from your spouse all year).
2. If you have a loss from a passive activity in box 9 and you do not meet all the conditions in 1 above, report the loss following the Instructions for Form 8582 to figure how much of the loss you can report on Schedule E (Form 1040), Part II, column (g). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.
3. If you were a real estate professional and you materially participated in the activity, report box 9 income (loss) on Schedule E (Form 1040), Part II, column (i) or (k).
4. If you have income from a passive activity in box 9, Code B1, enter the income on Schedule E, Part II, column (h). However, if the publicly traded partnership box is checked, report the income following the rules for Publicly traded partnerships starting on page 4.

Code B2 - General partner's net capital gain (loss) from rental real estate activities. The net capital gain (loss) from a rental real estate activity is a passive activity amount unless you were a real estate professional (defined on page 3) and you materially participated in the activity. If the amount is either (a) a loss that is not from a passive activity or (b) a gain, report it on Schedule D (Form 1040), line 12, column (f). If the amount is a loss from a passive activity, report it following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule D, line 12, column (f). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code B3 - General partner's 28% rate gain (loss) from rental real estate activities. The 28% rate gain (loss) from a rental real estate activity is a passive activity amount unless you were a real estate professional (defined on page 3) and you materially participated in the activity. If the amount is either (a) a loss that is not from a passive activity or (b) a gain, report it on Schedule D (Form 1040), line 12, column (g). If the amount is a loss from a passive activity, report it following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule D, line 12, column (g). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code B4 - General partner's general credits from rental real estate activities. Report the general credits on line 1p of Form 3800. Unless you were a real estate professional and materially participated in the rental real estate activity, you must also include the general credits on line 3 of Form 3800.

Code B5 - General partner's low-income housing credit (for property placed in service after 1989) from rental real estate activities. Report the low-income housing credit for property placed in service after 1989 on line 5 of Form 8586. Unless you were a real estate professional and materially participated in the rental real estate activity, the low-income housing credit is a passive activity credit.

Code B6 - General partner's rehabilitation credit from rental real estate activities. Report the rehabilitation credit on line 1e of Form 3468, Investment Credit. Unless you were a real estate professional and materially participated in the rental real estate activity, the credit is a passive activity credit, and you must also file Form 3800.

Code B7 - General partner's alternative minimum tax adjustment from rental real estate activities. An AMT adjustment must be reported on line 14f of Form 6251. However, if the AMT adjustment is from a passive activity, it must be taken into account on line 11 with other passive activities instead of being reported on line 14f.

Code C1 - General partner's taxable income (loss) from other rental activities. Income (loss) reported in box 9, Code C1, is a passive activity amount for all general partners. Report a loss following the Instructions for Form 8582. Report income on Schedule E (Form 1040), Part II, column (h). However, if the box for publicly traded partnerships is checked, report the income (loss) following the rules for Publicly traded partnerships starting on page 4.

Code C2 - General partner's net capital gain (loss) from other rental activities. The net capital gain (loss) from other rental activities is a passive activity amount for all general partners. Report the gain on Schedule D (Form 1040), line 12, column (f). Report a loss following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule D, line 12, column (f). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code C3 - General partner's 28% rate gain (loss) from other rental activities. The 28% rate gain (loss) from other rental activities is a passive activity amount for all general partners. Report a gain on Schedule D (Form 1040), line 12, column (g). Report a loss following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule D, line 12, column (g). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code C4 - General partner's general credits from other rental activities. Report the general credits on line 1p of Form 3800. Because general credits from other rental activities are passive activity credits for all general partners, you must also include the general credits on line 3 of Form 3800.

Code C5 - General partner's alternative minimum tax adjustment from other rental activities. An AMT adjustment must be reported on line 14f of Form 6251. However, if the AMT adjustment is from a passive activity, it must be taken into account on line 11 with adjustments and preferences from other passive activities instead of being reported on line 14f.

Code D - Limited Partner's 28% Rate Gain (Loss) From Passive Activities

Limited partners only. The 28% rate gain (loss) is treated as being from a trade or business that is a single passive activity. If a gain is reported, report it on Schedule D (Form 1040), line 12, column (g). If a loss is reported, report the loss following the Instructions for Form 8582 to figure how much of the loss can be reported on Schedule D, line 12, column (g). However, if the publicly traded partnership box is checked, report the loss following the rules for Publicly traded partnerships starting on page 4.

Code E - Limited Partner's 28% Rate Gain (Loss) From Other Activities

The 28% gain (loss) from other activities is not subject to the passive activity limitations. Report the gain (loss) on Schedule D (Form 1040), line 12, column (g).

Code F - Guaranteed Payments

Generally, these amounts are not passive income, and you should report them on Schedule E (Form 1040), Part II, column (k) (for example, guaranteed payments for personal services).

Code G - Income From Discharge of Indebtedness

The amount reported under Code G is excluded from your gross income to the extent provided in section 108 if the discharge:

1. Occurred in a title 11 case relating to bankruptcy,
2. Occurred when you were insolvent,
3. Involved qualified farm indebtedness, as defined in section 108(g), or
4. Involved qualified real property business indebtedness, as defined in section 108(c)(3), unless the partner is a C corporation.

This amount is applied, instead, to reduce certain tax attributes. File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, to explain why any amount received from the discharge of indebtedness should be excluded and to report your reduction of tax attributes.

For a discharge of indebtedness not described above, you must include this amount in income on Schedule E, Part II, column (h) or (k).

Code H - Tax-Exempt Interest Income

You must report on your return, as an item of information, your share of the tax-exempt interest received or accrued by the partnership during the year. Individual partners must include this amount on Form 1040, line 8b. Increase the adjusted basis of your interest in the partnership by this amount.

Code I - Limited Partner's Rehabilitation Credit From Rental Real Estate Activities

Limited partners only. Report the rehabilitation credit on line 1e of Form 3468. Because the credit is treated as being from a single passive activity, you must also file Form 3800.

Code J - Limited Partner's Nonconventional Source Fuel Credit

Limited partners only. The nonconventional source fuel credit is treated as being from a single passive activity. Complete Form 8582-CR (or Form 8810 for corporations) to figure how much of the credit is allowable. Enter the allowable amount on line 51 of Form 1040 or line 6c of Schedule J, Form 1120.

Codes K1 and K2 - Self-Employment

Code K1 - Net earnings (loss) from self-employment. Enter this amount on Schedule SE (Form 1040), line 2, Section A or B, whichever is applicable. General partners should reduce this amount by unreimbursed partnership expenses claimed. General partners who are disqualified persons also should reduce this amount by depletion claimed on oil and gas properties. If this amount is a loss, enter only the deductible amount on Schedule SE. For purposes of self-employment tax, no income from an electing large partnership is treated as farming or fishing income.

Code K2 - Gross nonfarm income. If you are an individual partner, use this amount to figure net earnings from self-employment under the nonfarm optional method on Schedule SE (Form 1040), Section B, Part II.

Codes L1 Through L9 - Foreign Tax Credit Information

Use the information reported under Codes L1 through L9 to figure your foreign tax credit. For more information, see Form 1116, Foreign Tax Credit (Individual, Estate, Trust, or Nonresident Alien Individual) and its instructions; Form 1118, Foreign Tax Credit - Corporations, and its instructions; and Pub. 514, Foreign Tax Credit for Individuals. See page 4 of the Instructions for Form 1116 for detailed instructions for reporting foreign tax information from partnerships. Note: The line references in this section of the Form 1116 instructions do not apply to the Schedule K-1 of Form 1065-B.

Code L1 - Name of foreign country or U.S. possession. Include on Form 1116, Part I, item l. For each country reported, the partnership must give you the amount and a description of your share of the following items for Codes L2 through L9. For each country or possession being reported, a separate column in Part I and a separate line in Part II is needed on Form 1116.

Code L2 - Gross income from all sources. Enter this amount on line 3e of Form 1116.

Code L3 - Gross income sourced at partner level. Although all this income reported has been apportioned to foreign source categories of income, you must nevertheless determine whether the income being reported is U.S. source income or foreign source income. See page 4 of the Instructions for Form 1116 for the rules to source the income reported to you. Enter only foreign source income on lines 1 and 3d of Form(s) 1116. A separate Form 1116 or 1118 is required for each foreign source category of income. Do not include income that you determined to be U.S. source income.

Codes L4(a) Through L4(c) - Foreign gross income sourced at partnership level. The following types of income have already been sourced for you by the partnership. Include these amounts on lines 1 and 3d of the applicable Forms 1116 (i.e., the Forms 1116 for each category of income provided to you).

• Code L4(a) - Passive foreign source income.
• Code L4(b) - Listed foreign categories of income.
• Code L4(c) - General limitation foreign source income.

Code L5 - Interest expense allocated and apportioned at the partner level. Include this amount on line 4b of the applicable Forms 1116. Do not include any interest expense allocated and apportioned to U.S. source income.

Code L6 - Other expenses allocated and apportioned at the partner level. Include this amount on line 2 of the applicable Forms 1116. Do not include any expenses allocated and apportioned to U.S. source income on any line of Part I of Form 1116.

Codes L7(a) Through Codes L7(c) - Deductions allocated and apportioned at partnership level to foreign source income. The following codes report the expenses allocated and apportioned by the partnership to foreign source categories of income. Include these amounts on line 2 of the applicable Forms 1116 (i.e., the Forms 1116 for each category of income provided to you).

• Code L7(a) - Deductions allocated and apportioned at partnership level to passive foreign source income.
• Code L7(b) - Deductions allocated and apportioned at partnership level to listed foreign categories of income.
• Code L7(c) - Deductions allocated and apportioned at partnership level to general limitation foreign source income.

Code L8(a) - Total foreign taxes paid. Include this amount in Part II of Form 1116.

Code L8(b) - Total foreign taxes accrued. Include this amount in Part II of Form 1116.

Code L9 - Reduction in taxes available for credit. Enter this amount on line 12 of Form 1116.

Code M - Oil and Gas Activities

Generally, oil and gas income, deductions, credits, and other items are included in your distributive share of income or loss from passive loss limitation activities, general credits, and the alternative minimum tax adjustment. However, distributive shares of all oil and gas income, deductions, credits, and other items are separately reported to partners who are disqualified persons (defined on page 2) in accordance with the regular partnership rules, here or on an attached schedule.

A partner must notify the partnership of its status as a disqualified person.

Codes N1 Through N9 - Miscellaneous

Code N1 - Other tax-exempt income. Increase the adjusted basis of your interest in the partnership by the amount shown in box 9, Code N1, but do not include it in income on your tax return.

Code N2 - Nondeductible expenses. The nondeductible expenses paid or incurred by the partnership are not deductible on your tax return. Decrease the adjusted basis of your interest in the partnership by this amount.

Code N3 - Unrelated business taxable income. The partnership will give you any information you need to figure unrelated business taxable income under section 512(a)(1) (but excluding any modifications required by paragraphs (8) through (15) of section 512(b)) for a partner that is a tax-exempt organization.

Reminder: A partner is required to notify the partnership of its tax-exempt status.

Code N4 - Health insurance. Any amounts paid during the tax year for insurance that constitutes medical care for you, your spouse, and your dependents. On line 28 of your 2001 Form 1040, you may be allowed to deduct up to 60% of such amounts, even if you do not itemize deductions. If you do itemize deductions, enter on line 1 of Schedule A (Form 1040) any amounts not deducted on line 28 of Form 1040.

Code N5 - Distributions of money (cash and marketable securities). Box 9, Code N5, shows the distributions the partnership made to you of cash and certain marketable securities. The marketable securities are included at their fair market value on the date of distribution (minus your share of the partnership's gain on the securities distributed to you). If the amount shown here exceeds the adjusted basis of your partnership interest immediately before the distribution, the excess is treated as gain from the sale or exchange of your partnership interest. Generally, this gain is treated as gain from the sale of a capital asset and should be reported on the Schedule D for your return. However, the gain may be ordinary income. For details, see Pub. 541.

The partnership will separately identify both of the following:

• The fair market value of the marketable securities when distributed (minus your share of the gain on the securities distributed to you).
• The partnership's adjusted basis of those securities immediately before the distribution.

Decrease the adjusted basis of your interest in the partnership (but not below zero) by the amount of cash distributed to you and the partnership's adjusted basis of the distributed securities. Advances or drawings of money or property against your distributive share are treated as current distributions made on the last day of the partnership's tax year.

Your basis in the distributed marketable securities (other than in liquidation of your interest) is the smaller of:

• The partnership's adjusted basis in the securities immediately before the distribution increased by any gain recognized on the distribution of the securities or
• The adjusted basis of your partnership interest reduced by any cash distributed in the same transaction and increased by any gain recognized on the distribution of the securities.

If you received the securities in liquidation of your partnership interest, your basis in the marketable securities is equal to the adjusted basis of your partnership interest reduced by any cash distributed in the same transaction and increased by any gain recognized on the distribution of the securities.

If, within 5 years of a distribution to you of marketable securities, you contributed appreciated property (other than those securities) to the partnership and the fair market value of those securities exceeded the adjusted basis of your partnership interest immediately before the distribution (reduced by any cash received in the distribution), you may have to recognize gain on the appreciated property. For property contributed after June 8, 1997, the 5-year period is generally extended to 7 years. See section 737 for details.

Code N6 - Distributions of property other than money. Box 9, Code N6, shows the partnership's adjusted basis of property other than money immediately before the property was distributed to you. In addition, the partnership will attach a statement showing the cost basis and fair market value of each property distributed. Decrease the adjusted basis of your interest in the partnership by the amount of your basis in the distributed property. Your basis in the distributed property (other than in liquidation of your interest) is the smaller of:

• The partnership's adjusted basis immediately before the distribution, or
• The adjusted basis of your partnership interest reduced by any cash distributed in the same transaction.

If you received the property in liquidation of your interest, your basis in the distributed property is equal to the adjusted basis of your partnership interest reduced by any cash distributed in the same transaction.

If you contributed appreciated property to the partnership within 5 years of a distribution of other property to you, and the fair market value of the other property exceeded the adjusted basis of your partnership interest immediately before the distribution (reduced by any cash received in the distribution), you may have to recognize gain on the appreciated property. For property contributed after June 8, 1997, the 5-year period is generally extended to 7 years. See section 737 for details.

Code N7 - Gain eligible for section 1202 exclusion. This gain from the sale or exchange of qualified small business stock (as defined in the Instructions for Schedule D) is eligible for the 50% section 1202 exclusion. The partnership should also give you the name of the corporation that issued the stock, your share of the partnership's adjusted basis and sales price of the stock, and the dates the stock was bought and sold. Corporate partners are not eligible for the section 1202 exclusion. The following additional limitations apply at the partner level:

1. You must have held an interest in the partnership when the partnership acquired the qualified small business stock and at all times thereafter until the partnership disposed of the qualified small business stock.
2. Your distributive share of the eligible section 1202 gain cannot exceed the amount that would have been allocated to you based on your interest in the partnership at the time the stock was acquired.

See the Instructions for Schedule D (Form 1040) for details on how to report the gain and the amount of the allowable exclusion.

Code N8 - Gain eligible for section 1045 rollover-stock replaced. This gain is eligible for the section 1045 rollover. Replacement stock has been purchased by the partnership. The partnership should also give you the name of the corporation that issued the stock, your share of the partnership's adjusted basis and sales price of the stock, and the dates the stock was bought and sold. Corporate partners are not eligible for the section 1045 rollover. To qualify for the section 1045 rollover:

1. You must have held an interest in the partnership during the entire period in which the partnership held the qualified small business stock (more than 6 months prior to the sale), and
2. Your distributive share of the gain eligible for the section 1045 rollover cannot exceed the amount that would have been allocated to you based on your interest in the partnership at the time the stock was acquired.

See the Instructions for Schedule D (Form 1040) for details on how to report the gain and the amount of the allowable postponed gain.

Code N9 - Gain eligible for section 1045 rollover-stock not replaced. This gain is eligible for the section 1045 rollover. Replacement stock has not been purchased by the partnership. The partnership should also give you the name of the corporation that issued the stock, your share of the partnership's adjusted basis and sales price of the stock, and the dates the stock was bought and sold. Corporate partners are not eligible for the section 1045 rollover. To qualify for the section 1045 rollover:

1. You must have held an interest in the partnership during the entire period in which the partnership held the qualified small business stock (more than 6 months prior to the sale),
2. Your distributive share of the gain eligible for the section 1045 rollover cannot exceed the amount that would have been allocated to you based on your interest in the partnership at the time the stock was acquired, and
3. You must purchase other qualified small business stock (as defined in the Instructions for Schedule D (Form 1040)) during the 60-day period that began on the date the stock was sold by the partnership.

See the Instructions for Schedule D (Form 1040) for details on how to report the gain and the amount of the allowable postponed gain.

Code O - Unrecaptured Section 1250 Gain

Report this gain on line 11 of the Unrecaptured Section 1250 Gain Worksheet on page D-7 of the Instructions for Schedule D (Form 1040). Do not report the gain on line 5 as stated in the worksheet instructions.

Codes P1 and P2 - Extraterritorial Income Exclusion

a. Partnership did not claim the exclusion. If the partnership reports your distributive share of foreign trading gross receipts (Code P1) and the extraterritorial income exclusion (Code P2), the partnership was not entitled to claim the exclusion because it did not meet the foreign economic process requirements. You may qualify for your distributive share of this exclusion because the partnership's foreign trading gross receipts for the tax year were $5 million or less. To qualify for this exclusion, your foreign trading gross receipts from all sources for the tax year also must have been $5 million or less. See Form 8873, Extraterritorial Income Exclusion, for more information. If you qualify for the exclusion, limited partners must report the extraterritorial exclusion amount (Code P2) as a deduction reducing the amount reported in box 1 (see the box 1 instructions on page 6). General partners who qualify for the exclusion must report the Code P2 amount in accordance with the instructions for box 9, Code A1, B1, or C1, whichever applies.

b. Partnership claimed the exclusion. If the partnership reports your distributive share of foreign trading gross receipts (Code P1) but not the amount of the extraterritorial income exclusion, the partnership met the foreign economic process requirements and claimed the exclusion when figuring your distributive share of partnership income. You also may need to know the amount of your distributive share of foreign trading gross receipts from this partnership to determine if you met the $5 million or less exception discussed above for purposes of qualifying for an extraterritorial income exclusion from other sources.

Note: Upon request, the partnership should furnish you a copy of the partnership's Form 8873 if there is a reduction for international boycott operations, illegal bribes, kickbacks, etc.

Code Q - Qualified 5-year Gain

Report the qualified 5-year gain on line 4 of the Qualified 5-year Gain Worksheet for Schedule D (Form 1040), line 29.

Other

Any other information you may need to file with your return not shown elsewhere on Schedule K-1. The partnership should give you a description and the amount of your share for each of these items.

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