Partner's Share of Income, Credits, Deductions, etc. (For Partner's Use Only)

General Information and Questions

Item F

Item F should 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, Item F should show 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.

Item G

If the partnership is a registration-required tax shelter or has invested in a registration-required tax shelter, it should have completed Item G. If you claim or report any income, loss, deduction, or credit from a tax shelter, you must attach Form 8271 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 this information 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.

Item H

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

Lines 1 Through 25

The amounts shown on lines 1 through 25 reflect your share of income, loss, credits, deductions, etc., from partnership business or rental activities without reference to limitations on losses or adjustments that may be required of you because of:

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 and the passive activity rules do not apply to the amounts shown on your Schedule K-1, take the amounts shown in column (b) and enter them on the lines on your tax return as indicated in column (c). If the passive activity rules do apply, report the amounts shown in column (b) as indicated in the line instructions.

If you are not an individual, report the amounts in column (b) as instructed on your tax return.

The line numbers in column (c) 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 column (b) 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 column (b) 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 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.

Income

Line 1 - Ordinary Income (Loss) From Trade or Business Activities

The amount reported for line 1 is your share of the ordinary income (loss) from the trade or business activities of the partnership. Generally, where you report this amount on Form 1040 depends on whether the amount is from an activity that is a passive activity to you. If you are an individual partner filing your 2001 Form 1040, find your situation below and report your line 1 income (loss) as instructed, after applying the basis and at-risk limitations on losses:

1. Report line 1 income (loss) from partnership trade or business activities in which you materially participated on Schedule E (Form 1040), Part II, column (i) or (k).
2. Report line 1 income (loss) from partnership trade or business activities in which you did not materially participate, as follows:
   1. If income is reported on line 1, report the income on Schedule E, Part II, column (h). However, if the box in Item H is checked, report the income following the rules for Publicly traded partnerships on page 4.
   2. If a loss is reported on line 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 box in Item H is checked, report the loss following the rules for Publicly traded partnerships on page 4.

Line 2 - Net Income (Loss) From Rental Real Estate Activities

Generally, the income (loss) reported on line 2 is a passive activity amount for all partners. However, the income (loss) on line 2 is not from a passive activity if you were a real estate professional (defined on page 3) and you materially participated in the activity.

If you are filing a 2001 Form 1040, use the following instructions to determine where to enter a line 2 amount:

1. If you have a loss from a passive activity on line 2 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).
   8. Your interest in the rental real estate activity was not held as a limited partner.
2. If you have a loss from a passive activity on line 2 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 box in Item H is checked, report the loss following the rules for Publicly traded partnerships on page 4.
3. If you were a real estate professional and you materially participated in the activity, report line 2 income (loss) on Schedule E (Form 1040), Part II, column (i) or (k).
4. If you have income from a passive activity on line 2, enter the income on Schedule E, Part II, column (h). However, if the box in Item H is checked, report the income following the rules for Publicly traded partnerships on page 4.

Line 3 - Net Income (Loss) From Other Rental Activities

The amount on line 3 is a passive activity amount for all partners. Report the income or loss as follows:

1. If line 3 is a loss, report the loss following the Instructions for Form 8582. However, if the box in Item H is checked, report the loss following the rules for Publicly traded partnerships on page 4.
2. If income is reported on line 3, report the income on Schedule E (Form 1040), Part II, column (h). However, if the box in Item H is checked, report the income following the rules for Publicly traded partnerships on page 4.

Lines 4a Through 4f - Portfolio Income (Loss)

Portfolio income or loss is not subject to the passive activity limitations. Portfolio income includes income not derived in the ordinary course of a trade or business from interest, ordinary dividends, annuities, or royalties and gain or loss on the sale of property that produces such income or is held for investment.

Column (c) of Schedule K-1 tells individual partners where to report this income on Form 1040.

The partnership uses line 4f to report portfolio income other than interest, ordinary dividend, royalty, and capital gain (loss) income. It will attach a statement to tell you what kind of portfolio income is reported on line 4f.

If the partnership has a residual interest in a real estate mortgage investment conduit (REMIC), it will report on the statement your share of REMIC taxable income (net loss) that you report on Schedule E (Form 1040), Part IV, column (d). The statement will also report your share of any excess inclusion that you report on Schedule E, Part IV, column (c), and your share of section 212 expenses that you report on Schedule E, Part IV, column (e). If you itemize your deductions on Schedule A (Form 1040), you may also deduct these section 212 expenses as a miscellaneous deduction subject to the 2% limit on Schedule A, line 22.

Line 5 - Guaranteed Payments to Partners

Generally, amounts on this line 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).

Line 6 - Net Section 1231 Gain (Loss) (Other Than Due to Casualty or Theft)

If the amount on line 6 is from a rental activity, the section 1231 gain (loss) is generally a passive activity amount. Likewise, if the amount is from a trade or business activity and you did not materially participate in the activity, the section 1231 gain (loss) is a passive activity amount.

However, an amount on line 6 from a rental real estate activity is not from a passive activity if you were a real estate professional (defined on page 3) and you materially participated in the activity.

If the amount on line 6 is either (a) a loss that is not from a passive activity or (b) a gain, report it on line 2, column (g) of Form 4797, Sales of Business Property. Do not complete columns (b) through (f) on line 2. Instead, write From Schedule K-1 (Form 1065) across these columns.

If the amount on line 6 is a loss from a passive activity, see Passive loss limitations in the Instructions for Form 4797. You will need to report the loss following the Instructions for Form 8582 to figure how much of the loss is allowed on Form 4797. However, if the box in Item H is checked, report the loss on line 6 following the rules for Publicly traded partnerships on page 4.

Any amount of gain from section 1231 property held more than 5 years will be indicated on an attachment to Schedule K-1. Include this amount in your computation of qualified 5-year gain only if the amount on your Form 4797, line 7, is more than zero.

Line 7 - Other Income (Loss)

Amounts on this line are other items of income, gain, or loss not included on lines 1 through 6. The partnership should give you a description and the amount of your share for each of these items.

Report loss items that are passive activity amounts to you following the Instructions for Form 8582. However, if the box in Item H is checked, report the loss following the rules for Publicly traded partnerships on page 4.

Report income or gain items that are passive activity amounts to you as instructed below.

The instructions given below tell you where to report line 7 items if such items are not passive activity amounts.

Line 7 items may include the following:

• Partnership gains from the disposition of farm recapture property (see Form 4797) and other items to which section 1252 applies.
• Income from recoveries of tax benefit items. A tax benefit item is an amount you deducted in a prior tax year that reduced your income tax. Report this amount on line 21 of Form 1040 to the extent it reduced your tax.
• Gambling gains and losses.
  1. If the partnership was not engaged in the trade or business of gambling, (a) report gambling winnings on Form 1040, line 21 and (b) deduct gambling losses to the extent of winnings on Schedule A, line 27.
  2. If the partnership was engaged in the trade or business of gambling, (a) report gambling winnings in Part II of Schedule E and (b) deduct gambling losses to the extent of winnings in Part II of Schedule E.
• Any income, gain, or loss to the partnership under section 751(b). Report this amount on Form 4797, line 10.
• Specially allocated ordinary gain (loss). Report this amount on Form 4797, line 10.
• Net gain (loss) from involuntary conversions due to casualty or theft. The partnership will give you a schedule that shows the amounts to be entered on Form 4684, Casualties and Thefts, line 34, columns (b)(i), (b)(ii), and (c).
• Net short-term capital gain or loss, net long-term capital gain or loss, and the 28% rate gain or loss from Schedule D (Form 1065) that is not portfolio income. An example is gain or loss from the disposition of nondepreciable personal property used in a trade or business activity of the partnership. Report total net short-term gain or loss on Schedule D (Form 1040), line 5; total net long-term capital gain or loss on Schedule D (Form 1040), line 12, column (f); and the 28% rate gain or loss on Schedule D (Form 1040), line 12, column (g).

  Any amount of long-term capital gain from such property held more than 5 years will be indicated on an attachment to Schedule K-1. Include this amount on line 4 of the worksheet for line 29 of Schedule D (Form 1040).

• Any net gain or loss from section 1256 contracts. Report this amount on line 1 of Form 6781, Gains and Losses From Section 1256 Contracts and Straddles.
• Gain from the sale or exchange of qualified small business stock (as defined in the instructions for Schedule D) that 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 busniess 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.

• Gain eligible for section 1045 rollover (replacement stock 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.

• Gain eligible for section 1045 rollover (replacement stock not 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.

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