Return of U.S. Persons With Respect to Certain Foreign Partnerships

Other

Lines 18a and 18b

Do not deduct or include qualified expenditures for intangible drilling and development costs as adjustments or tax preference items on Schedule K-1. Instead, enter on line 18a the type of expenditures claimed on line 18b. Enter on line 18b the qualified expenditures paid or incurred during the tax year to which an election under section 59(e) may apply. Enter this amount on each required Schedule K-1 whether or not any partner makes an election under section 59(e). If the expenditures are for intangible drilling and development costs, enter the month in which the expenditures were paid or incurred (after the type of expenditure on line 18a). If there is more than one type of expenditure included in the total shown on line 18b (or intangible drilling and development costs were paid or incurred for more than 1 month), report this information separately for each type of expenditure (or month) on an attachment to Schedules K and K-1.

The term qualified expenditures includes only the following types of expenditures paid or incurred during the tax year:

• Circulation expenditures.
• Research and experimental expenditures.
• Intangible drilling and development costs.
• Mining exploration and development costs.

Line 19 - Tax-Exempt Interest Income

Enter on line 19 tax-exempt interest income, including any exempt-interest dividends received from a mutual fund or other regulated investment company. Individual partners must report this information on line 8b of Form 1040. The adjusted basis of the partner's interest is increased by the amount shown on this line under section 705(a)(1)(B).

Line 20 - Other Tax-Exempt Income

Enter on line 20 all income of the partnership exempt from tax other than tax-exempt interest (e.g., life insurance proceeds). The adjusted basis of the partner's interest is increased by the amount shown on this line under section 705(a)(1)(B).

Line 21 - Nondeductible Expenses

Enter on line 21 nondeductible expenses paid or incurred by the partnership. Do not include separately stated deductions shown elsewhere on Schedules K and K-1, capital expenditures, or items the deduction for which is deferred to a later tax year. The adjusted basis of the partner's interest is decreased by the amount shown on this line under section 705(a)(2)(B).

Line 22 - Distributions of Money (Cash and Marketable Securities)

Enter on line 22 the total distributions to the partner(s) of cash and marketable securities that are treated as money under section 731(c)(1). Generally, marketable securities are valued at FMV on the date of distribution. However, the value of marketable securities does not include the distributee partner's share of the gain on the securities distributed to that partner. See section 731(c)(3)(B) for details.

If the amount on line 22 includes marketable securities treated as money, state separately on an attachment to Schedules K and K-1 (a) the partnership's adjusted basis of those securities immediately before the distribution and (b) the FMV of those securities on the date of distribution (excluding the distributee partner's share of the gain on the securities distributed to that partner).

Line 23 - Distributions of Property Other Than Money

Enter on line 23 the total distributions to the partner(s) of property not included on line 22. In computing the amount of the distribution, use the adjusted basis of the property to the partnership immediately before the distribution. In addition, attach a statement showing the adjusted basis and FMV of each property distributed.

Line 24 (Schedule K Only)

Attach a statement to report the partnership's total income, expenditures, or other information for the items listed under Line 25 (Schedule K-1 Only) - Supplemental Information below.

Lines 24a and 24b (Schedule K-1 Only) - Recapture of Low-Income Housing Credit

If recapture of part or all of the low-income housing credit is required because: (a) prior year qualified basis of a building decreased, or (b) the partnership disposed of a building or part of its interest in a building, see Form 8611, Recapture of Low-Income Housing Credit. The instructions for Form 8611 indicate when the form is completed and what information is provided to partners when recapture is required.

If a partner's ownership interest in a building decreased because of a transaction at the partner level, attach the necessary information for the partner to figure the recapture.

Report on line 24a the total low-income housing credit recapture with respect to a partnership treated under section 42(j)(5) as the taxpayer to which the low-income housing credit was allowed. Report any other low-income housing credit recapture on line 24b.

If the partnership filed Form 8693, Low-Income Housing Credit Disposition Bond, to avoid recapture of the low-income housing credit, no entry should be made on line 24 of Schedule K-1.

See Form 8586, Form 8611, and section 42 for more information.

Line 25 (Schedule K-1 Only) - Supplemental Information

Enter in the line 25 Supplemental Information space of Schedule K-1, or on an attached schedule if more space is needed, the partner's share of any information requested on lines 1 through 24b that must be reported in detail, and items 1 through 23 below. Identify the applicable line number next to the information entered in the Supplemental Information space. Show income or gains as a positive number. Show losses in parentheses.

1. Taxes paid on undistributed capital gains by a regulated investment company (RIC) or a real estate investment trust (REIT). As a shareholder of a RIC or a REIT, the partnership will receive notice on Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, of the amount of tax paid on undistributed capital gains.
2. The number of gallons of each fuel sold or used during the tax year for a nontaxable use qualifying for the credit for taxes paid on fuels, types of use, and the applicable credit per gallon. See Form 4136, Credit for Federal Tax Paid on Fuels, for details.
3. The partner's share of gross income from each property, share of production for the tax year, etc., needed to figure the partner's depletion deduction for oil and gas wells. The partnership should also allocate to the partner(s) a proportionate share of the adjusted basis of each partnership oil or gas property. The allocation of the basis of each property is made as specified in section 613A(c)(7)(D).

   The partnership cannot deduct depletion on oil and gas wells. The partner must determine the allowable amount to report on his or her return. See Pub. 535 for more information.

4. Recapture of section 179 expense deduction. For property placed in service after 1986, the section 179 expense deduction is recaptured at any time the business use of the property drops to 50% or less. Enter the amount that was originally passed through to the partners and the partnership's tax year in which the amount was passed through. State whether the recapture amount was caused by the disposition of the section 179 property. Do not include this amount in the partnership's income.
5. Recapture of certain mining exploration expenditures (section 617).
6. Any information or statements a partner needs to comply with section 6111 (registration of tax shelters) or section 6662(d)(2)(B)(ii) (regarding adequate disclosure of items that may cause an understatement of income tax).
7. The partner's share of preproductive period farm expenses, if the partnership is not required to use the accrual method of accounting. See Regulations section 1.263A-4.
8. Any information a partner needs to figure the interest due under section 453(l)(3). If the partnership previously had elected to report the disposition of certain timeshares and residential lots on the installment method, the partner's tax liability must be increased by the partner's allocable share of the interest on tax attributable to the installment payments received during the tax year.
9. Any information a partner needs to figure interest due under section 453A(c). If an obligation arising from the disposition of property to which section 453A applies is outstanding at the close of the year, report the partner's allocable share of the outstanding installment obligation to which section 453A(b) applies.
10. For closely held partnerships (as defined in section 460(b)(4)), state the information a partner needs to figure the partner's allocable share of any 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. Also attach the information specified in the instructions for Form 8697, Part II, lines 1 and 3, for each tax year in which such a long-term contract is completed.
11. Any information a partner needs relating to interest expense that the partner is required to capitalize. A partner may be required to capitalize interest expense incurred by the partner for the partnership's production expenditures. Similarly, a partner may have to capitalize interest that was incurred by the partnership for the partner's own production expenditures. See Regulations sections 1.263A-8 through 1.263A-15 for more information.
12. Any information a partner that is a tax-exempt organization may need to figure its share of unrelated business taxable income under section 512(a)(1) (but excluding any modifications required by paragraphs (8) through (15) of section 512(b)). Partners are required to notify the partnership of their tax-exempt status. See Form 990-T, Exempt Organization Business Income Tax Return, for more information.
13. Expenditures qualifying for the (a) rehabilitation credit not related to rental real estate activities, (b) energy credit, or (c) reforestation credit. Complete and attach Form 3468. See Form 3468 and the related instructions for information on eligible property and the lines on Form 3468 to complete. Attach to each Schedule K-1 a separate schedule in a format similar to that shown on Form 3468 detailing the partner's share of qualified expenditures. Also indicate the lines of Form 3468 on which the partners should report these amounts.
14. Recapture of investment credit. Complete and attach Form 4255, Recapture of Investment Credit, when investment credit property is disposed of, or it no longer qualifies for the credit, before the end of the recapture period or the useful life applicable to the property. State the type of property at the top of Form 4255 and complete lines 2, 4, and 5, whether or not any partner is subject to recapture of the credit. Attach to each Schedule K-1 a separate schedule providing the information the partnership is required to show on Form 4255, but list only the partner's distributive share of the cost of the property subject to recapture. Also indicate the lines of Form 4255 on which the partners should report these amounts.
15. Any information a partner may need to figure the recapture of the qualified electric vehicle credit. See Pub. 535 for more information.
16. Any information a partner may need to figure recapture of the Indian employment credit. Generally, if a partnership terminates a qualified employee less than 1 year after the date of initial employment, any Indian employment credit allowed for a prior tax year by reason of wages paid or incurred to that employee must be recaptured. For details, see section 45A(d).
17. Nonqualified withdrawals by the partnership from a capital construction fund.
18. Unrecaptured section 1250 gain. Figure this amount for each section 1250 property in Part III of Form 4797 (except property for which gain is reported using the installment method on Form 6252) for which you had an entry in Part I of Form 4797 by subtracting line 26g of Form 4797 from the smaller of line 22 or line 24 of Form 4797. Figure the total of these amounts for all section 1250 properties. Generally, the result is the partnership's unrecaptured section 1250 gain. However, if the partnership is reporting gain on the installment method for a section 1250 property held more than 1 year, see the next paragraph to figure the unrecaptured section 1250 gain on that property. Report the partner's distributive share of the total amount as Unrecaptured section 1250 gain.

    The total unrecaptured section 1250 gain for an installment sale of section 1250 property held more than 1 year is figured for the year of the sale in a manner similar to that used in the preceding paragraph. However, the total unrecaptured section 1250 gain must be allocated to the installment payments received from the sale. To do so, the partnership generally must treat the gain allocable to each installment payment as unrecaptured section 1250 gain until all such gain has been used in full. Figure the unrecaptured section 1250 gain for installment payments received during the tax year as the smaller of (a) the amount from line 26 or line 37 of Form 6252 (whichever applies) or (b) the total unrecaptured section 1250 gain for the sale reduced by all gain reported in prior years (excluding section 1250 ordinary income recapture). However, if the partnership chose not to treat all of the gain from payments received after May 6, 1997, and before August 24, 1999, as unrecaptured section 1250 gain, use only the amount the partnership chose to treat as unrecaptured section 1250 gain for those payments to reduce the total unrecaptured section 1250 gain remaining to be reported for the sale.

    If the partnership received a Schedule K-1 or Form 1099-DIV from an estate, a trust, a REIT, or a mutual fund (or other regulated investment company) reporting unrecaptured section 1250 gain, do not add it to the partnership's own unrecaptured section 1250 gain. Instead, report it as a separate amount. For example, if the partnership received a Form 1099-DIV from a REIT with unrecaptured section 1250 gain, report it as Unrecaptured section 1250 gain from a REIT.

    Also report as a separate amount any gain from the sale or exchange of an interest in another partnership attributable to unrecaptured section 1250 gain. See Regulations section 1.1(h)-1 and attach the statement required under Regulations section 1.1(h)-1(e).

19. If the partnership is a closely held partnership (as defined in section 460(b)(4)) and it depreciated certain property placed in service after September 13, 1995, under the income forecast method, it must attach to Form 1065 the information specified in the instructions for Form 8866, line 2, for the 3rd and 10th tax years beginning after the tax year the property was placed in service. It must also report the line 2 amounts to its partners. See the instructions for Form 8866 for more details.
20. Any information a partner that is a publicly traded partnership may need to determine if it meets the 90% qualifying income test of section 7704(c)(2). Partners are required to notify the partnership of their status as a publicly traded partnership.
21. Amortization of reforestation expenditures. Report the amortizable basis and year in which the amortization began for the current year and the 7 preceding years. For limits that may apply, see section 194 and Pub. 535.
22. Any information needed by a partner to figure the interest due under section 1260(b). If any portion of a constructive ownership transaction was open in any prior year, the partner's tax liability must be increased by the partner's pro rata share of interest due on any deferral of gain recognition. See section 1260(b) for details, including how to figure the interest.
23. Any other information a partner may need to file his or her return that is not shown anywhere else on Schedule K-1. For example, if one of the partners is a pension plan, that partner may need special information to properly file its tax return.

Schedule L - Balance Sheets per Books

Important: If the foreign partnership filed Form 1065 or 1065-B, do not complete Schedule L on Form 8865. Instead, attach to Form 8865 a copy of the Schedule L from Form 1065 or 1065-B.

Only Category 1 filers are required to complete Schedule L. If you answered "Yes" to question G9 on page 1 of Form 8865, you do not have to complete Schedule L. Schedule L requires balance sheets prepared and translated into U.S. dollars in accordance with U.S. generally accepted accounting principles (GAAP).

Exception. If the partnership or any qualified business unit of the partnership uses the dollar approximate separate transactions method (DASTM), Schedule L should reflect the tax balance sheets prepared and translated into U.S. dollars according to Regulations section 1.985-3(d).

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