Line 3 - Net Capital Gain (Loss) From Passive Loss Limitation Activities
On Schedule K, line 3a, enter the amount from Schedule D (Form 1065-B), line 20. Report the amount allocated to interests held as a limited partner in box 9, Code D, of Schedule K-1.
On Schedule K, line 3b, enter the amount from line 8 of the worksheet below. This is qualified 5-year gain. Report this amount to all partners using Code Q in box 9 of Schedule K-1.
On Schedule K, line 3c, enter the amount from Schedule D, line 18. Report the amount allocated to interests held as a limited partner in box 3 of Schedule K-1.
Because general partners must comply with the passive activity rules, report the line 3a and 3c amounts allocated to interests held as a general partner separately for each activity using Codes A2 and A3, B2 and B3, and C2 and C3, in box 9 of Schedule K-1.
Line 4 - Net Capital Gain (Loss) From Other Activities
On Schedule K, line 4a, enter the amount from Schedule D (Form 1065-B), line 23. Report this amount to all partners in box 9, Code E of Schedule K-1.
On Schedule K, line 4b, enter the amount from line 9 of the worksheet below. This is qualified 5-year gain. Report this amount to all partners using Code Q in box 9 of Schedule K-1.
On Schedule K, line 4c, enter the amount from Schedule D, line 22. Report this amount to all partners in box 4 of Schedule K-1.
Lines 5 and 6
For electing large partnerships, the alternative minimum tax (AMT) adjustments and preferences are combined at the partnership level. The partnership computes net AMT adjustments separately for passive loss limitation activities and other activities.
In determining a partner's alternative minimum taxable income, a partner's distributive share of any net AMT adjustment is taken into account instead of making separate AMT adjustments for different partnership items. The net AMT adjustment is determined by using the adjustments and preferences applicable to individuals for partners other than corporations, and by using the adjustments and preferences applicable to corporations for corporate partners. See Form 6251, Alternative Minimum Tax - Individuals, and Form 4626, Alternative Minimum Tax - Corporations, to figure the partnership's AMT adjustments and preferences.
The net passive AMT adjustment is reported on line 5 of Schedule K and in box 5 of Schedule K-1 for interests held as a limited partner. Because general partners must comply with the passive activity rules, report the amounts allocated to interests held as a general partner separately for each activity in box 9 using Codes A6, B7, and C5.
The net other AMT adjustment is reported on line 6 of Schedule K and in box 6 of Schedule K-1 for all partners.
Line 7 - Guaranteed Payments to Partners
Guaranteed payments to partners include:
- Payments for salaries, health insurance, and interest deducted by the partnership and reported on Form 1065-B, Part I, line 13; on a schedule attached to line 5, Part I; or on Form 8825; and
- Payments the partnership must capitalize. See the instructions for line 13 on page 15.
Report guaranteed payments to the partners receiving them in box 9 of Schedule K-1 using Code F.
Line 8 - Income From Discharge of Indebtedness
Income from the discharge of indebtedness is separately reported to each partner. In addition, the section 108 rules governing the income are the same as for other partnerships. Elections under section 108 are made by each partner separately.
Enter the income from discharge of indebtedness on line 8 of Schedule K and in box 9 of Schedule K-1 for each partner using Code G.
Line 9 - Tax-Exempt Interest Income
Enter on line 9 tax-exempt interest income, including any exempt-interest dividends received from a mutual fund or other regulated investment company. Individuals must report this amount 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). Report this amount to partners in box 9 of Schedule K-1 using Code H.
Line 10 - General Credits
The term general credits means any credit other than the low-income housing credit, the rehabilitation credit from rental real estate activities, the credit for producing fuel from a nonconventional source, and the foreign tax credit.
General credits are separately reported to partners as a single item. A partner's distributive share of general credits is taken into account as a current year general business credit. The tax liability limit for the general business credit is applied at the partner level.
Combine the following credits and report them under general credits on line 10.
- Credit for backup withholding on dividends, interest, and other types of income.
- Qualified electric vehicle credit (Form 8834).
- Unused credits from cooperatives.
- Investment credit (other than rehabilitation credits from rental real estate activities) (Form 3468).
- Work opportunity credit (Form 5884).
- Welfare-to-work credit (Form 8861).
- Credit for alcohol used as fuel (Form 6478).
- Credit for increasing research activities (Form 6765).
- Enhanced oil recovery credit (Form 8830).
- Disabled access credit (Form 8826).
- Renewable electricity production credit (Form 8835).
- Empowerment zone and renewal community employment credit (Form 8844).
- Indian employment credit (Form 8845).
- Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846).
- Orphan drug credit (Form 8820).
- New markets credit (Form 8874).
- Credit for contributions to selected community development corporations (Form 8847).
- Credit for small employer pension start-up costs (Form 8881).
- Credit for employer-provided child care facilities and services (Form 8882).
- New York Liberty Zone business employee credit (Form 8884).
- General credits from other electing large partnerships.
Exception: The refundable credit for Federal tax paid on fuels and the refund or credit for tax paid on undistributed capital gains of a regulated investment company or a real estate investment trust are allowed to the partnership. Thus, they are not separately reported to partners.
General credits are reported as a single figure on line 10 of Schedule K and are reported in box 7 of Schedule K-1 for limited partners. However, for general partners, credits allocable to passive loss limitation activities must be separately stated for each trade or business activity, rental real estate activity, and rental activity other than rental real estate. Provide this information to general partners in box 9 of Schedule K-1 using Codes A4, B4, and C4 so they can comply with section 469.
Lines 11 and 12
Section 42 provides a credit that may be claimed by owners of low-income residential rental buildings. If the partners are eligible to take the low-income housing credit, complete and attach Form 8586, Low-Income Housing Credit; Form 8609, Low-Income Housing Credit Allocation Certification; and Schedule A (Form 8609), Annual Statement, to Form 1065-B.
Report on line 11 the low-income housing credit for property placed in service after 1989.
Because the rehabilitation credit from rental real estate activities and low-income housing credit for property placed in service before 1990 that is attributable to additions to qualified basis of property are subject to the same passive activity rules, they are combined and reported on line 12. Complete and attach Form 8586 for the low-income housing credit. For the rehabilitation credit, complete the lines of Form 3468, Investment Credit, that apply to qualified rehabilitation expenditures for property related to rental real estate activities of the partnership. See Form 3468 for details on qualified rehabilitation expenditures. Attach Form 3468 to Form 1065-B.
Report amounts from line 11 in box 8 of Schedule K-1 for interests held as a limited partner. However, for interests held as a general partner, credits allocable to passive loss limitation activities must be separately stated for each rental real estate activity. Provide this information in box 9 of Schedule K-1 using Code B5 so general partners can comply with section 469.
For limited partners, report any low-income housing and rehabilitation credits from rental real estate activities reported on line 12 as a single rehabilitation credit in box 9 of Schedule K-1 using Code I. However, for general partners, credits allocable to passive loss limitation activities must be separately stated for each rental real estate activity. For general partners, combine low-income housing and rehabilitation credits reported on line 12 as a single rehabilitation credit and allocate it to partnership activities as explained above. Report this information in box 9 of Schedule K-1 using Code B6 so general partners can comply with section 469.
Note: Any rehabilitation credits from an activity other than a rental real estate activity are included in general credits reported on line 10 of Schedule K.
Line 13
The nonconventional source fuel credit is figured at the partnership level and then is apportioned to the partners based on their distributive shares of partnership income attributable to sales of qualified fuels. Attach a separate schedule to the return to show the computation of the credit. See section 29 for more information. For interests held as a limited partner, report each partner's share of the credit in box 9 of Schedule K-1 using Code J. However, for interests held as a general partner, credits allocable to passive loss limitation activities must be separately stated for each trade or business activity. Provide this information for general partners in box 9 of Schedule K-1 using Code A5 so they can comply with section 469.
Line 14 - Net Earnings From Self-Employment
General partners. General partners' net earnings (loss) from self-employment do not include:
- Dividends on any shares of stock and interest on any bonds, debentures, notes, etc., unless the dividend or interest income is received in the course of a trade or business, such as a dealer in stocks or securities or interest on notes or accounts receivable.
- Rentals from real estate, except rentals of real estate held for sale to customers in the course of a trade or business as a real estate dealer or payments for rooms or space when significant services are provided.
- Royalty income, except royalty income received in the course of a trade or business.
See the instructions for Schedule SE (Form 1040), Self-Employment Tax, for more information.
Limited partners. Generally, a limited partner's share of partnership income (loss) is not included in net earnings (loss) from self-employment. Limited partners treat as self-employment earnings only guaranteed payments for services they actually rendered to, or on behalf of, the partnership to the extent that those payments are payment for those services.
Schedule K. Enter on line 14a the amount from line 5 of the worksheet below. On line 14b enter the amount of gross nonfarm income from self-employment.
Note: For purposes of self-employment tax, no income from an electing large partnership is treated as fishing or farming income.
Schedules K-1. Do not complete box 9 for any partner that is an estate, trust, corporation, exempt organization, or individual retirement arrangement (IRA).
Using Code K1, enter in box 9 of Schedule K-1 each individual general partner's share of the amount shown on line 5 of the worksheet below and each individual limited partner's share of the amount shown on line 4c of the worksheet. Enter the partner's share of gross nonfarm income in box 9 using Code K2.
Worksheet for Figuring Net Earnings
Worksheet Instructions
Line 1b. Include on line 1b any part of the net income (loss) from rental real estate activities from Schedule K, line 1b(2) that is from:
- Rentals of real estate held for sale to customers in the course of a trade or business as a real estate dealer or
- Rentals for which services were rendered to the occupants (other than services usually or customarily rendered for the rental of space for occupancy only). The supplying of maid service is such a service; but the furnishing of heat and light, the cleaning of public entrances, exits, stairways and lobbies, trash collection, etc., are not considered services rendered to the occupants.
Line 4a. Include in the amount on line 4a any guaranteed payments to partners reported on Schedule K, line 7, and derived from a trade or business as defined in section 1402(c). Also include other ordinary income and expense items reported on Schedules K and K-1 that are used to figure self-employment earnings under section 1402.
Line 15 - Foreign Tax Credit Information
Lines 15a through 15h must be completed if the partnership has foreign income, deductions, or losses or has paid or accrued foreign taxes. See Pub. 514, Foreign Tax Credit for Individuals, for more information.
Line 15a - Name of Foreign Country or U.S. Possession
Enter the name of the foreign country or U.S. possession from which the partnership had income or to which the partnership paid or accrued taxes. If the partnership had income from, or paid or accrued taxes to, more than one foreign country or U.S. possession, enter See attached and attach a schedule for each country for lines 15a through 15h.
Using Code L1, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15b - Gross Income From All Sources
Enter the partnership's gross income from all sources (both U.S. and foreign source).
Using Code L2, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15c - Gross Income Sourced at Partner Level
Enter the total gross income of the partnership that is required to be sourced at the partner level. This includes income from the sale of most personal property other than inventory, depreciable property, and certain intangible property. See Pub. 514 and section 865 for details. Attach a schedule showing the following information:
- The amount of this gross income (without regard to its source) in each category identified in the instructions for line 15d, including each of the listed categories.
- Specifically identify gains on the sale of personal property other than inventory, depreciable property, and certain intangible property on which a foreign tax of 10% or more was paid or accrued. Also list losses on the sale of such property if the foreign country would have imposed a 10% or higher tax had the sale resulted in a gain. See Sales or Exchanges of Certain Personal Property in Pub. 514 and section 865.
- Specify the net foreign source capital gain or loss within each separate limitation category shown below in the instructions for line 15d(2). Also, in the case of noncorporate partners, separately identify the net foreign source gain or loss within each separate limitation category that is 28% rate gain or loss, unrecaptured section 1250 gain, and qualified 5-year gain.
Using Code L3, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15d - Foreign Gross Income Sourced at Partnership Level
Separately report gross income from sources outside the United States by category of income as follows. For partnership and corporate partners only, attach a schedule identifying the total amount of foreign gross income in each category of income attributable to foreign branches. See Pub. 514 for information on the categories of income.
Line 15d(1). Passive foreign source income.
Using Code L4(a), enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15d(2). Attach a schedule showing the amount of foreign source income included in each of the following listed categories of income:
- Financial services income;
- High withholding tax interest;
- Shipping income;
- Dividends from each noncontrolled section 902 corporation;
- Dividends from a DISC, a former DISC, an IC-DISC, or a former IC-DISC;
- Distributions from a foreign sales corporation (FSC) or a former FSC;
- Section 901(j) income; and
- Certain income re-sourced by treaty.
Using Code L4(b), enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15d(3). General limitation foreign source income (all other foreign source income).
Using Code L4(c), enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15e - Deductions Allocated and Apportioned at Partner Level
Enter on line 15e(1) the partnership's total interest expense (including interest equivalents under Temporary Regulations section 1.861-9T(b)). Do not include interest directly allocable under Temporary Regulations section 1.861-10T to income from a specific property. This type of interest is allocated and apportioned at the partnership level and is included on lines 15f(1) through (3).
Using Code L5, enter the total interest expense in box 9 of Schedule K-1 or on an attached schedule.
On line 15e(2), enter the total of all other deductions or losses that are required to be allocated at the partner level. For example, include on line 15e(2) research and experimental expenditures (see Regulations section 1.861-17(f)). Using Code L6, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15f - Deductions Allocated and Apportioned at Partnership Level to Foreign Source Income
Separately report partnership deductions that are apportioned at the partnership level to (1) passive foreign source income, (2) each of the listed foreign categories of income, and (3) general limitation foreign source income (see the instructions for line 15d). See Pub. 514 for more information.
For partnership and corporate partners only, attach a schedule identifying the total amount of deductions apportioned to each category of income shown in the instructions for line 15d that are attributable to foreign branches.
Using Code L7(a) for passive foreign source income, Code L7(b) for each listed foreign category of income, and Code L7(c) for the general limitation foreign source income, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15g - Total Foreign Taxes
Enter in U.S. dollars the total foreign taxes (described in section 901 or section 903) that were paid or accrued by the partnership (according to its method of accounting for such taxes). Translate these amounts into U.S. dollars by using the applicable exchange rate (see Pub. 514).
Attach a schedule reporting the following information:
- The total amount of foreign taxes (including foreign taxes on income sourced at the partner level) relating to each category of income (see instructions for line 15d).
- The dates on which the taxes were paid or accrued, the exchange rates used, and the amounts in both foreign currency and U.S. dollars, for:
- Taxes withheld at source on interest.
- Taxes withheld at source on dividends.
- Taxes withheld at source on rents and royalties.
- Other foreign taxes paid or accrued.
Using Code L8(a) for total foreign taxes paid, and Code L8(b) for total foreign taxes accrued, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 15h - Reduction in Taxes Available for Credit
Attach a schedule showing the total reductions in taxes available for credit.
Separately show the reductions for:
- Taxes on foreign mineral income (section 901(e)).
- Taxes on foreign oil and gas extraction income (section 907(a)).
- Taxes attributable to boycott operations (section 908).
- Failure to timely file (or furnish all of the information required on) Forms 5471 and 8865.
- Any other items (specify).
Using Code L9 for reduction in taxes available for credit, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Previous| First | Next
Instructions Index | 2002 Tax Help Archives | Tax Help Archives | Home
