Instructions for Form 1065-B |
2006 Tax Year |
Instructions for Form 1065-B - Notices
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Schedules K and K-1. Partners' Shares of Income, Credits, Deductions, etc.
The partners are liable for tax on their shares of the partnership income, whether or not distributed, and must include their
shares on their tax
returns.
Schedule K
(page 4 of Form 1065-B) is a summary schedule of all the partners' shares of the partnership's income, credits, deductions,
etc.
Schedule K-1
(Form 1065-B) shows each partner's separate share. Attach a copy of each Schedule K-1 to the Form 1065-B filed with
the IRS; keep a copy with a
copy of the partnership return as a part of the partnership's records; and furnish a copy to each partner. If a partnership
interest is held by a
nominee on behalf of another person, the partnership may be required to furnish Schedule K-1 to the nominee. See Temporary
Regulations sections
1.6031(b)-1T and 1.6031(c)-1T for more information.
Give each partner a copy of either the Partner's Instructions for Schedule K-1 (Form 1065-B) or specific instructions
for each item reported on the
partner's Schedule K-1 (Form 1065-B).
The partnership does not need IRS approval to use a substitute Schedule K-1 if it is an exact copy of the IRS schedule. The
boxes must use the same
numbers and titles and must be in the same order and format as on the comparable IRS Schedule K-1. The substitute schedule
must include the OMB
number. The partnership must provide each partner with the Partner's Instructions for Schedule K-1 (Form 1065-B) or other
prepared specific
instructions for each item reported on the partner's Schedule K-1.
The partnership must request IRS approval to use other substitute Schedules K-1. To request approval, write to Internal Revenue
Service, Attention:
Substitute Forms Program, SE:W:CAR:MP:T:T:SP, 1111 Constitution Avenue, NW, IR-6406, Washington, DC 20224.
Each partner's information must be on a separate sheet of paper. Therefore, separate all continuously printed substitutes
before you file them with
the IRS.
The partnership may be subject to a penalty if it files Schedules K-1 that do not conform to the specifications discussed
in Pub. 1167, General
Rules and Specifications for Substitute Forms and Schedules.
How Income Is Shared Among Partners
Generally, allocate shares of income, gain, loss, deduction, or credit among the partners according to the partnership agreement
for sharing income
or loss. However, partners can agree to allocate specific items in a ratio different from the ratio for sharing income or
loss.
In determining the amounts required to be separately taken into account by a partner, those provisions of the large partnership
rules governing
computation of taxable income are applied separately with respect to that partner by taking into account that partner's distributive
share of the
partnership's items of income, gain, loss, deduction, or credit. This rule permits partnerships to make otherwise valid special
allocations of
partnership items to partners.
Report the specially allocated items in the appropriate box of the applicable partner's Schedule K-1 and the total on the
appropriate line of
Schedule K, instead of on Parts I or II of Form 1065-B or Schedules A or D. For example, specially allocated net capital gain
from passive activities
is entered in box 4a of Schedule K-1, and the total is entered on line 4a of Schedule K, along with any net capital gain from
line 16 of Schedule D
(Form 1065-B).
If a partner's interest changed during the year, see section 706(d) before determining each partner's distributive share of
any item of income,
gain, loss, deduction, etc. Income (loss) is allocated to a partner only for the part of the year in which that person is
a member of the partnership.
The partnership will either allocate on a daily basis or divide the partnership year into segments and allocate income, loss,
or special items in each
segment among the persons who were partners during that segment. Partnerships that report their income on the cash basis must
allocate interest
expense, taxes, and any payment for services or for the use of property on a daily basis if there is any change in any partner's
interest during the
year.
Special rules on the allocation of income, gain, loss, and deductions generally apply if a partner contributes property to
the partnership and the
FMV of that property at the time of contribution differs from the contributing partner's adjusted tax basis. Under these rules,
the partnership must
use a reasonable method of making allocations of income, gain, loss, and deductions from the property so that the contributing
partner receives the
tax burdens and benefits of any built-in gain or loss (for example, precontribution appreciation or diminution of value of
the contributed property).
See Regulations section 1.704-3 for details on how to make these allocations, including a description of specific allocation
methods that are
generally reasonable.
See Dispositions of Contributed Property on page 9 for special rules on the allocation of income, gain, loss, and deductions on the
disposition of property contributed to the partnership by a partner.
If the partnership agreement does not provide for the partner's share of income, gain, loss, deduction, or credit, or if the
allocation under the
agreement does not have substantial economic effect, the partner's share is determined according to the partner's interest
in the partnership. See
Regulations section 1.704-1 for more information.
Specific Instructions for Schedules K and K-1
Generally, the ELP is required to prepare and give a Schedule K-1 to each person who was a partner in the partnership at any
time during the year.
However, if a foreign partnership meets each of the following four requirements, it is not required to file or provide Schedule
K-1 for foreign
partners (unless the foreign partner is a pass-through entity through which a U.S. person holds an interest in the foreign
partnership).
-
The partnership had no gross income effectively connected with the conduct of a trade or business within the United States
during its tax
year.
-
All required Forms 1042 and 1042-S were filed by the partnership or another withholding agent as required by Regulations sections
1.1461-1(b) and (c).
-
The tax liability of each partner for amounts reportable under Regulations sections 1.1461-1(b) and (c) has been fully satisfied
by the
withholding of tax at the source.
-
The partnership is not a withholding foreign partnership as defined in Regulations section 1.1441-5(c).
Generally, any person who holds an interest in a partnership as a nominee for another person must furnish to the partnership
the name, address,
etc., of the other person.
On each Schedule K-1, enter the names, addresses, and identifying numbers of the partner and partnership and the partner's
distributive share of
each item.
For an individual partner, enter the partner's social security number (SSN) or individual taxpayer identification number (ITIN).
For all other
partners, enter the partner's EIN. However, if a partner is an individual retirement arrangement (IRA), enter the identifying
number of the custodian
of the IRA. Do not enter the SSN of the person for whom the IRA is maintained.
Foreign partners without a U.S. taxpayer identifying number should be notified by the partnership of the necessity of obtaining
one. Certain aliens
who are not eligible to obtain an SSN can apply for an ITIN on Form W-7, Application for IRS Individual Taxpayer Identification
Number.
If a husband and wife each had an interest in the partnership, prepare a separate Schedule K-1 for each of them. If a husband
and wife held an
interest together, prepare one Schedule K-1 if the two of them are considered to be one partner.
Use the codes listed on page 31 for box 9 of Schedule K-1 to report various items. If more space is needed, include the information
in an
attachment to box 9.
Due date.
Unlike other partnerships, an ELP must provide a Schedule K-1 to each partner by the first March 15 following the
close of the partnership's tax
year. For calendar year 2006 partnerships, the due date is March 15, 2007.
Partner's Share of Liabilities (Schedule K-1)
Enter each partner's share of:
“Nonrecourse liabilities” are those liabilities of the partnership for which no partner bears the economic risk of loss. The extent to which a
partner bears the economic risk of loss is determined under the rules of Regulations section 1.752-2. Do not include partnership-level
qualified
nonrecourse financing (defined below) on the line for nonrecourse liabilities.
If the partner terminated his or her interest in the partnership during the year, enter the share that existed immediately
before the total
disposition. In all other cases, enter it as of the end of the year.
If the ELP is engaged in two or more different types of at-risk activities, or a combination of at-risk activities and any
other activity, attach a
statement showing the partner's share of nonrecourse liabilities, partnership-level qualified nonrecourse financing, and other
liabilities for each
activity. See Pub. 925, Passive Activity and At-Risk Rules, to determine if the partnership is engaged in more than one at-risk
activity.
The at-risk rules of section 465 generally apply to any activity carried on by the partnership as a trade or business or for
the production of
income. These rules generally limit the amount of loss and other deductions a partner can claim from any partnership activity
to the amount for which
that partner is considered at risk. However, for partners who acquired their partnership interests before 1987, the at-risk
rules do not apply to
losses from an activity of holding real property the partnership placed in service before 1987. The activity of holding mineral
property does not
qualify for this exception. Identify on an attachment to Schedule K-1 the amount of any losses that are not subject to the
at-risk rules.
If the ELP is engaged in an activity subject to the limitations of section 465(c)(1) (such as films or videotapes, leasing
section 1245 property,
farming, or oil and gas property), give each partner his or her share of the total pre-1976 losses from that activity for
which there existed a
corresponding amount of nonrecourse liability at the end of each year in which the losses occurred. See Form 6198, At-Risk
Limitations, and related
instructions for more information.
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 that is
borrowed from a “qualified” person. Qualified persons include any person 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 section 465 for more information on qualified nonrecourse financing.
The partner as well as the partnership must meet the qualified nonrecourse rules. Therefore, the partnership must enter on
an attached statement
any other information the partner needs to determine if the qualified nonrecourse rules are also met at the partner level.
Tax Shelter Registration Number (Schedule K-1)
If the ELP is a registration-required tax shelter or has invested in a registration-required tax shelter, it must enter the
tax shelter
registration number on Schedule K-1. Also, a partnership that has invested in a registration-required tax shelter must furnish
a copy of its Form 8271
to its partners. See Form 8271 for more details.
Note.
The following line numbers correspond with Schedule K. However, each line instruction also provides reporting information
for Schedule K-1. Letter
codes required for entries in box 9 of Schedule K-1 are on page 31.
Line 1. Taxable Income (Loss) From Passive Loss Limitation Activities
Enter the amount from Form 1065-B, page 1, line 25, on Schedule K, line 1a. Enter the income or (loss) without reference to
(a) the
basis of the partners' interests in the partnership, (b) the partners' at-risk limitations, or (c) the passive activity
limitations. These limitations, if applicable, are determined at the partner level.
Allocate the income (loss) from passive loss limitation activities (line 1a of Schedule K) to interests held as a general
partner as follows.
Step 1. Allocate the amount reported on line 1a to the following categories.
Step 2. Report on lines 1b(1), 1b(2), and 1b(3) of Schedule K that portion of each amount from Step 1 that will be allocated to
interests held as a general partner (the combined distributive shares and any separate allocations for all general partner
interests).
General partners in an ELP must separately account for any items attributable to passive loss limitation activities to the
extent necessary to
comply with the passive activity rules.
Because general partners must comply with the passive activity rules, report the information on lines 1b(1), 1b(2), and 1b(3)
of Schedule K
separately for each activity of the partnership using Codes A1, B1, and C1 in box 9 of Schedule K-1. The remaining amount
on line 1d of Schedule K is
reported in box 1 of Schedule K-1 for limited partners (including interests held as a limited partner by general partners).
Line 2. Taxable Income (Loss) From Other Activities
On Schedule K, line 2, enter the amount from Form 1065-B, Part II, line 13. Report amounts for both general and limited partners
in box 2 of
Schedule K-1.
Line 3. Qualified Dividends
Enter the qualified dividends from other activities from Form 1065-B, Part II, line 2b. Report amounts for both general and
limited partners in box
3 of Schedule K-1.
Line 4a. Net Capital Gain (Loss) From Passive Loss Limitation Activities
Enter the net capital gain or (loss) from passive loss limitation activities from Schedule D (Form 1065-B), line 16. Report
the amount allocated to
interests held as a limited partner in box 4a of Schedule K-1.
Because general partners must comply with the passive activity rules, report the line 4a amount allocated to interests held
as a general partner
separately for each activity using Codes A2, B2, and C2, in box 9 of Schedule K-1.
Line 4b. Net Capital Gain (Loss) From Other Activities
Enter the net capital gain (loss) from other activities from Schedule D (Form 1065-B), line 18. Report this amount to all
partners in box 4b of
Schedule K-1.
For an ELP, 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 A5, 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;
-
Compensation deferred under a section 409A nonqualified deferred compensation plan that does not meet the requirements of
section 409A
reported on line 15 of Schedule K; and
-
Payments the partnership must capitalize. See the instructions for Part 1, line 13.
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.
Note.
Include the amount of income the partnership must recognize for a transfer of a partnership interest, after October 21, 2004,
in satisfaction of a
partnership debt when the debt relieved exceeds the FMV of the partnership interest. See section 108(e)(8) for more information.
Line 9. Tax-Exempt Interest Income
Enter 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.
The term “general credits” means any credit, other than the low-income housing credit, the rehabilitation credit from rental real
estate activities, 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).
-
Qualified railroad track maintenance credit (Form 8900).
-
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.
-
Disabled access credit (Form 8826).
-
Renewable electricity, refined coal production, and Indian coal 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).
-
Biodiesel and renewable fuels credit (Form 8864).
-
New markets credit (Form 8874).
-
Credit for contributions to selected community development corporations (Form 8847).
-
Credit for small employer pension plan startup costs (Form 8881).
-
Credit for employer-provided childcare facilities and services (Form 8882).
-
Low sulfur diesel fuel production credit (Form 8896).
-
General credits from other ELPs.
-
Distilled spirits credit (Form 8906).
-
Nonconventional source fuel credit (Form 8907).
-
Energy efficient home credit (Form 8908).
-
Energy efficient appliance credit (Form 8909).
-
Alternative motor vehicle credit (Form 8910).
-
Alternative fuel vehicle refueling property credit (Form 8911).
-
Clean renewable energy bond credit (Form 8912).
-
Gulf tax credit bond credit (Form 8912).
-
Hurricane Katrina housing credit (Form 5884-A).
-
Mine rescue team training credit (Form 8923).
Exception.
The refundable credit for federal tax paid on fuels and the refund or credit for tax paid on undistributed capital gains
of a RIC or a REIT are
claimed by the partnership. Therefore, 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.
Line 11. Low-Income Housing Credit
Section 42 provides a credit that can be claimed by owners of low-income residential rental buildings. To qualify for this
credit, the partnership
must file Form 8609, Low-Income Housing Credit Allocation and Certification, separately with the IRS. Do not attach Form 8609
to Form 1065-B. Complete
and attach Form 8609-A, Annual Statement for Low-Income Housing Credit, and Form 8586, Low-Income Housing Credit, to Form
1065-B.
Report this credit on line 11.
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.
Line 12. Rehabilitation Credit From Rental Real Estate Activities
Report the rehabilitation credit from rental real estate activities on line 12. Complete the lines on Form 3468, Investment
Credit, that apply to
the rehabilitation credit and attach it to Form 1065-B. The ELP may qualify for an increased rehabilitation credit under section
1400N(h) for
expenditures paid or incurred during the period beginning on August 28, 2005, and ending on December 31, 2008, for property
located in the Gulf
Opportunity Zone for Hurricane Katrina. See the instructions for Form 3468 and Pub. 4492 for details.
For limited partners, report the rehabilitation credit from rental real estate activities reported on line 12 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, report the rehabilitation credit reported on line 12 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.
Worksheet for Figuring Net Earnings (Loss) From Self-Employment
1a
|
Income (loss) from Schedule K, line 1b(1)
|
1a
|
|
|
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b
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Certain rental real estate activity income (loss) from Schedule K, line 1b(2) (see instructions)
|
1b
|
|
|
|
c
|
Other rental activity income (loss) from Schedule K, line 1b(3)
|
1c
|
|
|
|
d
|
Net loss from Form 4797, Part II, line 17, included on lines 1a through 1c above. Enter as a positive amount
|
1d
|
|
|
|
e
|
Combine lines 1a through 1d
|
1e
|
|
|
|
2
|
Net gain from Form 4797, Part II, line 17, included on lines 1a through 1c above
|
2
|
|
|
|
3a
|
Subtract line 2 from line 1e. If line 1e is a loss, increase the loss on line 1e by the amount on line 2
|
3a
|
|
|
|
b
|
Part of line 3a allocated to estates, trusts, corporations, exempt organizations, and IRAs
|
3b
|
|
|
|
c
|
Subtract line 3b from line 3a. If line 3a is a loss, reduce the loss on line 3a by the amount
on line 3b. Include each individual general partner's share in box 9 of Schedule K-1
|
3c
|
|
4a
|
Guaranteed payments to partners (Schedule K, line 7) derived from a trade or business as defined in section 1402(c) (see
instructions)
|
4a
|
|
|
|
b
|
Part of line 4a allocated to individual limited partners for other than services and to estates, trusts, corporations, exempt
organizations, and IRAs
|
4b
|
|
|
|
c
|
Subtract line 4b from line 4a. Include each individual general partner's share and each individual limited
partner's share in box 9 of Schedule K-1
|
4c
|
|
5
|
Net earnings (loss) from self-employment. Combine lines 3c and 4c. Enter here and on Schedule K, line
13a
|
5
|
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Line 13. Net Earnings From Self-Employment
General partners.
General partners' net earnings (loss) from self-employment do not include the following.
-
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 13a the amount from line 5 of the worksheet below. On line 13b 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 J1, 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. Using Code J2, enter the partner's share
of gross nonfarm income
in box 9.
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 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 14. Foreign Tax Credit Information
Lines 14a through 14h 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 14a. 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 ELP received 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 14a through 14h.
Using Code K1, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 14b. Gross Income From All Sources
Enter the partnership's gross income from all sources (both U.S. and foreign source).
Using Code K2, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 14c. 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 14d,
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 Determining the Source of Income From the 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
14d(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 (loss) and unrecaptured section 1250 gain.
Using Code K3, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 14d. 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 14d(1).
Passive foreign source income.
Using Code K4(a), enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 14d(2).
Listed categories. 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 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.
-
Certain income re-sourced by treaty.
Using Code K4(b), enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 14d(3).
General limitation foreign source income (all other foreign source income).
Using Code K4(c), enter this information in box 9 of Schedule K-1 or on an attached schedule. Include all foreign
income sourced at the partnership
level that is not reported on lines 14d(1) and 14d(2).
Line 14e. Deductions Allocated and Apportioned at Partner Level
Enter on line 14e(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 14f(1) through (3).
Using Code K5, enter the total interest expense in box 9 of Schedule K-1 or on an attached schedule.
On line 14e(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 14e(2) research and experimental expenditures (see Regulations section 1.861-17(f)). Using Code K6, enter this information
in box 9 of Schedule
K-1 or on an attached schedule.
Line 14f. 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 14d). See Pub.
514 for more information.
Note.
For tax years beginning on or after October 19, 2006, allocations of creditable foreign expenditures generally must be allocated
in accordance with
each partner's interest in the partnership. See Treasury Decision 9292, 2006-47 I.R.B. 914 for details.
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 14d that are attributable to foreign branches.
Using Code K7(a) for passive foreign source income, Code K7(b) for each listed foreign category of income, and Code K7(c)
for the general
limitation foreign source income, enter this information in box 9 of Schedule K-1 or on an attached schedule.
Line 14g. 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).
Line 14g. Foreign taxes paid.
If the partnership uses the cash method of accounting, enter foreign taxes paid during the year on line 14g and check
the “ Paid” box. Report
each partner's distributive share in box 9 of Schedule K-1 using code K8(a).
Line 14g. Foreign taxes accrued.
If the partnership uses the accrual method of accounting, enter foreign taxes accrued on line 14g and check the “ Accrued” box. Report each
partner's distributive share in box 9 of Schedule K-1 using code K8(b).
A partnership reporting foreign taxes using the cash method can make an irrevocable election to report the taxes using the
accrual method for the
year of the election and all future years. Make this election by reporting all foreign taxes using the accrual method on line
14g (see Regulations
section 1.905-1).
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 14d).
-
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, and
-
Other foreign taxes paid or accrued.
Line 14h. Reduction in Taxes Available for Credit
Attach a schedule showing the total reductions in taxes available for credit.
Separately show the reductions for the following.
-
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 K9 for reduction in taxes available for credit, enter this information in box 9 of Schedule K-1 or on an attached
schedule.
28% Rate Gain Worksheet—Line 16
1.
|
Enter the total of all collectibles gain or (loss) from items reported on lines 5 through 8, column (f) of Schedule D
(Form 1065-B).
|
1.
|
|
2.
|
If Schedule D, line 4, is a (loss), enter here. Otherwise, enter -0-.
|
2.
|
|
3.
|
Combine lines 1 and 2. If zero or less, enter -0-.
|
3.
|
|
4.
|
Redetermine the amount on line 3 by taking into account 28% rate gain and losses from passive loss limitation
activities. Report the amount allocated to interests held as a limited partner in box 9 of Schedule K-1 using Code D. Report
amounts allocated to
general partners using Codes A3, B3, and C3, in box 9 of Schedule K-1.
|
4.
|
|
5.
|
Subtract line 4 from line 3. Report the amount to all partners in box 9 of Schedule K-1 using Code E.
|
5.
|
|
Attach a schedule listing other items and amounts required to be reported separately to partners. Enter each partner's share
in box 9 or on an
attached schedule to Schedule K-1. Examples of items to report include the following.
-
Any information a partnership must separately report to its disqualified partners regarding its oil and gas activities. See
Partnerships Holding Oil and Gas Properties for more information. Enter this information as Code L in box 9 of Schedule K-1 or on an
attached schedule.
-
Other tax-exempt income. On the schedule for line 15, enter all income of the partnership exempt from tax other than tax-exempt
interest
income (for example, 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). Enter this amount as Code M1 in box 9 of Schedule K-1.
-
Nondeductible expenses. Enter nondeductible expenses paid or incurred by the partnership. Do not include 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). Enter this amount as Code M2 in box 9 of Schedule K-1.
-
Unrelated business taxable income. Any information a partner that is a tax-exempt organization may need to figure that partner's
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 the Instructions for Form 990-T, Exempt Organization
Business Income
Tax Return, for more information. Enter this amount as Code M3 in box 9 of Schedule K-1.
-
Amounts paid during the tax year for health insurance coverage for a partner (including that partner's spouse and dependents).
Enter this
amount as Code M4 in box 9 of Schedule K-1.
-
Distributions of money (cash and marketable securities). Enter the total distributions to each partner 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 this amount includes marketable securities treated as money, state separately on an attachment
(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). Enter this information as Code M5
in box 9 of Schedule K-1 or
on an attached schedule.
-
Distributions of property other than money. Enter the total distributions of property other than money. In computing the amount
of the
distribution, use the adjusted basis of the property to the partnership immediately before the distribution. On an attachment
also include the
adjusted basis and FMV of each property distributed. Enter this information as Code M6 in box 9 of Schedule K-1 or on an attached
schedule.
-
Gain from the sale or exchange of qualified small business stock (as defined in the instructions for Schedule D) that is eligible
for the
partial section 1202 exclusion. The section 1202 exclusion applies only to qualified small business stock issued after August
10, 1993, and held by
the partnership for more than 5 years. Corporate partners are not eligible for the section 1202 exclusion. Additional limitations
apply at the partner
level. Report each partner's share of section 1202 gain using Code M7 in box 9 of Schedule K-1. Each partner will determine
if he or she qualifies for
the section 1202 exclusion. Report with Code M7 on an attachment to Schedule K-1 for each sale or exchange the name of the
corporation that issued the
stock, the partner's share of the partnership's adjusted basis and sales price of the stock, and the dates the stock was bought
and sold.
-
Gain eligible for section 1045 rollover (replacement stock purchased by the partnership). Include only gain from the sale
or exchange of
qualified small business stock (as defined in the instructions for Schedule D) that was deferred by the partnership under
section 1045 and reported on
Schedule D. See the instructions for Schedule D for more details. Corporate partners are not eligible for the section 1045
rollover. Additional
limitations apply at the partner level. Report each partner's share of the gain eligible for section 1045 rollover using Code
M8 in box 9 of Schedule
K-1. Each partner will determine if he or she qualifies for the rollover. Report with Code M8 on an attachment to Schedule
K-1 for each sale or
exchange the name of the corporation that issued the stock, the partner's share of the partnership's adjusted basis and sales
price of the stock, and
the dates the stock was bought and sold.
-
Gain eligible for section 1045 rollover (replacement stock not purchased by the partnership). Include only gain from the sale
or exchange of
qualified small business stock (as defined in the instructions for Schedule D) the partnership held for more than 6 months
but that was not deferred
by the partnership under section 1045. See the instructions for Schedule D for more details. A partner (other than a corporation)
may be eligible to
defer his or her distributive share of this gain under section 1045 if he or she purchases other qualified small business
stock during the 60-day
period that began on the date the stock was sold by the partnership. Additional limitations apply at the partner level. Report
with Code M9 on an
attachment to Schedule K-1 for each sale or exchange the name of the corporation that issued the stock, the partner's share
of the partnership's
adjusted basis and sales price of the stock, and the dates the stock was bought and sold.
-
Unrecaptured section 1250 gain.
Use the worksheet on page 30 to figure the unrecaptured section 1250 gain.
-
28% rate gain (loss). Use the worksheet below to figure the 28% rate gain (loss) (that is, collectibles gain or loss). A collectibles
gain
or loss is any long-term gain or deductible long-term loss from the sale or exchange of a collectible that is a capital asset.
Collectibles include
works of art, rugs, antiques, metals (such as gold, silver, and platinum bullion), gems, stamps, coins, alcoholic beverages,
and certain other
tangible property. Also include on the worksheet any gain (but not loss) from the sale or exchange of an interest in a partnership
or trust held more
than 1 year and attributable to unrealized appreciation of collectibles. For details, see Regulations section 1.1(h)-1. Also
attach the statement
required under Regulations section 1.1(h)-1(e).
-
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, each 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.
-
Extraterritorial income exclusion.
See the instructions on page 13 for the information and codes that are required to be reported
in box 9 of Schedule K-1.
-
Any income or gain reported on lines 1 through 4 of Schedule K that qualifies as inversion gain, if the
partnership is an expatriated entity or is a partner in an expatriated entity. For details, see section 7874. Attach a statement
to Form 1065-B that
shows the amount of each type of income or gain included in the inversion gain. The partnership must report each partner's
distributive share of the
inversion gain in box 9 of Schedule K-1 using Code P. Attach a statement to Schedule K-1 that shows the partner's distributive
share of the amount of
each type of income or gain included in the inversion gain.
-
Commercial revitalization deduction from rental real estate activities. Enter this amount as Code Q in box 9 of Schedule K-1.
If the
deduction is for a nonrental building, it is deducted by the partnership on line 23 of Form 1065-B. See the instructions for
line 23 on page
17.
-
For corporate partner's only, enter the following information in box 9 for purposes of the interest deduction limitations
under section
163(j). Using Code R1, enter the corporate partner's distributive share of interest income reported in Parts I and II of the
return. Using Code R2,
enter the corporate partner's distributive share of interest expense reported in Parts I and II of the return.
-
Domestic production activities information (code S1).
If the partnership is not using the small business simplified overall method to allocate and apportion cost of goods sold
and deductions between
domestic production gross receipts and other receipts, attach a statement with the following information to enable each partner
to figure the domestic
production activities deduction under section 199. Enter this information using code S1 in box 9 of Schedule K-1.
-
Domestic production gross receipts (DPGR).
-
Gross receipts from all sources.
-
Cost of goods sold allocable to DPGR.
-
Cost of goods sold from all sources.
-
Total deductions, expenses, and losses directly allocable to DPGR.
-
Total deduction, expenses, and losses directly allocable to a non-DPGR class of income.
-
Other deductions, expenses, and losses not directly allocable to DPGR or another class of income.
-
Form W-2 wages.
-
Any other information a partner needs to use the section 861 method to allocate or apportion costs of goods sold and deductions
between
domestic production gross receipts and other receipts.
For partnerships with a tax year beginning after May 17, 2006, include only W-2 wages properly allocable to domestic production.
See Form 8903, Domestic Production Activities Deduction, its instructions, and applicable Regulations for more details. If
the partnership is using
the small business simplified overall method, see the instructions below.
-
Domestic production activity information (small business simplified overall method).
If the partnership elected to use the small business simplified overall method to allocate and apportion cost of goods sold
and deductions between
domestic production gross receipts and other receipts, report the following information in box 9 of Schedule K-1 using codes
S2 and S3.
Qualified production activities income (code S2). Enter the partner's distributive share of the partnership's qualified production
activities income computed using the small business simplified overall method. This amount may be less than zero. See the
instructions for Form 8903
for details.
Employer's W-2 wages (code S3). Use code S3 to report the partner's distributive share of employer's W-2 wages if the partnership has
elected to use the small business simplified overall method to apportion cost of goods sold and deductions.
Tax years beginning on or before May 17, 2006. Employer's W-2 wages are the lesser of:
Tax years beginning after May 17, 2006. Employer's W-2 wages are the partner's allocable share of the employer's W-2 wages
properly allocable to domestic production activities (defined in section 199(b)(2)).
For partnerships with a tax year beginning after May 17, 2006, the following rules apply in determining the amount of W-2
wages for the small
business simplified overall method.
-
Compensation to partners deferred under a section 409A nonqualified deferred compensation plan that does not meet the requirements
of
section 409A. Include in this amount any earnings on these deferrals. Enter this amount in box 9 of Schedule K-1 using Code
T. This amount must also
be included on line 7 of Schedule K, Guaranteed Payments to Partners. If the section 409A deferred compensation was part of
a transaction in which the
partner was not acting as a member of the partnership (under section 707(a)), report the income and section 409A deferred
compensation information on
Form 1099-MISC.
-
Other information (Code U). Use Code U to report the following items.
-
Recapture of credits. Report the recapture of any credit (other than the low-income housing credit or investment credit) as
a separately
stated item. See the instructions for line 26 on page 18 for reporting the recapture of the low-income housing credit and
investment
credit.
-
Any information a partner that is a PTP 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 PTP.
-
Any information or statements the partners need to allow them to comply with the disclosure requirements under section 6111
and section
6662(d)(2)(B)(ii) and the list keeping requirements of Regulations section 301.6112-1. See Form 8264 and Notice 2004-80, 2004-50
I.R.B. 963; Notice
2005-17, 2005-8 I.R.B. 606; and Notice 2005-22, 2005-12 I.R.B. 756.
-
If the partnership participates in a transaction that must be disclosed on Form 8886, both the partnership and its partners
may be required
to file Form 8886. The partnership must determine if any of its partners are required to disclose the transaction and provide
those partners with
information they will need to file Form 8886. This determination is based on the category(s) under which a transaction qualified
for disclosure. See
the instructions for Form 8886 for details.
-
Any other information a partner may need to file his or her return that is not shown elsewhere on Schedule K-1. Enter this
information on an
attachment to Schedule K-1.
Instructions for the Unrecaptured Section 1250 Gain Worksheet
Lines 1 through 3.
If the partnership had more than one property described on line 1, complete lines 1 through 3 for each property on
a separate worksheet. Enter the
total of the line 3 amounts for all properties on line 3 and go to line 4.
Unrecaptured Section 1250 Gain Worksheet—Line 15
|
|
If any of the following apply, the partnership does not have to complete all of the worksheet.
Instead, follow the instructions below.
|
|
•
|
Go to line 4 if the partnership's only unrecaptured section 1250 gain is from an installment sale of trade or
business property held more than 1 year that the partnership is reporting on Form 6252.
|
|
•
|
Go to line 5 if the partnership's only unrecaptured section 1250 gain is from a Schedule K-1 reporting such gain
from another partnership.
|
|
•
|
Go to line 10 if the partnership's only unrecaptured section 1250 gain is from the sale or exchange of an interest
in another partnership.
|
|
•
|
Go to line 11 if the partnership's only unrecaptured section 1250 gain is from a Schedule K-1, Form
1099-DIV, or Form 2439 reporting such gain from an estate, trust, real estate investment trust, or regulated investment company
(including a mutual
fund).
|
|
|
1.
|
If the partnership had a section 1250 property in Part III of Form 4797 for which there was an entry
in Part I of Form 4797 (but not on Form 6252), enter the smaller of line 22 or line 24 of Form 4797 for that property. If
the partnership had more
than one such property, see instructions
|
1.
|
|
|
|
2.
|
Enter the amount from Form 4797, line 26g, for the property for which the partnership made an entry on
line 1
|
2.
|
|
|
|
3.
|
Subtract line 2 from line 1
|
3.
|
|
|
|
4.
|
Enter the total unrecaptured section 1250 gain included on line 26 or 37 of Form(s) 6252 from
installment sales of trade or business property held more than 1 year (see instructions)
|
4.
|
|
|
|
5.
|
Enter the total of any amounts reported to the partnership on Schedules K-1 from another partnership
as “unrecaptured section 1250 gain”
|
5.
|
|
|
|
6.
|
Add lines 3 through 5
|
6.
|
|
|
|
7.
|
Enter the smaller of line 6 or the gain, if any, from Form 4797, line 7
|
7.
|
|
|
|
|
|
8.
|
Enter the amount, if any, from Form 4797, line 8
|
8.
|
|
|
|
|
|
9.
|
Subtract line 8 from line 7. If zero or less, enter -0-
|
9.
|
|
|
|
10.
|
Enter the 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)
|
10.
|
|
|
|
11.
|
Enter the total of any amounts reported to the partnership on Schedule K-1, Form 1099-DIV, or Form
2439 as “Unrecaptured section 1250 gain” from an estate, trust, real estate investment trust, or mutual fund (or other regulated investment
company)
|
11.
|
|
|
|
12.
|
Add lines 9 through 11. This is the partnership's “unrecaptured section 1250 gain.” Report each
partner's distributive share with Code N in box 9 of Schedule K-1
|
12.
|
|
|
Line 4.
The total unrecaptured section 1250 gain for an installment sale of property held more than 1 year is figured for
the year of sale in a manner
similar to that used to figure line 3 of the worksheet. However, the 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.
Box 9 Codes (Schedule K-1)
The following codes should be used to describe the information located in box 9.
-
Code A1—General partner's taxable income (loss) from trade or business activities.
-
Code A2—General partner's net capital gain (loss) from trade or business activities.
-
Code A3—General partner's 28% rate gain (loss) from trade or business activities.
-
Code A4—General partner's general credits from trade or business activities.
-
Code A5—General partner's alternative minimum tax adjustment from trade or business activities.
-
Code B1—General partner's taxable income (loss) from rental real estate activities.
-
Code B2—General partner's net capital gain (loss) from rental real estate activities (for the entire year).
-
Code B3—General partner's 28% rate gain (loss) from rental real estate activities.
-
Code B4—General partner's general credits from rental real estate activities.
-
Code B5—General partner's low-income housing credit from rental real estate activities.
-
Code B6—General partner's rehabilitation credit from rental real estate activities.
-
Code B7—General partner's alternative minimum tax adjustment from rental real estate activities.
-
Code C1—General partner's taxable income (loss) from other rental activities.
-
Code C2—General partner's net capital gain (loss) from other rental activities.
-
Code C3—General partner's 28% rate gain (loss) from other rental activities.
-
Code C4—General partner's general credits from other rental activities.
-
Code C5—General partner's alternative minimum tax adjustment from other rental activities.
-
Code D—Limited partner's 28% rate gain (loss) from passive activities.
-
Code E—Limited partner's 28% rate gain (loss) from other activities.
-
Code F—Guaranteed payments.
-
Code G—Income from discharge of indebtedness.
-
Code H—Tax-exempt interest income.
-
Code I—Limited partner's rehabilitation credit from rental real estate activities.
-
Code J1—Net earnings (loss) from self-employment.
-
Code J2—Gross nonfarm income.
-
Code K1—Name of foreign country or U.S. possession.
-
Code K2—Gross income from all sources.
-
Code K3—Gross income sourced at partner level.
-
Code K4(a)—Passive foreign source income.
-
Code K4(b)—Listed foreign categories of income.
-
Code K4(c)—General limitation foreign source income.
-
Code K5—Interest expense allocated and apportioned at the partner level.
-
Code K6—Other expenses allocated and apportioned at the partner level.
-
Code K7(a)—Deductions allocated and apportioned at partnership level to passive foreign source income.
-
Code K7(b)—Deductions allocated and apportioned at partnership level to listed foreign categories of income.
-
Code K7(c)—Deductions allocated and apportioned at partnership level to general limitation foreign source income.
-
Code K8(a)—Total foreign taxes paid.
-
Code K8(b)—Total foreign taxes accrued.
-
Code K9—Reduction in taxes available for credit.
-
Code L—Oil and gas activities.
-
Code M1—Other tax-exempt income.
-
Code M2—Nondeductible expenses.
-
Code M3—Unrelated business taxable income.
-
Code M4—Health insurance.
-
Code M5—Distributions of money (cash and marketable securities).
-
Code M6—Distributions of property other than money.
-
Code M7—Gain eligible for section 1202 exclusion.
-
Code M8—Gain eligible for section 1045 rollover-stock replaced.
-
Code M9—Gain eligible for section 1045 rollover-stock not replaced.
-
Code N—Unrecaptured section 1250 gain.
-
Code O1—Foreign trading gross receipts.
-
Code O2—Extraterritorial income exclusion.
-
Code P—Inversion gain.
-
Code Q—Commercial revitalization deduction.
-
Code R1—Corporate partner's interest income.
-
Code R2—Corporate partner's interest expense.
-
Code S1—Domestic production activities information.
-
Code S2—Qualified production activities income.
-
Code S3—Employer's W-2 wages.
-
Code T—Section 409A nonqualified deferred compensation.
-
Code U—Other income.
Analysis of Net Income (Loss)
For each type of partner shown, enter the portion of the amount shown on line 1 that was allocated to that type of partner.
Report all amounts for
limited liability company members on the line for limited partners. The sum of the amounts shown on line 2 must equal the
amount shown on line 1. In
addition, the amount on line 1 must equal the amount on line 9, Schedule M-1. If the partnership files Schedule M-3, the amount
on line 1 must equal
the amount in column (d) of line 26, Part II of Schedule M-3.
In classifying partners who are individuals as “active” or “passive,” the partnership should apply the rules below. In applying these
rules, a partnership should classify each partner to the best of its knowledge and belief. It is assumed that in most cases
the level of a particular
partner's participation in an activity will be apparent.
-
If the partnership's principal activity is a trade or business, classify a general partner as “active” if the partner materially
participated in all partnership trade or business activities; otherwise, classify a general partner as “passive.”
-
If the partnership's principal activity consists of a working interest in an oil or gas well, classify a general partner as
“active.”
-
If the partnership's principal activity is a rental real estate activity, classify a general partner as “active” if the partner
actively participated in all of the partnership's rental real estate activities; otherwise, classify a general partner as
“passive.”
-
Classify as “passive” all partners in a partnership whose principal activity is a rental activity other than a rental real estate
activity.
-
If the partnership's principal activity is a portfolio activity, classify all partners as “active.”
-
Classify as “passive” all limited partners and LLC members in a partnership whose principal activity is a trade or business or rental
activity.
-
If the partnership cannot make a reasonable determination whether a partner's participation in a trade or business activity
is material or
whether a partner's participation in a rental real estate activity is active, classify the partner as “passive.”
Schedule L. Balance Sheets per Books
The balance sheets should agree with the partnership's books and records. Attach a statement explaining any differences.
Partnerships reporting to the Interstate Commerce Commission (ICC) or to any national, state, municipal, or other public officer
can send copies of
their balance sheets prescribed by the ICC or national, state, or municipal authorities, as of the beginning and end of the
tax year, instead of
completing Schedule L. However, statements filed under this procedure must contain sufficient information to enable the IRS
to reconstruct a balance
sheet similar to that contained on Form 1065-B without contacting the partnership during processing.
All amounts on the balance sheet should be reported in U.S. dollars. If the partnership's books and records are kept in a
foreign currency, the
balance sheet should be translated in accordance with U.S. generally accepted accounting principles (GAAP).
Exception.
If the partnership or any qualified business unit of the partnership uses the United States dollar approximate separate transactions
method,
Schedule L should reflect the tax balance sheet prepared and translated into U.S. dollars according to Regulations section
1.985-3(d), and not a U.S.
GAAP balance sheet.
Partnerships Required To File Schedule M-3
For partnerships required to file Schedule M-3, the amounts reported on Schedule L must be the same as the amounts from financial
statements used
to complete Schedule M-3.
Line 5. Tax-Exempt Securities
Include on this line:
-
State and local government obligations, the interest on which is excludable from gross income under section 103(a) and
-
Stock in a mutual fund or other regulated investment company that distributed exempt-interest dividends during the tax year
of the
partnership.
Total assets must be determined without offset by liabilities and may not be reported as a negative amount. Total assets at
the beginning of the
tax year (column b) must equal total assets at close of the prior tax year. A partnership that is a partner in a tiered partnership
must show as an
asset on the partner's Schedule L the partner's share of the tiered partnership's assets.
Example.
Company A files Form 1065-B for calendar year 2006. Company B also files Form 1065-B for calendar year 2006.
A's only asset is its ownership interest in B. A's capital account in B at the close of tax year 2006
is negative $4 million. This reflects A's 2006 contribution to B's capital of $2 million reduced by $6 million, A's
share of 2006 losses passing through to it from B. A's adjusted basis in B at December 31, 2006, is $16 million, its
$4 million negative capital account in B and its $20 million as its share of B's liabilities. In preparing Schedule L,
A must report $16 million as its share of B's assets, $20 million as its share of B's liabilities, and a negative
capital account in B of $4 million. A may not report its $4 million negative capital account in B as its total assets
on Schedule L.
Line 18. All Nonrecourse Loans
Nonrecourse loans are those liabilities of the partnership for which no partner bears the economic risk of loss. If the partnership's
nonrecourse
liabilities include its share of the liabilities of another partnership, the partnership's share of those liabilities must
be reflected on line 18.
Line 20. Other Liabilities
A partnership that is a partner in a tiered partnership must include as a liability on line 20 the partner's share of the
tiered partnership's
liabilities to the extent they are recourse liabilities to the partner.
Schedule M-1. Reconciliation of Income (Loss) per Books With Income (Loss) per Return
Note.
Schedule M-3 may be required instead of Schedule M-1. See Item J. Schedule M-3 earlier. See the Instructions for Schedule M-3 for more
information.
Report on this line income included on Schedule K, lines 1c, 1d, 2, 3, 4a, 4b, and 8 not recorded on the partnership's books
this year. Describe
each such item of income. Attach a statement if necessary.
Line 3. Guaranteed Payments
Include on this line guaranteed payments shown on Schedule K, line 7.
Line 4b. Travel and Entertainment
Include on this line the following.
-
Meal and entertainment expenses not deductible under section 274(n).
-
Expenses for the use of an entertainment facility.
-
The part of business gifts over $25.
-
Expenses of an individual allocable to conventions on cruise ships over $2,000.
-
Employee achievement awards over $400.
-
The part of the cost of entertainment tickets that exceeds face value (also subject to 50% limit).
-
The part of the cost of skyboxes that exceeds the face value of nonluxury box seat tickets.
-
The part of the cost of luxury water travel expenses not deductible under section 274(m).
-
Expenses for travel as a form of education.
-
Nondeductible club dues.
-
Other travel and entertainment expenses not allowed as a deduction.
Schedule M-2. Analysis of Partners' Capital Accounts
Show what caused the changes during the tax year in the partners' capital accounts as reflected on the partnership's books
and records.
The partnership can, but is not required to, use the rules in Regulations section 1.704-1(b)(2)(iv) to determine the partners'
capital accounts in
Schedule M-2. If the beginning and ending capital accounts reported under these rules differ from the amounts reported on
Schedule L, attach a
statement reconciling any differences.
Line 2. Capital Contributed During Year
Include on line 2a the amount of money contributed and on line 2b the amount of property contributed by each partner to the
partnership as
reflected on the partnership's books and records.
Line 3. Net Income (Loss) per Books
Enter on line 3 the net income (loss) shown on the partnership books from Schedule M-1, line 1 (or Schedule M-3, Part I, line
11).
Line 6a. Cash.
Enter on line 6a the amount of money distributed to each partner by the partnership.
Line 6b. Property.
Enter on line 6b the amount of property distributed to each partner by the partnership as reflected on the partnership's
books and records. Include
withdrawals from inventory for the personal use of a partner.
Privacy Act and Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information.
We need it to
ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. Section 6109
requires return preparers to
provide their identifying numbers on the return.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless
the form displays a
valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in
the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required
by section 6103.
The time needed to complete and file this form and related schedules will vary depending on individual circumstances. The
estimated average times
are:
|
Form
|
Recordkeeping
|
Learning
about the law
or the form
|
Preparing
the form
|
Copying, assembling, and sending the form to the IRS
|
|
Form 1065-B
|
52 hr., 24 min.
|
23 hr., 51 min.
|
35 hr., 2 min.
|
2 hr., 40 min.
|
|
Schedule D (Form 1065-B)
|
14 hr., 6 min.
|
2 hr., 40 min.
|
3 hr., 1 min.
|
|
|
Schedule K-1 (Form 1065-B)
|
9 hr., 34 min.
|
7 hr., 43 min.
|
11 hr., 57 min.
|
1 hr., 4 min.
|
|
Schedule L (Form 1065-B)
|
15 hr., 46 min.
|
12 min.
|
27 min.
|
|
|
Schedule M-1 (Form 1065-B)
|
3 hr., 21 min.
|
12 min.
|
15 min.
|
|
|
Schedule M-2 (Form 1065-B)
|
3 hr., 6 min.
|
6 min.
|
9 min.
|
|
|
If you have comments concerning the accuracy of these time estimates or suggestions for making these forms simpler, we would
be happy to hear from
you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee, SE:W:CAR:MP:T:T:SP, 1111 Constitution
Ave. NW, IR-6406,
Washington, DC 20224. Do not send the tax form to this address. Instead, see Where To File on page 3.
|
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