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Department of the Treasury 2020 Internal Revenue Service Instructions for Form 1065 U.S. Return of Income

Section references are to the Internal Revenue Code Contents Page New employee retention credit. The unless otherwise noted. Specific Instructions Coronavirus Aid, Relief, and Economic Contents Page (Schedules K and K-1, Security Act (CARES Act) allows a new The Taxpayer Advocate Service Part III, Except as Noted) ... 33 employee retention credit for qualified (TAS) Is Here To Help You .....2 Flowchart To Help wages. Any qualified wages for which an How To Get Forms and Determine if Items Are eligible employer claims against payroll Publications ...... 2 Qualified for the new employee retention credit Income ...... 51 (ERC) may not be taken into for General Instructions ...... 2 Analysis of Net Income purposes of determining certain other Purpose of Form ...... 2 (Loss) ...... 55 credits. Definitions ...... 2 Schedule L. Balance Sheets Temporary allowance of 100% business Who Must File ...... 3 per Books ...... 55 meals. A partnership is allowed a 100% Termination of the Schedule M-1. Partnership ...... 4 deduction for certain business meals paid or Reconciliation of Income incurred in 2021 and 2022. See Travel, (Loss) per Books With Electronic Filing ...... 4 meals, and entertainment. When To File ...... 4 Income (Loss) per Where To File ...... 5 Return ...... 56 Request for section 754 revocation. Use Who Must Sign ...... 5 Schedule M-2. Analysis of new Form 15254, Request for Section 754 Partners' Capital Revocation, to request revocation of a Penalties ...... 5 Accounts ...... 56 section 754 election. See Elections Made by Methods ...... 6 Codes for Principal Business the Partnership. Accounting Periods ...... 7 Activity and Principal Product Code N, box 20. Regulations section Rounding Off to Whole or Service ...... 58 Dollars ...... 7 Index ...... 61 1.163(j)-6(h) created a new section 704(d) loss class for business expense Recordkeeping ...... 7 effective for years beginning after Amended Return ...... 7 Future Developments November 12, 2020. As a result, all Assembling the Return ...... 10 For the latest information about must report business interest Entity Classification Election ... 10 developments related to Form 1065 and its expense to partners on Schedules K-1 (Form Elections Made by the instructions, such as legislation enacted after 1065). Partnership ...... 10 they were published, go to IRS.gov/ Form1065. Code AG, box 20. Gross receipts for sec- Elections Made by Each tion 448(c)(2). Partnerships and partners Partner ...... 11 must determine whether they are subject to Partner's Dealings With What's New certain accounting methods and to section Partnership ...... 11 Schedule B question. New question 29 163(j) based on their gross receipts. For tax Contributions to the years ending after December 30, 2020, Partnership ...... 11 has been added to Schedule B, regarding a foreign 's direct or indirect partnerships with current year gross receipts Dispositions of Contributed acquisition of substantially all of the greater than $5 million are required to report Property ...... 11 properties constituting a or business of their current year gross receipts to partners. Recognition of the partnership. For tax years ending after December 30, Precontribution Gain on 2021, a partnership that has current year Certain Partnership Codes for Schedule K-1. Complete gross receipts greater than $5 million will be Distributions ...... 12 descriptions of codes for Schedule K-1 are required to report gross receipts to partners Unrealized Receivables and provided at Specific Instructions (Schedules for the three immediately preceding tax years Inventory Items ...... 12 K and K-1, Part III, Except as Noted). The as well as gross receipts for the current year. At-Risk Limitations ...... 12 codes are no longer listed on page 2 of Passive Activity Limitations .... 12 Schedule K-1 (Form 1065). Partnerships whose current year gross receipts are less than or equal to $5 million Extraterritorial Income New payroll credit for required paid sick Exclusion ...... 17 may also use this code to report gross leave or family leave. Under the Families receipts. Specific Instructions ...... 17 First Coronavirus Response Act, as Income ...... 18 amended (FFCRA), an eligible employer can Partner’s capital account analysis. The Deductions ...... 19 take a credit against payroll taxes owed for reporting requirements for certain Schedule B. Other amounts paid for qualified sick leave or partnerships regarding partners' capital Information ...... 24 family leave if incurred during the allowed accounts have been clarified. See Item L. Partner's Capital Account Analysis. See also Schedules K and K-1. period, which starts in 2020 and ends March Partners' Distributive 31, 2021. The requirement that employers Schedule M-2. Analysis of Partners' Capital Share Items ...... 28 provide the leave expired on December 31, Accounts. Specific Instructions 2020, but the credit is still available through (Schedule K-1 Only) ...... 29 March 31, 2021. There is no double tax Reminder benefit allowed and the amounts claimed are Part I. Information About the Hybrid arrangements under section Partnership ...... 30 reportable as income on . See Line 7. Other Income (Loss). 267A. Section 267A disallows a deduction Part II. Information About the for certain interest or royalty paid or accrued Partner ...... 30

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pursuant to a hybrid arrangement, to the professionals, including tax law updates and • In the case of an adjustment pursuant to extent that, under the foreign tax law, there is guidance, TAS programs, and ways to let the decision of a court in a proceeding not a corresponding income inclusion. TAS know about systemic problems you’ve brought under section 6234, such decision Report amounts disallowed under section seen in your practice. becomes final; 267A on Schedule B, question 22. See • In the case of an administrative section 267A and the instructions for How To Get Forms and adjustment request (AAR) under section Question 22 for more information. 6227, such AAR is filed; or Publications • In any other case, a notice of final Photographs of Missing Internet. You can access the IRS website partnership adjustment is mailed under Children at IRS.gov 24 hours a day, 7 days a week to: section 6231 or, if the partnership waives the • E-file your return—Find out about restrictions under section 6232(b) (regarding The Internal Revenue Service is a proud commercial tax preparation and e-file limitations on assessments), the waiver is partner with the National Center for Missing services available free to eligible taxpayers; executed by the IRS. & Exploited Children® (NCMEC). • Download forms, including talking tax Reviewed year. A reviewed year is a Photographs of missing children selected by forms, instructions, and publications; the Center may appear in instructions on partnership’s tax year to which a partnership • Use the online Internal Revenue Code, adjustment relates. pages that would otherwise be blank. You regulations, or other official guidance; can help bring these children home by • Get information on starting and operating Partnership looking at the photographs and calling a ; A partnership is the relationship between two 800-THE-LOST (800-843-5678) if you • Order IRS products online; recognize a child. or more persons who join to carry on a trade • Research your tax questions online; or business, with each person contributing • Search publications online by topic or money, property, labor, or skill and each The Taxpayer Advocate keyword; expecting to share in the profits and losses Service (TAS) Is Here To • View Internal Revenue Bulletins (IRBs) of the business whether or not a formal published in the last few years; and partnership agreement is made. Help You • Sign up to receive local and national tax The term “partnership” includes a limited What is the TAS? The Taxpayer Advocate news by email. partnership, syndicate, group, pool, joint Service (TAS) is an independent Tax forms and publications. The venture, or other unincorporated within the Internal Revenue partnership can download or print all of the organization, through or by which any Service that helps taxpayers and protects forms and publications it may need on business, financial operation, or venture is taxpayer rights. Their job is to ensure that IRS.gov/FormsPubs. Otherwise, the carried on, that isn't, within the meaning of every taxpayer is treated fairly and that you partnership can go to IRS.gov/OrderForms regulations under section 7701, a know and understand your rights under the to place an order and have forms mailed to corporation, trust, estate, or sole Taxpayer Bill of Rights. the partnership. The partnership should proprietorship. How can you learn about your taxpayer receive its order within 10 business days. rights? The Taxpayer Bill of Rights A joint undertaking merely to share describes 10 basic rights that all taxpayers General Instructions expenses isn't a partnership. Mere have when dealing with the IRS. Go to co- of property that is maintained TaxpayerAdvocate.IRS.gov to help you and leased or rented isn't a partnership. understand what these rights mean to you Purpose of Form However, if the co-owners provide services and how they apply. These are your rights. to the tenants, a partnership exists. Know them. Use them. Form 1065 is an information return used to report the income, gains, losses, deductions, Business owned and operated by spou- What can the TAS do for you? TAS can credits, and other information from the ses. Generally, if you and your spouse help you resolve problems that you can’t operation of a partnership. A partnership jointly own and operate an unincorporated resolve with the IRS. And their service is doesn't pay tax on its income but passes business and share in the profits and losses, free. If you qualify for their assistance, you through any profits or losses to its partners. you are partners in a partnership and you will be assigned to one advocate who will Partners must include partnership items on must file Form 1065. work with you throughout the process and their tax or information returns. Exception—Qualified . If will do everything possible to resolve your you and your spouse materially participate issue. TAS can help you if: Definitions as the only members of a jointly owned and • Your problem is causing financial difficulty operated business, and you file a joint return for you, your family, or your business; Centralized Partnership Audit for the tax year, you can make an election to • You face (or your business is facing) an Regime be treated as a qualified joint venture instead immediate threat of adverse action; or of a partnership. By making the election, you • You’ve tried repeatedly to contact the IRS The Bipartisan Budget Act of 2015 (BBA) created a new centralized partnership audit will not be required to file Form 1065 for any but no one has responded, or the IRS hasn’t year the election is in effect and will instead responded by the date promised. regime effective for partnership tax years beginning after 2017. The new audit regime report the income and deductions directly on How can you reach TAS? TAS has offices replaces the consolidated audit proceedings your joint return. in every state, the District of Columbia, and under the Tax Equity and Fiscal A qualified joint venture conducts a trade Puerto Rico. Your local advocate's number is Responsibility Act (TEFRA). The new audit or business where the only members of the in your local directory and at regime applies to all partnerships unless the joint venture are a married couple who file a TaxpayerAdvocate.IRS.gov. You can also partnership is an eligible partnership and joint return; both spouses materially call them at 877-777-4778. elects out by making a valid election using participate in the trade or business (because How else does the TAS help taxpayers? Schedule B-2 (Form 1065). mere joint ownership of property isn’t enough); both spouses elect not to be TAS works to resolve large-scale problems Electing out of the centralized that affect many taxpayers. If you know of treated as a partnership; and the business is partnership audit regime. See Electing co-owned by both spouses and isn't held in one of these broad issues, please report it to Out of the Centralized Partnership Audit them at IRS.gov/SAMS. the name of a state law entity such as a Regime later. partnership or . TAS for tax professionals. TAS can Adjustment year. An adjustment year is a To make this election, you must divide all provide a variety of information for tax tax year in which: items of income, gain, loss, deduction, and

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credit between you and your spouse in required to contribute to the partnership. Gain Deferral Contribution accordance with your respective in Some members of other entities, such as A gain deferral contribution is a contribution the venture. Each of you must file a separate domestic or foreign business trusts or limited of section 721(c) property to a section 721(c) Schedule C or F (Form 1040). On each line liability that are classified as partnership with respect to which the of your separate Schedule C or F (Form partnerships, may be treated as limited recognition of gain is deferred under the gain 1040), you must enter your share of the partners for certain purposes. deferral method. See Regulations section applicable income, deduction, or loss. Each 1.721(c)-1(b)(7). of you must also file a separate Schedule SE (Form 1040) to pay self-employment tax, as A limited partnership is formed under a state Gain Deferral Method applicable. limited partnership law and composed of at The gain deferral method is the method least one general partner and one or more If you and your spouse make the election described in Regulations section limited partners. for your rental real estate business, you each 1.721(c)-3(b) applied to avoid the immediate must report your share of income and Limited Liability Partnership recognition of gain upon a contribution of deductions on Schedule E (Form 1040). section 721(c) property to a section 721(c) Rental real estate income isn’t generally A limited liability partnership (LLP) is formed under a state limited liability partnership law. partnership under Regulations section included in net earnings from 1.721(c)-2(b). self-employment subject to self-employment Generally, a partner in an LLP isn't tax and generally is subject to the passive personally liable for the debts of the LLP or loss limitation rules. Electing qualified joint any other partner, nor is a partner liable for Who Must File venture status doesn't alter the application of the acts or omissions of any other partner Domestic Partnerships the self-employment tax or the passive loss solely by reason of being a partner. limitation rules. Except as provided below, every domestic Limited Liability Company partnership must file Form 1065, unless it To make the qualified joint venture A limited liability company (LLC) is an entity neither receives income nor incurs any election for 2020, jointly file the 2020 Form formed under state law by filing articles of expenditures treated as deductions or 1040 or 1040-SR with the required organization as an LLC. Unlike a partnership, credits for federal income tax purposes. schedules. This generally doesn't increase none of the members of an LLC are the total tax on the return, but it does give personally liable for its debts. An LLC may Note. To be certified as a qualified each spouse credit for social security be classified for federal income tax purposes opportunity fund (QOF), the partnership must earnings on which retirement benefits are as a partnership, a corporation, or an entity file Form 1065 and attach Form 8996, based, provided neither spouse exceeds the disregarded as an entity separate from its Qualified Opportunity Fund, even if the social security tax limitation. owner by applying the rules in Regulations partnership had no income or expenses to Once made, the election cannot be section 301.7701-3. See Form 8832, Entity report. See Schedule B question 26 and the revoked without IRS consent. If you and your Classification Election, for more details. Instructions for Form 8996. spouse filed a Form 1065 for the year prior to A domestic LLC with at least two Entities formed as LLCs that are the election, you don't need to amend that TIP members that does not file Form classified as partnerships for federal income return or file a final Form 1065 for the year 8832 is classified as a partnership tax purposes have the same filing the election takes effect. for federal income tax purposes. requirements as domestic partnerships. For more information on qualified joint ventures, go to IRS.gov/QJV. A religious or apostolic organization Nonrecourse Loans exempt from income tax under section Foreign Partnership Nonrecourse loans are those liabilities of the 501(d) must file Form 1065 to report its A foreign partnership is a partnership that partnership for which no partner or related taxable income, which must be allocated to isn't created or organized in the United person bears the economic risk of loss. its members as a , whether States or under the law of the United States Section 721(c) Partnership distributed or not. Such an organization must or of any state. See Notice 2010-41 for figure its taxable income on an attached information on when a domestic partnership A partnership (domestic or foreign) is a statement to Form 1065 in the same manner will be classified as foreign. section 721(c) partnership if there is a as a corporation. The organization may use contribution of section 721(c) property to the Form 1120, U.S. Corporation Income Tax If a domestic section 721(c) partnership is partnership and, after the contribution (and Return, for this purpose. Enter the formed after January 17, 2017, and the gain all transactions related to the contribution), organization's taxable income, if any, on deferral method is applied, then a U.S. (1) a related foreign person with respect to line 6a of Schedule K and each member's transferor must treat the section 721(c) the U.S. transferor is a direct or indirect distributive share in box 6a of Schedule K-1. partnership as a foreign partnership and file partner in the partnership, and (2) the U.S. Net operating losses aren't deductible by the a Form 8865, Return of U.S. Persons With transferor and related persons own 80% or members but may be carried back or forward Respect to Certain Foreign Partnerships, more of the interests in partnership capital, by the organization under the rules of section with respect to the partnership. See Form profits, deductions, or losses. See 172. The religious or apostolic organization 8865 and its instructions. See also Regulations section 1.721(c)-1(b)(14). must also make its annual information return Regulations section 1.721(c)-6(b)(4). U.S. Transferor available for public inspection. For this General Partner purpose, “annual information return” includes A U.S. transferor is a U.S. person other than an exact copy of Form 1065 and all A general partner is a partner who is a domestic partnership. See Regulations accompanying schedules and attached personally liable for partnership debts. section 1.721(c)-1(b)(18). statements, except Schedules K-1. For more Section 721(c) Property details, see Regulations section 301.6104(d)-1. A general partnership is composed only of Section 721(c) property is property (other general partners. than excluded property) with built-in gain that A qualifying syndicate, pool, joint venture, is contributed to a partnership by a U.S. or similar organization may elect under Limited Partner transferor, including pursuant to a section 761(a) not to be treated as a A limited partner is a partner in a partnership contribution described in Regulations section partnership for federal income tax purposes formed under a state limited partnership law, 1.721(c)-2(d) (partnership look-through rule). and will not be required to file Form 1065 whose personal liability for partnership debts See Regulations section 1.721(c)-1(b)(15). except for the year of election. For details, is limited to the amount of money or other see section 761(a) and Regulations section property that the partner contributed or is 1.761-2.

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Real estate mortgage investment Termination of the Internal Revenue Service conduits (REMICs) must file Form 1066, U.S. Ogden Submission Processing Center Real Estate Mortgage Investment Conduit Partnership Attn: Form 1065 e-file Waiver Request (REMIC) Income Tax Return. A partnership terminates when all its Mail Stop 1057 operations are discontinued and no part of Ogden, UT 84201 Certain publicly traded partnerships any business, financial operation, or venture treated as under section 7704 is continued by any of its partners in a must file Form 1120. Waiver requests can also be faxed to partnership. 877-477-0575. Foreign Partnerships The partnership’s tax year ends on the Contact the e-Help Desk at 866-255-0654 Generally, a foreign partnership that has date of termination which is the date the for questions regarding the waiver effectively connected with the partnership winds up its affairs. Special rules procedures or process. conduct of a trade or business within the apply in the case of a merger, consolidation, United States or has gross income derived or division of a partnership. See Regulations When To File from sources in the United States must file sections 1.708-1(c) and (d) for details. Also Generally, a domestic partnership must file Form 1065, even if its principal place of see IRS.gov/newsroom/questions-and- Form 1065 by the 15th day of the 3rd month business is outside the United States or all answers-about-technical-terminations- following the date its tax year ended as its members are foreign persons. A foreign internal-revenue-code-irc-sec-708. partnership required to file a return must shown at the top of Form 1065. For calendar generally report all of its foreign and U.S. year partnerships, the due date is March 15. source income. Electronic Filing Certain partnerships with more than 100 If the due date falls on a Saturday, A foreign partnership with U.S. source partners are required to file Form 1065, Sunday, or legal holiday in the District of income isn't required to file Form 1065 if it Schedules K-1, and related forms and Columbia or the state in which you file your qualifies for either of the following two schedules electronically. For tax years return, a return filed by the next day that isn't exceptions. beginning after July 1, 2019, a religious or a Saturday, Sunday, or legal holiday will be treated as timely. Calendar year partnerships Exception for foreign partnerships with apostolic organization exempt from income tax under section 501(d) must file Form 1065 may therefore timely file their return for the U.S. partners. A return isn't required if: 2020 partnership year by March 15, 2021. • The partnership had no effectively electronically. Other partnerships generally connected income (ECI) during its tax year; have the option to file electronically. Private Delivery Services The partnership had U.S. source income • See Rev. Proc. 2012-17, at IRS.gov/pub/ (PDSs) of $20,000 or less during its tax year; irs-irbs/irb12-10.pdf, for the requirements for Partnerships can use certain PDSs • Less than 1% of any partnership item of furnishing substitute Schedule K-1 in designated by the IRS to meet the “timely income, gain, loss, deduction, or credit was electronic format. mailing as timely filing/paying” rule for tax allocable in the aggregate to direct U.S. returns. Go to IRS.gov/PDS for the current partners at any time during its tax year; and The option to file electronically doesn't list of designated services. The PDS can tell • The partnership isn't a withholding foreign apply to certain returns, including: you how to get written proof of the mail date. partnership as defined in Regulations section • returns, and 1.1441-5(c)(2)(i). • Returns with pre-computed penalty and For the IRS mailing address to use if you Exception for foreign partnerships with interest. are using a PDS, go to IRS.gov/ PDSStreetAddresses. no U.S. partners. A return isn't required if: For more details on electronic filing us- • The partnership had no ECI during its tax ing the Modernized e-file system, see: A PDS can’t deliver items to P.O. year, • Pub. 3112, IRS e-file Application and ! boxes. You must use the U.S. Postal • The partnership had no U.S. partners at Participation; CAUTION Service to mail any item to an IRS any time during its tax year, • Pub. 4163, Modernized e-File (MeF) P.O. box address. • All required Forms 1042 and 1042-S were Information for Authorized IRS e-file filed by the partnership or another Providers for Business Returns; Extension of Time To File withholding agent as required by Regulations • Pub. 4164, Modernized e-File (MeF) File Form 7004 to request an extension of section 1.1461-1(b) and (c), Guide for Software Developers and • The tax liability of each partner for time to file. File Form 7004 by the regular Transmitters; due date of the partnership return. Form amounts reportable under Regulations • Form 8453-PE, U.S. Partnership section 1.1461-1(b) and (c) has been fully 7004 can be electronically filed. See the Declaration for an IRS e-file Return; and Instructions for Form 7004. satisfied by the withholding of tax at the • Form 8879-PE, IRS e-file Signature source, and Authorization for Form 1065. Period Covered • The partnership isn't a withholding foreign partnership as defined in Regulations section For More Information on Filing The 2020 Form 1065 is an information return 1.1441-5(c)(2)(i). for calendar year 2020 and fiscal years that Electronically begin in 2020 and end in 2021. For a fiscal A foreign partnership filing Form 1065 • Call the e-Help Desk at 866-255-0654, or year or a short tax year, fill in the tax year solely to make an election (such as an • Visit IRS.gov/Filing. space at the top of Form 1065 and each election to amortize organization expenses) Schedule K-1. need only provide its name, address, and Electronic Filing Waiver employer identification number (EIN) on The IRS may waive the electronic filing rules The 2020 Form 1065 may also be used if: page 1 of the form and attach a statement if the partnership demonstrates that a 1. The partnership has a tax year of less citing “Regulations section 1.6031(a)-1(b) hardship would result if it were required to file than 12 months that begins and ends in (5)” and identifying the election being made. its return electronically. A partnership 2021, and A foreign partnership filing Form 1065 solely interested in requesting a waiver of the 2. The 2021 Form 1065 isn't available to make an election must obtain an EIN if it mandatory electronic filing requirement must by the time the partnership is required to file doesn't already have one. file a written request, and request one in the its return. manner prescribed by the Ogden Submission Processing Center. However, the partnership must show its 2021 tax year on the 2020 Form 1065 and All written requests for waivers should be incorporate any tax law changes that are mailed to: effective for tax years beginning after 2020.

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Paid Preparer Authorization Where To File If the partnership wants to allow the paid File Form 1065 at the applicable IRS address listed below. If Schedule M-3 is filed, Form preparer to discuss its 2020 Form 1065 with 1065 must be filed at the Ogden Internal Revenue Service Center as shown below. the IRS, check the “Yes” box in the signature area of the return. The authorization applies And the total assets at only to the individual whose signature If the partnership's principal the end of the tax year appears in the “Paid Preparer Use Only” business, office, or agency (Form 1065, page 1, item section of its return. It doesn't apply to the is located in: F) are: Use the following address: firm, if any, shown in the section. Connecticut, Delaware, District If the “Yes” box is checked, the partnership is authorizing the IRS to call the of Columbia, Georgia, Illinois, paid preparer to answer any questions that Indiana, Kentucky, Maine, may arise during the processing of its return. Maryland, Massachusetts, Department of the Treasury The partnership is also authorizing the paid Michigan, New Hampshire, Less than $10 million and Internal Revenue Service Center preparer to: New Jersey, New York, North Schedule M-3 isn't filed Kansas City, MO 64999-0011 • Give the IRS any information that is Carolina, Ohio, Pennsylvania, missing from its return, Rhode Island, South Carolina, • Call the IRS for information about the Tennessee, Vermont, Virginia, processing of its return, and West Virginia, Wisconsin • Respond to certain IRS notices about Connecticut, Delaware, District math errors and return preparation. of Columbia, Georgia, Illinois, The partnership isn't authorizing the paid Indiana, Kentucky, Maine, preparer to bind the partnership to anything Maryland, Massachusetts, $10 million or more or Department of the Treasury or otherwise represent the partnership Michigan, New Hampshire, less than $10 million and Internal Revenue Service Center before the IRS. If the partnership wants to New Jersey, New York, North Schedule M-3 is filed Ogden, UT 84201-0011 expand the paid preparer's authorization, Carolina, Ohio, Pennsylvania, see Pub. 947, Practice Before the IRS and Rhode Island, South Carolina, Power of Attorney. Tennessee, Vermont, Virginia, The authorization cannot be revoked. West Virginia, Wisconsin However, the authorization will automatically Alabama, Alaska, Arizona, end no later than the due date (excluding Arkansas, California, extensions) for filing the 2021 return. Colorado, Florida, Hawaii, Idaho, Iowa, Kansas, Penalties Louisiana, Minnesota, Department of the Treasury Mississippi, Missouri, Any amount Internal Revenue Service Center Late Filing of Return Montana, Nebraska, Nevada, Ogden, UT 84201-0011 A penalty is assessed against the New Mexico, North Dakota, partnership if it is required to file a Oklahoma, Oregon, South partnership return and it (a) fails to file the Dakota, Texas, Utah, return by the due date, including extensions, Washington, Wyoming or (b) files a return that fails to show all the information required, unless such failure is A foreign country or U.S. Internal Revenue Service due to reasonable cause. The penalty is possession Any amount P.O. Box 409101 $210 for each month or part of a month (for a Ogden, UT 84409 maximum of 12 months) the failure continues, multiplied by the total number of persons who were partners in the Who Must Sign preparer's space should remain blank. In partnership during any part of the addition, anyone who prepares Form 1065 partnership's tax year for which the return is Any Partner or LLC Member but doesn't charge the partnership should due. If the partnership receives a notice about a penalty after it files the return, the Form 1065 isn't considered to be a return not complete this section. partnership may send the IRS an explanation unless it is signed by a partner or LLC Generally, anyone who is paid to prepare and the Service will determine if the member. When a return is made for a the partnership return must do the following. explanation meets reasonable-cause criteria. partnership by a receiver, trustee, or • Sign the return in the space provided for Do not attach an explanation when filing the assignee, the must sign the return, the preparer's signature. return. instead of the partner or LLC member. • Fill in the other blanks in the “Paid Returns and forms signed by a receiver or Preparer Use Only” area of the return. A paid Failure To Furnish Information trustee in bankruptcy on behalf of a preparer cannot use a social security number Timely partnership must be accompanied by a copy in the “Paid Preparer Use Only” box. The of the order or instructions of the court paid preparer must use a preparer tax For each failure to furnish Schedule K-1 to a authorizing signing of the return or form. identification number (PTIN). partner when due and each failure to include • Give the partnership a copy of the return on Schedule K-1 all the information required When filing an AAR, Form 1065 must be in addition to the copy to be filed with the to be shown (or the inclusion of incorrect signed by the partnership representative (or IRS. information), a $280 penalty may be the designated individual if the partnership imposed for each Schedule K-1 for which a representative is an entity) for the reviewed A paid preparer may sign original or failure occurs. The maximum penalty is year. TIP amended returns by rubber stamp, $3,392,000 for all such failures during a mechanical device, or computer calendar year. If the requirement to report Paid Preparer's Information software program. correct information is intentionally If a partner, member, or employee of the disregarded, each $280 penalty is increased partnership completes Form 1065, the paid to $560 or, if greater, 10% of the aggregate

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amount of items required to be reported. books and records prepared in accordance the amount or if there is any penalty for There is no limit to the amount of the penalty with the taxpayer's accounting procedures. failure to timely pay the amount. For in the case of intentional disregard. See section 471(c)(1), and Change in information, see section 448(d)(5) and accounting method, later. Regulations section 1.448-2. For reporting Trust Fund Recovery Penalty For tax years beginning after 2017, a requirements, see the instructions for line 1a. This penalty may apply if certain excise, small business taxpayer (defined below) can Percentage of completion method. income, social security, and Medicare taxes adopt or change its accounting method to Long-term (except for certain real that must be collected or withheld aren't not capitalize costs to property produced or property construction contracts) must collected or withheld, or these taxes are not acquired for resale under section 263A. See generally be accounted for using the paid. These taxes are generally reported on: section 263A(i), and Change in accounting percentage of completion method described • Form 720, Quarterly Federal Excise Tax method and Limitations on Deductions, later. in section 460. See section 460 and the Return; underlying regulations for rules on long-term • Form 941, Employer's QUARTERLY Small business taxpayer defined. For contracts. Federal Tax Return; 2020, a small business taxpayer is a • Form 943, Employer's Annual Federal Tax taxpayer that (a) has average annual gross Mark-to-market accounting method. Return for Agricultural Employees; receipts of $26 million or less for the prior 3 Dealers in securities must use the • Form 944, Employer's ANNUAL Federal tax years, and (b) isn't a tax shelter (as mark-to-market accounting method Tax Return; and defined in section 448(d)(3)). described in section 475. Under this method, • Form 945, Annual Return of Withheld Accrual method. Under the accrual any security that is inventory to the dealer Federal Income Tax. method: must be included in inventory at its fair market value (FMV). Any security that isn't The trust fund recovery penalty may be 1. An amount is includible in income inventory and that is held at the close of the imposed on all persons who are determined when all the events have occurred that fix the tax year is treated as sold at its FMV on the by the IRS to have been responsible for right to receive the income, which is the last business day of the tax year, and any collecting, accounting for, or paying over earliest of the date: gain or loss must be taken into account in these taxes, and who acted willfully in not • Payment is earned through the required determining gross income. The gain or loss doing so. The penalty is equal to the unpaid performance, taken into account is generally treated as trust fund tax. See the Instructions for Form • Payment is due to the taxpayer, or ordinary gain or loss. For details, including 720; Pub. 15 (Circular E), Employer's Tax • Payment is received by the taxpayer; exceptions, see section 475, the related Guide; Pub. 51 (Circular A), Agricultural and regulations, and Rev. Rul. 97-39, 1997-39 Employer's Tax Guide; or Pub. 15-T, Federal 2. When the amount can be determined I.R.B. 4. Income Tax Withholding Methods, for more with reasonable accuracy. details, including the definition of a Dealers in and traders in responsible person. 3. Income must be reported no later securities and commodities can elect to use than when it is taken into account as revenue the mark-to-market accounting method. To on the taxpayer’s applicable financial make the election, the partnership must file a Accounting Methods statements. statement describing the election, the first An accounting method is a set of rules used tax year the election is to be effective, and, in to determine when and how income and See section 451 and the related the case of an election for traders in expenditures are reported. The method of regulations. securities or commodities, the trade or accounting used must be reconcilable with Generally, an accrual basis taxpayer can business for which the election is made. the partnership's books and records. In all deduct accrued expenses in the tax year in Except for new taxpayers, the statement cases, the method used must clearly reflect which: must be filed by the due date (not including income. Generally, the following rules apply. • All events that establish the liability have extensions) of the return for the tax year For more information, see Pub. 538, occurred, immediately preceding the election year and Accounting Periods and Methods. • The amount of the liability can be figured attached to that return or, if applicable, to a Permissible overall methods of with reasonable accuracy, and request for an extension of time to file that accounting include: • Economic performance takes place with return. For more details, see Rev. Proc. • Cash, respect to the expense. 99-17, 1999-7 I.R.B. 52, as superseded in • Accrual, or For property and service liabilities, for part by Rev. Proc. 99-49, and sections • Any other method authorized by the example, economic performance occurs as 475(e) and (f). Internal Revenue Code. the property or service is provided. There are Change in accounting method. special economic performance rules for Generally, a partnership may use the Generally, the partnership must get IRS certain items, including recurring expenses. consent to change its method of accounting cash method of accounting unless it’s See section 461 and the related regulations required to maintain inventories, has a C used to report income or expense (for for the rules for determining when economic income or expense as a whole or for any corporation as a partner, or is a tax shelter performance takes place. (as defined in section 448(d)(3)). However, material item). To do so, the partnership for tax years beginning after 2017, any Nonaccrual-experience method. Accrual must generally file Form 3115, Application partnership qualifying as a small business method partnerships aren't required to for Change in Accounting Method, during the taxpayer (defined below) may use the cash accrue certain amounts to be received from tax year for which the change is requested. method. the performance of services that, on the See the Instructions for Form 3115 and Pub. basis of their experience, will not be 538, Accounting Periods and Methods, for Small business taxpayer. For tax years collected if: more information and exceptions. beginning after 2017, a small business • The services are in the fields of health, Section 481(a) adjustment. The taxpayer (defined below) can adopt or law, , architecture, accounting, change its accounting method to account for partnership may have to make an adjustment actuarial science, performing arts, or to prevent amounts of income or expenses inventories (i) in the same manner as consulting; or materials and supplies that are from being omitted or duplicated. This is • The partnership's average annual gross called a section 481(a) adjustment. The nonincidental, or (ii) to conform to the receipts don’t exceed $26 million for all prior taxpayer's treatment of inventories in an section 481(a) adjustment period is generally tax years. For more details, see section 1 year for a net negative adjustment and 4 applicable (as defined in 448(d)(5). section 451(b)(3)), or, if the taxpayer doesn't years for a net positive adjustment. However, have an applicable financial statement, the This provision doesn't apply to any in some instances, a partnership can elect to method of accounting used in the taxpayer's amount if interest is required to be paid on modify the section 481(a) adjustment period.

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The partnership must complete the Rounding Off to Whole result in an imputed underpayment. See appropriate lines of Form 3115 to make the section 6233 for information about interest election. See the Instructions for Form 3115. Dollars and penalties on the imputed underpayment. Include any net positive section 481(a) The partnership may enter decimal points Include the following information on your adjustment on page 1 of Form 1065, line 7. If and cents when completing its return. payment. the net section 481(a) adjustment is However, it should round off cents to whole • Name of partnership negative, report it on page 1, line 20. dollars on its return, forms, and schedules to • Form 1065 make completing its return easier. The • Tax identification number There are some instances when the partnership must either round off all amounts • Tax year partnership can obtain automatic consent on the return to whole dollars, or use cents • BBA AAR Imputed Underpayment from the IRS to change to certain accounting for all amounts. To round, drop amounts • Checks must be payable to “United States methods. See the Instructions for Form under 50 cents and increase amounts from Treasury” 3115. 50 to 99 cents to the next dollar. For Mail payment to: example, $8.40 rounds to $8 and $8.50 Accounting Periods rounds to $9. Ogden Service Center A partnership is generally required to have Ogden, UT 84201-0011 one of the following tax years. If two or more amounts are added to figure the amount to enter on a line, include 1. The tax year of a majority of its cents when adding the amounts and round Payments can be made by check or partners (majority tax year). off only the total. electronically. If making an electronic 2. If there is no majority tax year, then payment, choose the payment description the tax year common to all of the Recordkeeping “BBA AAR Imputed Underpayment” from the partnership's principal partners (partners list of payment types. The partnership must keep its records as with an interest of 5% or more in the If the partnership has an imputed long as they may be needed for the partnership profits or capital). underpayment, the partnership may elect to administration of any provision of the Internal have its partners take the adjustments into 3. If there is neither a majority tax year Revenue Code. The partnership must account instead of paying the imputed nor a tax year common to all principal usually keep records that support an item of underpayment. See the Instructions for Form partners, then the tax year that results in the income, deduction, or credit on the 8082 for information on how to make the least aggregate deferral of income. partnership return for 3 years from the date election. Note. In determining the tax year of a the return is due or is filed, whichever is later. partnership under (1), (2), or (3) above, the These records must usually be kept for 3 tax years of certain tax-exempt and foreign years from the date each partner's return is Amended Return partners are disregarded. See Regulations due or is filed, whichever is later. It must also The procedures to follow when filing an section 1.706-1(b) for more details. keep records that verify the partnership's amended partnership return depend on 4. Some other tax year if: basis in property for as long as they are whether the amended return is filed • The partnership can establish that there is needed to figure the basis of the original or electronically or on paper. The rules for a business purpose for the tax year; or replacement property. determining when a return must be filed • The partnership elects under section 444 electronically (see Electronic Filing, earlier) The partnership should also keep copies also apply to amended returns. to have a tax year other than a required tax of all returns it has filed. They help in year by filing Form 8716, Election To Have a preparing future returns and in making Electronically filed amended returns. If Tax Year Other Than a Required Tax Year. computations when filing an amended return. the amended return will be filed For a partnership to have this election in electronically, complete Form 1065 and effect, it must make the payments required Administrative Adjustment Request check box G(5) to indicate that you are filing by section 7519 and file Form 8752, (AAR). A partnership that is subject to the an amended return. Attach a statement that Required Payment or Refund Under Section BBA centralized partnership audit regime identifies the line number of each amended 7519. must file an AAR to request an administrative item, the corrected amount or other A section 444 election ends if a adjustment in the amount or other treatment treatment of the item, and an explanation of partnership changes its accounting period to of one or more partnership-related items. the reason(s) for each change. If the income, its required tax year or some other permitted BBA partnerships filing an AAR should not deductions, credits, or other information year or it is penalized for willfully failing to file amended tax returns or amended provided to any partner on Schedule K-1 is comply with the requirements of section Schedules K-1. incorrect, file an amended Schedule K-1 7519. If the termination results in a short tax Electronically filed AARs. If the AAR will (Form 1065) for that partner with the year, type or legibly print at the top of the first be filed electronically, complete Form 1065 amended Form 1065. Also give a copy of the page of Form 1065 for the short tax year, with the corrected amounts and check box amended Schedule K-1 to that partner. “SECTION 444 ELECTION TERMINATED”; G(5). In addition, complete Form 8082, Check the “Amended K-1” box at the top of or Notice of Inconsistent Treatment or the Schedule K-1 to indicate that it is an • The partnership elects to use a Administrative Adjustment Request (AAR). amended Schedule K-1. 52-53-week tax year that ends with reference See the instructions for Form 8082 for Partner amended return filed as part of to either its required tax year or a tax year detailed instructions. modification of the imputed underpay- elected under section 444. AARs for which payment is made. A ment during a BBA examination. Section Change of tax year. To change its tax partnership filing an AAR that has not made 6225(c)(2) allows a BBA partnership under year or to adopt or retain a tax year other a valid election out of the BBA centralized examination to request specific types of than its required tax year, the partnership partnership audit regime, and that does not modifications of any imputed underpayment must file Form 1128, Application To Adopt, elect to have its partners take adjustments proposed by the IRS. One type of Change, or Retain a Tax Year, unless the into account, and that has adjustments that modification that may be requested is when partnership is making an election under result in an imputed underpayment, should one or more partners, including section 444. report the imputed underpayment and any partnership-partners, file amended returns interest and penalties on Form 1065, page 1, for the tax years of the partners which The tax year of a common trust fund includes the end of the reviewed year of the TIP must be the calendar year. line 25. See the Instructions for Form 8082 for information on how to figure a BBA BBA partnership under examination and for imputed underpayment and what to do when any tax year with respect to which tax an adjustment requested by an AAR doesn't attributes are affected.

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A modification amended return filing must payment made with an amended Form 1065 What if You Can’t Pay Now? meet a number of requirements. Therefore, a should detail the amount of the payment to Go to IRS.gov/Payments for more partnership-partner filing a modification be applied separately to tax, interest, and information about your options. amended return must refer to Form 8982, penalties. The partnership should consider Apply for an online payment agreement Affidavit for Partner Modification Amended all guidance issued by the IRS when figuring • (IRS.gov/OPA) to meet your tax obligation in Return Under IRC 6225(c)(2)(A) or Partner the amount due. In general, the partnership monthly installments if you can’t pay your Alternative Procedure Under IRC 6225(c)(2) should figure its amount due in accordance taxes in full today. Once you complete the (B). The instructions for Form 8982, with Regulations 301.6225-2(d)(2)(vi)(A) and online process, you will receive immediate Section A, explain the modification of 301.6226-3(e)(4)(iii). notification of whether your agreement has amended returns, requirements for payment Paper-filed amended returns and AARs. been approved. and submission, and the requirement to If the amended return or AAR will not be filed Use the Offer in Compromise Pre- provide Form 8982, Section A, to the PR of • electronically, complete Form 1065-X, Qualifier to see if you can settle your tax debt the BBA partnership. See Filing Instructions Amended Return or Administrative for less than the full amount you owe. for Partner Modification Amended Returns Adjustment Request (AAR), to file the and Paying the Amount you Owe in the amended return or administrative adjustment instructions for Form 8982. request. See Form 1065-X and its separate Partnership-partners who are filing instructions for information on completing amended returns electronically as part of the and filing the form. modification will report the applicable payment of tax and interest and any When a partnership's federal return penalties on Form 1065, page 1, line 25. A TIP is amended or changed for any reason, it may affect the partnership's state tax return. For more information, contact the state tax agency for the state in which the partnership return was filed.

Other Forms, Returns, and Statements That May Be Required

Form, Return, or Statement Use this to—

W-2 and W-3—Wage and Tax Statement; and Transmittal of Wage Report wages, tips, other compensation, and withheld income, social security, and Medicare taxes for and Tax Statements employees. 720—Quarterly Federal Excise Tax Return Report and pay environmental excise taxes, communications and air transportation taxes, fuel taxes, manufacturers taxes, ship passenger tax, and certain other excise taxes. Also see Trust Fund Recovery Penalty, earlier. 940—Employer's Annual Federal Unemployment (FUTA) Tax Return Report and pay FUTA tax. 941—Employer's QUARTERLY Federal Tax Return Report quarterly income tax withheld on wages and employer and employee social security and Medicare taxes. Also see Trust Fund Recovery Penalty, earlier. 943—Employer's Annual Federal Tax Return for Agricultural Report income tax withheld and employer and employee social security and Medicare taxes on Employees farmworkers. Also see Trust Fund Recovery Penalty, earlier. 944—Employer's ANNUAL Federal Tax Return File annual Form 944 instead of filing quarterly Forms 941 if the IRS notified you in writing.

945—Annual Return of Withheld Federal Income Tax Report income tax withheld from nonpayroll payments, including pensions, annuities, individual retirement accounts (IRAs), gambling winnings, and backup withholding. Also see Trust Fund Recovery Penalty, earlier. 965—Inclusion of Deferred Foreign Income Upon Transition to Report deferred foreign income upon transition to a participation exemption system of taxation if the Participation Exemption System provisions of section 965 apply. Attach and submit with Form 1065. 1042 and 1042-S—Annual Withholding Tax Return for U.S. Source Report and send withheld tax on payments or distributions made to nonresident alien individuals, Income of Foreign Persons; and Foreign Person's U.S. Source foreign partnerships, or foreign corporations to the extent these payments or distributions constitute Income Subject to Withholding gross income from sources within the United States that isn't effectively connected with a U.S. trade or business. A domestic partnership must also withhold tax on a foreign partner's distributive share of such income, including amounts that are not actually distributed. Withholding on amounts not previously distributed to a foreign partner must be made and paid over by the earlier of: • The date on which Schedule K-1 is sent to that partner, or • The 15th day of the 3rd month after the end of the partnership's tax year. For more details, see sections 1441 and 1442 and Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

1042-T—Annual Summary and Transmittal of Forms 1042-S Transmit paper Forms 1042-S to the IRS. 1065-X—Amended Return or Administrative Adjustment Request Use Form 1065-X to correct a previously filed partnership return or to make an Administrative (AAR) Adjustment Request for a previously filed return. 1095-B and 1094-B—Health Coverage; and Transmittal of Forms Required to be filed by certain health issuers and others who provide minimum essential 1095-B coverage to report information on the primary insured and other individuals covered under the plan. 1095-C and 1094-C—Employer-Provided Health Insurance Offer and Used by certain employers to report information about the health care coverage the employer offered Coverage; and Transmittal of Forms 1095-C with regard to each full-time employee. 1096—Annual Summary and Transmittal of U.S. Information Returns Transmit paper Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G to the IRS. 1097-BTC—Bond Tax Credit Report tax credits to bond holders and tax credits passed to another person.

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Form, Return, or Statement Use this to— 1098—Mortgage Interest Statement Report the receipt from any individual of $600 or more of mortgage interest (including certain points) in the course of the partnership's trade or business. 1099-A, B, C, INT, K, LS, LTC, MISC, NEC, OID, R, S, and SA. Report the following. • Acquisitions or abandonments of secured property. Important. Every partnership must file Forms 1099-MISC or • Proceeds from broker and barter exchange transactions. 1099-NEC if, in the course of its trade or business, it makes payments • Cancellation of debts. of rents, commissions, or other fixed or determinable income (see • Interest income. section 6041) totaling $600 or more to any one person during the • Payment card and third-party network transactions. calendar year. • Payments of long-term care and accelerated death benefits. • Acquisition of a life insurance , or interest therein, in a reportable policy sale. • Miscellaneous income. • Non-employee compensation • Original issue discount. • Distributions from pensions, annuities, retirement or -sharing plans, IRAs, insurance contracts, etc. • Proceeds from real estate transactions. • Distributions from an HSA, Archer MSA, or Medicare Advantage MSA. 5471—Information Return of U.S. Persons With Respect to Certain A partnership may have to file Form 5471 if it: Foreign Corporations • Controls a foreign corporation; or • Acquires or owns 10% or more of the total combined voting power or values of shares of all classes of stock; or • Disposes of sufficient stock to reduce its interest to less than 10% of the total combined voting power or values of shares of all classes of stock. 5713—International Boycott Report Report operations in, or related to, a “boycotting” country, company, or national of a country and to figure the loss of certain tax benefits. The partnership must give each partner a copy of the Form 5713 filed by the partnership if there has been participation in, or cooperation with, an international boycott.

8275—Disclosure Statement Disclose items or positions, except those contrary to a regulation, that are not otherwise adequately disclosed on a tax return. The disclosure is made to avoid the parts of the accuracy-related penalty imposed for disregard of rules or substantial understatement of tax. Also use Form 8275 for disclosures relating to preparer penalties for understatements due to unrealistic positions or disregard of rules. 8275-R—Regulation Disclosure Statement Disclose any item on a tax return for which a position has been taken that is contrary to Treasury regulations. 8288 and 8288-A—U.S. Withholding Tax Return for Dispositions by Report and send withheld tax on the sale of U.S. real property by a foreign person. See section 1445 Foreign Persons of U.S. Real Property Interests; and Statement of and the related regulations for additional information. Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests 8300—Report of Cash Payments Over $10,000 Received in a Trade Report the receipt of more than $10,000 in cash or foreign currency in one transaction or a series of or Business related transactions. 8308—Report of a Sale or Exchange of Certain Partnership Interests Report the sale or exchange by a partner of all or part of a partnership interest where any money or other property received in exchange for the interest is attributable to unrealized receivables or inventory items.

8594—Asset Acquisition Statement Under Section 1060 Report a sale of assets if goodwill or going concern value attaches, or could attach, to such assets. Both the seller and buyer of a group of assets that makes up a trade or business must use this form. 8621—Information Return by a of a Passive Foreign Report ownership interest in a passive foreign investment company or qualified electing fund. Investment Company or Qualified Electing Fund 8697—Interest Computation Under the Look-Back Method for Figure the interest due or to be refunded under the look-back method of section 460(b)(2) on certain Completed Long-Term Contracts long-term contracts that are accounted for under either the percentage of completion-capitalized cost method or the percentage of completion method. Partnerships that are not closely held use this form. Closely held partnerships should see the instructions for line 20c, Look-back interest completed long-term contracts (code J), later, for details on the Form 8697 information they must provide to their partners. 8804, 8805, and 8813—Annual Return for Partnership Withholding Figure and report the withholding tax on the distributive shares of any effectively connected gross Tax (Section 1446); Foreign Partner's Information Statement of income for foreign partners. This is done on Forms 8804 and 8805. Use Form 8813 to send installment Section 1446 Withholding Tax; and Partnership Withholding Tax payments of withheld tax based on effectively connected taxable income allocable to foreign partners. Payment Voucher (Section 1446) Exception. Publicly traded partnerships do not file these forms. They must instead withhold tax on distributions to foreign partners and report and send payments using Forms 1042 and 1042-S. See Regulations section 1.1446-4 for more information. 8832—Entity Classification Election See Entity Classification Election, later. 8865—Return of U.S. Persons With Respect to Certain Foreign Report the information required under section 6038 (reporting with respect to controlled foreign Partnerships partnerships), section 6038B (reporting of transfers to foreign partnerships), or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests). See Form 8865 and its instructions for more details. 8866—Interest Computation Under the Look-Back Method for Figure the interest due or to be refunded under the look-back method of section 167(g)(2) for certain Property Depreciated Under the Income Forecast Method property placed in service after September 13, 1995, depreciated under the income forecast method. Partnerships that are not closely held use this form. Closely held partnerships should see the instructions for line 20c, Look-back interest income forecast method (code K), later, for details on the Form 8866 information they must provide to their partners. 8876—Excise Tax on Structured Settlement Transactions Report and pay the 40% excise tax imposed under section 5891.

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Form, Return, or Statement Use this to— 8886—Reportable Transaction Disclosure Statement Disclose information for each reportable transaction in which the partnership participated. Form 8886 must be filed for each tax year the partnership participated in the reportable transaction. The partnership may have to pay a penalty if it's required to file Form 8886 and doesn't do so. The following are reportable transactions. 1. Any listed transaction, which is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction and identified by notice, regulation, or other published guidance as a listed transaction. 2. Any transaction offered under conditions of confidentiality for which the partnership (or a related party) paid an adviser a fee of at least $50,000 ($250,000 for partnerships if all partners are corporations). 3. Certain transactions for which the partnership (or a related party) has contractual protection against disallowance of the tax benefits. 4. Certain transactions resulting in a loss of at least $2 million in any single year or $4 million in any combination of years. 5. Any transaction of interest, which is a transaction that is the same as, or substantially similar to, one of the types of transactions identified by the IRS by notice, regulation, or other published guidance. See Notice 2009-55, 2009-31 I.R.B. 170.

See Regulations section 1.6011-4, the Instructions for Form 8886, and the instructions for line 20c, Other information (code AH), later, for more information.

8918—Material Advisor Disclosure Statement Material advisors to any reportable transaction must disclose certain information about the reportable transaction by filing a Form 8918 with the IRS. See Form 8918 and its instructions for more details. 8925—Report of Employer-Owned Life Insurance Contracts Report the number of employees covered by employer-owned life insurance contracts issued after August 17, 2006, and the total amount of employer-owned life insurance in force on those employees at the end of the tax year. 8990—Limitation on Business Interest Expense Under Section 163(j) Business interest expense may be limited. See section 163(j) and Form 8990 and its instructions. Also see Schedule B, questions 23 and 24, and the related instructions.

8994—Employer Credit for Paid Family and Medical Leave Report if the partnership has a credit for paid family and medical leave. See the Instructions for Form 8994 for more information. 8996—Qualified Opportunity Fund Certify that the requirements to be a qualified opportunity fund investing in qualified opportunity zone property, as defined in section 1400Z-2 have been fulfilled. Entities attaching Form 8996 must also complete Form 1065, Schedule B, Question 26. For more information, see the Instructions for Form 8996. Assembling the Return partnership's name and EIN on each 1. Section 179 (election to expense supporting statement. certain property). When submitting Form 1065, organize the pages of the return in the following order. 2. Section 614 (definition of • Pages 1–5. Entity Classification property—mines, wells, and other natural • Schedule F (Form 1040), Profit or Loss Election deposits). This election must be made before From Farming (if required). the partners figure their individual depletion Use Form 8832, Entity Classification allowances under section 613A(c)(7)(D). • Form 8825, Rental Real Estate Income Election, to make a change in classification. and Expenses of a Partnership or an S Except for certain business entities always 3. Section 1033 (involuntary Corporation (if required). classified as a corporation, a business entity conversions). • Schedule D (Form 1065), Capital Gains with at least two members may choose to be 4. Section 754 (manner of electing and Losses (if required). classified either as a partnership or an optional adjustment to basis of partnership • Form 8949, Sales and Other Dispositions association taxable as a corporation. A property). of Capital Assets (if required). domestic eligible entity with at least two • Form 8996, Qualified Opportunity Fund (if Under section 754, a partnership may members that doesn't file Form 8832 is elect to adjust the basis of partnership required). classified under the default rules as a • Form 1125-A, Cost of Goods Sold (if property when property is distributed or partnership. However, a foreign eligible when a partnership interest is transferred. If required). entity with at least two members is classified • Form 8941, Credit For Small Employer the election is made regarding a transfer of a under the default rules as a partnership only partnership interest (section 743(b)) and the Health Insurance Premiums (if required). if the entity doesn't provide limited liability to • Form 6252, Installment Sale Income (if assets of the partnership constitute a trade at least one member. File Form 8832 only if or business for purposes of section 1060(c), required). the entity doesn't want to be classified under • Schedules K-1 (Form 1065). then the value of any goodwill transferred these default rules or if it wants to change its must be determined in the manner provided • Form 8938, Statement of Specified classification. Foreign Financial Assets (if required). in Regulations section 1.1060-1. Once an • Any other schedules in alphabetical order. Attach a copy of Form 8832 to the election is made under section 754, it applies • Any other forms in numerical order. ! partnership's federal tax return for both to all distributions and to all transfers CAUTION the tax year of the election. made during the tax year and in all Complete every applicable entry space subsequent tax years unless the election is on Form 1065 and Schedule K-1. Do not revoked. enter “See attached” instead of completing Elections Made by the This election must be made in a the entry spaces. Penalties may be Partnership statement that is filed with the partnership's assessed if the partnership files an Generally, the partnership decides how to timely filed return (including any extension) incomplete return. If you need more space figure income from its operations. For for the tax year during which the distribution on the forms or schedules, attach separate example, it chooses the accounting method or transfer occurs. See Proposed sheets and place them at the end of the and depreciation methods it will use. The Regulations section 1.754-1(b)(1). The return using the same size and format as on partnership also makes elections under the statement must include: the printed forms. Show the totals on the following sections. • The name and address of the partnership, printed forms. Also be sure to put the and

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• A declaration that the partnership elects • The name and EIN of the partnership 3. Section 617 (deduction and recapture under section 754 to apply the provisions of making the election; of certain exploration expenditures section 734(b) and section 743(b). • A declaration that the partnership elects paid or incurred). The partnership can get an automatic under Regulations section 1.1411-10(g) to 4. Section 901 (foreign tax credit). 12-month extension to make the section 754 apply the rules in Regulations section election, provided corrective action is taken 1.1411-10(g) to the CFCs and QEFs Partner's Dealings With within 12 months of the original deadline for identified in the statement; and making the election. For details, see • The following information for each CFC Partnership Regulations section 301.9100-2. and QEF for which an election is made: (i) If a partner engages in a transaction with his the name of the CFC or QEF; and (ii) either or her partnership, other than in his or her See section 754 and the related the EIN of the CFC or QEF, or, if the CFC or regulations for more information. capacity as a partner, the partner is treated QEF doesn't have an EIN, the reference ID as not being a member of the partnership for If there is a distribution of property number of the CFC or QEF. that transaction. Special rules apply to sales consisting of an interest in another In addition, for each CFC or QEF held by or exchanges of property between partnership, see section 734(b). the partnership for which an election under partnerships and certain persons, as The partnership is required to attach a Regulations section 1.1411-10(g) has explained in Pub. 541, Partnerships. statement for any section 743(b) basis already been made by the partnership, the adjustments. See below for details. statement should include (i) the name of the Contributions to the To revoke a section 754 election, the CFC or QEF; and (ii) either the EIN of the Partnership partnership must file the revocation request CFC or QEF, or, if the CFC or QEF doesn't using Form 15254, Request for Section 754 have an EIN, the reference ID number of the Generally, no gain (loss) is recognized to the Revocation. See the Instructions for Form CFC or QEF. partnership or any of the partners when property is contributed to the partnership in 15254 for more information. 7. Section 41(h) (payroll tax credit exchange for an interest in the partnership. election). 5. Section 743(e) (electing investment This rule doesn't apply to any gain realized partnership). Effect of Section 743(b) Basis on a transfer of property to a partnership that 6. Regulations section 1.1411-10(g) would be treated as an investment company (section 1411 election regarding CFCs and Adjustment on Partnership (within the meaning of section 351(e)) if the QEFs). Items partnership were incorporated. If, as a result A domestic partnership that directly or If the basis of partnership property has been of a transfer of property to a partnership, indirectly owns stock of a controlled foreign adjusted for a transferee partner under there is a direct or indirect transfer of money corporation (CFC) (within the meaning of section 743(b), the partnership must adjust or other property to the transferring partner, section 953(c)(1)(B) or section 957(a)) or a the transferee's distributive share of the the partner may have to recognize gain on passive foreign investment company (within items of partnership income, deduction, gain, the exchange. the meaning of section 1297(a)) that the or loss in accordance with Regulations The basis to the partnership of property domestic partnership treats as a qualified section 1.743-1(j)(3) and (4). These contributed by a partner is the adjusted basis electing fund (QEF) under section 1293 may adjustments (other than adjustments to in the hands of the partner at the time it was make the election provided in Regulations depletable oil and gas property allocable to contributed, plus any gain recognized (under section 1.1411-10(g). The election must be the partner under section 613A(c)(7)(D)) section 721(b)) by the partner at that time. made no later than the first tax year must be reported on Schedule K and the See section 723 for more information. beginning after 2013 during which the transferee partner's Schedule K-1. Report partnership (i) includes an amount in gross the adjustments on an attached statement on See Regulations sections 1.721(c)-1(b) income for chapter 1 purposes under section line 20, code AH. See instructions for line 20. (7) and 1.721(c)-3(b) for more information on 951(a) or section 1293(a) for the CFC or Identify the partnership item being adjusted a gain deferral contribution of section 721(c) QEF, and (ii) has a direct or indirect owner and the amount of the adjustment. If the property to a section 721(c) partnership. Also that is subject to tax under section 1411 or adjustments are to partnership items from see Section 721(c) Partnership, Section would have been if the election were made. more than one trade or business, report the 721(c) Property, and Gain Deferral Method This election must be made on an adjustments separately for each activity. under Definitions, earlier. entity-by-entity basis, and applies only to the particular CFCs and QEFs for which an Electing Out of the Centralized Dispositions of election is made. In general, for purposes of Partnership Audit Regime Contributed Property section 1411, if an election is in effect for a A partnership can elect out of the centralized CFC or QEF, the amounts included in Generally, if the partnership disposes of partnership audit regime for a tax year if the property contributed to the partnership by a income under section 951 and section 1293 partnership is an eligible partnership that derived from the CFC or QEF are included in partner, income, gain, loss, and deductions year. See Question 25 under Schedule B from that property must be allocated among net investment income, and distributions below. described in section 959(d) or section the partners to take into account the 1293(c) are excluded from net investment difference between the property's basis and income. An election that is made under Elections Made by Each its FMV at the time of the contribution. Regulations section 1.1411-10(g) cannot be Partner However, if the adjusted basis of the contributed property exceeds its FMV at the revoked. For more information regarding this Elections under the following sections are time of the contribution, the built-in loss can election, see Regulations section made by each partner separately on the only be taken into account by the 1.1411-10(g). partner's tax return. contributing partner. For all other partners, The election must be made in a statement 1. Section 59(e) (election to deduct the basis of the property in the hands of the that is filed with the partnership’s original or ratably certain qualified expenditures such partnership is treated as equal to its FMV at amended return for the tax year in which the as intangible drilling costs, mining the time of the contribution (see section election is made. An election can be made exploration expenses, or research and 704(c)(1)(C)). on an amended return only if the tax year for experimental expenditures). which the election is made, and all tax years For property contributed to the 2. Section 108 (income from discharge affected by the election, aren't closed by the partnership, the contributing partner must of indebtedness). period of limitations on assessments under recognize gain or loss on a distribution of the section 6501. The statement must include: property to another partner within 7 years of being contributed. The gain or loss is equal

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to the amount that the contributing partner income (loss). The income (loss) is specially If you aggregate your activities under should have recognized if the property had allocated only to partners other than the these rules for section 465 purposes, check been sold for its FMV when distributed, distributee partner. the appropriate box in item K. because of the difference between the At-risk activity reporting requirements. If property's basis and its FMV at the time of If a partnership gives other property the partnership items of income, loss or contribution. (including money) for all or part of that partner's interest in the partnership's deduction reported on Schedule K-1 are See section 704(c) for details and other unrealized receivables or substantially from more than one activity covered by the rules on dispositions of contributed property. appreciated inventory items, treat the at-risk rules, the partnership should report on See section 724 for the character of any gain transaction as a sale or exchange of the an attachment to Schedule K-1 information or loss recognized on the disposition of property. relating to each activity as is required by Item unrealized receivables, inventory items, or K. Partner's Share of Liabilities. Additional capital loss property contributed to the See Rev. Rul. 84-102, 1984-2 C.B. 119, information needed to enable the partner to partnership by a partner. for information on the tax consequences that compute the profit or loss from each at-risk result when a new partner joins a partnership activity and the amount at risk may be See Regulations sections 1.721(c)-4 and required to be separately reported pursuant 1.721(c)-5 for more information on certain that has liabilities and unrealized receivables. Also see Pub. 541 for more to the Instructions for Form 6198 and Pub. dispositions of contributed 721(c) property to 925. which the gain deferral method applies. Also information on unrealized receivables and see Section 721(c) Partnership, Section inventory items. 721(c) Property, and Gain Deferral Method Passive Activity under Definitions, earlier. At-Risk Limitations Limitations In general, section 465 limits the amount of In general, section 469 limits the amount of Recognition of deductible losses partners can claim from losses, deductions, and credits that partners certain activities. The at-risk limitations don't can claim from “passive activities.” The Precontribution Gain on apply to the partnership, but instead apply to passive activity limitations don't apply to the Certain Partnership each partner's share of net losses partnership. Instead, they apply to each Distributions attributable to each activity. Because the partner's share of any income or loss and treatment of each partner's share of credit attributable to a passive activity. A partner who contributes appreciated partnership losses depends on the nature of Because the treatment of each partner's property to the partnership must include in the activity that generated it, the partnership share of partnership income or loss and income any precontribution gain to the extent must report the items of income, loss, and credit depends on the nature of the activity the FMV of other property (other than deduction separately for each activity. The that generated it, the partnership must report money) distributed to the partner by the at-risk limitation applies to individuals, income or loss and credits separately for partnership exceeds the adjusted basis of estates, trusts, and certain closely held C each activity. his or her partnership interest just before the corporations. See Pub. 925, Passive Activity distribution. Precontribution gain is the net and At-Risk Rules, for additional information. The following instructions and the gain, if any, that would have been instructions for Schedules K and K-1, later, recognized under section 704(c)(1)(B) if the Activities covered by the at-risk rules. If explain the applicable passive activity partnership had distributed to another the partnership is involved in one of the limitation rules and specify the type of partner all the property that had been following activities as a trade or business or information the partnership must provide to contributed to the partnership by the for the production of income, the partner may its partners for each activity. If the distributee partner within 7 years of the be subject to the at-risk rules. partnership had more than one activity, it distribution and that was held by the 1. Holding, producing, or distributing must report information for each activity on partnership just before the distribution. motion picture films or video tapes. an attached statement to Schedules K and K-1. Appropriate basis adjustments are to be 2. Farming. made to the adjusted basis of the distributee 3. Leasing section 1245 property, Generally, passive activities include (a) partner's interest in the partnership and the including personal property and certain other activities that involve the conduct of a trade partnership's basis in the contributed tangible property that's depreciable or or business if the partner doesn't materially property to reflect the gain recognized by the amortizable. participate in the activity, and (b) all rental partner. activities (defined later) regardless of the 4. Exploring for, or exploiting, oil and partner's participation. For exceptions, see gas. For more details and exceptions, see Activities That Are Not Passive Activities, Pub. 541. 5. Exploring for, or exploiting, later. The level of each partner's participation geothermal deposits (for wells started after in an activity must be determined by the Unrealized Receivables September 1978). partner. 6. Any other activity not included in and Inventory Items The passive activity rules provide that items 1 through 5, above, that's carried on as Generally, if a partner sells or exchanges a losses and credits from passive activities can a trade or business or for the production of partnership interest where unrealized generally be applied only against income income. receivables or inventory items are involved, and tax from passive activities. Thus, the transferor partner must notify the passive losses and credits cannot be applied Aggregation of activities. Activities partnership, in writing, within 30 days of the against income from , wages, described in (6) above that constitute a trade exchange. The partnership must then file professional fees, or a business in which the or business are treated as one activity if: Form 8308, Report of a Sale or Exchange of partner materially participates; against You actively participate in the Certain Partnership Interests. • “portfolio income” (defined later); or against of the trade or business, or the tax related to any of these types of The trade or business is carried on by a If a partnership distributes unrealized • income. receivables or substantially appreciated partnership or and 65% or inventory items in exchange for all or part of more of its losses for the tax year are Special provisions apply to certain a partner's interest in other partnership allocable to persons who actively participate activities. First, the passive activity limitations property (including money), treat the in the management of the trade or business. must be applied separately for a net loss transaction as a sale or exchange between Similar rules apply to activities described in from passive activities held through a the partner and the partnership. Treat the items (1) through (5) above. For more publicly traded partnership. Second, special partnership gain (loss) as ordinary business information, see Pub. 925. rules require that net income from certain

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activities that would otherwise be treated as 4. The rental of a dwelling unit used by a • The rental of such property is treated as passive income must be recharacterized as partner for personal purposes during the incidental to a nonrental activity of the nonpassive income for purposes of the year for more than the greater of 14 days or partnership under Temporary Regulations passive activity limitations. 10% of the number of days that the section 1.469-1T(e)(3)(vi) and Regulations residence was rented at fair rental value. section 1.469-1(e)(3)(vi)(D). To allow each partner to correctly apply 5. An activity of trading personal • The partnership customarily makes the the passive activity limitations, the property for the account of owners of property available during defined business partnership must report income or loss and interests in the activity. For purposes of this hours for nonexclusive use by various credits separately by activity for each of the rule, personal property means property that customers. following. is actively traded, such as stocks, bonds, • The partnership provides property for use • Trade or business activities. and other securities. See Temporary in a nonrental activity of a partnership or joint • Rental real estate activities. Regulations section 1.469-1T(e)(6). venture in its capacity as an owner of an • Rental activities other than real estate. interest in such partnership or joint venture. • Portfolio income. Trade or Business Activities Whether the partnership provides property used in an activity of another partnership or A trade or business activity is an activity Activities That Are Not Passive of a joint venture in the partnership's capacity (other than a rental activity or an activity Activities as an owner of an interest in the partnership treated as incidental to an activity of holding or joint venture is determined on the basis of The following are not passive activities. property for investment) that: all the facts and circumstances. 1. Trade or business activities in which 1. Involves the conduct of a trade or the partner materially participated for the tax business (within the meaning of section In addition, a guaranteed payment year. 162), described in section 707(c) is never income 2. Any rental real estate activity in which 2. Is conducted in anticipation of starting from a rental activity. the partner materially participated if the a trade or business, or Average period of customer use. Figure partner met both of the following conditions 3. Involves research or experimental the average period of customer use for a for the tax year. expenditures deductible under section 174 class of property by dividing the total number a. More than half of the personal (or that would be if you chose to deduct of days in all rental periods by the number of services the partner performed in or rather than capitalize them). rentals during the tax year. If the activity were performed in real property involves renting more than one class of trades or businesses in which he or she If the partner doesn't materially participate property, multiply the average period of materially participated. in the activity, a trade or business activity customer use of each class by the ratio of conducted through a partnership is generally b. The partner performed more than 750 the gross rental income from that class to the a passive activity of the partner. hours of services in real property trades or activity's total gross rental income. The businesses in which he or she materially Each partner must determine if the activity's average period of customer use participated. partner materially participated in an activity. equals the sum of these class-by-class As a result, while the partnership's ordinary average periods weighted by gross income. Note. For a partner that is a closely held C business income (loss) is reported on page 1 See Regulations section 1.469-1(e)(3)(iii). corporation (defined in section 465(a)(1)(B)), of Form 1065, the specific income and Significant personal services. Personal the above conditions are treated as met if deductions from each separate trade or services include only services performed by more than 50% of the corporation's gross business activity must be reported on individuals. To determine if personal services receipts are from real property trades or attached statements to Form 1065. Similarly, are significant personal services, consider all businesses in which the corporation while each partner's distributive share of the the relevant facts and circumstances. materially participated. partnership's ordinary business income Relevant facts and circumstances include: (loss) is reported in box 1 of Schedule K-1, For purposes of this rule, each interest in How often the services are provided, each partner's distributive share of the • rental real estate is a separate activity, The type and amount of labor required to income and deductions from each trade or • unless the partner elects to treat all interests perform the services, and business activity must be reported on in rental real estate as one activity. The value of the services in relation to the attached statements to each Schedule K-1. • amount charged for use of the property. If the partner is married filing jointly, either See Passive Activity Reporting the partner or his or her spouse must Requirements, later, for more information. The following services aren't considered separately meet both of the above in determining whether personal services are conditions, without taking into account Rental Activities significant. services performed by the other spouse. Generally, except as noted below, if the • Services necessary to permit the lawful A real property trade or business is any gross income from an activity consists of use of the rental property. real property development, redevelopment, amounts paid principally for the use of real or • Services performed in connection with construction, reconstruction, acquisition, personal tangible property held by the improvements or repairs to the rental conversion, rental, operation, management, partnership, the activity is a rental activity. property that extend the useful life of the property substantially beyond the average leasing, or brokerage trade or business. There are several exceptions to this rental period. Services the partner performed as an general rule. Under these exceptions, an Services provided in connection with the employee aren't treated as performed in a activity involving the use of real or personal • use of any improved real property that are real property trade or business unless he or tangible property isn't a rental activity if any similar to those commonly provided in she owned more than 5% of the stock (or of the following apply. connection with long-term rentals of more than 5% of the capital or profits The average period of customer use • high-grade commercial or residential interest) in the employer. (defined below) for such property is 7 days or property. Examples include cleaning and 3. An interest in an oil or gas well drilled less. maintenance of common areas, routine or operated under a working interest if at any The average period of customer use for • repairs, trash collection, elevator service, time during the tax year the partner held the such property is 30 days or less and and security at entrances. working interest directly or through an entity significant personal services (defined below) that didn't limit the partner's liability (for are provided by or on behalf of the Extraordinary personal services. example, an interest as a general partner). partnership. Services provided in connection with making This exception applies regardless of whether • Extraordinary personal services (defined rental property available for customer use the partner materially participated for the tax below) are provided by or on behalf of the are extraordinary personal services only if year. partnership. the services are performed by individuals

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and the customers' use of the rental property limited to $25,000. This $25,000 amount is See Temporary Regulations section is incidental to their receipt of the services. generally reduced for high-income partners. 1.469-2T(c)(3) for more information on For example, a patient's use of a hospital Report rental real estate activity income portfolio income. room is generally incidental to the care (loss) on Form 8825, Rental Real Estate Report portfolio income and related received from the hospital's medical staff. Income and Expenses of a Partnership or an deductions on Schedule K rather than on Similarly, a student's use of a dormitory room S Corporation, and line 2 of Schedule K and page 1 of Form 1065. in a boarding school is incidental to the in box 2 of Schedule K-1, rather than on personal services provided by the school's page 1 of Form 1065. Report credits related teaching staff. to rental real estate activities on lines 15c Self-Charged Interest and 15d of Schedule K (box 15, codes E and Rental activity incidental to a nonrental Certain self-charged interest income and F, of Schedule K-1) and low-income housing activity. An activity isn't a rental activity if deductions may be treated as passive credits on lines 15a and 15b of Schedule K the rental of the property is incidental to a activity gross income and passive activity (box 15, codes A–D of Schedule K-1). nonrental activity, such as the activity of deductions if the loan proceeds are used in a holding property for investment, a trade or See the instructions for . Other Net passive activity. Generally, self-charged business activity, or the activity of dealing in Rental Income (Loss), later, for reporting interest income and deductions result from property. other net rental income (loss) other than loans between the partnership and its rental real estate. partners. It also includes loans between the Rental of property is incidental to an partnership and another partnership if each activity of holding property for investment if Portfolio Income owner in the borrowing entity has the same both of the following apply. Generally, portfolio income includes all gross proportional ownership interest in the lending The main purpose for holding the property • income, other than income derived in the entity. is to realize a gain from the appreciation of ordinary course of a trade or business, that is the property. attributable to interest; ; royalties; The self-charged interest rules don't The gross rental income from such • income from a real estate investment trust, a apply to a partner's interest in a partnership if property for the tax year is less than 2% of regulated investment company, a real estate the partnership makes an election under the smaller of the property's unadjusted mortgage investment conduit, a common Regulations section 1.469-7(g) to avoid the basis or its FMV. trust fund, a controlled foreign corporation, a application of these rules. To make the Rental of property is incidental to a trade qualified electing fund, or a ; election, the partnership must attach to its or business activity if all of the following income from the disposition of property that original or amended partnership return a apply. produces income of a type defined as statement that includes the name, address, • The partnership owns an interest in the portfolio income; and income from the and EIN of the partnership and a declaration trade or business at all times during the year. disposition of property held for investment. that the election is being made under • The rental property was mainly used in See Self-Charged Interest, later, for an Regulations section 1.469-7(g). The election the trade or business activity during the tax exception. will apply to the tax year in which it was year or during at least 2 of the 5 preceding made and all subsequent tax years. Once tax years. Solely for purposes of the preceding made, the election may only be revoked with • The gross rental income from the property paragraph, gross income derived in the the consent of the IRS. for the tax year is less than 2% of the smaller ordinary course of a trade or business of the property's unadjusted basis or its includes (and portfolio income, therefore, For more details on the self-charged FMV. doesn't include) the following types of interest rules, see Regulations section The sale or exchange of property that is income. 1.469-7. also rented during the tax year (in which the • Interest income on loans and investments Grouping Activities gain or loss is recognized) is treated as made in the ordinary course of a trade or Generally, one or more trade or business or incidental to the activity of dealing in property business of lending money. rental activities may be treated as a single if, at the time of the sale or exchange, the • Interest on accounts receivable arising activity if the activities make up an property was held primarily for sale to from the performance of services or the sale appropriate economic unit for measurement customers in the ordinary course of the of property in the ordinary course of a trade of gain or loss under the passive activity partnership's trade or business. or business of performing such services or selling such property, but only if credit is rules. Whether activities make up an See Temporary Regulations section customarily offered to customers of the appropriate economic unit depends on all the 1.469-1T(e)(3) and Regulations section business. relevant facts and circumstances. The 1.469-1(e)(3) for more information on the • Income from investments made in the factors given the greatest weight in definition of rental activities for purposes of ordinary course of a trade or business of determining whether activities make up an the passive activity limitations. furnishing insurance or annuity contracts or appropriate economic unit are: Reporting of rental activities. In reporting reinsuring risks underwritten by insurance • Similarities and differences in types of the partnership's income or losses and companies. trades or businesses, credits from rental activities, the partnership • Income or gain derived in the ordinary • The extent of common control, must separately report rental real estate course of an activity of trading or dealing in • The extent of common ownership, activities and rental activities other than any property if such activity constitutes a • Geographical location, and rental real estate activities. trade or business (unless the dealer held the • Reliance between or among the activities. Partners who actively participate in a property for investment at any time before Example. The partnership has a rental real estate activity may be able to such income or gain is recognized). significant ownership interest in a bakery and deduct part or all of their rental real estate • Royalties derived by the taxpayer in the a movie theater in Baltimore and a bakery losses (and the deduction equivalent of ordinary course of a trade or business of and a movie theater in Philadelphia. rental real estate credits) against income (or licensing intangible property. Depending on the relevant facts and tax) from nonpassive activities. The • Amounts included in the gross income of circumstances, there may be more than one combined amount of rental real estate losses a patron of a cooperative by reason of any reasonable method for grouping the and the deduction equivalent of rental real payment or allocation to the patron based on partnership's activities. For instance, the estate credits from all sources (including patronage as a result of a trade or business following groupings may or may not be rental real estate activities not held through of the patron. permissible. the partnership) that may be claimed is • Other income identified by the IRS as • A single activity. income derived by the taxpayer in the • A movie theater activity and a bakery ordinary course of a trade or business. activity.

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• A Baltimore activity and a Philadelphia nonpassive income. Net passive income is item of rental property begins on the first day activity. the excess of an activity's passive activity that (a) the partnership owns an interest in • Four separate activities. gross income over its passive activity the property, (b) substantially all of the Once the partnership chooses a grouping deductions (current year deductions and property is either rented or held out for rent under these rules, it must continue using that prior year unallowed losses). and ready to be rented, and (c) no significant grouping in later tax years unless a material value-enhancing services remain to be Any net passive income recharacterized change in the facts and circumstances performed. as nonpassive income is treated as makes it clearly inappropriate. • The partner materially or significantly investment income for purposes of figuring participated for any tax year in an activity that The IRS may regroup the partnership's investment interest expense limitations if it is involved performing services to enhance the activities if the partnership's grouping fails to from (a) an activity of renting substantially value of the property (or any other item of reflect one or more appropriate economic nondepreciable property from an property if the basis of the property disposed units and one of the primary purposes of the equity-financed lending activity, or (b) an of is determined in whole or in part by grouping is to avoid the passive activity activity related to an interest in a reference to the basis of that item of limitations. pass-through entity that licenses intangible property). property. Limitation on grouping certain activities. Because the partnership cannot The following activities may not be grouped The amount of income from the activities determine a partner's level of participation, together. in the first three paragraphs, below, that any the partnership must identify net income from 1. A rental activity with a trade or partner will be required to recharacterize as property described earlier under Rental business activity unless the activities being nonpassive income may be limited under Activities (without regard to the partner's grouped together make up an appropriate Temporary Regulations section 1.469-2T(f) level of participation) as income that may be economic unit and: (8). Because the partnership will not have subject to recharacterization. a. The rental activity is insubstantial information regarding all of a partner's Rental of property to a nonpassive activi- relative to the trade or business activity or activities, it must identify all partnership ty. If a taxpayer rents property to a trade or vice versa, or activities meeting the definitions in the business activity in which the taxpayer Certain nondepreciable rental property b. Each owner of the trade or business materially participates, the taxpayer's net activities and Passive equity-financed activity has the same proportionate rental activity income from the property is lending activities paragraphs as activities ownership interest in the rental activity. If so, nonpassive income. that may be subject to recharacterization. the portion of the rental activity involving the Acquisition of an interest in a rental of property to be used in the trade or Income from the following six sources is pass-through entity that licenses intangi- business activity can be grouped with the subject to recharacterization. ble property. Generally, net royalty income trade or business activity. from intangible property is nonpassive Significant participation passive activi- 2. An activity involving the rental of real income if the taxpayer acquired an interest in ties. A significant participation passive property with an activity involving the rental the pass-through entity after the activity is any trade or business activity in of personal property (except personal pass-through entity created the intangible which the partner participated for more than property provided in connection with the real property or performed substantial services or 100 hours during the tax year but didn't property or vice versa). incurred substantial costs in developing or materially participate. Because each partner marketing the intangible property. Net royalty 3. Any activity with another activity in a must determine the partner's level of income is the excess of passive activity different type of business and in which the participation, the partnership will not be able gross income from licensing or transferring partnership holds an interest as a limited to identify significant participation passive any right in intangible property over passive partner or as a limited entrepreneur (as activities. defined in section 461(k)(4)) if that other activity deductions (current year deductions activity engages in holding, producing, or Certain nondepreciable rental property and prior year unallowed losses) that are distributing motion picture films or activities. Net passive income from a reasonably allocable to the intangible videotapes; farming; leasing section 1245 rental activity is nonpassive income if less property. property; or exploring for or exploiting oil and than 30% of the unadjusted basis of the See Temporary Regulations section gas resources or geothermal deposits. property used or held for use by customers 1.469-2T(f)(7)(iii) for exceptions to this rule. in the activity is subject to depreciation under Activities conducted through other part- section 167. Passive Activity Reporting nerships. Once a partnership determines Passive equity-financed lending activi- Requirements its activities under these rules, the ties. If the partnership has net income from To allow partners to correctly apply the partnership as a partner can use these rules a passive equity-financed lending activity, passive activity loss and credit limitation to group those activities with: the smaller of the net passive income or the rules, the partnership must do the following. • Each other, equity-financed interest income from the 1. If the partnership carries on more • Activities conducted directly by the activity is nonpassive income. partnership, or than one activity, provide an attached • Activities conducted through other Rental of property incidental to a devel- statement for each activity conducted partnerships. opment activity. Net rental activity income through the partnership that identifies the is the excess of passive activity gross type of activity conducted (trade or business, A partner cannot treat as separate income from renting or disposing of property rental real estate, or rental activity other than activities those activities grouped together by over passive activity deductions (current rental real estate). See Grouping Activities, a partnership. year deductions and prior year unallowed discussed earlier. If you group your activities under these losses) that are reasonably allocable to the 2. On the attached statement for each rules for section 469 purposes, check the rented property. Net rental activity income is activity, provide a statement, using the same appropriate box in item K. nonpassive income for a partner if all of the box numbers as shown on Schedule K-1, Recharacterization of Passive following apply. detailing the net income (loss), credits, and • The partnership recognizes gain from the all items required to be separately stated Income sale, exchange, or other disposition of the under section 702(a) from each trade or Under Temporary Regulations section rental property during the tax year. business activity, from each rental real estate 1.469-2T(f) and Regulations section • The use of the item of property in the activity, from each rental activity other than a 1.469-2(f), net passive income from certain rental activity started less than 12 months rental real estate activity, and from passive activities must be treated as before the date of disposition. The use of an investments. If the partnership grouped

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separate activities, the attachments must d. If section 736(a)(2) payments are 15. Identify separately the credits from identify each group. The attached group made for unrealized receivables or for each activity conducted by or through the activity description must be sufficient for a goodwill, the amount of the payments and partnership. partner to determine if its other activities the activities to which the payments are 16. Identify the partner's distributive qualify to be grouped with any groups attributable. share of the partnership's self-charged provided by the partnership. e. If section 736(b) payments are made, interest income or expense (see 3. Identify the net income (loss) and the amount of the payments and the Self-Charged Interest, earlier). credits from each oil or gas well drilled or activities to which the payments are a. Loans between a partner and the operated under a working interest that any attributable. partnership. Identify the lending or partner (other than a partner whose only 9. Identify the ratable portion of any borrowing partner's share of the self-charged interest in the partnership during the year is section 481 adjustment (whether a net interest income or expense. If the partner as a limited partner) holds through the positive or a net negative adjustment) made the loan to the partnership, also partnership. Further, if any partner had an allocable to each partnership activity. identify the activity in which the loan interest as a general partner in the 10. Identify the amount of gross income proceeds were used. If the proceeds were partnership during less than the entire year, used in more than one activity, allocate the the partnership must identify both the from each oil or gas property of the partnership. interest to each activity based on the amount disqualified deductions from each well that of the proceeds used in each activity. the partner must treat as passive activity 11. Identify any gross income from deductions, and the ratable portion of the sources specifically excluded from passive b. Loans between the partnership gross income from each well that the partner activity gross income, including: and another partnership or an S must treat as passive activity gross income. corporation. If the partnership's partners a. Income from intangible property if the have the same proportional ownership 4. Identify the net income (loss) and the partner is an individual whose personal interest in the partnership and the other partner's share of partnership interest efforts significantly contributed to the partnership or S corporation, identify each expense from each activity of renting a creation of the property; partner's share of the interest income or dwelling unit that any partner uses for b. Income from state, local, or foreign expense from the loan. If the partnership was personal purposes during the year for more income tax refunds; and the borrower, also identify the activity in than the greater of 14 days or 10% of the c. Income from a covenant not to which the loan proceeds were used. If the number of days that the residence is rented compete if the partner is an individual who loan proceeds were used in more than one at fair rental value. contributed the covenant to the partnership. activity, allocate the interest to each activity 5. Identify the net income (loss) and the based on the amount of the proceeds used 12. Identify any deductions that aren't partner's share of partnership interest in each activity. passive activity deductions. expense from each activity of trading personal property conducted through the 13. If the partnership makes a full or Net Investment Income Tax partnership. partial disposition of its interest in another Reporting Requirements entity, identify the gain (loss) allocable to 6. For any gain (loss) from the each activity conducted through the entity, The information described in this section disposition of an interest in an activity or of and the gain allocable to a passive activity should be given directly to the partner and an interest in property used in an activity that would have been recharacterized as should not be reported by the partnership to (including dispositions before 1987 from nonpassive gain had the partnership the IRS. which gain is being recognized after 1986): disposed of its interest in property used in To allow partners to correctly figure the a. Identify the activity in which the the activity (because the property was net investment income tax where a partner property was used at the time of disposition; substantially appreciated at the time of the disposes of an interest in the partnership disposition, and the gain represented more b. If the property was used in more than during the tax year, the partnership may be than 10% of the partner's total gain from the one activity during the 12 months preceding required to provide the partner with certain disposition). the disposition, identify the activities in which information. The net investment income tax the property was used and the adjusted 14. Identify the following items from is a tax imposed on an individual’s, trust’s, or basis allocated to each activity; and activities that may be subject to the estate’s net investment income. Net c. For gains only, if the property was recharacterization rules. See investment income includes the net gains or substantially appreciated at the time of the Recharacterization of Passive Income, losses from the sale of an interest in the disposition and the applicable holding period earlier. partnership. A partner who is actively specified in Regulations section 1.469-2(c) a. Net income from an activity of renting involved in one or more of the partnership or (2)(iii)(A) wasn't satisfied, identify the amount substantially nondepreciable property. lower-tier pass-through entities’ trades or of the nonpassive gain and indicate whether businesses (other than trading in financial b. The smaller of equity-financed the gain is investment income under instruments or commodities) can reduce the interest income or net passive income from Regulations section 1.469-2(c)(2)(iii)(F). amount of the gain or loss from the sale of an equity-financed lending activity. 7. Specify the amount of gross portfolio the partnership or lower-tier pass-through c. Net rental activity income from income, the interest expense properly entity interest included in its net investment property developed (by the partner or the allocable to portfolio income, and expenses income. However, to figure its net investment partnership), rented, and sold within 12 other than interest expense that are clearly income, the active partner needs certain months after the rental of the property and directly allocable to portfolio income. information from the partnership. commenced. 8. Identify separately any of the d. Net rental activity income from the Generally, the partnership must provide following types of payments to partners. rental of property by the partnership to a certain information to the partner if the a. Payments to a partner for services trade or business activity in which the partner partnership knows, or has reason to know, other than in the partner's capacity as a had an interest (either directly or indirectly). the following. partner under section 707(a). e. Net royalty income from intangible 1. The partner disposed of an interest in b. Guaranteed payments to a partner for property if the partner acquired the partner's the partnership. services under section 707(c). interest in the partnership after the 2. The partner materially participates c. Guaranteed payments for use of partnership created the intangible property or (within the meaning of the passive activity capital. performed substantial services, or incurred loss rules (section 469)) in one or more of substantial costs in developing or marketing the trades or businesses (within the meaning the intangible property. of section 162) of the partnership or a

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lower-tier pass-through entity (other than foreign trading gross receipts from of If the partnership receives its mail in care trading in financial instruments or Form 8873 in box 16 using code S. of a third party (such as an accountant or an commodities). • Extraterritorial income exclusion (code T). attorney), enter “C/O” on the street address 3. The partner doesn't qualify for the Report each partner's distributive share of line, followed by the third party’s name and optional simplified reporting method for the extraterritorial income exclusion from street address or P.O. box. line 52 of Form 8873 in box 16 using code T figuring its net investment income associated If the partnership's address is outside the with the disposition of the interest. For more and identify on an attached statement the activity to which the exclusion relates. If the United States or its possessions or information, see the instructions for Form territories, enter the information on the line 8960, line 5c. partnership is required to complete more than one Form 8873, combine the exclusions for “City or town, state or province, country, and ZIP or foreign postal code” in the Information to be provided to partner. from line 52 and report a single exclusion amount in box 16. following order: city, province or state, and Generally, the partnership must provide the the foreign country. Follow the foreign partner with its distributive share of the net Upon request of a partner, the country's practice in placing the postal code gain and loss from the deemed sale for FMV TIP partnership should furnish a copy of in the address. Do not abbreviate the country of the partnership’s property, other than the partnership's Form 8873 if that name. property that relates to the trades or partner has a reduction for international If the partnership has changed its businesses in which the partner materially boycott operations, illegal bribes, kickbacks, address since it last filed a return (including a participates, as determined under the etc. passive activity loss rules applicable to the change to an “in care of” address), check transfer of an interest in a pass-through box G(4) for “Address change.” entity. For more information see the If the partnership changes its mailing instructions for Form 8960, line 5c. Specific Instructions address or the responsible party If a partner, who qualifies for the optional after filing its return, it can notify the simplified reporting method, prefers to These instructions follow the line numbers on IRS by filing Form 8822-B, Change of determine net gain or loss under the general the first page of Form 1065. The Address or Responsible Party—Business. calculation, the partnership may, but isn't accompanying schedules are discussed obligated to, provide the information to the separately. Specific instructions for most of Partnerships with Adjustments partner at that partner’s request. the lines are provided. Lines that aren't in the Current Year That Did discussed are self-explanatory. Extraterritorial Income Not Result in an Imputed Exclusion Fill in all applicable lines and schedules. Underpayment (IU) See Form 8873, Extraterritorial Income Enter any items specially allocated to the If a partnership has an adjustment from a Exclusion, to determine whether the partners in the appropriate box of the BBA audit which does not result in an partnership qualifies for the exclusion and to applicable partner's Schedule K-1. Enter the imputed underpayment, the partnership figure the amount of the exclusion. If the total amount on the appropriate line of should not take the adjustment into account partnership's foreign trading gross receipts Schedule K. Do not enter separately stated until the adjustment year (see Definitions, don't exceed $5 million and the partnership amounts on the numbered lines on Form above). With its Form 1065 for the doesn't meet the foreign economic process 1065, page 1 on Form 1125-A or on adjustment year, the partnership should requirements for the exclusion, it must report Schedule D (Form 1065). provide a statement describing the certain information to its partners. See the adjustments, including the line numbers to instructions below on how to report the File all five pages of Form 1065. which the adjustments relate, and exclusion on the partnership's return and the However, if the answer to question 4 of incorporate those adjustments into its information it must report to its partners. Schedule B is “Yes,” Schedules L, M-1, and adjustment year return. If there is a M-2 on page 5 are optional. Also attach a reallocation adjustment being reported on The partnership must report the Schedule K-1 to Form 1065 for each partner. the adjustment year return, ensure the extraterritorial income exclusion on its return statement identifies the partner receiving the as follows. File only one Form 1065 for each reallocation adjustment. If there is an 1. If the partnership met the foreign partnership. Mark “Duplicate Copy” on any adjustment to a separately stated item or to a economic process requirements explained in copy you give to a partner. credit, the partnership must adjust that item the Instructions for Form 8873, it can report or that credit in the adjustment year. See the exclusion as a nonseparately stated item If a syndicate, pool, joint venture, or Examples 1 and 2 in Regulations on whichever of the following lines apply to similar group files Form 1065, it must attach 301.6225-3. that activity. a copy of the agreement and all • Form 1065, page 1, line 20. amendments to the return, unless a copy has Items A and C • Form 8825, line 15. previously been filed. Enter the applicable activity name and the • Form 1065, Schedule K, line 3b. A foreign partnership required to file code number from the list, Codes for In addition, the partnership must report as a return must generally report all of Principal Business Activity and Principal an item of information on Schedule K-1, its foreign and U.S. source income. Product or Service, near the end of the box 16, using code S, the partner's For rules regarding whether a foreign instructions. distributive share of foreign trading gross partnership must file Form 1065, see Who For example, if, as its principal business receipts from Form 8873, line 15. Must File, earlier. activity, the partnership (a) purchases raw 2. If the foreign trading gross receipts of materials, (b) subcontracts out for labor to the partnership for the tax year are $5 million Name and Address make a finished product from the raw or less and the partnership didn't meet the Print or type the legal name of the materials, and (c) retains title to the goods, foreign economic process requirements, it partnership, address, and EIN on the the partnership is considered to be a cannot report the extraterritorial income appropriate lines. If the partnership has manufacturer and must enter “Manufacturer” exclusion as a nonseparately stated item on changed its name, check box G(3). Include in item A and enter in item C one of the its return. Instead, the partnership must the suite, room, or other unit number after the codes (311110 through 339900) listed under report the following separately stated items street address. If the Post Office doesn't “” on the list, Codes for to the partners on Schedule K-1, box 16. deliver mail to the street address and the Principal Business Activity and Principal • Foreign trading gross receipts (code S). partnership has a P.O. box, show the box Product or Service, near the end of the Report each partner's distributive share of number instead. instructions.

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Item D. Employer Identification Any partnership that files Schedule M-3 income from long-term contracts, see must also complete and file Schedule C, section 460. For permissible methods for Number (EIN) Additional Information for Schedule M-3 reporting advance payments for goods and Show the correct EIN in item D. If the Filers. See Eased requirements next. services by an accrual method partnership, partnership doesn't have an EIN, it must see the Applicability Dates discussion in the apply for one in one of the following ways. Eased requirements. Partnerships that regulations under section 451(c), T.D. 9941. • Online—Go to IRS.gov/EIN. The EIN is (a) are required to file Schedule M-3 and For information on adopting or changing to a issued immediately once the application have less than $50 million in total assets at permissible method for reporting advance information is validated. tax-year-end, or (b) aren't required to file payments for goods and services by an • By mailing or faxing Form SS-4, Schedule M-3 and voluntarily file accrual method partnership, see the Application for Employer Identification Schedule M-3, must either (i) complete Instructions for Form 3115. Number. Schedule M-3 entirely; or (ii) complete Schedule M-3 through Part I and complete Installment sales. Generally, the A limited liability company must Schedule M-1 instead of completing Parts II installment method cannot be used for determine which type of federal tax entity it and III of Schedule M-3. See Schedule M-3 dealer dispositions of property. A “dealer will be (that is, partnership, corporation, or for more information. disposition” is any disposition of: disregarded entity) before applying for an In addition, partnerships that meet the 1. Personal property by a person who EIN (see Form 8832, Entity Classification requirements of (a) and (b) above aren't regularly sells or otherwise disposes of Election, for details). If the partnership has required to file Schedule C (Form 1065) or personal property of the same type on the not received its EIN by the time the return is Form 8916-A. installment plan, or due, enter “Applied for” and the application date in the space for the EIN. For more See the instructions for Schedule C and 2. Real property held for sale to details, see the Instructions for Form SS-4. Schedule M-3 for more information. customers in the ordinary course of the taxpayer's trade or business. Note. The online application process isn't Income Exception. These restrictions on using yet available for partnerships with addresses the installment method don't apply to in foreign countries. If you are located Report only trade or business activity income on lines 1a through 8. Do not dispositions of property used or produced in outside the United States, please call ! a farming business or sales of timeshares 267-941-1099. CAUTION report rental activity income or portfolio income on these lines. See Passive and residential lots. However, if the Item F. Total Assets Activity Limitations, earlier, for definitions of partnership elects to report dealer rental income and portfolio income. Rental dispositions of timeshares and residential You aren't required to complete item F if the lots on the installment method, each answer to question 4 of Schedule B is “Yes.” activity income and portfolio income are reported on Schedules K and K-1. Rental partner's tax liability must be increased by If you are required to complete this item, real estate activities are also reported on the partner's distributive share of the interest enter the partnership's total assets at the end Form 8825. payable under section 453(l)(3). of the tax year, as determined by the Include on line 1a the gross profit on accounting method regularly used in keeping Tax-exempt income. Do not include any collections from installment sales for any of the partnership's books and records. If there tax-exempt income on lines 1a through 8. A the following. were no assets at the end of the tax year, partnership that receives any tax-exempt • Dealer dispositions of property before enter -0-. income other than interest, or holds any March 1, 1986. property or engages in any activity that • Dispositions of property used or produced Item J. Schedule C and produces tax-exempt income, reports this in the trade or business of farming. Schedule M-3 income on line 18b of Schedule K and in • Certain dispositions of timeshares and A partnership must file Schedule M-3, Net box 18 of Schedule K-1 using code B. residential lots reported under the installment Income (Loss) Reconciliation for Certain Report tax-exempt interest income, method. Partnerships, instead of Schedule M-1, if any including exempt-interest dividends received Attach a statement showing the following of the following apply. as a shareholder in a mutual fund or other information for the current year and the 3 1. The amount of total assets at the end regulated investment company, on line 18a preceding years. of the tax year reported on Schedule L, of Schedule K and in box 18 of Schedule K-1 • Gross sales. , column (d), is $10 million or more. using code A. • Cost of goods sold. See Deductions, after the instructions for • Gross profits. 2. The amount of adjusted total assets • Percentage of gross profits to gross sales. for the tax year is $10 million or more. lines 1a through 8 and before the instructions for lines 9 through 21, for information on how • Amount collected. Adjusted total assets is defined in the • Gross profit on the amount collected. Instructions for Schedule M-3. to report expenses related to tax-exempt income. 3. The amount of total receipts (as Nonaccrual-experience method. defined later, in the instructions for Line 1a. Gross Receipts or Partnerships that qualify to use the nonaccrual-experience method (described Schedule B, question 4) for the tax year is Sales $35 million or more. earlier) should attach a statement showing Enter on line 1a gross receipts or sales from total gross receipts, the amount not accrued 4. An entity that is a reportable entity all trade or , except for as a result of the application of section partner of the partnership owns or is deemed amounts that must be reported on lines 4 448(d)(5), and the net amount accrued. to own, directly or indirectly, an interest of through 7. Include the net amount on line 1a. 50% or more in the partnership's capital, profit, or loss on any day during the tax year Special rules apply to certain income, as Line 2. Cost of Goods Sold of the partnership. Reportable entity partner discussed below. For example, don't include If the partnership has a cost of goods sold is defined in the Instructions for gross receipts from farming on line 1a. deduction, complete and attach Form Schedule M-3. Instead, show the net profit (loss) from 1125-A. Enter on Form 1065, page 1, line 2, A partnership filing Form 1065 that isn't farming on . Also, don't include on the amount from Form 1125-A, line 8. See required to file the Schedule M-3 may line 1a rental activity income or portfolio Form 1125-A and its instructions. voluntarily file Schedule M-3 instead of income. Schedule M-1. In general, advance payments are reported in the year of receipt. To report

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Line 4. (Loss) Schedule K-1, using code P. See section Report of Employer-Owned Life Insurance From Other Partnerships, 263A(d) for more information. Contracts. See section 101(j) for details. 9. The amount of payroll tax credit taken Estates, and Trusts . Net Gain (Loss) From by an employer for qualified paid sick leave Enter the ordinary income (loss) shown on Form 4797 and qualified paid family leave under Schedule K-1 (Form 1065) or Schedule K-1 sections 7001 and 7003 of the Families First (Form 1041), or other ordinary income (loss) Include only ordinary gains or losses Coronavirus Response Act, as amended. from a foreign partnership, estate, or trust. ! from the sale, exchange, or See Form 941, lines 11b and 13c; Form 944, Show the partnership's, estate's, or trust's CAUTION involuntary conversion of assets lines 8b and 10d; or Form 943, lines 12b and name, address, and EIN on a separate used in a trade or business activity. Ordinary 14d. The partnership must include the full statement attached to this return. If the gains or losses from the sale, exchange, or amount (both the refundable and amount entered is from more than one involuntary conversion of rental activity nonrefundable portions) of the credit for source, identify the amount from each assets are reported separately on line 19 of qualified sick and family leave wages in its source. Form 8825 or line 3c of Schedule K and in gross income for the tax year that includes box 3 of Schedule K-1, generally as a part of the last day of any calendar quarter in which Do not include portfolio income or rental the net income (loss) from the rental activity. a credit is allowed. activity income (loss) from other partnerships, estates, or trusts on this line. A partnership that is a partner in another Do not include items requiring separate Instead, report these amounts on Schedules partnership must include on Form 4797, computations that must be reported on K and K-1, or on line 20a of Form 8825 if the Sales of Business Property, its share of Schedules K and K-1. See the instructions amount is from a rental real estate activity. ordinary gains (losses) from sales, for Schedules K and K-1, later. exchanges, or involuntary conversions (other Ordinary income (loss) from another than casualties or thefts) of the other Do not report portfolio or rental activity partnership that is a publicly traded partnership's trade or business assets. income (loss) on this line. partnership isn't reported on this line. Instead, report the amount separately on Partnerships should not use Form 4797 to Deductions line 11 of Schedule K and in box 11 of report the sale or other disposition of Schedule K-1 using code I. property if a section 179 expense deduction Report only trade or business activity was previously passed through to any of its deductions on lines 9 through 20. Treat shares of other items separately partners for that property. Instead, report it in reported on Schedule K-1 issued by the box 20 of Schedule K-1 using code L. See Do not report the following expenses on other entity as if the items were realized or the instructions for Dispositions of property lines 9 through 20. incurred by this partnership. with section 179 deductions (code L), later, • Rental activity expenses. Report these for details. expenses on Form 8825 or line 3b of If there is a loss from another partnership, Schedule K. the amount of the loss that may be claimed is Line 7. Other Income (Loss) Deductions allocable to portfolio income. subject to the basis limitations as • Enter any other trade or business income Report these deductions on line 13d of appropriate. (loss) not included on lines 1a through 6. List Schedule K and in box 13 of Schedule K-1 the type and amount of income on an If the tax year of your partnership doesn't using code I or L. attached statement. Examples of other coincide with the tax year of the other • Nondeductible expenses (for example, income include the following. partnership, estate, or trust, include the expenses connected with the production of ordinary income (loss) from the other entity 1. Interest income derived in the tax-exempt income). Report nondeductible in the tax year in which the other entity's tax ordinary course of the partnership's trade or expenses on line 18c of Schedule K and in year ends. business, such as interest charged on box 18 of Schedule K-1 using code C. receivable balances. • Qualified expenditures to which an Line 5. Net Farm Profit (Loss) 2. Recoveries of bad debts deducted in election under section 59(e) may apply. The Enter the partnership's net farm profit (loss) prior years under the specific charge-off instructions for line 13c of Schedule K and from Schedule F (Form 1040), Profit or Loss method. for Schedule K-1, box 13, code J, explain From Farming. Attach Schedule F (Form how to report these amounts. 3. Taxable income from insurance 1040) to Form 1065. Do not include on this • Items the partnership must state proceeds. line any farm profit (loss) from other separately that require separate partnerships. Report those amounts on 4. Any amount included in income from computations by the partners. Examples . In figuring the partnership's net farm line 2 of Form 6478, Biofuel Producer Credit, include expenses incurred for the production profit (loss), don't include any section 179 if applicable. of income instead of in a trade or business, expense deduction; this amount must be 5. Any amount included in income from charitable contributions, foreign taxes paid or separately stated. line 8 of Form 8864, Biodiesel and accrued, intangible drilling and development Renewable Diesel Fuels Credit, if applicable. costs, soil and water conservation Also report the partnership's fishing expenditures, amortizable basis of income on this line. 6. The recapture amount under section reforestation expenditures, and exploration 280F if the business use of listed property expenditures. The distributive shares of For a special rule concerning the method drops to 50% or less. To figure the recapture these expenses are reported separately to of accounting for a farming partnership with a amount, complete Part IV of Form 4797. each partner on Schedule K-1. corporate partner and for other tax 7. All section 481 income adjustments information on farms, see Pub. 225, Farmer's resulting from changes in accounting Limitations on Deductions Tax Guide. methods. Show the computation of the Section 263A uniform capitalization Because the partner, and not the section 481 adjustments on an attached rules. The uniform capitalization rules of TIP partnership, makes the election to statement. section 263A generally require partnerships deduct the expenses of raising any 8. Part or all of the proceeds received to capitalize certain costs incurred in plant with a preproductive period of more from certain employer-owned life insurance connection with the following. than 2 years, farm partnerships that aren't contracts issued after August 17, 2006. • The production of real property and required to use an accrual method should Partnerships that own one or more tangible personal property held in inventory not capitalize such expenses. Instead, state employer-owned life insurance contracts or held for sale in the ordinary course of them separately on an attached statement to issued after that date must file Form 8925, business. Schedule K, line 13d, and in box 13 of

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• Real property or personal property special rules. For more details, see Report the deductible amount of these (tangible and intangible) acquired for resale. Regulations sections 1.263A-8 through costs and any amortization on line 20. For • The production of real property and 1.263A-15. amortization that began during the tax year, tangible personal property by a partnership For more details on the uniform complete and attach Form 4562. for use in its trade or business or in an capitalization rules, see Regulations sections Syndication costs. Costs for issuing and activity engaged in for profit. 1.263A-1 through 1.263A-3. marketing interests in the partnership, such Tangible personal property produced by Transactions between related taxpayers. as commissions, professional fees, and a partnership includes a film, sound Generally, an accrual basis partnership can printing costs, must be capitalized. They recording, videotape, book, or similar deduct business expenses and interest cannot be depreciated or amortized. See the property. owed to a related party (including any instructions for , later, for the The costs required to be capitalized partner) only in the tax year of the treatment of syndication fees paid to a under section 263A aren't deductible until the partnership that includes the day on which partner. property to which the costs relate is sold, the payment is includible in the income of the Reducing certain expenses for which used, or otherwise disposed of by the related party. See section 267 for details. credits are allowable. The partnership partnership. Business interest. Business interest may need to reduce the otherwise allowable Exceptions. For tax years beginning expense is limited for tax years beginning deductions for expenses used to figure after 2017, a small business taxpayer, after 2017. See section 163(j) for limitations certain credits. The following are examples defined earlier, can adopt or change its on deductions for business interest. of such credits. (Do not reduce the amount of method of accounting to not capitalize costs the allowable deduction for any portion of the under section 263A. See section 263A(i) and Business start-up and organizational credit that was passed through to the Accounting Methods, earlier. costs. Generally, a partnership can elect to partnership from another pass-through deduct a limited amount of start-up or entity.) Section 263A doesn't apply to the organizational costs paid or incurred. Any 1. Work opportunity credit. following. costs not deducted must be amortized as • Timber. explained below. See sections 195(b) and 2. Credit for increasing research • Most property produced under a 709(b). activities. long-term contract. 3. Disabled access credit. • Certain property produced in a farming Time for making an election. The business. See the note at the end of the partnership generally elects to deduct 4. Empowerment zone employment instructions for line 5, earlier. start-up or organizational costs by claiming credit, if applicable. • Geological and geophysical costs the deduction on its return filed by the due 5. Indian employment credit, if amortized under section 167(h). date (including extensions) for the tax year in applicable. • Certain plants bearing fruits and nuts which the active trade or business begins. 6. Credit for employer social security under section 168(k)(5). However, for start-up or organizational costs and Medicare taxes paid on certain paid or incurred before September 9, 2008, employee tips. The partnership must report the following the partnership may be required to attach a costs separately to the partners for purposes statement to its return to elect to deduct such 7. Orphan drug credit. of determinations under section 59(e). costs. See Temporary Regulations sections 8. Credit for small employer pension • Research and experimental costs under 1.195-1T and 1.709-1T (as in effect on July plan startup costs and auto-enrollment. section 174. 7, 2008) for details. Also, see Regulations • Intangible drilling costs for oil, gas, and 9. Credit for employer-provided sections 1.195-1 and 1.709-1. If the childcare facilities and services. geothermal property. partnership timely filed its return for the year • Mining exploration and development without making an election, it can still make 10. Low sulfur diesel fuel production costs. an election by filing an amended return credit. Indirect costs. Partnerships subject to within 6 months of the due date of the return 11. Mine rescue team training credit, if the uniform capitalization rules are required (excluding extensions). Clearly indicate the applicable. to capitalize not only direct costs but an election on the amended return and write 12. Credit for employer differential wage allocable part of most indirect costs “Filed pursuant to section 301.9100-2” at the payments. (including taxes) that benefit the assets top of the amended return. File the amended return at the same address the partnership 13. Credit for small employer health produced or acquired for resale, or are insurance premiums. incurred because of the performance of filed its original return. The election applies production or resale activities. when figuring income for the current tax year 14. Employer credit for paid family and and all subsequent years. medical leave (Form 8994). For inventory, indirect costs that must be capitalized include the following. The partnership can choose to forgo the 15. Employee retention credit (Form • Administration expenses. above elections by clearly electing to 5884-A) Taxes. capitalize its start-up or organizational costs • Note. Wages taken into account in Depreciation. on its return filed by the due date (including • determining the credits for qualified sick and Insurance. extensions) for the tax year in which the • family leave or the employee retention credit Compensation paid to officers attributable active trade or business begins. • on Form 941 cannot be taken into account in to services. The election to either amortize or determining the employer credit for paid Rework labor. capitalize start-up or organizational costs is • family and medical leave on Form 8994. See Contributions to pension, stock bonus, irrevocable and applies to all start-up and • the Instructions for Form 8994. and certain profit-sharing, annuity, or organizational costs that are related to the deferred compensation plans. trade or business. If the partnership has any of the credits listed above, figure each current year credit Regulations section 1.263A-1(e)(3) Amortization. Any costs not deducted before figuring the deductions for expenses specifies other indirect costs that relate to under the above rules must be amortized on which the credit is based. production or resale activities that must be ratably over a 180-month period, beginning capitalized and those that may be currently with the month the partnership begins . Salaries and Wages deductible. business. See the Instructions for Form 4562 Enter the salaries and wages paid or Interest expense paid or incurred during for details. incurred for the tax year, reduced by the the production period of designated property amount of the following credit(s). must be capitalized and is governed by

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• Work Opportunity Credit (Form 5884). restorations of the property (such as the And the vehicle's FMV on • Empowerment Zone Employment Credit replacements of major components or The lease term the first day of the lease (Form 8844), if applicable. substantial structural parts), or if they adapt began: exceeded: • Indian Employment Credit (Form 8845), if the property to a new or different use. applicable. Improvements must be capitalized. See Automobiles other than trucks and • Mine Rescue Team Training Credit (Form Regulations section 1.263(a)-3. vans 8923), if applicable. After 12/31/2017 • Credit for Employer Differential Wage The partnership can deduct repair and maintenance expenses only to the extent but before Payments (Form 8932). 1/1/2021 ...... $50,000 • Employee retention credit. (Form 5884-A). they relate to a trade or business activity. • Nonrefundable and refundable portions of See Regulations section 1.162-4. The After 12/31/12 and before the CARES Act employee retention credit partnership may elect to capitalize certain 1/1/18 ...... $19,000 repair and maintenance costs consistent with claimed on the partnership’s employment tax After 12/31/09 but before 1/1/13 .. $18,500 return(s). its books and records. See Regulations section 1.263(a)-3(n) for information on how Trucks and vans Do not reduce the amount of the to make the election. After 12/31/2017 allowable deduction for any portion of the . Bad Debts but before credit that was passed through to the 1/1/2021 ...... $50,000 Enter the total debts that became worthless partnership from another pass-through After 12/31/13 and before entity. See the instructions for the credit form in whole or in part during the year, but only to 1/1/18 ...... $19,500 for more information. the extent such debts relate to a trade or business activity. Report deductible After 12/31/09 and before Do not include salaries and wages nonbusiness bad debts as a short-term 1/1/14 ...... $19,000 reported elsewhere on the return, such as capital loss on Form 8949. The inclusion amount for lease terms beginning in amounts included in cost of goods sold, 2021 will be published in the Internal Revenue elective contributions to a section 401(k) Cash method partnerships cannot Bulletin in early 2021. cash or deferred arrangement, or amounts ! take a bad debt deduction unless the contributed under a reduction SEP CAUTION amount was previously included in agreement or a SIMPLE IRA plan. income. See Pub. 463, Travel, Gift, and Car Line 10. Guaranteed Payments Line 13. Rent Expenses, for instructions on figuring the to Partners Enter rent paid on business property used in inclusion amount. Deduct payments or credits to a partner for a trade or business activity. Do not deduct Line 14. Taxes and Licenses services or for the use of capital if the rent for a dwelling unit occupied by any Enter taxes and licenses paid or incurred in payments or credits are determined without partner for personal use. the trade or business activities of the regard to partnership income and are If the partnership rented or leased a partnership if not reflected elsewhere on the allocable to a trade or business activity. Also vehicle, enter the total annual rent or lease return. Federal import duties and federal include on line 10 amounts paid during the expense paid or incurred in the trade or excise and stamp taxes are deductible only if tax year for insurance that constitutes business activities of the partnership. Also paid or incurred in carrying on the trade or medical care for a partner, a partner's complete Part V of Form 4562, Depreciation business of the partnership. spouse, a partner's dependents, or a and Amortization. If the partnership leased a partner's children under age 27 who aren't vehicle for a term of 30 days or more, the Do not deduct the following taxes on dependents. deduction for vehicle lease expense may line 14. For information on how to treat the have to be reduced by an amount called the • Taxes not imposed on the partnership. partnership's contribution to a partner's inclusion amount. The partnership may have • Federal income taxes or taxes reported Health Savings Account (HSA), see Notice an inclusion amount if: elsewhere on the return. 2005-8, 2005-4 I.R.B. 368. • Section 901 foreign taxes. Report these taxes separately on Schedule K, line 16p, Do not include any payments and credits and in box 16 of Schedule K-1, using codes that should be capitalized. For example, P and Q. although payments or credits to a partner for • Taxes allocable to a rental activity. Report services rendered in syndicating a taxes allocable to rental real estate activity partnership may be guaranteed payments, on Form 8825. Report taxes allocable to a they aren't deductible on line 10. They are rental activity other than a rental real estate capital expenditures. However, they should activity on line 3b of Schedule K. be reported as guaranteed payments on the • Taxes paid or incurred for the production applicable line of Schedule K, line 4, and on or collection of income, or for the the applicable line of box 4 of Schedule K-1. management, conservation, or maintenance of property held to produce income. Report Do not include distributive shares of these taxes separately on line 13d of partnership profits. Schedule K and in box 13 of Schedule K-1 Report the guaranteed payments to the using code W. appropriate partners on the applicable line of See section 263A(a) for rules on box 4 of Schedule K-1. capitalization of allocable costs (including Line 11. Repairs and taxes) for any property. Maintenance • Taxes, including state or local sales taxes, Enter the cost of repairs and maintenance that are paid or incurred in connection with not claimed elsewhere on the return, such as an acquisition or disposition of property labor and supplies, that are not payments for (these taxes must be treated as a part of the improvements to the partnership’s property. cost of the acquired property or, in the case Amounts are paid for improvements if they of a disposition, as a reduction in the amount are for betterments to the property, realized on the disposition).

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• Taxes assessed against local benefits designated property. A partner may have to the gross receipts test of section 448(c). that increase the value of the property capitalize interest that the partner incurs Gross receipts include the aggregate gross assessed (such as for paving, etc.). during the tax year for the partnership's receipts from all persons treated as a single See section 164(d) for information on production expenditures. Similarly, interest employer such as a controlled group of apportionment of taxes on real property incurred by a partnership may have to be corporations, commonly controlled between seller and purchaser. capitalized by a partner for the partner's own partnerships or proprietorships, and affiliated production expenditures. The information service groups. If the partnership fails to Do not reduce your deduction for required by the partner to properly capitalize meet the gross receipts test, Form 8990, ! social security and Medicare taxes interest for this purpose must be provided by Limitation on Business Interest Expense CAUTION by the following amounts claimed on the partnership on an attached statement for Under Section 163(j), is generally required. the partnership's employment tax returns: (1) box 20 of Schedule K-1, using code R. See Also see Schedule B, questions 23 and 24. the nonrefundable and refundable portions of section 263A(f) and Regulations sections the CARES Act employee retention credit 1.263A-8 through 1.263A-15. Note. The 50% ATI limit does not apply to (ERC), and (2) the nonrefundable and partnerships for tax years beginning in 2019. refundable portions of the FFCRA credits for Special rules apply to the following. qualified sick and family leave wages. • Allocating interest expense among Line 16. Depreciation Instead, item (1) reduces your deduction for activities so that the limitations on passive On line 16a, enter only the depreciation wages on line 9, and item (2) must be activity losses, investment interest, and claimed on assets used in a trade or reported as income on line 7. personal interest can be properly figured. business activity. Enter on line 16b the Generally, interest expense is allocated in depreciation included elsewhere on the Line 15. Interest the same manner as debt is allocated. Debt return (for example, on page 1, line 2) that is Include only interest incurred in the trade or is allocated by tracing disbursements of the attributable to assets used in trade or business activities of the partnership that debt proceeds to specific expenditures. business activities. See the Instructions for isn't claimed elsewhere on the return. Temporary Regulations section 1.163-8T Form 4562, or Pub. 946, How To Depreciate gives rules for tracing debt proceeds to Property, to figure the amount of Do not include interest expense on the expenditures. Also see Proposed depreciation to enter on this line. following. Regulations 1.163-14 for a special rule for • Debt used to purchase rental property or allocating interest expense with respect to Complete and attach Form 4562 only if debt used in a rental activity. Interest passthrough entities. the partnership placed property in service allocable to a rental real estate activity is • Interest paid by a partnership to a partner during the tax year or claims depreciation on reported on Form 8825 and is used in for the use of capital, which should be any car or other listed property. arriving at net income (loss) from rental real entered on line 10 as guaranteed payments. Do not include any section 179 expense estate activities on line 2 of Schedule K and • Prepaid interest, which generally can only deduction on this line. This amount isn't in box 2 of Schedule K-1. Interest allocable be deducted over the term of the debt. See deducted by the partnership. Instead, it is to a rental activity other than a rental real section 461(g) and Regulations sections passed through to the partners in box 12 of estate activity is included on line 3b of 1.163-7, 1.446-2, and 1.1273-2(g) for details. Schedule K-1. Generally, the basis of a Schedule K and is used in arriving at net • Interest that is allocable to unborrowed partnership's section 179 property must be income (loss) from a rental activity (other policy cash values of life insurance, reduced to reflect the amount of section 179 than a rental real estate activity). This net endowment, or annuity contracts issued after expense elected by the partnership. This amount is reported on line 3c of Schedule K June 8, 1997, when the partnership is a reduction must be made in the basis of and in box 3 of Schedule K-1. policyholder or beneficiary. See section partnership property even if the limitations of Debt used to buy property held for • 264(f). Attach a statement showing the section 179(b) and Regulations section investment. Interest that is clearly and computation of the deduction. 1.179-2 prevent a partner from deducting all directly allocable to interest, dividend, or a portion of the amount of the section 179 royalty, or annuity income not derived in the Limitation on deduction. Business interest expense allocated by the partnership. ordinary course of a trade or business is expense deduction is generally limited to the reported on line 13b of Schedule K and in sum of business interest income, 30% of the Line 17. Depletion adjusted taxable income, and floor plan box 13 of Schedule K-1 using code H. See If the partnership claims a deduction for the instructions for line 13b of Schedule K; financing interest. This limitation generally applies at the partnership level. The CARES timber depletion, complete and attach Form box 13, code H, of Schedule K-1; and Form T (Timber), Forest Activities Schedule. 4952, Investment Interest Expense Act increases the amount of business Deduction, for more information on interest expense that may be deducted by a Do not deduct depletion for oil and investment property. partnership for tax years beginning in 2020 gas properties. Each partner figures • Debt proceeds allocated to distributions by computing the section 163(j) limitation depletion on oil and gas properties. made to partners during the tax year. using 50% of the partnership’s adjusted See the instructions for Schedule K-1, Instead, report such interest on line 13d of taxable income (ATI) instead of 30%. box 20, Depletion information oil and gas Schedule K and in box 13 of Schedule K-1 Partnerships have the ability to elect out of (code T), for the information on oil and gas using code W. To determine the amount to using the 50% ATI limitation. A different depletion that must be supplied to the allocate to distributions to partners, see special rule applies for partnerships for tax partners by the partnership. Notice 89-35, 1989-1 C.B. 675. years beginning in 2019. See section 163(j) • Debt required to be allocated to the (10)(A)(ii). See Form 8990, Limitation on Line 18. Retirement Plans, etc. Business Interest Expense Under Section production of designated property. Do not deduct payments for partners to Designated property includes real property, 163(j), and its instructions for more information and also Rev. Proc. 2020-22. retirement or deferred compensation plans personal property that has a class life of 20 including IRAs, qualified plans, and years or more, and other tangible property Business interest expense includes any interest expense properly allocable to a trade simplified employee pension (SEP) and requiring more than 2 years (1 year in the SIMPLE IRA plans on this line. These case of property with a cost of more than $1 or business. A small business taxpayer that isn't a tax shelter (as defined in section amounts are reported in box 13 of million) to produce or construct. Interest Schedule K-1, using code R, and are allocable to designated property produced 448(d)(3)) and that meets the gross receipts test isn't required to limit business interest deducted by the partners on their own by a partnership for its own use or for sale returns. must be capitalized. In addition, a expense under section 163(j). A taxpayer partnership must also capitalize to the basis meets the gross receipts test if the taxpayer Enter the deductible contributions not of the designated property any interest on has average annual gross receipts of $26 claimed elsewhere on the return made by the debt allocable to an asset used to produce million or less for the 3 prior tax years under partnership for its common-law employees

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under a qualified pension, profit-sharing, claiming amortization of costs that began and other similar amounts paid to certain annuity, or SEP or SIMPLE IRA plan, and during the tax year. tax-exempt may not be under any other deferred compensation plan. • Insurance premiums. deductible. If certain in-house lobbying Legal and professional fees. expenditures don't exceed $2,000, they are If the partnership contributes to an IRA for • Supplies used and consumed in the deductible. See section 162(e)(4)(B). employees, include the contribution in • business. Amounts paid or incurred for any salaries and wages on page 1, line 9, or • Utilities. settlement or payout related to sexual Form 1125-A, line 3, and not on line 18. • • Certain business startup and harassment or sexual abuse that is subject to Employers who maintain a pension, organizational costs. See Limitations on a nondisclosure agreement, as well as any profit-sharing, or other funded deferred Deductions, earlier, for more details. attorney’s fees related to the settlement or compensation plan (other than a SEP or • Deduction for certain energy efficient payout. See section 162(q). SIMPLE IRA), whether or not the plan is commercial building property. See section qualified under the Internal Revenue Code 179D, Notice 2006-52, 2006-26 I.R.B. 1175, Special Rules and whether or not a deduction is claimed for as amplified and clarified by Notice 2008-40, the current year, must generally file the 2008-14 I.R.B. 725, and modified by Notice Commercial revitalization deduction. If applicable form listed below. 2012-26. the partnership constructed, purchased, or • Form 5500, Annual Return/Report of • Any net negative section 481(a) substantially rehabilitated a qualified building Employee Benefit Plan. adjustment. in a renewal community, it may have • Form 5500-SF, Short Form Annual qualified for either (a) a deduction of 50% of Return/Report of Small Employee Benefit Also see Special Rules, later. qualified capital expenditures in the year the Plan (generally filed instead of Form 5500 if building was placed in service, or (b) Do not deduct the following on line 20. there are under 100 participants at the amortization of 100% of the qualified capital Items that must be reported separately on beginning of the plan year). • expenditures over a 120-month period Schedules K and K-1. beginning with the month the building was Form 5500 and Form 5500-SF must Fines or similar penalties. Generally, no • placed in service. If the partnership elected TIP be filed electronically under the deduction is allowed for fines or similar to amortize these expenditures, complete computerized ERISA Filing penalties paid to or at the direction of a and attach Form 4562. To qualify, the Acceptance System (EFAST2). For more government or governmental entity for building must be nonresidential (as defined information, see the EFAST2 website at violating any law except amounts that in section 168(e)(2)) and placed in service by www.efast.dol.gov. constitute restitution (including remediation the partnership. The partnership must be the of property), amounts paid to come into • Form 5500-EZ, Annual Return of A original user of the building unless it is compliance with the law, amounts paid or One-Participant (Owners/Partners and Their substantially rehabilitated. The qualified incurred as the result of orders or Spouses) Retirement Plan or A Foreign Plan. expenditures cannot exceed the lesser of agreements in which no government or File this form for a plan that only covers one $10 million or the amount allocated to the governmental entity is a party, and amounts or more partners (or partners and their building by the commercial revitalization paid or incurred for taxes due to the extent spouses) or a foreign plan that is required to agency of the state in which the building is the amount would have been allowed as a file an annual return and does not file the located. Any remaining expenditures are deduction if timely paid. No deduction is annual return electronically on Form depreciated over the regular depreciation allowed unless the amounts are specifically 5500-SF. recovery period. See section 1400I, as in identified in the order or agreement and the effect before its repeal on March 23, 2018, Line 19. Employee Benefit taxpayer establishes that the amounts were for details. Programs paid for that purpose. Also, any amount paid or incurred as reimbursement to the The commercial revitalization Enter the partnership's contributions to government for the costs of any investigation deduction isn't available for buildings employee benefit programs not claimed or litigation are not eligible for the exceptions placed in service after 2009. elsewhere on the return (for example, and are nondeductible. See section 162(f). insurance, health, and welfare programs) Report nondeductible amounts on Rental real estate. Do not report this that aren't part of a pension, profit-sharing, Schedule K, line 18c. deduction on line 20 if the building is placed etc., plan included on line 18. • Expenses allocable to tax-exempt in service as rental real estate. A commercial Do not include amounts paid during the income. Report these expenses on revitalization deduction for rental real estate tax year for insurance that constitutes Schedule K, line 18c. isn't deducted by the partnership but is medical care for a partner, a partner's • Net operating losses. Only individuals and passed through to the partners in box 13 of spouse, a partner's dependents, or a corporations may claim a net operating loss Schedule K-1 using code Q. partner's children under age 27 who aren't deduction. Travel, meals, and entertainment. dependents. Instead, include these amounts • Amounts paid or incurred to participate or Subject to limitations and restrictions on line 10 as guaranteed payments on the intervene in any political campaign on behalf discussed below, a partnership can deduct applicable line of Schedule K, line 4, and the of a candidate for public office, or to ordinary and necessary travel and applicable line of box 4 of Schedule K-1, of influence the general public regarding nonentertainment-related meal expenses each partner on whose behalf the amounts legislative matters, elections, or paid or incurred in its trade or business. were paid. Also report these amounts on referendums. Report these expenses on Generally, entertainment expenses, Schedule K, line 13d, and Schedule K-1, Schedule K, line 18c. membership dues, and facilities used in box 13, using code M, of each partner on • Lobbying expenses. Generally, lobbying connection with these activities cannot be whose behalf the amounts were paid. expenses are not deductible. These expenses include amounts paid or incurred deducted. Also, special rules apply to Line 20. Other Deductions in connection with influencing federal, state, deductions for gifts, luxury water travel, and Enter the total allowable trade or business or local legislation (but not amounts paid or convention expenses. See section 274 and deductions that aren't deductible elsewhere incurred before December 22, 2017, in Pub. 463 for details. on page 1 of Form 1065. Attach a statement connection with local legislation); or amounts Travel. The partnership cannot deduct listing by type and amount each deduction paid or incurred in connection with any travel expenses of any individual included on this line. Examples of other communication with certain federal executive accompanying a partner or partnership deductions include the following. branch officials in an attempt to influence the employee, including a spouse or dependent • Amortization. See the Instructions for official actions or positions of the officials. of the partner or employee, unless: Form 4562 for more information. Complete See Regulations section 1.162-29 for the and attach Form 4562 if the partnership is definition of “influencing legislation.” Dues

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• That individual is an employee of the Tax and Payment See Item J. Partner's Profit, Loss, and partnership, and Capital, later, for more information on • His or her travel is for a bona fide Line 23. Interest due under the look-back ownership percentages. business purpose and would otherwise be method for completed long-term con- deductible by that individual. tracts. For partnerships that aren't closely Questions 2 and 3 held, attach Form 8697 and a check or Meals. Generally, the partnership can Constructive ownership of the partner- money order for the full amount, made ship. For purposes of question 2, except for deduct only 50% of the amount otherwise payable to "United States Treasury." Write allowable for nonentertainment meal foreign governments within the meaning of the partnership's employer identification section 892, in determining an ownership expenses paid or incurred in its trade or number (EIN), daytime phone number, and business. However, the partnership can interest in the profit, loss, or capital of the "Form 8697 Interest'' on the check or money partnership, the constructive ownership rules deduct 100% of business meals if the meals order. are food and beverages provided by a of section 267(c) (excluding section 267(c) restaurant, and paid or incurred after Line 24. Interest due under the look-back (3)) apply to ownership of interests in the December 31, 2020. Entertainment related method for property depreciated under partnership as well as corporate stock. An meals are generally disallowed. In addition the income forecast method. For interest in the partnership that is owned (subject to exceptions under section 274(k) partnerships that aren’t closely held, attach directly or indirectly by or for another entity (2)): Form 8866 and a check or money order for (corporation, partnership, estate, trust, or • Meals must not be lavish or extravagant, the full amount, made payable to “United tax-exempt organization) is considered to be and States Treasury.” Write the partnership’s owned proportionately by the owners • A partner or employee of the partnership employer identification number (EIN), (, partners, or beneficiaries) of must be present at the meal. daytime phone number, and “Form 8866 the owning entity. Interest” on the check or money order. See section 274(n)(3) for a special rule Also, under section 267(c), an individual that applies to expenses for meals Line 25. BBA AAR imputed underpay- is considered to own an interest owned consumed by individuals subject to the hours ment. Use this line if the partnership is filing directly or indirectly by or for his or her of service limits of the Department of an AAR electronically and chooses to pay family. The family of an individual includes Transportation. the imputed underpayment. For instructions only that individual's spouse, brothers, on how to figure the imputed underpayment, sisters, ancestors, and lineal descendants. Membership dues. The partnership see the Instructions for Form 8082. Write the An interest will be attributed from an may deduct amounts paid or incurred for name of the partnership, tax identification individual under the family attribution rules membership dues in civic or public service number, tax year, "Form 1065," and "BBA only if the person to whom the interest is organizations, professional organizations AAR Imputed Underpayment" on the attributed owns a direct interest in the (such as bar and medical associations), payment. Checks must be payable to “United partnership or an indirect interest under business leagues, trade associations, States Treasury” and mailed to Ogden section 267(c)(1) or (5). For purposes of chambers of commerce, boards of trade, Service Center, Ogden, UT 84201-0011. these instructions, an individual will not be and real estate boards. However, no Payments can be made by check or considered to own, under section 267(c)(2), deduction is allowed if a principal purpose of electronically. If making an electronic an interest in the partnership owned, directly the organization is to entertain, or provide payment, choose the payment description or indirectly, by a family member of the entertainment facilities for, members or their “BBA AAR Imputed Underpayment” from the individual unless the individual also owns an guests. In addition, the partnership may not list of payment types. interest in the partnership either directly or deduct membership dues in any club indirectly through a corporation, partnership, organized for business, pleasure, recreation, Line 26. Other taxes. In a few instances, or trust. payments other than those listed above may or other social purpose. This includes For purposes of question 2, “foreign have to be made with Form 1065. Enter the country clubs, golf and athletic clubs, government” has the same meaning as it amount on this line and attach a statement and hotel clubs, and clubs operated to does under section 892. In determining a identifying the purpose of the payment. provide meals under conditions favorable to foreign government's ownership interest in business discussion. Line 28. Payment. Enter any prepayments the profit, loss, or capital of the partnership, Entertainment facilities. The related to lines 23–26 above. the constructive ownership rules of partnership cannot deduct an expense paid Regulations section 1.892-5T(c)(1)(i) apply or incurred for a facility (such as a yacht or to ownership of interests in the partnership hunting lodge) used for an activity usually Schedule B. Other as well as corporate stock. An interest in the considered entertainment, amusement, or Information partnership that is owned directly or recreation. indirectly by an integral part or controlled entity of a foreign sovereign (within the Amounts treated as compensation. Question 1 meaning of Regulations section 1.892-2T(a)) Generally, the partnership may be able to Check box 1f for any other type of entity and is considered to be owned proportionately by deduct otherwise nondeductible state the type. such foreign sovereign. entertainment, amusement, or recreation Maximum Percentage Owned Constructive ownership examples for expenses if the amounts are treated as questions 2 and 3 are included below. For compensation to the recipient and reported for Purposes of Questions 2 the purposes of questions 2 and 3, add an on Form W-2 for an employee or on Form and 3 owner's direct percentage ownership and 1099-NEC for an independent contractor. indirect percentage ownership in an entity to To determine the maximum percentage determine if the owner owns, directly or Reforestation expenditures. If the owned in the partnership's profit, loss, or indirectly, 50% or more of the entity. partnership made an election to deduct a capital for the purposes of questions 2a, 2b, portion of its reforestation expenditures on and 3b, determine separately the partner's Example for question 2a. Corporation line 13d of Schedule K, it must amortize over percentage of interest in profit, loss, and A owns, directly, an interest of 50% in the an 84-month period the portion of these capital at the end of the partnership's tax profit, loss, or capital of Partnership B. expenditures in excess of the amount year. This determination must be based on Corporation A also owns, directly, an interest deducted on Schedule K (see section 194). the partnership agreement and it must be of 15% in the profit, loss, or capital of Deduct on line 20 only the amortization of made using the constructive ownership rules Partnership C. Partnership B owns, directly, these excess reforestation expenditures. described below. The maximum percentage an interest of 70% in the profit, loss, or See Reforestation expense deduction (code is the highest of these three percentages capital of Partnership C. Therefore, S), later. (determined at the end of the tax year).

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Corporation A owns, directly or indirectly, an interest. For each partnership or trust listed, • The accounts were not with a U.S. military interest of 50% in the profit, loss, or capital of indicate the name, EIN, type of entity banking facility operated by a U.S. financial Partnership C (15% directly and 35% (partnership or trust), and country of origin. If institution. indirectly through Partnership B). On the listed entity is a partnership, enter in 2. The partnership owns more than 50% Partnership C's Form 1065, it must answer column (v) the maximum of percentage of the stock in any corporation that would “Yes” to question 2a of Schedule B. See interests owned, directly or indirectly, in the answer the question “Yes” based on item (1) Example 1 in the instructions for profit, loss, or capital of the partnership at the above. Schedule B-1 (Form 1065) for guidance on end of the partnership's tax year. If the entity providing the rest of the information required is a trust, enter in column (v) the percentage If the “Yes” box is checked for the of entities answering “Yes” to this question. of the partnership's beneficial interest in the question, do the following. trust owned, directly or indirectly, at the end • Enter the name of the foreign country or Example for question 2b. A owns, of the tax year. List a partnership or trust countries. Attach a separate sheet if more directly, 50% of the profit, loss, or capital of owned through a disregarded entity rather space is needed. Partnership X. B, the daughter of A, doesn't than the disregarded entity. • File FinCEN Form 114 electronically at the own, directly, any interest in X and doesn't FinCEN website, bsaefiling.fincen.treas.gov/ own, indirectly, any interest in X through any Question 4 main.html. entity (corporation, partnership, trust, or Answer “Yes” if the partnership meets all four estate). Because family attribution rules of the requirements shown on the form. Total Question 9 apply only when an individual (in this receipts is defined as the sum of gross The partnership may be required to file Form example, B) owns a direct interest in the receipts or sales (page 1, line 1a); all other 3520, Annual Return To Report Transactions partnership or an indirect interest through income (page 1, lines 4 through 7); income With Foreign Trusts and Receipt of Certain another entity, A's interest in Partnership X reported on Schedule K, lines 3a, 5, 6a, and Foreign Gifts, if any of the following apply. isn't attributable to B. On Partnership X's 7; income or net gain reported on • It directly or indirectly transferred property Form 1065, it must answer “Yes” to question Schedule K, lines 8, 9a, 10, and 11; and or money to a foreign trust. For this purpose, 2b of Schedule B. See Example 2 in the income or net gain reported on Form 8825, any U.S. person who created a foreign trust instructions for Schedule B-1 (Form 1065) lines 2, 19, and 20a. “Total assets” is defined is considered a transferor. for guidance on providing the rest of the as the amount that would be reported in item • It is treated as the owner of any part of the information required of entities answering F on page 1 of Form 1065. assets of a foreign trust under the grantor “Yes” to this question. trust rules. Constructive ownership of other entities Question 5 • It received a distribution from a foreign by the partnership. For purposes of Answer “Yes” if interests in the partnership trust. determining the partnership's constructive are traded on an established securities ownership of other entities, the constructive market or are readily tradable on a For more information, see the Instructions ownership rules of section 267(c) (excluding secondary market (or its substantial for Form 3520. section 267(c)(3)) apply to ownership of equivalent). interests in partnerships and trusts as well as An owner of a foreign trust must ensure corporate stock. Generally, if an entity (a Question 6 that the trust files an annual information corporation, partnership, or trust) is owned, Generally, the partnership will have income if return on Form 3520-A, Annual Information directly or indirectly, by or for another entity debt is canceled or forgiven. The Return of Foreign Trust With a U.S. Owner. (corporation, partnership, estate, or trust), determination of the existence and amount Questions 10a, 10b, and 10c the owned entity is considered to be owned of cancellation of debt income is made at the proportionally by or for the owners partnership level. Partnership cancellation of You must check “Yes” or “No” for (shareholders, partners, or beneficiaries) of indebtedness income is separately stated on TIP each question. the owning entity. Schedule K and Schedule K-1. The extent to which such income is taxable is usually Question 3a. List each corporation in made by each individual partner under rules Question 10a. Answer “Yes” if the which the partnership, at the end of the tax found in section 108. For more information, partnership is making, or has made (and has year, owns, directly, 20% or more, or owns, see Pub. 334, Tax Guide for Small Business. not revoked) a section 754 election. For directly or indirectly, 50% or more of the total information about the election, see item 4 voting power of all classes of stock entitled to Question 7 under Elections Made by the Partnership, vote. Indicate the name, EIN, country of Answer “Yes” if the partnership filed, or is earlier. , and percentage interest required to file, a return under section 6111 Question 10b. Answer “Yes” if the owned, directly or indirectly, in the total to provide information on any reportable partnership made an optional basis voting power. List the parent corporation of transaction by a material advisor. Use Form adjustment under section 743(b) or 734(b) an affiliated group filing a consolidated tax 8918, Material Advisor Disclosure for the tax year. If the partnership has made return rather than the subsidiary members Statement, to provide the information. For a section 754 election (and it has not been except for subsidiary members in which an details, see the Instructions for Form 8918. revoked) and either of the following interest is owned, directly or indirectly, transactions occurs, the partnership must independent of the interest owned, directly or Question 8 make a basis adjustment under section indirectly, in the parent corporation. If a Answer “Yes” if either (1) or (2) below applies 734(b) or 743(b). corporation is owned through a disregarded to the partnership. Otherwise, check the “No” entity, list the information for the corporation box. Section 743(b) basis adjustment. A rather than the disregarded entity. section 743(b) basis adjustment is required if 1. At any time during calendar year there is a transfer of an interest in the 2020, the partnership had an interest in or Question 3b. List each partnership in partnership by a sale or exchange, or in the signature or other authority over a bank which the partnership, at the end of the tax death of a partner. See question 10c if the account, securities account, or other year, owns, directly, an interest of 20% or partnership has a substantial built-in loss financial account in a foreign country (see more, or owns, directly or indirectly, an immediately after such a transfer. The basis FinCEN Form 114, Report of Foreign Bank interest of 50% or more in the profit, loss, or adjustment affects only the transferee's basis and Financial Accounts (FBAR); and capital of the partnership. List each trust in in partnership property. The partnership The combined value of the accounts was which the partnership, at the end of the tax • must attach a statement to the return for the more than $10,000 at any time during the year, owns, directly, an interest of 20% or tax year in which the transfer occurred. The calendar year; and more, or owns, directly or indirectly, an statement must include: interest of 50% or more in the trust beneficial • The name of the transferee partner,

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• The EIN or SSN of the transferee partner, Section 743(b) basis adjustment. For certain cases, indirectly or constructively) to • The computation of the adjustment, and a section 743(b) basis adjustment, attach a satisfy the reporting requirements of sections • The identity of the partnership properties statement that includes: 6011, 6012, 6031, 6038, and the related to which the adjustment has been allocated. • The name of the transferee partner, regulations. See Form 8858 (and its For details, see section 743 and Regulations • The EIN or SSN of the transferee partner, separate instructions) for information on section 1.743-1. For details on allocating the • The computation of the adjustment, and completing the form and the information that basis adjustment to partnership properties, • The identity of the partnership properties the partnership may need to provide to see section 755 and Regulations section to which the adjustment has been allocated. certain partners for them to complete their 1.755-1. Form 8858 relating to that foreign Section 734(b) basis adjustment. For disregarded entity or foreign branch. Section 734(b) basis adjustment. A a section 734(b) basis adjustment, attach a section 734(b) basis adjustment is required if statement that includes: Question 14 there is a distribution of property to a partner, • The computation of the adjustment, Answer “Yes” if the partnership had any whether or not in liquidation of the partner's • The class of property distributed (ordinary foreign partners (for purposes of section entire interest in the partnership. See income property or capital gain property), 1446) at any time during the tax year. question 10c if there is a substantial built-in and Otherwise, answer “No.” loss related to the distribution. The basis • The partnership properties to which the adjustment affects each partner's basis in adjustment has been allocated. If the partnership had gross income the partnership property. The partnership effectively connected with a trade or must attach a statement to the return for the Question 11 business in the United States and foreign tax year in which the distribution occurred. Check the box if the partnership engaged in partners, it may be required to withhold tax The statement must include: a like-kind exchange during the current or under section 1446 on income allocable to • The computation of the adjustment, immediately preceding tax year and received foreign partners (without regard to • The class of property distributed (ordinary replacement property that it distributed distributions) and file Forms 8804, 8805, and income property or capital gain property), during the current tax year. For purposes of 8813. See Regulations sections 1.1446-1 and this question, the partnership is considered through -7 for more information. • The partnership properties to which the to have distributed replacement property if Questions 16a and 16b adjustment has been allocated. the partnership contributed such property to If the partnership made any payment in 2020 For details, see section 734 and any entity other than a disregarded entity. The distribution of its ownership interest in a that would require the partnership to file any Regulations section 1.734-1. For details on Form(s) 1099, check the “Yes” box for allocating the basis adjustment to disregarded entity is considered a distribution of the underlying property. question 16a and answer question 16b. partnership properties, see section 755 and Otherwise, check the “No” box for question Regulations section 1.755-1. Question 12 16a and skip question 16b. See Am I Question 10c. Answer “Yes” if the If a partnership distributed property to its Required to File a Form 1099 or Other partnership had to make a basis reduction partners to be jointly owned, whether such Information Return for more information. under section 743(b) because of a distribution is direct or through the formation Question 20 substantial built-in loss (as defined in section of an intermediate entity, the question must 743(d)) or under section 734(b) because of a be answered “Yes.” For purposes of For tax years beginning after 2015, domestic substantial basis reduction (as defined in question 12, an “undivided interest in partnerships that are formed or availed of to section 734(d)). Section 743(d)(1) provides partnership property” means property that hold specified foreign financial assets that, for purposes of section 743, a was owned by the partnership either directly (“specified domestic entities”) must file Form partnership has a substantial built-in loss or through a disregarded entity and which 8938, Statement of Specified Foreign resulting from a transfer of a partnership was distributed to partners as fractional Financial Assets, with its Form 1065 for the interest if the partnership's adjusted basis in ownership interests. A tenancy in common tax year. Form 8938 must be filed each year the partnership's property exceeds by more interest is a type of undivided ownership the value of the partnership’s specified than $250,000 the FMV of the property or the interest in property which provides each foreign financial assets meets or exceeds transferee partner would be allocated a loss owner the right to transfer property to a third the reporting threshold. For more information of more than $250,000 if the partnership party without destroying the tenancy in on domestic partnerships that are specified assets were sold for cash equal to their FMV common. Partners may agree to partition domestic entities and the types of foreign immediately after such transfer. Under property held as tenants in common or may financial assets that must be reported, see section 734(d), there is a substantial basis seek a court order to partition the property the Instructions for Form 8938. reduction resulting from a distribution if the (usually dividing the property into fractional A domestic partnership required to file sum of the following amounts exceeds interests in accordance with each partner's Form 8938 with its Form 1065 for the tax $250,000. ownership interest in the partnership). year should check “Yes” to question 20 of • The amount of loss recognized by the Schedule B, Form 1065. distributee partner on a distribution in Example. Partnership P is a partnership liquidation of the partner's interest in the that files Form 1065. Partnership P holds title Question 22 to land held for investment. Partnership P partnership (see section 731(a)(2)). Section 267A disallows deductions for converts its title to the land to fractional • The excess of the basis of the distributed certain interest and royalty payments or interests in the name of the partners and property to the distributee partner accruals. In general, section 267A applies distributes such interests to its partners. (determined under section 732) over the when the interest or royalty is paid or Partnership P must answer “Yes” to question adjusted basis of the distributed property to accrued to a related party which, under its 12. the partnership immediately before the tax laws, either doesn't include the full distribution (as adjusted by section 732(d)). Question 13 amount in income, or is allowed a deduction For information about the recent changes with respect to the amount; and the amount Enter the number of Forms 8858, Information to section 743 concerning substantial built-in is paid or accrued pursuant to a hybrid Return of U.S. Persons With Respect To losses, see IRS.gov/newsroom/questions- transaction or by, or to, a hybrid entity. When Foreign Disregarded Entities (FDEs) and and-answers-about-the-substantial-built-in- section 267A applies, the deduction is Foreign Branches (FBs), that are attached to loss-changes-under-internal-revenue-code- generally disallowed to the extent the related the return. Form 8858 and its schedules are irc-section-743. party doesn't include the amount in income used by certain U.S. persons (including or is allowed a deduction with respect to the domestic partnerships) that own a foreign amount. However, the deduction isn't disregarded entity (FDE) directly (or, in disallowed to the extent the amount is

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included in the gross income of a U.S. Small business taxpayer. A small partnership representative (PR) who shall shareholder under section 951(a). For business taxpayer isn't subject to the have the sole authority to act on behalf of the definitions of terms, see section 267A. Also business interest expense limitation and isn't partnership. On Form 1065, provide the see FAQs at IRS.gov/businesses/ required to file Form 8990. A small business name, address, and phone number of the partnerships/FAQs-for-Form-1065- taxpayer is a taxpayer that (a) isn't a tax PR. If an entity is designated as the PR, the Schedule-B-Other-Information-Question-22. shelter (as defined in section 448(d)(3)) and partnership must also appoint an individual to act on the entity's behalf (a designated Question 23 (b) meets the gross receipts test of section 448(c), discussed next. individual (DI)). To be a DI, the appointed The limitation on business interest expense person must also have a substantial applies to every taxpayer with a trade or Gross receipts test. A taxpayer meets presence in the United States. business, unless the taxpayer meets certain the gross receipts test if the taxpayer has How to designate. A designation of a PR specified exceptions. A partnership may average annual gross receipts of $26 million must be made for each respective year on elect out of the limitation for certain or less for the 3 prior tax years. A taxpayer's the partnership’s Form 1065. The businesses otherwise subject to the average annual gross receipts for the 3 prior partnership can revoke a designation of a PR business interest expense limitation. tax years is determined by adding the gross receipts for the 3 prior tax years and dividing or DI, and the PR or DI can resign, by Certain real property trades or the total by 3. Gross receipts include the submitting Form 8979, Partnership businesses and farming businesses qualify aggregate gross receipts from all persons Representative Revocation, Designation, to make an election not to limit business treated as a single employer, such as a and Resignation Form. interest expense. This is an irrevocable controlled group of corporations, commonly Form 8979 should not be submitted election. If you make this election, you are controlled partnerships, or proprietorships, ! as a stand-alone form to an IRS required to use the alternative depreciation and affiliated service groups. See section CAUTION Service Center. Form 8979 may only system to depreciate certain property. Also, 448(c) and the Instructions for Form 8990 for be submitted by the partnership: (1) with a you are not entitled to the special additional information. valid AAR or (2) directly to the IRS employee depreciation allowance for that property. point of contact any time after the issuance Additionally, see Rev. Proc. 2020–22, which Question 25 of a notice of selection for examination provides an automatic extension of time for Answer "Yes" if an eligible partnership (Letter 2205-D) or a notice of administrative certain taxpayers to file a real property trade chooses to elect out of the centralized proceeding (Letter 5893). Form 8979 may or business election or a farming business partnership audit regime for the tax year and only be submitted directly to the IRS election for tax years 2018, 2019, or 2020. enter the total from Schedule B-2, Part III, employee point of contact by a PR or DI any Rev. Proc. 2020-22 also provides an line 3. If making the election, attach a time after the issuance of notice of opportunity for certain taxpayers to withdraw completed Schedule B-2 to Form 1065. A administrative proceeding (Letter 5893-A). a prior election. Rev. Proc. 2020-22 does not partnership is an eligible partnership for the See the Instructions for Form 8979. apply to utility trades or businesses. For a tax year if it has 100 or fewer eligible partnership with more than one qualifying partners in that year. Eligible partners are Partnership representative authority. business, the election is made with respect individuals, C corporations, S corporations, Under section 6223, the partnership and all to each business. Check “Yes” if the foreign entities that would be C corporations its partners (and any other person whose tax partnership has an election in effect to if they were domestic entities, and estates of liability is determined in whole or in part by exclude a real property trade or business or deceased partners. The determination as to taking into account directly or indirectly a farming business from section 163(j). For whether the partnership has 100 or fewer adjustments determined under the more information, see section 163(j) and the partners is made by adding the number of centralized partnership audit regime) are Instructions for Form 8990. Schedules K-1 required to be issued by the bound by the actions of the partnership partnership for the tax year to the number of representative in dealings with the IRS. A Question 24 Schedules K-1 required to be issued by any designation for a partnership tax year Generally, a taxpayer with a trade or partner that is an S corporation to its remains in effect until the designation is business must file Form 8990 to claim a shareholders for the tax year of the S terminated by (a) a valid resignation of the deduction for business interest. Business corporation ending with or within the partnership representative, (b) a valid interest expense is interest that is properly partnership tax year. A partnership isn't revocation of the partnership representative allocable to a non-excepted trade or eligible to elect out of the centralized (with designation of successor partnership business or that is floor plan financing partnership audit regime if it is required to representative), or (c) a determination by the interest. In addition, Form 8990 must be filed issue a Schedule K-1 to any of the following IRS that the designation isn't in effect. by any taxpayer that owns an interest in a partners. partnership with current year, or prior year • A partnership. Substantial presence. In order for either a carryover, excess business interest expense • A trust. partnership representative or a designated allocated from the partnership. A • A foreign entity that would not be treated individual to have substantial presence, they pass-through entity allocating excess taxable as a if it were a domestic must make themselves available to meet in income or excess business interest income entity. person with the IRS in the United States at a to its owners (that is, a pass-through entity • A disregarded entity described in reasonable time and place as determined by that isn't a small business taxpayer) must file Regulations section 301.7701-2(c)(2)(i). the IRS, and must have a street address in Form 8990, regardless of whether it has any • An estate of an individual other than a the United States, a U.S. TIN, and a interest expense. deceased partner. telephone number with a U.S. area code. Any person that holds an interest in the Exclusions from filing. A taxpayer isn't • Question 26 partnership on behalf of another person. required to file Form 8990 if the taxpayer is a To be certified as a qualified opportunity small business taxpayer and doesn't have Designated Partnership fund, the partnership must file Form 1065 excess business interest expense from a Representative and attach Form 8996, even if the partnership. A taxpayer is also not required partnership had no income or expenses to to file Form 8990 if the taxpayer only has Section 6223 provides that unless the report. If the partnership is attaching Form business interest expense from the following partnership has made a valid election out of 8996, check the "Yes" box for question 26. excepted trades or businesses. the centralized partnership audit regime, On the line following the dollar sign, enter the • An electing real property trade or each partnership must designate, in the amount from Form 8996, line 15. business. manner prescribed by the Secretary, a • An electing farming business. partner or other person with a substantial • Certain utility businesses. presence in the United States as the

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Question 27 a domestic partnership. Check “Yes” if, since statement reporting the ownership December 22, 2017, a foreign corporation percentage by vote and value for the other Provide the number of foreign partners directly or indirectly acquired substantially all acquisitions. subject to section 864(c)(8) as a result of of the properties constituting a trade or transferring all or a portion of an interest in business of your partnership (and you are a the partnership if the partnership is engaged domestic partnership), and the ownership Schedules K and K-1. in a U.S. trade or business. Section 864(c)(8) with respect to the acquisition was greater provides that gain or loss of a foreign Partners' Distributive than 50% (by vote or value). If “Yes” is transferor from the transfer of a partnership checked, list the ownership percentage by Share Items interest is treated as effectively connected both vote and value. with the conduct of a trade or business within the United States to the extent that the The information must be reported even if Purpose of Schedules transferor would have had effectively you conclude that section 7874 does not Although the partnership isn't subject to connected gain or loss if the partnership sold apply. income tax, the partners are liable for tax on all of its assets at fair market value on the their shares of the partnership income, date of transfer. For purposes of section Section 7874 generally applies when the whether or not distributed, and must include 864(c)(8), a transfer of a partnership interest following three requirements are met. their shares on their tax returns. means a sale, exchange, or other 1. Pursuant to a plan or series of related Schedule K. Schedule K is a summary disposition, and includes a distribution from a transactions, a foreign corporation must schedule of all the partners' shares of the partnership to a partner to the extent that acquire directly or indirectly substantially all partnership's income, credits, deductions, gain or loss is recognized on the distribution, of the properties constituting a trade or etc. All partnerships must complete as well as a transfer treated as a sale or business of a domestic partnership. Schedule K. Rental activity income (loss) exchange under section 707(a)(2)(B). 2. After the acquisition, the ownership and portfolio income aren't reported on Section 864(c)(8) is applicable to transfers in percentage (by vote or value) must be at page 1 of Form 1065. These amounts aren't which a foreign transferor transfers all or part least 60%. combined with trade or business activity of its interest in a partnership. It also applies income (loss) reported on page 1. to a foreign partner in a partnership that 3. After the acquisition, the expanded Schedule K is used to report the totals of directly or indirectly transfers an interest in a affiliate that includes the foreign acquiring these and other amounts reported on partnership that engaged in a U.S. trade or corporation must not have substantial page 1. business. If the partnership is a publicly business activities in the foreign country in traded partnership as defined in section which the foreign acquiring corporation is Schedule K-1. Schedule K-1 shows each 469(k)(2) and has properly answered yes to created or organized. partner's separate share. Attach a copy of question 5 on Form 1065, Schedule B, then it When section 7874 applies, the tax each Schedule K-1 to the Form 1065 filed is not required to provide the information treatment of the acquisition depends on the with the IRS. Keep a copy with a copy of the requested in Question 27 on Form 1065, ownership percentage. If the ownership is at partnership return as a part of the Schedule B, relating to foreign partners. least 80%, the foreign acquiring corporation partnership's records and furnish a copy to each partner. If the partner is a disregarded Question 28 is treated as a domestic corporation for all purposes of the Internal Revenue Code. See entity (DE), furnish the Schedule K-1 to the Answer "Yes" if at any time during the tax section 7874(b). If the ownership is at least DE partner. If a partnership interest is held by year there were transfers between the 60% but less than 80%, the foreign acquiring a nominee on behalf of another person, the partnership and its partners subject to the corporation is considered a foreign partnership may be required to furnish disclosure requirements of Regulations corporation but the domestic partnership and Schedule K-1 to the nominee. See section 1.707-8. For certain transfers that are certain other persons are subject to special Temporary Regulations sections presumed to be sales, the partnership or the rules that reduce the tax benefits of the 1.6031(b)-1T and 1.6031(c)-1T for more partners must comply with the disclosure acquisition. See section 7874(a)(1). information. requirements in Regulations section 1.707-8. Give each partner a copy of either the The Tax Cuts and Jobs Act of 2017 Generally, disclosure is required when: Partner's Instructions for Schedule K-1 (Form provides additional special rules for certain 1. Certain transfers to a partner are 1065) or specific instructions for each item cases in which section 7874 applies. See made within 2 years of a transfer of property reported on the partner's Schedule K-1. sections 59A(d)(4) and 965(l). by the partner to the partnership; Substitute Forms 2. Certain debt is incurred by a partner Ownership percentage. The ownership within 2 years of the earlier of (a) a written percentage is the percentage described in The partnership doesn't need IRS approval agreement to transfer, or (b) a transfer of the section 7874(a)(2)(B)(ii). See the regulations to use a substitute Schedule K-1 if it is an property that secures the debt, if the debt is under section 7874 for rules regarding the exact copy of the IRS schedule. The boxes treated as a qualified liability; or computation of the ownership percentage. must use the same numbers and titles and must be in the same order and format as on 3. Transfers from a partnership to a In general, the ownership percentage measures the percentage of stock of the the comparable IRS Schedule K-1. The partner occur which are the equivalent to substitute schedule must include the OMB those listed in (1) or (2) above. foreign acquiring corporation that is held by partners of the domestic partnership by number. The partnership must provide each The disclosure must be made on the reason of holding a capital or profits interest partner with the Partner's Instructions for transferor partner's return using Form 8275, in the domestic partnership, with certain Schedule K-1 (Form 1065) or other prepared Disclosure Statement, or on an attached adjustments (for example, disregarding specific instructions for each item reported statement providing the same information. certain stock of the foreign acquiring on the partner's Schedule K-1. When more than one partner transfers corporation attributable to passive assets or The partnership must request IRS property to a partnership under a plan, the assets of other domestic entities that were approval to use other substitute Schedules disclosure may be made by the partnership recently acquired by the foreign acquiring K-1. To request approval, write to: rather than by each partner. corporation). The ownership percentage is Question 29 measured separately by vote and value. Internal Revenue Service Attention: Substitute Forms Program Section 7874 applies in certain cases in Multiple reportable acquisitions. If there are multiple acquisitions that must be 5000 Ellin Road, C6-440 which a foreign corporation directly or Lanham, MD 20706 indirectly acquires substantially all of the reported, list on the lines for Question 29 the properties constituting a trade or business of ownership percentage by vote and value for the most recent acquisition. Attach a

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Each partner's information must be on a specific allocation methods that are generally Generally, any person who holds an separate sheet of paper. Therefore, separate reasonable. interest in a partnership as a nominee for all continuously printed substitutes before another person must furnish to the you file them with the IRS. See Dispositions of Contributed Property, partnership the name, address, etc., of the earlier, for special rules on the allocation of other person. The partnership may be subject to a income, gain, loss, and deductions on the penalty if it files Schedules K-1 that don't disposition of property contributed to the If a married couple each had an interest in conform to the specifications discussed in partnership by a partner. the partnership, prepare a separate Pub. 1167, General Rules and Specifications Schedule K-1 for each of them. for Substitute Forms and Schedules. If the partnership agreement doesn't provide for the partner's share of income, How To Complete Schedule K-1 How Income Is Shared Among gain, loss, deduction, or credit, or if the Partners allocation under the agreement doesn't have In order to enable accurate scanning Allocate shares of income, gain, loss, substantial economic effect, the partner's ! and processing of Schedule(s) K-1, deduction, or credit among the partners share is determined according to the CAUTION please use a 10-point Helvetica according to the partnership agreement for partner's interest in the partnership. See Light Standard font for all entries on sharing income or loss generally. Partners Regulations section 1.704-1 for more Schedules K-1 if the entries are typed or may agree to allocate specific items in a ratio information. made using a computer. different from the ratio for sharing income or If the return is for a fiscal year or a short tax loss. For instance, if the net income year, fill in the tax year space at the top of exclusive of specially allocated items is Specific Instructions each Schedule K-1. On each Schedule K-1, divided evenly among three partners but (Schedule K-1 Only) enter the information about the partnership some special items are allocated 50% to and the partner in Parts I and II (items A one, 30% to another, and 20% to the third General Information through N). In Part III, enter the partner's partner, report the specially allocated items distributive share of each item of income, on the appropriate line of the applicable Generally, the partnership is required to deduction, and credit and any other partner's Schedule K-1 and the total on the prepare and give a Schedule K-1 to each information the partner needs to file the appropriate line of Schedule K, instead of on person who was a partner in the partnership partner's tax return, including information the numbered lines on page 1 of Form 1065, at any time during the year. Schedule K-1 needed to prepare state and local tax Form 1125-A, or Schedule D. must be provided to each partner on or returns. before the day on which the partnership If a partner's interest changed during the return is required to be filed. Codes. In box 11 and boxes 13 through 20, year (such as the entrance of a new partner, identify each item by entering a code in the the exit of a partner, an increase to a When the gain deferral method, as column to the left of the entry space for the partner's interest through an additional described in Regulations section 1.721(c)-3, dollar amount. These codes are identified in capital contribution, or a decrease in a is being applied, a partnership that is a these instructions and on the List of Codes in partner's interest through a distribution), see section 721(c) partnership will attach to the the Partner’s Instructions for Schedule K-1 section 706(d) and Regulations section Schedule K-1 provided to a U.S. transferor (Form 1065). 1.706-4 before determining each partner's the information required under Regulations Attached statements. When attaching distributive share of any item of income, sections 1.721(c)-6(b)(2) and (3). A statements to Schedule K-1 to report gain, loss, deduction, and other items. partnership that is a section 721(c) additional information to the partner, indicate Partnership items are allocated to a partner partnership will also attach to its Form 1065 there is a statement for the following. only for the part of the year in which that a Schedule K-1 for each partner that is a • If an amount can be input on person is a member of the partnership. related foreign person with respect to the Schedule K-1 but additional information is Generally, for each change in a partner’s U.S. transferor. For an indirect partner that is required, enter an asterisk (*) after the code interest, the partnership will either allocate its a related foreign person with respect to the in the column to the left of the entry space. items using a proration method or a U.S. transferor, the Schedule K-1 will only • For items that can't be reported as a closing-of-the-books method. Special rules include relevant information with respect to single dollar amount, enter the code and an apply to certain partnerships, certain section 721(c) property. See Regulations asterisk (*) in the column to the left and enter variations, and certain items. See section 1.721(c)-1 for definitions. “STMT” in the right column to indicate that Regulations section 1.706-4 for additional the information is provided on an attached However, if a foreign partnership meets rules and procedures for making elections. In statement. each of the following four requirements, it addition, special rules in section 706(d)(2) • If the partnership has more coded items isn't required to file or provide Schedules K-1 apply to certain items of partnerships that than the number of entry boxes (for example, for foreign partners (unless the foreign report their income on the cash basis and boxes 11, 13 through 15, or boxes 17 partner is a pass-through entity through special rules in section 706(d)(3) apply to through 20), don't enter a code or dollar which a U.S. person holds an interest in the tiered partnerships. amount in the last entry box. Instead, enter foreign partnership). an asterisk in the left column and enter Special rules on the allocation of income, The partnership had no gross income • “STMT” in the entry space to the right. gain, loss, and deductions generally apply if effectively connected with the conduct of a a partner contributes property to the trade or business within the United States More than one attached statement can be partnership and the FMV of that property at during its tax year. placed on the same sheet of paper. The the time of contribution differs from the • All required Forms 1042 and 1042-S were information included in the statement should contributing partner's adjusted tax basis. filed by the partnership or another be identified in alphanumeric order by box Under these rules, the partnership must use withholding agent as required by Regulations number followed by the letter code (if any), a reasonable method of making allocations section 1.1461-1(b) and (c). description, and dollar amount for each item. of income, gain, loss, and deductions from • The tax liability for each foreign partner for For example: “Box 13, code J—Work the property so that the contributing partner amounts reportable under Regulations opportunity credit —$1,000.” This can be receives the tax burdens and benefits of any section 1.1461-1(b) and (c) has been fully followed with any additional information the built-in gain or loss (that is, precontribution satisfied by the withholding of tax at the partner needs to determine the proper tax appreciation or diminution of value of the source. treatment of the item. contributed property). See Regulations • The partnership isn't a withholding foreign section 1.704-3 for details on how to make partnership as defined in Temporary these allocations, including a description of Regulations section 1.1441-5(c)(2)(i).

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Part I. Information About XXX-XX-xxxx). For more information, see Item J. Partner's Profit, Loss, the Partnership Regulations section 301.6109-4. and Capital Foreign address. If the partner has a On each Schedule K-1, enter the name, On each line, enter the partner's percentage foreign address, enter the information in the address, and identifying number of the share of the partnership's profit, loss, and following order: City or town, state or partnership. capital as of the beginning and end of the province, country, and ZIP or foreign postal partnership's tax year, as determined under Item C. If the partnership is filing its return code. Follow the country's practice for the partnership agreement. If a partner's electronically, enter "e-file." Otherwise, enter entering the postal code. Do not abbreviate interest commences after the beginning of the name of the IRS service center where the the country name. the partnership's tax year, enter in the partnership will file its return. See Where To Item G Beginning column the percentages that File, earlier. existed for the partner immediately after Complete item G on all Schedules K-1. If a admission. If a partner's interest terminates Part II. Information About partner holds interests as both a general and before the end of the partnership's tax year, the Partner limited partner, check both boxes and attach enter in the Ending column the percentages a statement for each activity that shows the that existed immediately before termination. Complete a Schedule K-1 for each partner. amounts allocable to the partner's interest as On each Schedule K-1, enter the partner's a limited partner. On the line for Capital, enter the name, address, identifying number, and percentage share of the capital that the distributive share items. See special rules Item H1. Domestic/Foreign partner would receive if the partnership was below for partners that are disregarded Partner liquidated by the distribution of undivided entities (DEs). Check the foreign partner box if the partner is interests in partnership assets and liabilities. Items E and F a nonresident alien individual, foreign If the partner's capital account is negative or partnership, foreign corporation, foreign zero, express the percentage ownership of For an individual partner, enter the partner's estate, foreign trust, or foreign government. capital as zero. social security number (SSN) or individual Otherwise, check the domestic partner box. taxpayer identification number (ITIN) rather The partner's percentage share of each than the TIN of the DE partner. For all other Item H2. Disregarded Entity category must be expressed as a percentage. The percentage must not be partners, enter the partner's EIN. However, if (DE) a partner is an IRA, enter the identifying negative. The total percentage interest in number of the custodian of the IRA. Do not If the partner is a DE, check the box and each category must total 100% for all enter the identification number of the person provide the name and TIN of the DE partner. partners. To determine whether the total for whom the IRA is maintained. The partnership should make reasonable beginning and ending percentages are attempts to obtain the DE’s TIN. If after 100%, do not include the beginning Foreign partners without a U.S. making reasonable attempts to obtain the percentage for a partner that wasn't a partner identifying number should be notified by the DE’s TIN such TIN is unavailable or unknown at the beginning of the partnership's tax year partnership of the necessity of obtaining a to the partnership, the partnership may or the ending percentage for a partner that U.S. identifying number. Certain aliens who report the DE’s TIN as unknown. If the DE left the partnership before the end of the aren't eligible to obtain SSNs can apply for does not have a TIN, enter “None” in the partnership's tax year. If the partnership an ITIN on Form W-7, Application for IRS space for the DE’s TIN. For more information agreement doesn't express the partner's Individual Taxpayer Identification Number. about disregarded entity reporting, see share of profit, loss, and capital as fixed IRS.gov/forms-pubs/clarifications-for- percentages, the partnership may use a If the partner in the partnership is an disregarded-entity-reporting-and- reasonable method in arriving at each entity, such as single-member limited liability section-743b-reporting. percentage for purposes of completing the company (LLC), that is a disregarded entity items required by item J, as long as such (DE) for federal income tax purposes, enter Item I1. What Type of Entity Is method is consistent with the partnership the TIN of the beneficial owner of the DE This Partner? agreement and is applied consistently from partner in item E rather than the TIN of the State whether the partner is an individual, a year to year. Maintain records to support the DE partner. The beneficial owner is the corporation, an estate, a trust, a partnership, share of profits, share of losses, and share of taxpayer who owns the DE partner. In item F, a disregarded entity, an exempt capital reported for each partner. enter the name and address of the beneficial organization, a foreign government, or a owner of the DE partner. See the instructions Check the box in this item if there was a nominee (custodian). If the partner is an LLC for item H2 below. sale or exchange of all or part of a and has elected to be treated as other than a partnership interest to a new or pre-existing Note. If the partner is a limited liability DE under Regulations section 301.7701-3 partner during the year, regardless of company (LLC) or a trust, the partnership for federal income tax purposes, the whether the partner recognized gain or loss should inquire as to whether the LLC is a partnership must enter the LLC's on the transaction(s). disregarded entity (DE) for federal income classification for federal income tax tax purposes. If the LLC or trust is a DE, the purposes (that is, a corporation or Item K. Partner's Share of partnership must verify that the partner's TIN partnership). If any legal owner of the Liabilities partnership is a disregarded entity for federal is the TIN used by the partner's beneficial Enter each partner's share of nonrecourse owner in filing its federal income tax return. income tax purposes, report the beneficial owner’s entity type in Item I1. If the partner is liabilities, partnership-level qualified Truncating recipient's TIN on Sched- a nominee, use one of the following codes nonrecourse financing, and other recourse ule K-1. The partnership can truncate a after the word “nominee” to indicate the type liabilities at the end of the year. partner's identifying number on the of entity the nominee represents: “Nonrecourse liabilities” are those Schedule K-1 the partnership sends to the I—Individual; C—Corporation; F—Estate or liabilities of the partnership for which no partner. Truncation isn't allowed on the Trust; P—Partnership; DE—Disregarded partner (or related person) bears the Schedule K-1 the partnership files with the Entity; E—Exempt Organization; economic risk of loss. The extent to which a IRS. Also, the partnership cannot truncate its IRA—Individual Retirement Arrangement; or partner bears the economic risk of loss is own identification number on any form. FGOV—Foreign Government. determined under the rules of Regulations To truncate, where allowed, replace the section 1.752-2. Do not include first five digits of the nine-digit number with partnership-level qualified nonrecourse asterisks (*) or Xs (for example, an SSN financing (defined below) on the line for xxx-xx-xxxx would appear as ***-**-xxxx or nonrecourse liabilities.

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If the partner terminated his or her interest partner needs to determine if the qualified explanation for the difference. If a partner in the partnership during the year, enter the nonrecourse rules are also met at the partner joined the partnership through a contribution share that existed immediately before the level. to the partnership this year, enter zero as the total disposition. In all other cases, enter it as partner's beginning capital account. of the end of the year. If a partnership (upper-tier) owns a direct interest in other partnerships (lower-tier), Beginning capital account balance if If the partnership is engaged in two or then Regulations section 1.752-4(a) requires tax basis method was not previously more different types of at-risk activities, or a that the upper-tier partnership allocates to its used. If you reported partners' capital combination of at-risk activities and any other partners its share of the lower-tier accounts using a method other than the tax activity, attach a statement showing the partnership's liabilities (except for any liability basis method last year, but also maintained partner's share of nonrecourse liabilities, of the lower-tier partnership that is owed to capital accounts in your books and records partnership-level qualified nonrecourse the upper-tier partnership). Allocate those using the tax basis method (for example, for financing, and other recourse liabilities for lower-tier partnership liabilities to each purposes of meeting the requirement to each activity. See Pub. 925 to determine if partner based on whether that liability is a report partner negative tax capital accounts), the partnership is engaged in more than one recourse or nonrecourse liability to the you must report each partner's beginning at-risk activity. partner under the regulations under section capital account using the tax basis method. If 752. The characterization of a liability may you did not report partners' capital accounts The at-risk rules of section 465 generally change as it moves from a lower-tier using the tax basis method last year and did apply to any activity carried on by the partnership to an upper-tier partnership. If not maintain capital accounts under the tax partnership as a trade or business or for the Schedule K-1 (Form 1065) includes basis method in your books and records, you production of income. These rules generally lower-tier partnership liabilities, check the may refigure a partner's beginning capital limit the amount of loss and other deductions box in item K. If the total liabilities on all account using the tax basis method, a partner can claim from any partnership Schedule K-1s (Form 1065) do not equal the modified outside basis method, modified activity to the amount for which that partner total liabilities on Schedule L, attach a previously taxed capital method, or section is considered at risk. However, for partners reconciliation. 704(b) method, described below, for this who acquired their partnership interests year only. The same method must be used to before 1987, the at-risk rules don't apply to Item L. Partner's Capital determine each partner's beginning capital losses from an activity of holding real account. All other lines in item L must be property the partnership placed in service Account Analysis reported using the tax basis method. You before 1987. The activity of holding mineral You aren’t required to complete item L if the must also attach a statement to the partners' property doesn't qualify for this exception. answer to question 4 of Schedule B is “Yes.” Schedules K-1 indicating the method used to Identify on an attached statement to If you are required to complete this item, also determine each partner's beginning capital Schedule K-1 the amount of any losses that see the instructions for Schedule M-2, later. account. If the modified previously taxed aren't subject to the at-risk rules. Tax basis method. Figure each partner's capital method is used, the statement must If a partnership is engaged in an activity capital account for the partnership's tax year also include the method used to determine subject to the limitations of section 465(c)(1) using the transactional approach, discussed the partnership's net liquidity value (fair (such as films or videotapes, leasing section below, for the tax basis method. If you market value, section 704(b) book value, 1245 property, farming, or oil and gas reported the partner's capital account last etc.). The method used to determine the property), give each partner his or her share year using any other method (for example, partnership's net liquidity value must be of the total pre-1976 losses from that activity GAAP, section 704(b), or other), you must adopted for all partners in the partnership. for which there existed a corresponding use the tax basis method this year. amount of nonrecourse liability at the end of Capital contributed during the year. How to report partnership events or each year in which the losses occurred. See On the line for capital contributed during the transactions. If you are uncertain how to Form 6198, At-Risk Limitations, and related year, enter the amount of cash plus the report a partnership event or transaction, you instructions for more information. adjusted tax basis of all property contributed should account for the event or transaction in by the partner to the partnership during the Qualified nonrecourse financing secured a manner generally consistent with figuring year. The amount you enter on this line by real property used in an activity of holding the partner's adjusted tax basis in its should be reduced by any liabilities assumed real property that is subject to the at-risk partnership interest (without regard to by the partnership in connection with, or rules is treated as an amount at risk. partnership liabilities), taking into account the liabilities to which the property is subject “Qualified nonrecourse financing” generally rules and principles of sections 705, 722, immediately before, the contribution. This includes financing for which no one is 733, and 742 and by reporting the amount on amount might be negative. personally liable for repayment that is the line for other increase (decrease). The borrowed for use in an activity of holding real partner's ending capital account as reported Current year net income (loss). On property and that is loaned or guaranteed by using the tax basis method in item L might the line for current year net income (loss), a federal, state, or local government or that is not equal the partner's adjusted tax basis in enter the partner's distributive share of borrowed from a “qualified” person. Qualified its partnership interest. Generally, this is partnership income and gain (including persons include any person actively and because a partner's adjusted tax basis in its tax-exempt income) as figured for tax regularly engaged in the business of lending partnership interest includes the partner's purposes for the year, minus the partner's money, such as a bank or savings and loan share of partnership liabilities, as well as distributive share of partnership loss and association. Qualified persons generally partner specific adjustments. Each partner is deductions (including nondeductible, don't include related parties (unless the responsible for maintaining a record of the noncapital expenditures) as figured for tax nonrecourse financing is commercially adjusted tax basis in its partnership interest. purposes for the year. reasonable and on substantially the same Beginning capital account if tax basis Other increase (decrease). On the line terms as loans involving unrelated persons), method was previously used. If you for other increase (decrease), enter the sum the seller of the property, or a person who figured the partner's capital account for last of all other increases or decreases that receives a fee for the partnership's year using the tax basis method, enter the affected the partner's capital account for tax investment in the real property. See section partner's ending capital account as purposes during the year and attach a 465(b)(6) for more information on qualified determined for last year on the line for statement explaining each adjustment. For nonrecourse financing. beginning capital account. If you reported a example, if a new partner acquired its The partner as well as the partnership negative ending capital account to a partner interest in the partnership from another must meet the qualified nonrecourse rules. last year and a different amount is figured for partner in a purchase, exchange, gift, or Therefore, the partnership must enter on an the partner's beginning capital account using inheritance, enter an amount for the attached statement any other information the the tax basis method this year, provide an transferee under other increase that is equal

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to the transferor partner's ending capital example, sections 705, 722, 733, and 742; the adjustments, you may use information account with respect to the interest and subtracting from that basis (1) the required to be reported to you under transferred immediately before the transfer partner's share of partnership liabilities under Regulations section 1.6031(c)-1T, and figured using the tax basis method. Other section 752 and (2) the sum of partner's publicly available trading price information. If examples of increases include the following. section 743(b) adjustments (that is, net you are a publicly traded partnership and • The partner's distributive share of the section 743(b) adjustments). For purposes of adopt the modified previously taxed capital excess of the tax deductions for depletion establishing a partner's beginning capital method, you may apply Regulations section (other than oil and gas depletion) over the account, you may rely on the adjusted tax 1.743-1(j)(4)(i)(B)(2) in figuring a partner's adjusted tax basis of the property subject to basis information provided by your partners. beginning capital account. depletion. Modified previously taxed capital meth- The partner's share of any increase to the Item M. Did the Partner • od. The amount to report as a partner's adjusted tax basis of partnership property Contribute Property With a beginning capital account under the modified under section 734(b). previously taxed capital method is equal to Built-in Gain or Loss? If a transferor partner disposed of its the following. Check the appropriate box to indicate interest in the partnership by sale, exchange, • The amount of cash the partner would whether the partner contributed property with gift, or as the result of death, enter the receive if you liquidated after selling all of a built-in gain or loss during the tax year. If transferor partner's ending capital account your assets in a fully taxable transaction for the “Yes” box is checked, attach a statement with respect to the interest transferred cash equal to the fair market value of the that contains the following information. immediately before the transfer figured using assets; increased by • A description of each property the partner the tax basis method. Other examples of • The amount of tax loss determined contributed. decreases include the following. without taking into account any section • The date the property was contributed. • The partner's distributive share of tax 743(b) basis adjustments (including any • The amount of the property's built-in gain deductions for depletion of any partnership remedial allocations under Regulations or loss. oil and gas property, but not exceeding the section 1.704-3(d)) that would be allocated partner's share of the adjusted tax basis of to the partner following such a liquidation Exception. If a partner contributes more that property. (treating all liabilities as nonrecourse); and than 10 properties with either a built-in gain • The partner's share of any decrease to the decreased by or built-in loss on any date during the tax adjusted tax basis of partnership property • The amount of tax gain determined year, the partnership isn't required to provide under section 734(b). without taking into account any section the required information separately for each 743(b) basis adjustments (including any property contributed for that date. Instead, Note. Section 743(b) basis adjustments are remedial allocations under Regulations the partnership can report the (a) number of not taken into account in calculating a section 1.704-3(d)) that would be allocated properties contributed on that date, (b) total partner's capital account under the tax basis to the partner following such a liquidation amount of built-in gain, and (c) total amount method. If section 743(b) adjustments are (treating all liabilities as nonrecourse). of built-in loss. Do not net the built-in gains included in a partner's beginning capital Instead of using the assets' fair market value, and built-in losses; instead, show the total account balance (because they were you may determine the partnership's net built-in gain and total built-in loss for all included in last year's ending capital liquidity value, and gain or loss, by using properties contributed on that date. account), those section 743(b) adjustments, such assets' bases as determined under whether positive or negative adjustments, A property's built-in gain is the amount by section 704(b), as determined for financial which the FMV of the property exceeds its should be removed from the partner's capital accounting purposes, or on the basis set account in the 2020 tax year and reported as adjusted tax basis at the time the property is forth in the partnership agreement for contributed to the partnership. A property's a 2020 tax year other increase(decrease) purposes of determining what each partner item. built-in loss is the amount by which the FMV would receive if the partnership were to of the property is less than its adjusted tax Withdrawals and distributions. On the liquidate, as determined by partnership basis at the time the property is contributed line for withdrawals and distributions, enter management. to the partnership. Partnerships are required the amount of cash plus the adjusted tax Section 704(b) method. The amount to to keep track of this information (see basis of all property distributed by the report as a partner's beginning capital Regulations section 1.704-3). This partnership to the partner during the year. account under the section 704(b) method is information is also needed for purposes of The amount you enter on this line should be equal to the partner's section 704(b) capital allocating partnership items to partners reduced by any liabilities assumed by the account, minus the partner's share of section because income, gain, loss, and deductions partner in connection with, or liabilities to 704(c) built-in gain in the partnership's related to property contributed to the which the property is subject immediately assets, plus the partner's share of section partnership by a partner must be shared before, the distribution. This amount might 704(c) built-in loss in the partnership's among the partners so as to take account of be negative. assets. Property contributed to a partnership the variation between the basis of the is section 704(c) property if, at the time of the property to the partnership and its FMV at Ending capital account. The sum of contribution, its fair market value differs from the time of contribution. If the partnership the amounts shown on the lines in item L its adjusted tax basis. Section 704(c) distributes any property (other than built-in above the line for ending capital account property also includes property with gain property) to a partner that has must equal the amount reported on the line differences resulting from revaluations contributed built-in gain property to the for ending capital account. A partner's (reverse section 704(c) allocations). For partnership within the last 7 years, it will ending capital account determined under the more information see sections 704(b) and need this information for the attached tax basis method may be negative if the sum 704(c) and Regulations sections 1.704-1 statement required in the instructions for of a partner's losses and distributions through 1.704-3. line 19b of Schedule K for distributions exceeds the sum of the partner's subject to section 737 (code B). If the contributions and share of income. Publicly Traded Partnerships. In the case partnership distributes contributed property of a sale or exchange of an interest in a Modified outside basis method. The with a built-in gain or loss to any partner publicly traded partnership, you may amount to report as a partner's beginning other than the partner that contributed the determine a transferee partner's beginning capital account under the modified outside property and the date of the distribution is capital account by adjusting the partner's basis method is equal to the partner's within 7 years of the date the property was beginning capital account to reflect the adjusted tax basis in its partnership interest contributed to the partnership, it will need transferee partner's purchase price of the as determined under the principles and this information for the attached statement interest rather than entering the transferor provisions of subchapter K including, for required by the instructions for line 20c of partner's ending capital account. In making

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Schedule K for the precontribution gain Schedule K-1. Enter each partner's Line 4. Guaranteed Payments to (loss) (code W). distributive share of ordinary business Partners Item N. Partner's Share of Net income (loss) in box 1 of Schedule K-1. Identify on statements attached to Guaranteed payments are payments made Unrecognized Section 704(c) Schedule K-1 any additional information the by a partnership to a partner that are Gain or (Loss) partner needs to correctly apply the passive determined without regard to the partnership's income. Some examples of For item N, the partnership should report the activity limitations. For example, if the partnership has more than one trade or guaranteed payments to partners include: partner's share of net unrecognized section • Payments for salaries, health insurance, 704(c) gains or losses, both at the beginning business activity, identify on an attached statement to Schedule K-1 the amount from and interest deducted by the partnership and and at the end of the partnership's tax year. reported on Form 1065, page 1, line 10; Solely for purposes of completing item N, the each separate activity. See Passive Activity Reporting Requirements, earlier. Form 8825; or on Schedule K, line 3b; section 704(c) gain or loss is the partner's • Compensation deferred under a section share of the net (net means aggregate or 409A nonqualified deferred compensation sum) of all unrecognized section 704(c) gain Line 2. Net Rental Real Estate plan that doesn't meet the requirements of or loss in partnership property, including Income (Loss) section 409A reported on line 20c of section 704(c) gain or loss arising from Schedule K; and Enter the net income (loss) from rental real revaluations of partnership property. See • Payments the partnership must capitalize. estate activities of the partnership from Form Notice 2019-66 for more information. See the instructions for Form 1065, line 10. 8825. Attach this form to Form 1065. Schedule K-1. Enter each partner's Generally, amounts reported on line 4a as Specific Instructions distributive share of net rental real estate guaranteed payment for services and line 4b (Schedules K and K-1, Part income (loss) in box 2 of Schedule K-1. as guaranteed payment for the use of capital III, Except as Noted) Identify on statements attached to aren't considered to be related to a passive Schedule K-1 any additional information the activity. For example, guaranteed payments These instructions refer to the lines on partner needs to correctly apply the passive for personal services paid to a partner would Schedule K and the boxes on Schedule K-1. activity limitations. For example, if the not be passive activity income. Likewise, partnership has more than one rental real guaranteed payments for capital are treated Special Allocations estate activity, identify the amount as interest for purposes of section 469 and An item is specially allocated if it is allocated attributable to each activity. Also, for are generally not passive activity income. example, identify certain items from any to a partner in a ratio different from the ratio A partnership must treat and report a for sharing income or loss generally. rental real estate activities that may be subject to the recharacterization rules. See TIP transfer of partnership property to a Report specially allocated ordinary gain Passive Activity Reporting Requirements, partner in satisfaction of a (loss) on Schedule K, line 11, and in box 11 earlier. guaranteed payment as a sale or exchange, of Schedule K-1. Report other specially and not a distribution. See Rev. Rul. allocated items in the applicable boxes of the 2007-40, 2007-25 I.R.B. 1426, for more partner's Schedule K-1, with the total amount Line 3. Other Net Rental Income details. on the applicable line of Schedule K. See (Loss) Schedule K-1. Enter each partner's How Income Is Shared Among Partners, Enter on line 3a gross income from rental earlier. guaranteed payments for services in box 4a activities other than those reported on Form and guaranteed payments for use of capital Example. A partnership has a long-term 8825. Include on line 3a gain (loss) from in box 4b of Schedule K-1. Report each capital gain that is specially allocated to a line 17 of Form 4797 that is attributable to the partner's total guaranteed payments in partner and a net long-term capital gain sale, exchange, or involuntary conversion of box 4c of Schedule K-1. reported on line 15 of Schedule D that must an asset used in a rental activity other than a be reported on line 9a of Schedule K. rental real estate activity. Because specially allocated gains or losses Portfolio Income aren't reported on Schedule D, the Enter on line 3b the deductible expenses See Portfolio Income, earlier, for a definition partnership must report both the net of the activity. Attach a statement of these of portfolio income. long-term capital gain from Schedule D and expenses to Form 1065. the specially allocated gain on line 9a of Do not reduce portfolio income by Enter on line 3c the net income (loss). Schedule K. Box 9a of the Schedule K-1 for deductions allocated to it. Report such the partner must include both the specially See Rental Activities, earlier, and Pub. deductions (other than interest expense) on allocated gain and the partner's distributive 925 for more information on rental activities. line 13d of Schedule K. Report each share of the net long-term capital gain from partner's distributive share of deductions Schedule D. Schedule K-1. Enter each partner's (other than interest) allocable to portfolio distributive share of net income (loss) from income in box 13 of Schedule K-1, using Income (Loss) rental activities other than rental real estate code I or L. . Ordinary Business Income activities in box 3 of Schedule K-1. Identify on statements attached to Schedule K-1 any (Loss) Interest expense allocable to portfolio additional information the partner needs to income is generally investment interest Enter the amount from page 1, line 22. Enter correctly apply the passive activity expense reported on line 13b of Schedule K. the income (loss) without reference to (a) the limitations. For example, if the partnership Report each partner's distributive share of basis of the partners' interests in the has more than one rental activity reported in interest expense allocable to portfolio partnership, (b) the partners' at-risk box 3, identify on an attached statement to income in box 13 of Schedule K-1 using limitations, or (c) the passive activity Schedule K-1 the amount from each activity. code H. limitations. These limitations, if applicable, See Passive Activity Reporting are determined at the partner level. Requirements, earlier. Line 5. Interest Income Line 1 should not include rental activity Enter only taxable portfolio interest on this income (loss) or portfolio income (loss). line. Taxable interest is interest from all sources except interest exempt from tax and interest on tax-free covenant bonds. Include

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interest income from the credit to holders of qualified dividend income under section Line 7. Royalties tax credit bonds. See the instructions for 857(c). Other credits (code P) under Line 15f. Other • Dividends from a corporation which first Enter the royalties received by the Credits, and the Instructions for Form 8912 became a surrogate foreign corporation (as partnership. for details. defined in section 7874(a)(2)(B) after Schedule K-1. Enter each partner's December 22, 2017) other than a foreign Schedule K-1. Enter each partner's distributive share of royalties in box 7 of corporation that is treated as a domestic distributive share of interest income in box 5 Schedule K-1. corporation under section 7874(b). See of Schedule K-1. If the partnership is section 1(h)(11)(C)(iii)(II). reporting interest income from clean Line 8. Net Short-Term Capital See Pub. 550 for more details. renewable energy bonds, attach a statement Gain (Loss) to Schedule K-1 that shows each partner's Qualified foreign corporation. A foreign distributive share of interest income from this corporation is a qualified foreign corporation Enter the gain (loss) that is portfolio income credit. Partners need this information to if it is: (loss) from Schedule D (Form 1065), line 7. properly adjust the basis of their interest in Schedule K-1. Enter each partner's the partnership. 1. Incorporated in a possession of the United States, or distributive share of net short-term capital gain (loss) in box 8 of Schedule K-1. Line 6a. Ordinary Dividends 2. Eligible for benefits of a comprehensive income tax treaty with the Enter only taxable ordinary dividends on United States that the Secretary determines Line 9a. Net Long-Term Capital line 6a, including any qualified dividends is satisfactory for this purpose and that Gain (Loss) reported on line 6b. Do not include any includes an exchange of information dividend equivalents reported on line 6c. program. See Notice 2011-64, 2011-37 Enter the gain or loss that is portfolio income I.R.B. 231, for details. (loss) from Schedule D (Form 1065), line 15. Schedule K-1. Enter each partner's distributive share of ordinary dividends in If the foreign corporation doesn't meet Schedule K-1. Enter each partner's box 6a of Schedule K-1. either (1) or (2), then it may be treated as a distributive share of net long-term capital qualified foreign corporation for any dividend gain (loss) in box 9a of Schedule K-1. Line 6b. Qualified Dividends paid by the corporation if the stock If any gain or loss from line 7 or 15 of associated with the dividend paid is readily Schedule D is from the disposition of Enter qualified dividends on line 6b. Except tradable on an established securities market nondepreciable personal property as provided below, qualified dividends are in the United States. used in a trade or business, it may not be dividends received from domestic However, qualified dividends don't treated as portfolio income. Instead, report it corporations and qualified foreign on line 11 of Schedule K and report each corporations. include dividends paid by an entity that was a passive foreign investment company partner's distributive share in box 11 of Exceptions. The following dividends aren't (defined in section 1297) in either the tax Schedule K-1 using code I. qualified dividends. year of the distribution or the preceding tax • Dividends the partnership received on any year. Line 9b. Collectibles (28%) Gain share of stock held for less than 61 days See Notice 2004-71, 2004-45 I.R.B. 793, during the 121-day period that began 60 for more details. (Loss) days before the ex-dividend date. When Figure the amount attributable to collectibles determining the number of days the Schedule K-1. Enter each partner's from the amount reported on Schedule D partnership held the stock, don't count distributive share of qualified dividends in (Form 1065), line 15. A collectibles gain certain days during which the partnership's box 6b of Schedule K-1. (loss) is any long-term gain or deductible risk of loss was diminished. The ex-dividend Attach a statement to the Schedule K-1 long-term loss from the sale or exchange of a date is the first date following the declaration identifying the dividends included in box 6a collectible that is a capital asset. of a dividend on which the purchaser of a or box 6b that are eligible for the deduction stock isn't entitled to receive the next for dividends received under section 243(a), Collectibles include works of art, rugs, dividend payment. When counting the (b), or (c); section 245; section 245A; or are antiques, metal (such as gold, silver, or number of days the partnership held the hybrid dividends as defined in section platinum bullion), gems, stamps, coins, stock, include the day the partnership 245A(e)(4). alcoholic beverages, and certain other disposed of the stock but not the day the tangible property. partnership acquired it. If any amounts from line 6b are from foreign sources, see the instructions • Dividends attributable to periods totaling ! Also, include gain (but not loss) from the more than 366 days that the partnership CAUTION for lines 16d–h, later, for additional statements required. sale or exchange of an interest in a received on any share of preferred stock partnership or trust held for more than 1 year held for less than 91 days during the 181-day and attributable to unrealized appreciation of period that began 90 days before the Line 6c. Dividend Equivalents collectibles. For details, see Regulations ex-dividend date. When determining the section 1.1(h)-1. Also attach the statement number of days the partnership held the Information on dividend equivalents, as required under Regulations section stock, do not count certain days during which described in section 871(m), is provided for 1.1(h)-1(e). the partnership's risk of loss was diminished. persons that are not U.S. persons, who are Preferred dividends attributable to periods generally required to treat dividend Schedule K-1. Report each partner's totaling less than 367 days are subject to the equivalents as U.S. source dividends, and distributive share of the collectibles (28%) 61-day holding period rule above. domestic partnerships with partners who gain (loss) in box 9b of Schedule K-1. • Dividends that relate to payments that the may need this information. Enter the amount partnership is obligated to make because of of dividend equivalents as defined in section Line 9c. Unrecaptured Section short sales or positions in substantially 871(m). See Regulations section 1.871-15 similar or related property. for additional information. For purposes of 1250 Gain • Dividends paid by a regulated investment line 6c, include all amounts that would be The three types of unrecaptured section company that aren't treated as qualified included as a dividend equivalent if the 1250 gain must be reported separately on an dividend income under section 854. amount were paid to a person subject to tax attached statement to Form 1065. • Dividends paid by a real estate under section 871 or 881, even if the partner investment trust that aren't treated as is a U.S. person.

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From the sale or exchange of the part- business assets in box 9c of Schedule K-1. If would be reported on an attached statement nership's business assets. Figure this the partnership is reporting unrecaptured for line 11. If the partnership holds a residual amount in Part III of Form 4797 for each section 1250 gain from an estate, trust, interest in a REMIC, report on the attached section 1250 property (except property for REIT, or RIC, or from the partnership's sale statement for box 11 of Schedule K-1 the which gain is reported using the installment or exchange of an interest in another partner's share of the following. method on Form 6252) for which you had an partnership (as explained above), enter • Taxable income (net loss) from the entry in Part I of Form 4797. Subtract “STMT” in box 9c and an asterisk (*) in the REMIC (line 1b of Schedules Q (Form line 26g of Form 4797 from the smaller of left column of the box and attach a statement 1066)). line 22 or line 24. Figure the total of these that separately identifies the amount of • Excess inclusion (line 2c of Schedules Q amounts for all section 1250 properties. unrecaptured section 1250 gain from the (Form 1066)). Generally, the result is the partnership's following. • Section 212 expenses (line 3b of unrecaptured section 1250 gain. However, if • The sale or exchange of the partnership's Schedules Q (Form 1066)). Do not report the partnership is reporting gain on the business assets. these section 212 expense deductions installment method for a section 1250 • The sale or exchange of an interest in related to portfolio income on Schedules K property held more than 1 year, see the next another partnership. and K-1. paragraph. • An estate, trust, REIT, or RIC. Because Schedule Q (Form 1066) is a The total unrecaptured section 1250 gain If any amounts from line 9c are from quarterly statement, the partnership must for an installment sale of section 1250 foreign sources, see the instructions follow the Schedule Q instructions to figure property held more than 1 year is figured in a for lines 16d–h, later, for additional the amounts to report to partners for the manner similar to that used in the preceding statements required. partnership's tax year. paragraph. However, the total unrecaptured Involuntary conversions (code B). Net section 1250 gain must be allocated to the gain (loss) from involuntary conversions due installment payments received from the sale. Line 10. Net Section 1231 Gain to casualty or theft. The amount for this line To do so, the partnership must generally (Loss) is shown on Form 4684, Casualties and treat the gain allocable to each installment Enter the net section 1231 gain (loss) from Thefts, line 38a, 38b, or 39. payment as unrecaptured section 1250 gain Form 4797, line 7. Each partner's share must be entered on until all such gain has been used in full. Schedule K-1. Give each partner a schedule Figure the unrecaptured section 1250 gain that shows the amounts to be reported on for installment payments received during the Do not include net gain or loss from the partner's Form 4684, line 34, columns (b) tax year as the smaller of (a) the amount involuntary conversions due to casualty or (i), (b)(ii), and (c). from line 26 or line 37 of Form 6252 theft. Report net gain or loss from involuntary (whichever applies), or (b) the total conversions due to casualty or theft on If there was a gain (loss) from a casualty unrecaptured section 1250 gain for the sale line 11 of Schedule K (box 11, code B, of or theft to property not used in a trade or reduced by all gain reported in prior years Schedule K-1). See the instructions for business or for income-producing purposes, (excluding section 1250 ordinary income line 11 on how to report net gain (loss) due to notify the partner. The partnership should not recapture). a casualty or theft. complete Form 4684 for this type of casualty Schedule K-1. Report each partner's or theft. Instead, each partner will complete If the partnership chose not to treat his or her own Form 4684. all of the gain from payments distributive share of net section 1231 gain ! (loss) in box 10 of Schedule K-1. If the CAUTION received after May 6, 1997, and Section 1256 contracts and straddles before August 24, 1999, as unrecaptured partnership has more than one rental, trade, (code C). Report any net gain or loss from section 1250 gain, use only the amount the or business activity, identify on an attached section 1256 contracts from Form 6781, partnership chose to treat as unrecaptured statement to Schedule K-1 the amount of Gains and Losses From Section 1256 section 1250 gain for those payments to section 1231 gain (loss) from each separate Contracts and Straddles. reduce the total unrecaptured section 1250 activity. See Passive Activity Reporting Requirements, earlier. Mining exploration costs recapture (code gain remaining to be reported for the sale. D). Provide the information partners need to See Regulations section 1.453-12. If any amounts from line 10 are from recapture certain mining exploration foreign sources, see the instructions expenditures. See Regulations section From the sale or exchange of an interest for lines 16d–h, later, for additional 1.617-3. in a partnership. Also report as a separate statements required. amount any gain from the sale or exchange Cancellation of debt (code E). If of an interest in a partnership attributable to cancellation of debt is reported to the unrecaptured section 1250 gain. See Line 11. Other Income (Loss) partnership on Form 1099-C, report each Regulations section 1.1(h)-1 and attach the partner's distributive share in box 11 using Enter any other item of income or loss not statement required under Regulations code E. included on lines 1 through 10. On the line to section 1.1(h)-1(e). the left of the entry space for line 11, identify Include the amount of income the From an estate, trust, REIT, or RIC. If the the type of income. If there is more than one TIP partnership must recognize for a partnership received a Schedule K-1 or Form type of income, attach a statement to Form transfer of a partnership interest in 1099-DIV from an estate, a trust, a real 1065 that separately identifies each type and satisfaction of a partnership debt when the estate investment trust (REIT), or a regulated amount of income for each of the following debt relieved exceeds the FMV of the investment company (RIC) reporting categories. The codes needed for partnership interest. See section 108(e)(8) “unrecaptured section 1250 gain,” do not Schedule K-1 reporting are provided for each for more information. add it to the partnership's own unrecaptured category. section 1250 gain. Instead, report it as a Section 743(b) positive income adjust- Other portfolio income (loss) (code A). separate amount. For example, if the ments (code F). For partnerships other Portfolio income not reported on lines 5 partnership received a Form 1099-DIV from than publicly traded partnerships, report the through 10. a REIT with unrecaptured section 1250 gain, partner's share of net positive income report it as “Unrecaptured section 1250 gain Report and identify other portfolio income resulting from all section 743(b) adjustments. from a REIT.” or loss on an attached statement for line 11. For purposes of code F, net positive income from all section 743(b) adjustments means Schedule K-1. Report each partner's For example, income reported to the partnership from a real estate mortgage the excess of all section 743(b) adjustments distributive share of unrecaptured section allocated to the partner that increase the 1250 gain from the sale or exchange of the investment conduit (REMIC), in which the partnership is a residual interest holder, partner's taxable income over all section

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743(b) adjustments that decrease the (c) The partner's share of the partnership's under section 1045. Do not include these partner's taxable income. Attach a statement adjusted basis in the property (except for oil amounts on line 11 of Schedule K. on line 20, code AH, showing each section or gas properties). • Gain eligible for section 1045 rollover 743(b) basis adjustment making up the total (d) Total intangible drilling costs, (replacement stock not purchased by the and identify the assets to which it relates. development costs, and mining exploration partnership). Include only gain from the sale The partnership may group these 743(b) costs (section 59(e) expenditures) passed or exchange of qualified small business basis adjustments by asset category or through to the partner for the property. (QSB) stock (as defined in the Instructions description in cases where multiple assets See Regulations section 1.1254-5 for more for Schedule D) the partnership held for are affected. See the instructions to line 20, information. more than 6 months but that wasn't deferred Code AH. Also see IRS.gov/forms-pubs/ • Gains from the disposition of farm by the partnership under section 1045. See clarifications-for-disregarded-entity- recapture property (see Form 4797) and the Instructions for Schedule D for more reporting-and-section-743b-reporting. other items to which section 1252 applies. details. A partner (other than a corporation) Any income, gain, or loss to the may be eligible to defer his or her distributive Section 965 inclusion (code G). Enter • partnership under section 751(b). When a share of this gain under section 1045 if he or the section 965(a) inclusion amount from partnership makes a distribution and the she purchases other QSB stock during the Form 965, line 3, on Schedule K, line 11. You partnership holds section 751 property, if any 60-day period that began on the date the must also complete and attach Form 965, partner has any gain or loss under section QSB stock was sold by the partnership. Inclusion of Deferred Foreign Income Upon 751(b), the partnership must report the net of Additional limitations apply at the partner Transition to Participation Exemption all such gains or losses. level. Report on an attached statement to System, and applicable schedules. • Specially allocated ordinary gain (loss). Schedule K-1 for each sale or exchange (a) Income under subpart F (other than in- • Any gain or loss from line 7 or 15 of the name of the corporation that issued the clusions under section 951A and 965) Schedule D that isn't portfolio income (for QSB stock, (b) the partner's share of the (code H). If the partnership is a domestic example, gain or loss from the disposition of partnership's adjusted basis and sales price partnership that does not rely on Proposed nondepreciable personal property used in a of the QSB stock, (c) the dates the QSB Regulations section 1.958-1(d)(1) to treat it trade or business). stock was bought and sold, and (d) the as not owning stock of a foreign corporation • Gain from the sale or exchange of partner's distributive share of gain from the within the meaning of section 958(a) for qualified small business (QSB) stock (as sale of the QSB stock. purposes of section 951, or is a foreign defined in the Instructions for Schedule D) For more information, see Regulations partnership, then enter the subpart F income that is eligible for the section 1202 exclusion. section 1.1045-1. Do not include these inclusions (other than sections 951A and 965 The section 1202 exclusion applies only to amounts on line 11 of Schedule K. inclusions) of the domestic partnership. QSB stock held by the partnership for more Attach a statement to the Schedule K-1 than 5 years. Corporate partners aren't Distribution of replacement QSB identifying the subpart F inclusion eligible for the section 1202 exclusion. stock to a partner that reduces the attributable to the sale or exchange by a Additional limitations apply at the partner interest of another partner in controlled foreign corporation (CFC) of stock level. Report each partner's share of section replacement QSB stock. A partner must in another foreign corporation described in 1202 gain on Schedule K-1. Each partner will recognize gain upon a distribution of section 964(e)(4) or attributable to hybrid determine if he or she qualifies for the replacement QSB stock to another partner dividends of tiered corporations under section 1202 exclusion. Report on an that reduces the partner's share of the section 245A(e)(2). attached statement to Schedule K-1 for each replacement QSB stock held by a sale or exchange (a) the name of the partnership. The amount of gain that the Other income (loss) (code I). Include any corporation that issued the QSB stock, (b) partner must recognize is based on the other type of income, such as the following. the partner's share of the partnership's amount of gain that the partner would The partner's distributive share of the • adjusted basis and sales price of the QSB recognize upon a sale of the distributed partnership's gain or loss attributable to the stock, and (c) the dates the QSB stock was replacement QSB stock for its FMV on the sale or exchange of qualified preferred stock bought and sold. date of the distribution, not to exceed the of the Federal National Mortgage • Gain eligible for section 1045 rollover amount that the partner previously deferred Association (Fannie Mae) and the Federal (replacement stock purchased by the under section 1045 related to the distributed Home Loan Mortgage Corporation (Freddie partnership). Include only gain from the sale replacement QSB stock. If the partnership Mac). On an attached statement, show (a) or exchange of qualified small business distributed a partner's share of replacement the gain or loss attributable to the sale or (QSB) stock (as defined in the Instructions QSB stock to another partner, the exchange of the qualified preferred stock, for Schedule D) that was deferred by the partnership must give the partner whose (b) the date the stock was acquired by the partnership under section 1045 and reported share of the replacement QSB stock is partnership, and (c) the date the stock was on Form 8949/Schedule D. See the reduced (a) the name of the corporation that sold or exchanged by the partnership. See Instructions for Schedule D, and the issued the replacement QSB stock, (b) the Rev. Proc. 2008-64, 2008-47 I.R.B. 1195, for Instructions for Form 8949 for more details. date the replacement QSB stock was more information. The partnership makes the election for distributed to another partner or partners, Recoveries of tax benefit items (section • section 1045 rollover on a timely filed and (c) the partner's share of the 111). (including extensions) return for the year in partnership's adjusted basis and FMV of the Gambling gains and losses subject to the • which the sale occurred. Corporate partners replacement QSB stock on such date. limitations in section 165(d). Indicate on an aren't eligible for the section 1045 rollover. attached statement whether or not the Schedule K-1. Enter each partner's Additional limitations apply at the partner partnership is in the trade or business of distributive share of the other income level. Each partner will determine if he or she gambling. categories listed earlier in box 11 of qualifies for the rollover. Report on an Disposition of an interest in oil, gas, Schedule K-1. Enter the applicable code A, • attached statement to Schedule K-1 for each geothermal, or other mineral properties. B, C, D, E, F, G, H, or I (as shown earlier). sale or exchange (a) the name of the Report the following information on an If you are reporting each partner's corporation that issued the QSB stock, (b) attached statement to Schedule K-1. distributive share of only one type of income the partner's share of the partnership's (a) Description of the property. under code I, enter the code with an asterisk adjusted basis and sales price of the QSB (b) The partner's share of the amount (I*) and the dollar amount in the entry space stock, (c) the dates the QSB stock was realized on the sale, exchange, or in box 11 and attach a statement that shows bought and sold, (d) the partner's distributive involuntary conversion of each property “Box 11, Code I,” and the type of income. If share of gain from the sale of the QSB stock, (FMV of the property for any other you are reporting multiple types of income and (e) the partner's distributive share of the disposition, such as a distribution). under code I, enter the code with an asterisk gain that was deferred by the partnership (I*) and enter “STMT” in the entry space in

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box 11 and attach a statement that shows Line 13a. Contributions federal, state, and local laws and “Box 11, Code I,” and the dollar amount of regulations. The amount of the charitable each type of income. Generally, no deduction is allowed for any contribution for donated food inventory is the contribution of $250 or more unless the lesser of (a) the basis of the donated food If the partnership has more than one trade partnership obtains a written or business or rental activity (for codes B plus one-half of the appreciation (gain if the acknowledgment from the charitable donated food was sold at FMV on the date of through I), identify on an attached statement organization that shows the amount of cash to Schedule K-1 the amount from each the gift), or (b) twice the amount of basis of contributed, describes any property the donated food. A partnership that doesn't separate activity. See Passive Activity contributed, and gives an estimate of the Reporting Requirements, earlier. account for inventories and isn't required to value of any goods or services provided in capitalize indirect costs under section 263A Deductions return for the contribution. The may elect to treat the basis of the donated acknowledgment must be obtained by the food as equal to 25% of the FMV of the food. Line 12. Section 179 Deduction due date (including extensions) of the See section 170(e)(3)(C) for more details. A partnership can elect to expense part or all partnership return or, if earlier, the date the • The partner's distributive share of the net of the cost of certain property the partnership partnership files its return. Do not attach the income for the tax year from the purchased during the tax year for use in its acknowledgment to the partnership return, partnership's trades or businesses that made trade or business (including certain rental but keep it with the partnership's records. the contribution of food inventory. activities, if the renting of the property is the These rules apply in addition to the filing Do not include the amount of food partnership’s trade or business). See Pub. requirements for Form 8283, Noncash inventory contributions in the amount 946 for a definition of what kind of property Charitable Contributions, described below. ! CAUTION reported in box 13 using code C. qualifies for the section 179 expense These contributions must be reported deduction and the Instructions for Form 4562 Cash contributions of any amount must separately on an attached statement for limitations on the amount of the section be supported by a dated bank record or because partners must separately determine 179 expense deduction. receipt. the limitations on the deduction. Complete Part I of Form 4562 to figure Enter charitable contributions made Noncash contributions (30%) (code D). the partnership's section 179 expense during the tax year. Attach a statement to Enter noncash contributions subject to the deduction. The partnership doesn't take the Form 1065 that separately identifies the 30% AGI limitation. deduction itself but instead passes it through partnership's contributions for each of the to the partners. Attach Form 4562 to Form following categories. See Limits on Capital gain property to a 50% organiza- 1065 and show the total section 179 Deductions in Pub. 526, Charitable tion (30%) (code E). Enter capital gain expense deduction on Schedule K, line 12. Contributions, for information on adjusted property contributions subject to the 30% gross income (AGI) limitations on deductions AGI limitation. The partnership must reduce the basis of for charitable contributions. the asset by the amount of the section 179 Capital gain property (20%) (code F). expense elected by the partnership, even if a The codes needed for Schedule K-1 Enter capital gain property contributions portion of that amount cannot be passed reporting are provided for each category. subject to the 20% AGI limitation. through to its partners that year and must be Cash contributions (60%) (code A). Contributions of property. See carried forward because of limitations at the Enter cash contributions subject to the 60% Contributions of Property in Pub. 526, and partnership level. Do not reduce the AGI limitation. Do not include in the amount Pub. 561, Determining the Value of Donated partnership's basis in section 179 property to reported using code A the cash contributions Property, for information on noncash reflect any portion of the section 179 reported using code G. contributions and contributions of capital expense that is allocable to a partner that is a gain property. If the deduction claimed for trust or estate. Cash contributions (30%) (code B). noncash contributions exceeds $500, Enter cash contributions subject to the 30% complete Form 8283 and attach it to Form Identify on an attached statement to AGI limitation. 1065. Schedules K and K-1 the cost of section 179 If the partnership made a qualified property placed in service during the year Noncash contributions (50%) (code C). conservation contribution under section that is qualified enterprise zone. See the Enter noncash contributions subject to the 170(h), also include the FMV of the Instructions for Form 4562 for more details. 50% AGI limitation. underlying property before and after the Qualified conservation contributions. See the instructions for line 20c of donation, as well as the type of legal interest The AGI limit for qualified conservation contributed, and describe the conservation Schedule K for sales or other dispositions of contributions under section 170(h) is 50%. property for which a section 179 deduction purpose furthered by the donation. Give a The carryover period is 15 years. See copy of this information to each partner. has passed through to partners and for the section 170(b) and Notice 2007-50, 2007-25 recapture rules if the business use of the I.R.B. 1430, for details. Report qualified Nondeductible contributions. Certain property dropped to 50% or less. conservation contributions with a 50% AGI contributions made to an organization Schedule K-1. Report each partner's limitation in box 13 of Schedule K-1, using conducting lobbying activities are not distributive share of the section 179 expense code C. Do not include in the amount deductible. See section 170(f)(9) for more deduction in box 12 of Schedule K-1. If the reported using code C the conservation details. Also, see Contributions You Cannot partnership has more than one trade or contributions of property used in agriculture Deduct in Pub. 526 for more examples of business activity, identify on an attached or livestock production reported on nondeductible contributions. statement to Schedule K-1 the amount of Schedule K-1 using code G. Contributions (100%) (code G). Use section 179 deduction from each separate Charitable contributions of food code G to report the contributions below and, activity. See Passive Activity Reporting inventory. Attach a statement to on an attached statement, provide the Requirements, earlier. Schedule K-1 that shows the following. following information. Do not complete box 12 of Schedule K-1 • The partner's distributive share of the Cash contributions for relief efforts in for any partner that is an estate or trust; amount of the charitable contributions made certain disaster areas. Show each estates and trusts aren't eligible for the under section 170(e)(3) for qualified partner's distributive share of qualified cash section 179 expense deduction. inventory that was donated to charitable contributions made for relief efforts in certain organizations for the care of the ill, needy, disaster areas. Individuals can elect the and infants. The food must meet all the increased deduction for contributions made quality and labeling standards imposed by

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before February 19, 2020. Corporations can dividends, annuities, or royalties; and gains months paid or incurred if required) for each elect the increased deduction for from the disposition of property that type of expenditure separately for each contributions made between January 1, produces those types of income or is held for property. 2020, and February 25, 2021. To qualify, the investment. Schedule K-1. Report each partner's contributions must meet the following distributive share of section 59(e) conditions. Investment interest expense doesn't expenditures in box 13 of Schedule K-1 The contributions must be made in cash include interest expense allocable to a • using code J. Identify the following on an to qualified charitable organizations (other passive activity. attached statement. (a) the type of than certain private foundations described in expenditure, (b) the property for which the section 509(a)(3) or donor advised funds Investment income and investment expenditures are paid or incurred, and (c) for described in section 4966(d)(2)) for certain expenses other than interest are reported on oil and gas properties only, the month in relief efforts. lines 20a and 20b, respectively. This which intangible drilling costs and The partnership must obtain a information is needed by partners to • development costs were paid or incurred. If contemporaneous written acknowledgment determine the investment interest expense there is more than one type of expenditure or (within the meaning of section 170(f)(8)) from limitation (see Form 4952, Investment the expenditures are for more than one the qualified charitable organization that the Interest Expense Deduction, for details). property, provide each partner's distributive contribution was used or is to be used for Schedule K-1. Report each partner's share of the amounts (and the months paid relief efforts. distributive share of investment interest or incurred for oil and gas properties) for Certain other cash contributions expense in box 13 of Schedule K-1 using each type of expenditure separately for each made in 2020 or 2021. Individuals may code H. property. also elect to deduct certain cash contributions in amounts up to 100% of AGI Lines 13c(1) and 13c(2). Section Line 13d. Other Deductions for other cash contributions made in tax years ending after 2019. See Pub. 526. 59(e)(2) Expenditures Enter deductions not included on lines 12, Generally, section 59(e) allows each partner 13a, 13b, 13c(2), and 16p. On the line to the Qualified conservation contributions to make an election to deduct their left of the entry space for this line, identify the of property used in agriculture or distributive share of the partnership's type of deduction. If there is more than one livestock production. Enter qualified otherwise deductible qualified expenditures type of deduction, attach a statement to conservation contributions of property used ratably over 10 years (3 years for circulation Form 1065 that separately identifies the type in agriculture or livestock production. The expenditures). The deduction is taken and amount of each deduction for the contribution must be subject to a restriction beginning with the tax year in which the following categories. The codes needed for that the property remain available for such expenditures were made (or for intangible Schedule K-1 reporting are provided for each production. See section 170(b)(1)(E)(iv) for drilling and development costs, over the category. details. 60-month period beginning with the month in Deductions—royalty income (code I). If the partnership is a qualified farmer or which such costs were paid or incurred). Enter deductions related to royalty income. rancher (as defined in section 170(b)(1)(E) (v)), show each partner's distributive share of The term “qualified expenditures” Schedule K-1. Report each partner’s qualified conservation contributions of includes only the following types of distributive share of deductions related to property used in agriculture or livestock expenditures paid or incurred during the tax royalty income. production. Partners will have to separately year. Deductions—section 59(e)(2) expendi- determine whether they qualify for the 50% • Circulation expenditures. tures (code J). Generally, section 59(e) or 100% AGI limitation for these • Research and experimental expenditures. allows each partner to make an election to contributions. Do not include the amounts • Intangible drilling and development costs. deduct their distributive share of the reported on the attached statement using • Mining exploration and development partnership's otherwise deductible qualified code G in the amount reported on costs. expenditures ratably over 10 years (3 years Schedule K-1 for qualified conservation for circulation expenditures). The deduction contributions using code C. If a partner makes the election, these is taken beginning with the tax year in which Schedule K-1. Report each partner's items aren't treated as alternative minimum the expenditures were made (or for distributive share of charitable contributions tax (AMT) tax preference items. Because the intangible drilling and development costs, in box 13 of Schedule K-1 using codes A partners are generally allowed to make this over the 60-month period beginning with the through F for each of the contribution election, the partnership cannot deduct month in which such costs were paid or categories shown above. For code G items, these amounts or include them as AMT incurred). The term "qualified expenditures" report them by entering code G with an items on Schedule K-1. Instead, the includes only the following types of asterisk (G*) and entering "STMT" in the partnership passes through the information expenditures paid or incurred during the tax dollar amount entry space for box 13 and the partners need to figure their separate year. attach a statement that shows "Box 13, Code deductions. On line 13c(1), enter the type of • Circulation expenditures. G" and the dollar amount of each type of expenditures claimed on line 13c(2). Enter • Research and experimental expenditures. deduction. The partnership must attach a on line 13c(2) the qualified expenditures paid • Intangible drilling and development costs. copy of its Form 8283 to the Schedule K-1 of or incurred during the tax year for which an • Mining exploration and development each partner receiving a distributive share of election under section 59(e) may apply. costs. the contribution deduction shown in Enter this amount for all partners whether or If a partner makes the election, these items Section A or Section B of its Form 8283. not any partner makes an election under aren't treated as alternative minimum tax section 59(e). (AMT) tax preference items. Because the Line 13b. Investment Interest partners make this election, the partnership On an attached statement, identify the can't deduct these amounts or include them Expense property for which the expenditures were as AMT items on Schedule K-1. Instead, the paid or incurred. If the expenditures were for Include on this line the interest properly partnership passes through the information intangible drilling costs or development costs the partners need to figure their separate allocable to debt on property held for for oil and gas properties, identify the investment purposes. Property held for deductions. On line 13c(1), enter the type of month(s) in which the expenditures were expenditures claimed on line 13c(2). Enter investment includes property that produces paid or incurred. If there is more than one income (unless derived in the ordinary on line 13c(2) the qualified expenditures paid type of expenditure or more than one or incurred during the tax year for which a course of a trade or business) from interest, property, provide the amounts (and the

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partner may make an election under section Amounts paid for medical insurance description and the amount for each 59(e). Enter this amount for all partners (code M). Enter amounts paid during the property. whether or not any partner makes an election tax year for insurance that constitutes Codes T through U. These codes are under section 59(e). medical care for the partner (including the reserved for future use. On an attached statement, identify the partner's spouse, dependents, and children property for which the expenditures were under age 27 who aren't dependents). Section 743(b) negative income adjust- paid or incurred. If the expenditures were for ments (code V). For partnerships other Educational assistance benefits (code intangible drilling or development costs for oil than publicly traded partnerships, report the N). Enter amounts paid during the tax year and gas properties, identify the month(s) in partner’s share of net negative income for educational assistance benefits paid to a which the expenditures were paid or resulting from all section 743(b) adjustments. partner. incurred. If there is more than one type of For purposes of code V, net negative income expenditure or more than one property, Dependent care benefits (code O). Enter from all section 743(b) adjustments means provide the amounts (and the months paid or amounts paid during the tax year for the excess of all section 743(b) adjustments incurred, if required) for each type of dependent care benefits paid on behalf of allocated to the partner that decrease expenditure separately for each property. each partner. partner taxable income over all section 743(b) adjustments that increase partner Schedule K-1. Report each partner's Preproductive period expenses (code P). taxable income. Attach a statement on distributive share of section 59(e) If the partnership is required to use an line 20, code AH, showing each section expenditures in box 13 of Schedule K-1 accrual method of accounting under section 743(b) basis adjustment making up the total using code J. Identify the following 447 or is prohibited from using the cash and identify the assets to which it relates. information on an attached statement. method under 448(a)(3), it must capitalize The partnership may group these 743(b) • The type of expenditure. these expenses. If the partnership is basis adjustments by asset category or • The property for which the expenditures permitted to use the cash method, enter the description in cases where multiple assets are paid or incurred. amount of preproductive period expenses are affected. See the instructions for line 20, • For oil and gas properties only, the month that qualify under section 263A(d). An Code AH. Also see IRS.gov/forms-pubs- in which intangible drilling costs and election not to capitalize these expenses clarifications-for-disregarded-entity- development costs were paid or incurred. must be made at the partner level. See reporting-and-section-743b-reporting. If there is more than one type of expenditure Uniform Capitalization Rules in Pub. 225, or the expenditures are for more than one Farmer's Tax Guide. Other deductions (code W). Include any property, provide each partner's distributive other deductions, such as the following. Commercial revitalization deduction share of the amounts (and the months paid • Amounts paid by the partnership that from rental real estate activities (code or incurred for oil and gas properties) for would be allowed as itemized deductions on Q). Enter the commercial revitalization each type of expenditure separately for each any of the partners' income tax returns if they deduction on line 13d only if it is for a rental property. were paid directly by a partner for the same real estate activity. If the deduction is for a purpose. These amounts include, but aren't Excess business interest expense (code nonrental building, enter it on line 20 of Form limited to, expenses under section 212 for K). If the partnership is required to file Form 1065. See the instructions for line 20, earlier, the production of income other than from the 8990, Limitation on Business Interest for more information. partnership's trade or business. However, do Expense Under Section 163(j), it may Pensions and IRAs (code R). Enter the not enter expenses related to portfolio determine it has excess business interest payments for a partner to an IRA, qualified income or investment interest expense expense. If so, enter the amount from Form plan, or simplified employee pension (SEP) reported on line 13b of Schedule K on this 8990, Part II, line 32, for excess business or SIMPLE IRA plan. If a qualified plan is a line. interest expense. defined benefit plan, a partner's distributive • Any penalty on early withdrawal of savings not reported on line 13b because the Schedule K-1. Provide the information share of payments is determined in the same partnership withdrew its time savings deposit the partners need to figure excess business manner as his or her distributive share of before its maturity. interest expenses. In box 13, report the partnership taxable income. For a defined Soil and water conservation expenditures, partner’s distributive share of excess benefit plan, attach to the Schedule K-1 for • and endangered species recovery business expense. If the partnership reports each partner a statement showing the expenditures (section 175). excess business interest expense, the amount of benefit accrued for the tax year. Expenditures paid or incurred for the partner is required to file Form 8990. The • Reforestation expense deduction (code removal of architectural and transportation partner will enter the amount on Form 8990, S). The partnership can elect to deduct a barriers to the elderly and disabled that the Schedule A, line 43(c). See the Instructions limited amount of its reforestation partnership has elected to treat as a current for Form 8990 for additional information. expenditures paid or incurred during the tax expense. See section 190. Deductions—portfolio (other) (code L). year. The amount the partnership can elect • Film, television, and theatrical production Enter any other deductions related to to deduct is limited to $10,000 for each expenses. The partnership can elect to portfolio income. qualified timber property. See section 194(c) deduct certain costs of a qualified film, for a definition of reforestation expenditures No deduction is allowed under section television, or live theatrical production and qualified timber property. The 212 for expenses allocable to a convention, commencing before January 1, 2026 (after partnership must amortize over 84 months seminar, or similar meeting. Because these December 31, 2015, and before January 1, any amount not deducted. See the expenses aren't deductible by partners, the 2026, for a live theatrical production), limited instructions for line 20, earlier. See Notice partnership doesn't report these expenses to $15 million of the aggregate production 2006-47, 2006-20 I.R.B. 892, for details on on line 13d of Schedule K. The expenses are cost of the production. There is a higher making the election. nondeductible and are reported as such on dollar limitation for productions in certain areas. Provide a description of the film, line 18c of Schedule K and in box 18 of Schedule K-1. Enter the partner's television, or theatrical production on an Schedule K-1 using code C. distributive share of the allowable attached statement. If the partnership makes reforestation expenses in box 13 of Schedule K-1. In box 13, report the the election for more than one film, Schedule K-1 using code S and attach a partner's distributive share of deductions television, or theatrical production, attach a statement that provides a description of the related to portfolio income that are reported statement to Schedule K-1 that shows each qualified timber property. If the partnership is on line 13d of Schedule K using code I (for partner's distributive share of the qualified electing to deduct amounts from more than deductions related to royalty income) or L expenditures separately for each production. one qualified timber property, provide a (for other deductions related to portfolio The deduction is subject to recapture under income). section 1245 if the election is voluntarily

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revoked or the production fails to meet the operation aren't self-employment earnings Worksheet Instructions requirements for the deduction. See section for either general or limited partners. 181 and the related regulations for details. Line 1b. Include on line 1b any part of the • Interest expense allocated to General partners. General partners' net net income (loss) from rental real estate debt-financed distributions. See Notice earnings (loss) from self-employment do not activities from Schedule K, line 2, that is 89-35, 1989-1 C.B. 675, or Pub. 535 for include the following. from: more information. • Dividends on any shares of stock and 1. Rentals of real estate held for sale to • Interest paid or accrued on debt properly interest on any bonds, debentures, notes, customers in the course of a trade or allocable to each general partner's share of a etc., unless the dividends or interest are business as a real estate dealer, or working interest in any oil or gas property (if received in the course of a trade or business, the partner's liability isn't limited). General such as a dealer in stocks or securities or 2. Rentals for which services were partners that didn't materially participate in interest on notes or accounts receivable. rendered to the occupants (other than the oil or gas activity treat this interest as • Rentals from real estate, except rentals of services usually or customarily rendered for investment interest; for other general real estate held for sale to customers in the the rental of space for occupancy only). The partners, it is trade or business interest. course of a trade or business as a real estate supplying of maid service is such a service, • Contributions to a capital construction dealer or payments for rooms or space when but the furnishing of heat and light, the fund. See Pub. 595. significant services are provided. cleaning of public entrances, exits, stairways • Deductions—portfolio (formerly • Royalty income, except royalty income and lobbies, trash collection, etc., aren't deductible by individuals under section 67 received in the course of a trade or business. considered services rendered to the occupants. subject to the 2% AGI floor). For partners See the Instructions for Schedule SE other than individuals, amounts that are (Form 1040), Self-Employment Tax, for more Lines 3b and 4b. Allocate the amounts on clearly and directly allocable to portfolio information. these lines in the same way Form 1065, income (other than investment interest page 1, line 22, is allocated to these expense and section 212 expenses from a Limited partners. Generally, a limited particular partners. REMIC) can be deducted on those partners’ partner's share of partnership income (loss) income tax returns. isn't included in net earnings (loss) from Line 4a. Include in the amount on line 4a self-employment. Limited partners treat as any guaranteed payments to partners Schedule K-1. Enter each partner's self-employment earnings only guaranteed reported on Schedule K, line 4c, and in distributive share of the deduction categories payments for services they actually rendered box 4c of Schedule K-1, and derived from a listed earlier in box 13 of Schedule K-1 or to, or on behalf of, the partnership to the trade or business as defined in section provide the information required on an extent that those payments are payment for 1402(c). Also include other ordinary attached statement for the deduction. Enter those services. business income and expense items (other the applicable code I, K, L, M, N, O, P, Q, R, than expense items subject to separate S, V, or W (as shown earlier). Line 14a. Net Earnings (Loss) limitations at the partner level, such as the If you are reporting only one type of section 179 expense deduction) reported on deduction under code W, enter code W with From Self-Employment Schedules K and K-1 that are used to figure an asterisk (W*) and the dollar amount in the Schedule K. Enter on line 14a the amount self-employment earnings under section entry space in box 13 and attach a statement from line 5 of the worksheet. 1402. that shows the box number, code, and type of deduction. If you are reporting multiple Schedule K-1. Do not complete this line for Credits any partner that is an estate, trust, types of deductions under code W, enter the Do not attach Form 3800, General corporation, exempt organization, or IRA. code with an asterisk (W*), enter “STMT” in Business Credit, to Form 1065. the dollar amount entry space in box 13, and Enter in box 14 of Schedule K-1 each attach a statement that shows the box individual general partner's share of the number, code, and dollar amount of each amount shown on line 3c of the worksheet type of deduction. and each individual limited partner's share of Low-Income Housing Credit If the partnership has more than one trade the amount shown on line 4c of the Section 42 provides a credit that can be or business activity, identify on an attached worksheet, using code A. claimed by owners of low-income residential statement to Schedule K-1 the amount for rental buildings. To qualify for this credit, the each separate activity. See Passive Activity Line 14b. Gross Farming or partnership must file Form 8609, Reporting Requirements, earlier. Low-Income Housing Credit Allocation and Fishing Income Certification, separately with the IRS. Do not Section 965(c) deduction (code X). The attach Form 8609 to Form 1065. Complete partnership will provide information on your Enter on line 14b the partnership's gross and attach Form 8609-A, Annual Statement share of the section 965(c) deduction. See farming or fishing income from for Low-Income Housing Credit, and Form Form 965, Form 965-A, and the related self-employment. Individual partners need 8586, Low-Income Housing Credit, to Form instructions for more detail. this amount to figure net earnings from self-employment under the farm optional 1065. Schedule K-1. Enter the partner’s method in Section B, Part II, of Schedule SE distributive share of the section 965(c) (Form 1040). Enter each individual partner's Line 15a. Low-Income Housing deduction amount. distributive share in box 14 of Schedule K-1 using code B. Credit (Section 42(j)(5)) Self-Employment Enter on line 15a the total low-income If the partnership is an options dealer Line 14c. Gross Nonfarm Income housing credit for property which a TIP or a commodities dealer, see section partnership is to be treated under section 1402(i) before completing lines 14a, Enter on line 14c the partnership's gross 42(j)(5) as the taxpayer to which the 14b, and 14c, to determine the amount of nonfarm income from self-employment. low-income housing credit was allowed. any adjustment that may have to be made to Individual partners need this amount to figure net earnings from self-employment under the the amounts shown on the Worksheet for If the partnership invested in another nonfarm optional method in Section B, Part Figuring Net Earnings (Loss) From partnership to which the provisions of section II, of Schedule SE (Form 1040). Enter each Self-Employment. If the partnership is 42(j)(5) apply, report on line 15a the credit individual partner's share in box 14 of engaged solely in the operation of a group reported to the partnership in box 15 of Schedule K-1 using code C. investment program, earnings from the Schedule K-1 (Form 1065), code A and code C.

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Worksheet for Figuring Net Earnings (Loss) From Self-Employment

1a Ordinary business income (loss) (Schedule K, line 1) ...... 1a

b Net income (loss) from certain rental real estate activities (see instructions) ...... 1b

c Other net rental income (loss) (Schedule K, line 3c) ...... 1c

d Net loss from Form 4797, Part II, line 17, included on line 1a, 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 line 1a, 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 limited partners, estates, trusts, corporations, exempt organizations, and 3b IRAs ...... 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 14 of Schedule K-1, using code A ...... 3c 4a Guaranteed payments to partners (Schedule K, line 4c) 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 14 of Schedule K-1, using code A ...... 4c

5 Net earnings (loss) from self-employment. Combine lines 3c and 4c. Enter here and on Schedule K, line 14a ...... 5

Schedule K-1. Report in box 15 of Schedule K-1. Report each partner's multiple types of rental real estate credit Schedule K-1 each partner's distributive distributive share of qualified rehabilitation under code F, enter the code with an asterisk share of the low-income housing credit expenditures related to rental real estate (F*) and enter “STMT” in the entry space in reported on line 15a of Schedule K. Use activities in box 15 of Schedule K-1 using box 15 and attach a statement that shows code A to report credits attributable to code E. Attach a statement to Schedule K-1 “Box 15, Code F” and the type and dollar buildings placed in service before 2008. Use that provides the information and the amount of the credits. If the partnership has code C to report credits attributable to partner's distributive share of the amounts credits from more than one rental real estate buildings placed in service after 2007. If the the partner will need to complete lines 11b activity, identify on the attached statement partnership has credits from more than one through 11g of Form 3468. See the the amount of each type of credit for each rental activity, identify on an attached Instructions for Form 3468 for details. If the separate activity. See Passive Activity statement to Schedule K-1 the amount for partnership has expenditures from more than Reporting Requirements, earlier. each separate activity. See Passive Activity one rental real estate activity, identify on an Reporting Requirements, earlier. attached statement to Schedule K-1 the Line 15e. Other Rental Credits amount for each separate activity. See Enter on line 15e any other credit (other than Line 15b. Low-Income Housing Passive Activity Reporting Requirements, earlier. credits reported on lines 15a through 15d) Credit (Other) related to rental activities. On the dotted line Qualified rehabilitation expenditures to the left of the entry space for line 15e, Enter on line 15b any low-income housing ! for property not related to rental real identify the type of credit. If there is more credit not reported on line 15a. This includes CAUTION estate activities must be reported in than one type of credit, attach a statement to any credit reported to the partnership in box 20, using code D. Form 1065 that identifies the type and box 15 of Schedule K-1 (Form 1065), using amount for each credit. These credits may code B and code D. include any type of credit listed in the Schedule K-1. Report in box 15 of Line 15d. Other Rental Real Estate instructions for line 15f. Schedule K-1 each partner's distributive Credits Schedule K-1. Report in box 15 of share of the low-income housing credit Enter on line 15d any other credit (other than Schedule K-1 each partner's distributive reported on line 15b of Schedule K. Use credits reported on lines 15a through 15c) share of other rental credits using code G. If code B to report credits attributable to related to rental real estate activities. On the you are reporting each partner's distributive buildings placed in service before 2008. Use dotted line to the left of the entry space for share of only one type of rental credit under code D to report credits attributable to line 15d, identify the type of credit. If there is code G, enter the code with an asterisk (G*) buildings placed in service after 2007. If the more than one type of credit, attach a and the dollar amount in the entry space in partnership has credits from more than one statement to Form 1065 that identifies the box 15 and attach a statement that shows rental activity, identify on an attached type and amount for each credit. These “Box 15, Code G” and type of credit. If you statement to Schedule K-1 the amount for credits may include any type of credit listed are reporting multiple types of rental credit each separate activity. See Passive Activity in the instructions for line 15f. under code G, enter the code with an Reporting Requirements, earlier. asterisk (G*) and enter “STMT” in the entry Schedule K-1. Report in box 15 of space in box 15 and attach a statement that Line 15c. Qualified Rehabilitation Schedule K-1 each partner's distributive shows “Box 15, Code G” and the type and share of other rental real estate credits using Expenditures (Rental Real Estate) dollar amount of the credits. If the code F. If you are reporting each partner's partnership has credits from more than one Enter on line 15c the total qualified distributive share of only one type of rental rental activity, identify on the attached rehabilitation expenditures related to rental real estate credit under code F, enter the statement the amount of each type of credit real estate activities of the partnership. See code with an asterisk (F*) and the dollar for each separate activity. See Passive the Instructions for Form 3468 for details on amount in the entry space in box 15 and Activity Reporting Requirements, earlier. qualified rehabilitation expenditures. attach a statement that shows “Box 15, Code F” and type of credit. If you are reporting

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Line 15f. Other Credits • Qualified railroad track maintenance Schedule K. In addition, the amount of this credit. Complete Form 8900 to figure the credit must also be reported as a cash Enter on line 15f any other credit, except credit, and attach it to Form 1065. distribution on line 19a of Schedule K. credits or expenditures shown or listed for • Unused investment credit from the • Qualified energy conservation bond credit lines 15a through 15e. If any of these credits qualifying advanced coal project credit, (Form 8912). The amount of this credit are attributable to rental activities, enter the qualifying gasification project credit, or (excluding any credits from other amount on line 15d or 15e. On the dotted line qualifying advanced energy project credit partnerships, estates, and trusts) must also to the left of the entry space for line 15f, allocated from . be reported as interest income on line 5 of identify the type of credit. If there is more • Unused investment credit from the Schedule K. In addition, the amount of this than one type of credit or if there are any rehabilitation credit or energy credit allocated credit must also be reported as a cash credits subject to recapture, attach a from cooperatives. distribution on line 19a of Schedule K. statement to Form 1065 that separately • Renewable electricity, refined coal, and • Qualified zone academy bond credit identifies each type and amount of credit and Indian coal production credit. See Rev. Proc. (Form 8912). The amount of this credit credit recapture information for the following 2007-65, as modified by Announcement (excluding any credits from other categories. The codes needed for box 15 of 2009-69 and Announcement 2007-112, for a partnerships, estates, and trusts) must also Schedule K-1 are provided in the heading of safe harbor method for allocating the credit be reported as interest income on line 5 of each category. for wind energy production. Complete Form Schedule K. In addition, the amount of this Undistributed capital gains credit (code 8835 to figure the credit. Attach a statement credit must also be reported as a cash H). This credit represents taxes paid on to Form 1065 and Schedule K-1 showing the distribution on line 19a of Schedule K. undistributed capital gains by a regulated allocation of the credit for production during • Qualified school construction bond credit investment company (RIC) or a real estate the 4-year period beginning on the date the (Form 8912). The amount of this credit investment trust (REIT). As a shareholder of facility was placed in service and for (excluding any credits from other a RIC or a REIT, the partnership will receive production after that period. Attach Form partnerships, estates, and trusts) must also notice of the amount of tax paid on 8835 to Form 1065. be reported as interest income on line 5 of undistributed capital gains on Form 2439, • Indian employment credit. Complete Form Schedule K. In addition, the amount of this Notice to Shareholder of Undistributed 8845 to figure the credit, and attach it to credit must also be reported as a cash Long-Term Capital Gains. Form 1065. distribution on line 19a of Schedule K. • Orphan drug credit. Complete Form 8820 • Build America bond credit (Form 8912). Biofuel producer credit (code I). to figure the credit, and attach it to Form The amount of this credit (excluding any Complete Form 6478, if applicable, to figure 1065. credits from other partnerships, estates, and the credit. Attach it to Form 1065. Include • Credit for small employer pension plan trusts) must also be reported as interest any amount shown on line 2 of Form 6478 in startup costs and auto-enrollment. Complete income on line 5 of Schedule K. In addition, the partnership's income on line 7. See Form 8881 to figure the credit, and attach it the amount of this credit must also be section 40(f) for an election the partnership to Form 1065. reported as a cash distribution on line 19a of can make to not have the credit apply. • Credit for employer-provided childcare Schedule K. Work opportunity credit (code J). facilities and services. Complete Form 8882 • Mine rescue team training credit (Form Complete Form 5884 to figure the credit. to figure the credit, and attach it to Form 8923). Attach it to Form 1065. 1065. • Credit for employer differential wage • Biodiesel and renewable diesel fuels payments (Form 8932). Disabled access credit (code K). credit. Complete Form 8864, if applicable, to • Carbon oxide sequestration credit (Form Complete Form 8826 to figure the credit. figure the credit, and attach it to Form 1065. 8933). Attach it to Form 1065. If this credit includes the small agri-biodiesel • Qualified two-wheeled plug-in electric Empowerment zone employment credit producer credit, identify on a statement drive motor vehicle credit (Form 8936). (code L). Complete Form 8844 to figure attached to Schedule K-1 (a) each partner's • Credit for small employer health insurance the credit. Attach it to Form 1065. distributive share of the small agri-biodiesel premiums (Form 8941). producer credit included in the total credit • Employee retention credit (Form 5884-A). Credit for increasing research activities allocated to the partner, (b) the number of • Employer credit for paid family and (code M). Complete Form 6765 to figure gallons for which the partnership claimed the medical leave (Form 8994). the credit. Attach it to Form 1065. small agri-biodiesel producer credit, and (c) Schedule K-1. Enter in box 15 of the partnership's productive capacity for Schedule K-1 each partner's distributive Note. The partnership should provide the agri-biodiesel. share of the credits listed above. See information necessary for the partner to Low sulfur diesel fuel production credit. • additional Schedule K-1 reporting determine whether the partnership is an Complete Form 8896 to figure the credit, and information provided in the instructions eligible small business under section 38(c) attach it to Form 1065. above. Enter the applicable code, H through (5)(A). If the partner and the partnership Credit for oil and gas production from • P, in the column to the left of the dollar meet the requirements of section 38(c)(5)(A), marginal wells (Form 8904). amount entry space. the research credit may be treated as a • Distilled spirits credit (Form 8906). specified credit. • Energy efficient home credit (Form 8908). If you are reporting each partner's Credit for employer social security and • Alternative motor vehicle credit (Form distributive share of only one type of credit Medicare taxes paid on certain employee 8910). under code P, enter the code with an asterisk tips (code N). Complete Form 8846 to • Alternative fuel vehicle refueling property (P*) and the dollar amount in the entry space figure the credit. Attach it to Form 1065. credit (Form 8911). in box 15 and attach a statement that shows • Clean renewable energy bond credit “Box 15, Code P” and type of credit. If you Backup withholding (code O). This credit (Form 8912). The amount of this credit are reporting multiple types of credit under is for backup withholding on dividends, (excluding any credits from other code P, enter the code with an asterisk (P*) interest, and other types of income of the partnerships, estates, and trusts) must also and enter “STMT” in the entry space in partnership. be reported as interest income on line 5 of box 15 and attach a statement that shows Other credits (code P). Attach a Schedule K. “Box 15, Code P” and the type and dollar statement to Form 1065 that identifies the • New clean renewable energy bond credit amount of the credits. If the partnership has type and amount of any other credits not (Form 8912). The amount of this credit credits from more than one activity, identify reported elsewhere, such as the following. (excluding any credits from other on an attached statement to Schedule K-1 • New markets credit. Complete Form 8874 partnerships, estates, and trusts) must also the amount of each type of credit for each to figure the credit. Attach it to Form 1065. be reported as interest income on line 5 of

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separate activity. See Passive Activity • Specifically identify gains on the sale of Lines 16i–16j. Deductions Reporting Requirements, earlier. personal property other than inventory, depreciable property, and certain intangible Allocated and Apportioned at Foreign Transactions property on which a foreign tax of 10% or Partner Level Lines 16a through 16r must be completed if more was paid or accrued. Also list losses on the partnership has foreign income, the sale of such property if the foreign Line 16i. Interest expense (code I). Enter deductions, or losses, or has paid or accrued country would have imposed a 10% or higher on line 16i the partnership's total interest foreign taxes. tax had the sale resulted in a gain. In expense (including interest equivalents addition, separately identify the amounts of under Temporary Regulations section Attach a statement to Schedule K-1 for such gains or losses within each separate 1.861-9T(b)). Do not include interest directly these coded items providing the information limitation category that are long-term capital allocable under Temporary Regulations described below. If the partnership had gains and losses or collectibles (28%) gains section 1.861-10T to income from a specific income from, or paid or accrued taxes to, and losses. See Determining the Source of property. This type of interest is allocated more than one country or U.S. possession, Income From the Sales or Exchanges of and apportioned at the partnership level and see the requirement for an attached Certain Personal Property in Pub. 514 and is included on lines 16k through 16o. statement in the instructions for line 16a, section 865. below. See Pub. 514, Foreign Tax Credit for Line 16j. Other (code J). Enter the total of Individuals, and the Instructions for Form all other deductions or losses that are 1116 for more information. required to be allocated at the partner level. Lines 16e–16h. Foreign Gross For example, include on line 16j research Income Sourced at Partnership and experimental expenditures (see Line 16a. Name of Country or U.S. Level Regulations section 1.861-17(f)). Possession (Code A) Separately report gross income from sources Enter the name of the foreign country or U.S. outside the United States by category of Lines 16l–16o. Deductions possession from which the partnership had income as follows. See Pub. 514 and the Allocated and Apportioned at income or to which the partnership paid or Instructions for Form 1116 for more Partnership Level to Foreign accrued taxes. If the partnership had income information on the categories of income. from, or paid or accrued taxes to, more than Source Income You must attach a statement to Form one foreign country or U.S. possession, Separately report partnership deductions 1065 that specifies foreign source enter “See attached” and attach a statement that are allocated and apportioned at the qualified dividends, unrecaptured for each country for lines 16a through 16r partnership level by category of income as section 1250 gains, and net section 1231 (codes A through R and code X of follows. See Pub. 514 and the Instructions gain (loss). Schedule K-1). On Schedule K-1, if there is for Form 1116 for more information. more than one country, enter code A followed by an asterisk (A*), enter “STMT,” Line 16e. Foreign branch category (code Creditable foreign expenditures and attach a statement to Schedule K-1 for E). Foreign branch category foreign source TIP must generally be allocated in each country for the information and income is defined under section 904(d)(2)(J) accordance with each partner's amounts coded A through R and code X. (i) as the business profits of a U.S. person interest in the partnership. See Treasury that are attributable to one or more qualified Decision 9292, 2006-47 I.R.B. 914, for RIC pass-through amounts. Aggregate all business units (as defined in section 989(a)) details. income passed through from regulated in one or more foreign countries. Report all investment companies (RICs) and report the income that would be foreign branch Line 16l. Foreign branch category (code total on a single line. Enter “RIC” on line 16a category income of its partners as if all of its L). Enter the amount of deductions allocated and report the total on line 16b. Note that the partners were U.S. persons that were not and apportioned at the partnership level to totals are being reported on a single line pass-through entities. foreign branch category foreign source because it isn't necessary to report the RIC income. pass-through amounts on a per-country Line 16f. Passive category (code F). basis. Passive category foreign source income. Line 16m. Passive category (code M). This category includes the following income. Enter the amount of deductions allocated • Passive income. and apportioned at the partnership level to Line 16b. Gross Income From All • Dividends from a domestic international passive category foreign source income Sources (Code B) sales corporation (DISC) or a former DISC. (defined in the instructions for line 16f). Distributions from a former foreign sales Enter the partnership's gross income from all • corporation. Line 16n. General category (code N). sources (both U.S. and foreign). See Line 16h. Other (code H) for exceptions. Enter the amount of deductions allocated and apportioned at the partnership level to Line 16c. Gross Income Sourced at Passive income doesn't include general category foreign source income export financing interest. (defined in the instructions for line 16g). Partner Level (Code C) Line 16o. Other (code O). Attach a Enter the total gross income of the Line 16g. General category (code G). statement separately showing the amount of partnership that is required to be sourced at General category foreign source income. deductions allocated and apportioned at the the partner level. This includes income from Include all foreign source income sourced at partnership level to the following two the sale of most personal property other than the partnership level that isn't reported on categories. inventory, depreciable property, and certain lines 16e, 16f, or 16h. • Section 901(j) income. intangible property. See Pub. 514 and • Other. section 865 for details. Line 16h. Other (code H). Attach a statement separately showing the amount of You must attach a statement to Form foreign source income included in the Lines 16p–16x. Other information ! 1065 showing the following following categories. CAUTION information. • Section 901(j) income. • The amount of this gross income (without • Other. Line 16p. Total Foreign Taxes Paid regard to its source) in each category or Accrued identified in the instructions for lines 16e Enter in U.S. dollars the total foreign taxes through 16h including each of the listed (described in section 901 or section 903) that categories.

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were paid or accrued by the partnership result from hybrid dividends of tiered • Section 951A (GILTI) information (according to its method of accounting for corporations. (code AG). A domestic partnership that is a such taxes). Enter the amount paid on • Taxes with respect to dividends included U.S. shareholder of one or more CFCs must line 16p. Translate these amounts into U.S. in box 6a or 6b, where a deduction is allowed attach to its Form 1065 a Form 8992 dollars by using the applicable exchange under section 245A with respect to such including the domestic partnership's rate (see Pub. 514). dividends. identifying information as well as a Taxes with respect to subpart F inclusions completed Schedule A (Form 8992). The Foreign taxes paid (code P). If the • reported on line 11, where such inclusions domestic partnership should not complete partnership uses the cash method of are treated under section 964(e)(4) as a Parts I or II of Form 8992 because the accounting, check the Paid box and enter dividend that is eligible for a deduction under domestic partnership will not have a GILTI foreign taxes paid during the tax year on section 245A. inclusion. Domestic partnerships must also line 16p. Report each partner's distributive Any other items (specify). provide their partners with all information share in box 16 of Schedule K-1 using code • needed to determine their section 951A P. Line 16r. Other Foreign Tax income. See Form 8992 and its instructions Foreign taxes accrued (code Q). If the for details about the information partners will partnership uses the accrual method of Information need to determine their section 951A. accounting, check the Accrued box and • Foreign trading gross receipts (code • Foreign derived intangible income enter foreign taxes accrued on line 16p. S). Report the partner's distributive share of (FDII) information (code AH). Report each partner's distributive share in foreign trading gross receipts from line 15 of • Section 864(c)(8) foreign partner’s box 16 of Schedule K-1 using code Q. Form 8873 using code S. See Extraterritorial distributive share of deemed sale items Income Exclusion, earlier. on transfer of partnership interest (code A partnership reporting foreign taxes • Extraterritorial income exclusion AI). using the cash method can make an (code T). If the partnership isn't permitted to Alternative Minimum Tax (AMT) irrevocable election to report these taxes deduct the extraterritorial income exclusion using the accrual method for the year of the as a non-separately stated item, attach a Items election and all future years. Make this statement to Schedule K-1 showing the Lines 17a through 17f must be completed for election by reporting all foreign taxes using partner's distributive share of the all partners. the accrual method on line 16p and check extraterritorial income exclusion reported on the Accrued box (see Regulations section line 52 of Form 8873. Also identify the Enter items of income and deductions 1.905-1). activity to which the exclusion is related. that are adjustments or tax preference items • Section 965 information (code W). for the AMT. See Form 6251, Alternative Attach a statement reporting the following Report information necessary for the Minimum Tax—Individuals; or Schedule I information. calculation of creditable foreign income (Form 1041), Alternative Minimum 1. The total amount of foreign taxes taxes related to the section 965(a) inclusion. Tax—Estates and Trusts, to determine the (including foreign taxes on income sourced Attach Form 965, including its Schedules F, amounts to enter and for other information. at the partner level) relating to each category G, and H, to the Schedule K-1 (Form 1065). of income (see the instructions for lines 16d– • Other foreign transactions (code X). Do not include as a tax preference item 16h). Enter in box 16 of Schedule K-1 any other any qualified expenditures to which an election under section 59(e) may apply. 2. The dates on which the taxes were foreign transaction information the partners Instead, report these expenditures on paid or accrued, the exchange rates used, need to prepare their tax returns using code line 13c(2). Because these expenditures are and the amounts in both foreign currency X. Attach a statement that separately subject to an election by each partner, the and U.S. dollars, for the following. identifies any arrangement, along with the partnership cannot figure the amount of any Taxes withheld at source on interest. taxes paid or accrued in connection with the • tax preference related to them. Instead, the Taxes withheld at source on dividends. arrangement, in which the partnership • partnership must pass through to each Taxes withheld at source on rents and participates that would qualify as a splitter • partner in box 13, code J, of Schedule K-1 royalties. arrangement under section 909 if one or the information needed to figure the • Other foreign taxes paid or accrued. more partners are covered persons with respect to an entity that took into account deduction. related income from the arrangement. Also Line 16q. Reduction in Taxes Schedule K-1. Report each partner's indicate whether the partnership has taken distributive share of amounts reported on Available for Credit (Code R) into account any related income from any lines 17a through 17f (concerning AMT) in such splitter arrangement. (See section 909 Enter the total reduction in taxes available for box 17 of Schedule K-1 using codes A and the related regulations.) credit. Attach a statement showing the through F, respectively. If the partnership is Codes Y and Z. Reserved for future use. reductions for the following. • reporting items of income or deduction for Gross receipts per Regulations Taxes on foreign mineral income (section • oil, gas, and geothermal properties, you may • section 1.59A-7(e)(2) (code AA). Current 901(e)). be required to identify these items on a year. Taxes on foreign oil and gas extraction statement attached to Schedule K-1 (see the • Gross receipts per Regulations income and foreign oil-related income • instructions for Oil, Gas, and Geothermal section 1.59A-7(e)(2) (code AB). First (section 907(a)). Properties Gross Income and Deductions preceding year. Taxes attributable to boycott operations later for details). Also see the requirement for • Gross receipts per Regulations (section 908). • an attached statement in the instructions for section 1.59A-7(e)(2) (code AC). Second Failure to timely file (or furnish all of the line 17f. • preceding year. information required on) Forms 5471 and Gross receipts per Regulations 8865. • section 1.59A-7(e)(2) (code AD). Third Line 17a. Post-1986 Depreciation Foreign income taxes paid or accrued • preceding year. during the current tax year that have been Adjustment Base erosion tax benefits from base suspended under section 909. • Figure the adjustment for line 17a based only erosion tax payments per Regulations Taxes with respect to hybrid dividends on tangible property placed in service after • section 1.59A-2(e)(3)(i) (code AE). included in box 6a or 6b. 1986 (and tangible property placed in service Amounts included in the denominator Taxes with respect to subpart F inclusions • after July 31, 1986, and before 1987 for • of the base erosion percentage per reported on line 11, where such inclusions which the partnership elected to use the Regulations section 1.59A-2(e)(3)(i) General Depreciation System). Do not make (code AF). an adjustment for motion picture films,

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videotapes, sound recordings, certain public AMT gain (loss). If the AMT gain is less than Figure the amounts for lines 17d and 17e utility property (as defined in section 168(f) the regular tax gain, or the AMT loss is more separately for oil and gas properties that (2)), property depreciated under the than the regular tax loss, or there is an AMT aren't geothermal deposits and for all unit-of-production method (or any other loss and a regular tax gain, enter the properties that are geothermal deposits. method not expressed in a term of years), difference as a negative amount. qualified Indian reservation property, Give each partner a statement that shows property eligible for a special depreciation If any part of the adjustment is allocable the separate amounts included in the allowance, qualified revitalization to net short-term capital gain (loss), net computation of the amounts on lines 17d and expenditures, or the section 179 expense long-term capital gain (loss), or net section 17e of Schedule K. deduction. 1231 gain (loss), attach a statement that identifies the amount of the adjustment Line 17d. Oil, Gas, and Geothermal For property placed in service before allocable to each type of gain or loss. 1999, refigure depreciation for the AMT as Properties—Gross Income follows (using the same convention used for For a net long-term capital gain (loss), Enter the total amount of gross income the regular tax). also identify the amount of the adjustment (within the meaning of section 613(a)) from • For section 1250 property (generally, that is collectibles (28%) gain (loss). all oil, gas, and geothermal properties residential rental and nonresidential real received or accrued during the tax year and property), use the straight line method over For a net section 1231 gain (loss), also included on page 1 of Form 1065. 40 years. identify the amount of adjustment that is • For tangible property (other than section unrecaptured section 1250 gain. 1250 property) depreciated using the straight Line 17e. Oil, Gas, and Geothermal line method for the regular tax, use the Line 17c. Depletion (Other Than Oil Properties—Deductions straight line method over the property's class Enter any deductions allowed for the AMT life. Use 12 years if the property has no class and Gas) that are allocable to oil, gas, and geothermal life. Do not include any depletion on oil and gas properties. • For any other tangible property, use the wells. The partners must figure their oil and 150% declining balance method, switching gas depletion deductions and preference to the straight line method the first tax year it items separately under section 613A. Line 17f. Other AMT Items gives a larger deduction, over the property's Attach a statement to Form 1065 and AMT class life. Use 12 years if the property Refigure the depletion deduction under Schedule K-1 that shows other items not has no class life. section 611 for mines, wells (other than oil shown on lines 17a through 17e that are See Pub. 946 for a table of class and gas wells), and other natural deposits for adjustments or tax preference items or that TIP lives. the AMT. Percentage depletion is limited to the partner needs to complete Form 6251, 50% of the taxable income from the property Form 4626, or Schedule I (Form 1041). See as figured under section 613(a), using only these forms and their instructions to income and deductions for the AMT. Also, determine the amount to enter. For property placed in service after 1998, the deduction is limited to the property's refigure depreciation for the AMT only for adjusted basis at the end of the year as Other AMT items include the following. property depreciated for the regular tax using figured for the AMT. Figure this limit Accelerated depreciation of real property the 200% declining balance method. For the separately for each property. When • under pre-1987 rules. AMT, use the 150% declining balance refiguring the property's adjusted basis, take Accelerated depreciation of leased method, switching to the straight line method into account any AMT adjustments made this • personal property under pre-1987 rules. the first tax year it gives a larger deduction, year or in previous years that affect basis Long-term contracts entered into after and the same convention and recovery (other than the current year's depletion). • period used for the regular tax. February 28, 1986. Except for certain home construction contracts, the taxable income Enter the difference between the regular from these contracts must be figured using Figure the adjustment by subtracting the tax and AMT deduction. If the AMT the percentage of completion method of AMT deduction for depreciation from the deduction is greater, enter the difference as accounting for the AMT. regular tax deduction and enter the result on a negative amount. line 17a. If the AMT deduction is more than • Losses from tax shelter farm activities. No the regular tax deduction, enter the loss from any tax shelter farm activity is difference as a negative amount. Oil, Gas, and Geothermal allowed for the AMT. Depreciation capitalized to inventory must Properties—Gross Income and Schedule K-1. If you are reporting each also be refigured using the AMT rules. Deductions partner's distributive share of only one type Include on this line the current year of AMT item under code F, enter the code Generally, the amounts to be entered on adjustment to income, if any, resulting from with an asterisk (F*) and the dollar amount in lines 17d and 17e are only the income and the difference. the entry space in box 17 and attach a deductions for oil, gas, and geothermal statement that shows the type of AMT item. If properties that are used to figure the you are reporting multiple types of AMT Line 17b. Adjusted Gain or Loss partnership's ordinary income (loss) (line 22 items under code F, enter the code with an If the partnership disposed of any tangible of Form 1065). asterisk (F*) and enter “STMT” in the entry property placed in service after 1986 (or after space in box 17 and attach a statement that July 31, 1986, if an election was made to use If there are any items of income or shows the dollar amount of each type of the General Depreciation System), or if it deductions for oil, gas, and geothermal AMT item. disposed of a certified pollution control properties included in the amounts that are facility placed in service after 1986, refigure required to be passed through separately to the gain or loss from the disposition using the the partners on Schedule K-1 (items not Tax-Exempt Income and adjusted basis for the AMT. The property's reported in box 1 of Schedule K-1), give Nondeductible Expenses adjusted basis for the AMT is its cost or other each partner a statement that shows, for the basis minus all depreciation or amortization box in which the income or deduction is Line 18a. Tax-exempt interest income. deductions allowed or allowable for the AMT included, the amount of income or Enter on line 18a tax-exempt interest during the current tax year and previous tax deductions included in the total amount for income, including any exempt-interest years. Enter on this line the difference that box. Do not include any of these direct dividends received from a mutual fund or between the regular tax gain (loss) and the pass-through amounts on line 17d or 17e. other regulated investment company.

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Line 18b. Other tax-exempt income. than the previously contributed built-in gain Property subject to a net lease isn't Enter on line 18b all income of the property, attach a statement to the treated as investment property because it is partnership exempt from tax other than distributee partner's Schedule K-1 that subject to the passive loss rules. Do not tax-exempt interest. provides the following information. reduce investment income by losses from • The FMV of the distributed property (other passive activities. Line 18c. Nondeductible expenses. than money). Enter on line 18c nondeductible expenses • The amount of money received in the Enter investment expenses on line 20b. paid or incurred by the partnership. distribution. Investment expenses are deductible Do not include separately stated • The net precontribution gain of the expenses (other than interest) directly deductions shown elsewhere on Schedules partner. This is the net gain (if any) that connected with the production of investment K and K-1, capital expenditures, or items the would have been recognized by the income. See the Instructions for Form 4952 deduction for which is deferred to a later tax distributee partner under section 704(c)(1) for more information. (B) if all the following property had been year. Schedule K-1. Report each partner's distributed by the partnership to another distributive share of amounts reported on Schedule K-1. Report in box 18 of partner. This property includes all property lines 20a and 20b (investment income and Schedule K-1 each partner's distributive contributed by the distributee partner during expenses) in box 20 of Schedule K-1 using share of amounts reported on lines 18a, 18b, the 7 years prior to the distribution and that is codes A and B, respectively. and 18c of Schedule K (concerning items still held by the partnership at the time of the affecting partners' basis) using codes A distribution (see section 737). If there are other items of investment through C, respectively. Attach a statement income or expense included in the amounts For more information, see Recognition of to Schedule K-1 for the amounts included in that are required to be passed through Precontribution Gain on Certain Partnership line 18b that are exempt by reason of section separately to the partners on Schedule K-1, Distributions, earlier. 892, and describe the nature of the income. such as net short-term capital gain or loss, Other property (code C). Include all net long-term capital gain or loss, and other Distributions distributions of property not included on portfolio gains or losses, give each partner a line 19a that aren't section 737 property. In statement identifying these amounts. Line 19a. Distributions of cash and mar- figuring the amount of the distribution, use ketable securities. Enter on line 19a the the adjusted basis of the property to the Line 20c. Other Items and total distributions to each partner of cash and partnership immediately before the marketable securities that are treated as distribution. In addition, attach a statement Amounts money under section 731(c)(1). Also include showing the adjusted basis and FMV of each Report the following information on a the amount of the credits to holders of tax property distributed. statement attached to Form 1065. On credit bonds that are treated as cash Schedule K-1, enter the appropriate code in Schedule K-1. Report in box 19 each distributions under sections 54A(g) and box 20 for each information item followed by partner's distributive share of the amount on 54AA(f)(2). The instructions for the separate an asterisk in the left-hand column of the line 19a using code A. If a statement is credits (see Other credits (code P) under entry space (for example, “C*”). In the attached, enter an asterisk after the code Line 15f. Other Credits earlier) state when right-hand column, enter “STMT.” The codes (A*) and “STMT” in the entry space, and the amount of the credit must be reported as are provided for each information category. a cash distribution. Do not include attach the required statement. For line 19b, distributions of section 737 property (see report distributions subject to section 737 in Fuel tax credit information (code C). Distributions subject to section 737 (code B) box 19 using code B with an asterisk (B*) Report the number of gallons of each fuel later). Generally, marketable securities are and “STMT” in the entry space, and attach sold or used during the tax year for a valued at FMV on the date of distribution. the required statement. For distributions of nontaxable use qualifying for the credit for However, the value of marketable securities other property, report each partner's taxes paid on fuel, type of use, and the doesn't include the distributee partner's distributive share of the amount in box 19 applicable credit per gallon. See Form 4136, share of the gain on the securities distributed using code C with an asterisk (C*) and Credit for Federal Tax Paid on Fuels, for to that partner. See section 731(c)(3)(B) for “STMT” in the entry space, and attach the details. required statement. details. Qualified rehabilitation expenditures If the amount on line 19a includes Other Information (other than rental real estate) (code D). marketable securities treated as money, Enter total qualified rehabilitation state separately on an attached statement to Lines 20a and 20b. Investment expenditures from activities other than rental Schedules K and K-1 (a) the partnership's Income and Expenses real estate activities. See the Instructions for Form 3468 for details on qualified adjusted basis of those securities Enter on line 20a the investment income rehabilitation expenditures. immediately before the distribution, and (b) included on lines 5, 6a, 7, and 11 of the FMV of those securities on the date of Schedule K. Do not include other portfolio Note. Report qualified rehabilitation distribution (excluding the distributee gains or losses on this line. partner's share of the gain on the securities expenditures related to rental real estate distributed to that partner). activities on line 15c. Investment income includes gross Line 19b. Distributions of other property. income from property held for investment, Schedule K-1. Report each partner's Enter on line 19b the total distributions to the excess of net gain attributable to the distributive share of qualified rehabilitation each partner of property not included on disposition of property held for investment expenditures related to activities other than line 19a. In box 19 of Schedule K-1, over net capital gain from the disposition of rental real estate activities in box 20 of distributions of section 737 property will be property held for investment, any net capital Schedule K-1 using code D. Attach a reported separately from other property. The gain from the disposition of property held for statement to Schedule K-1 that provides the codes used when reporting amounts from investment that each partner elects to information and the partner's distributive line 19b in box 19 of Schedule K-1 appear in include in investment income under section share of the amounts the partner will need to the heading for the categories. 163(d)(4)(B)(iii), and any qualified dividend complete lines 11b through 11g of Form income that the partner elects to include in 3468. See the Instructions for Form 3468 for Distributions subject to section 737 investment income. Generally, investment details. If the partnership has expenditures (code B). If a partner contributed section income and investment expenses don't from more than one activity, identify on a 704(c) built-in gain property within the last 7 include any income or expenses from a statement attached to Schedule K-1 the years and the partnership made a passive activity. See Regulations section amount for each separate activity. See distribution of property to that partner other 1.469-2(f)(10) for exceptions.

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Passive Activity Reporting Requirements, investment credit reported on Schedule K-1 • The partner's share of the section 179 earlier. using codes F, G, and H). Examples of deduction (if any) passed through for the credits reported using code I when subject to property and the partnership's tax year(s) in Basis of energy property (code E). See recapture include the following. which the amount was passed through. the Instructions for Form 3468 for details on The new markets credit. See Form 8874 If the disposition is due to a casualty or basis of energy property. In box 20 of • • and Form 8874-B, Notice of Recapture theft, a statement indicating so, and any Schedule K-1, enter code E followed by an Event for New Markets Credit, for details. additional information needed by the partner. asterisk and enter “STMT” in the entry space The Indian employment credit. See For an installment sale, any information for the dollar amount. Attach a statement to • • section 45A(d) for details. the partner needs to complete Form 6252. Schedule K-1 that provides the information The credit for employer-provided The partnership must also separately report and the partner's distributive share of the • childcare facilities and services. See section the partner's share of all payments received amounts the partner will need to figure the 45F(d). for the property in future tax years. amounts to report on lines 12a-12f, 12h, 12i, The alternative motor vehicle credit. See (Installment payments received for sales 12k, 12l, 12n, 12o, 12q, 12r, 12t, 12u, 12w, • section 30B(h)(8). made in prior tax years should be reported in and 12y-12gg of Form 3468. See the The alternative fuel vehicle refueling the same manner used in prior tax years.) Instructions for Form 3468 for details. • property credit. See section 30C(e)(5). See the instructions for Form 6252 for Recapture of low-income housing credit • The qualified plug-in electric drive motor details. (codes F and G). If recapture of part or all vehicles credit. See section 30D(f)(5). Recapture of section 179 deduction of the low-income housing credit is required Look-back interest—completed (code M). This amount represents because (a) the prior year qualified basis of long-term contracts (code J). If the recapture of section 179 deduction if a building decreased, or (b) the partnership partnership is closely held (defined in section business use of the property dropped to 50% disposed of a building or part of its interest in 460(b)(4)) and it entered into any long-term or less before the end of the recapture a building, see Form 8611, Recapture of contracts after February 28, 1986, that are period. If the business use of any property Low-Income Housing Credit. Complete lines accounted for under either the percentage of (placed in service after 1986) for which a 1 through 7 of Form 8611 to determine the completion-capitalized cost method or the section 179 deduction was passed through amount of credit to recapture. Use code F on percentage of completion method, it must to partners dropped to 50% or less (for a Schedule K-1 to report recapture of the attach a statement to Form 1065 showing reason other than disposition), the low-income housing credit from a section the information required in items (a) and (b) partnership must provide all the following 42(j)(5) partnership. Use code G to report of the instructions for lines 1 and 3 of Part II information. recapture of any other low-income housing of Form 8697. It must also report the The partner's distributive share of the credit. See the instructions for lines 15a and • amounts for Part II, lines 1 and 3, to its original basis and depreciation allowed or 15b, earlier, for more information. partners. See the Instructions for Form 8697 allowable (not including the section 179 If a partner's ownership interest in a for more information. deduction). TIP building decreased because of a The partner's distributive share of the Look-back interest—income forecast • transaction at the partner level, the section 179 deduction (if any) passed method (code K). If the partnership is partnership must provide the necessary through for the property and the closely held (defined in section 460(b)(4)) information to the partner to enable the partnership's tax year(s) in which the amount and it depreciated certain property placed in partner to figure the recapture. was passed through. service after September 13, 1995, under the income forecast method, it must attach to See Regulations section 1.179-1(e) for The disposal of a building or an Form 1065 the information specified in the details. interest therein will generate a credit ! instructions for Form 8866, line 2, for the 3rd CAUTION recapture unless it is reasonably Business interest expense (code N). and 10th tax years beginning after the tax expected that the building will continue to be The partnership must determine the amount year the property was placed in service. It operated as a qualified low-income building of deductible business interest expense must also report the line 2 amounts to its for the remainder of the building's included in other lines on the Schedule K partners. See the Instructions for Form 8866 compliance period. (Form 1065). Attach a statement to for more details. Schedule K providing the allocation of the See Form 8586, Form 8611, and section Dispositions of property with section 179 deductible business interest expense 42 for more information. deductions (code L). This represents gain included within other lines of Schedule K. Recapture of investment credit (code H). or loss on the sale, exchange, or other Excess business interest expense is not Complete and attach Form 4255, Recapture disposition of property for which a section deductible business interest expense; of Investment Credit, when investment credit 179 deduction has been passed through to therefore, do not include it in this reported property is disposed of, or it no longer partners. The partnership must provide all amount for tax years beginning after qualifies for the credit, before the end of the the following information related to such November 12, 2020. recapture period or the useful life applicable dispositions (see the instructions for line 6, Schedule K-1. For tax years beginning to the property. State the type of property at earlier). after November 12, 2020, enter the partner's the top of Form 4255, and complete lines 2, • Description of the property. amount of deductible business interest 3, 4, 10, and 11, whether or not any partner • Date the property was acquired and expense for inclusion in the separate loss is subject to recapture of the credit. placed in service. class for computing any basis limitation • Date of the sale or other disposition of the Attach to each Schedule K-1 a separate (defined in section 704(d), Regulation property. statement providing the information the section 1.163(j)-6(h)). Also attach a • The partner's share of the gross sales partnership is required to show on Form statement to Schedule K-1 (1065) providing price or amount realized. 4255, but list only the partner's distributive the allocation of the business interest • The partner's share of the cost or other share of the cost of the property subject to expense already deducted by the basis plus expense of sale (reduced as recapture. Also indicate the lines of Form partnership within other lines of explained in the instructions for Form 4797, 4255 on which the partners should report Schedule K-1 by line number. Do not include line 21). these amounts. excess business interest expense reported • The partner's share of the depreciation in Box 13, Code K. Recapture of other credits (code I). On allowed or allowable, determined as an attached statement to Schedule K-1, described in the instructions for Form 4797, Section 453(l)(3) information (code O). provide any information partners will need to line 22, but excluding the section 179 Supply any information needed by a partner report recapture of credits (other than deduction. to figure the interest due under section 453(l) recapture of low-income housing and (3). If the partnership elected to report the

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dispositions of certain timeshares and by the partner's distributive share of interest sold the section 704(c) property to the residential lots on the installment method, due on any deferral of gain recognition. See distributee partner. each partner's tax liability must be increased section 1260(b) for details, including how to Enter code W in box 20 of Schedule K-1 by the partner's distributive share of the figure the interest. with an asterisk (W*) and enter “STMT,” and interest on tax attributable to the installment Interest allocable to production expendi- attach the required statement. payments received during the tax year. tures (code R). Supply any information Reserved for future use (code X). Section 453A(c) information (code P). needed by a partner to properly capitalize Supply any information needed by a partner interest as required by section 263A(f). See Net investment income (code Y). Use to figure the interest due under section Section 263A uniform capitalization rules, code Y to report any information that may be 453A(c). This information must include the earlier, for more information. relevant for partners to figure their net following from each Form 6252 where the investment income tax when the information CCF nonqualified withdrawal (code S). selling price, including mortgages and other isn't otherwise identifiable elsewhere on Report nonqualified withdrawals by the debts, is greater than $150,000. Schedule K-1. Attach a statement that shows partnership from a capital construction fund a description and dollar amount of each 1. Description of property; to partners. See Pub. 595. relevant item. 2. Date acquired; Depletion information—oil and gas (code Examples of items reported using code Y 3. Date property sold; T). Report gross income and other may include the following. 4. Selling price, including mortgages information relating to oil and gas well • Net rental real estate income reported on and other debts (not including interest, properties to partners to allow them to figure Form 1065, Schedule K, line 2, and other net whether stated or unstated), less mortgages, the depletion deduction for oil and gas well rental income reported on Form 1065, debts and other liabilities the buyer assumed properties. Allocate to each partner a Schedule K, line 3c, derived from a section or took the property subject to; proportionate share of the adjusted basis of 212 for-profit activity (and not from a section each partnership oil or gas property. See 5. Gross profit; 162 trade or business). section 613A(c)(7)(D) for details. • Gains and losses from dispositions of 6. Gross profit percentage; The partnership cannot deduct depletion assets attributable to a section 212 for-profit 7. Contract price less (4) above, plus on oil and gas wells. Each partner must activity (and not from a section 162 trade or payments received during the year, not determine the allowable amount to report on business). including interest, whether stated or his or her return. See Pub. 535 for more • Gain reported on the installment sale unstated; information. basis (or attributable to a private annuity) that 8. Payments received in prior years, not is attributable to the disposition of property Unrelated business taxable income held in a trade or business. including interest whether stated or unstated. (code V). Report any information a partner If this is the initial year of the sale, add as an • Gain or loss from the disposition of a that is a tax-exempt organization may need partnership interest, but only if such additional part of the payments received to figure its share of unrelated business during the year the amount of the liabilities partnership was engaged, directly or taxable income under section 512(a)(1) (but indirectly, in one or more trades or assumed that exceeds the combination of excluding any modifications required by the property's adjusted basis, commissions, businesses, and at least one of those trades paragraphs (8) through (15) of section or businesses wasn't trading in financial and other costs related to the sale, and any 512(b)). Partners are required to notify the income recapture relating to the transaction instruments or commodities. partnership of their tax-exempt status. See • The partner’s distributive share of interest on Form 4797. This excess is considered a Form 990-T, Exempt Organization Business current year payment other than cash; income, or interest expense, which is Income Tax Return, and Pub. 598, Tax on attributable to a loan between the 9. Installment sale income; Unrelated Business Income of Exempt partnership and the partner (self-charged 10. Character of the income—capital or Organizations, for more information. interest). ordinary; Precontribution gain (loss) (code W). If • If the partnership received a Schedule K-1 11. Partner's share of the deferred the partnership distributed any section (Form 1065), the detail and amounts obligation. See computation below. 704(c) property to any partner other than reported to the partnership on code Y. the contributing partner, and the date of the • If the partnership received a Schedule K-1 Schedule K-1 deferred obligation distribution was within 7 years of the date the (Form 1041), the amount of the adjustment computation. For each Form 6252 where section 704(c) property was contributed to reported. line 5 is greater than $150,000, figure the the partnership, the distribution must be • Guaranteed payments (reported on Form Schedule K-1 deferred obligation as follows. treated as if it were a sale by the contributing 1065, Schedule K, line 4b) unrelated to • Line (4) from the list above, less the sum partner taking place on the date of the services, such as for the use of capital or of lines (7) and (8). This equals the distribution. Section 704(c) property is attributable to section 736(a)(2) payments for Schedule K deferred obligation. property that had a FMV that was either unrealized receivables or goodwill. • Multiply the Schedule K deferred greater or less than the contributing partner's • In the case of a common trust fund, any obligation by each partner’s profit adjusted basis at the time the property was items of income or loss that may be taken percentage. This equals each partner’s contributed to the partnership. See into account in figuring the participant’s net share of the deferred obligation. Dispositions of Contributed Property, earlier, investment income (other than qualified If an obligation arising from the for more information. If the partnership made dividends, and short-term and long-term disposition of property to which section 453A such a distribution during its tax year, attach capital gains). applies is outstanding at the close of the a statement to the contributing partner's In addition, Regulations section 1.1411-10 year, each partner's tax liability must be Schedule K-1 that provides the following provides special rules for stock of controlled increased by the tax due under section information. foreign corporations (CFCs) and passive 453A(c) on the partner's distributive share of • The amount of the gain or loss that would foreign investment companies (PFICs) the tax deferred under the installment have been allocated to the contributing owned by the partnership. If the partnership method. partner if the partnership had sold the owns directly or indirectly stock of a CFC or section 704(c) property at its FMV at the time PFIC, then additional reporting may be Section 1260(b) information (code Q). of the distribution. See section 704(c)(1)(B) required under code Y. Supply any information needed by a partner for details. to figure the interest due under section CFCs and QEFs. In the case of stock of The character of the gain or loss that 1260(b). If the partnership had gain from • CFCs and QEFs directly or indirectly owned would have resulted if the partnership had certain constructive ownership transactions, by the partnership, the partnership must each partner's tax liability must be increased provide the name and EIN (if one has been

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issued) for each CFC and QEF the stock of engaged in a trade or business described in be reported because partners cannot use which is owned by the partnership for which section 1411(c)(2), the partnership may that information in figuring their QBI an election under Regulations section aggregate this information with other income deduction. 1.1411-10(g) is not in effect and for which derived by the partnership that is net Partnerships should use Statement the partnership isn't engaged in a trade or investment income under section 1411(c)(1) A—QBI Pass-Through Entity Reporting, or a business described in section 1411(c)(2). (A)(ii). substantially similar statement, to report For each of these entities, the partnership Section 1291 funds. In the case of stock of information for each partner’s distributive must provide the following information on an PFICs directly or indirectly owned by the share from each trade or business, including entity-by-entity basis (to the extent such partnership with respect to which direct or QBI items, W-2 wages, UBIA of qualified information isn't otherwise identifiable indirect partners are subject to section 1291, property, qualified PTP items, and section elsewhere on Schedule K-1). the partnership must provide the following 199A dividends by attaching the completed Section 951(a) inclusions. • information (to the extent such information statement(s) to each partner’s Schedule K-1. Section 1293(a)(1)(A) inclusions. • isn't otherwise identifiable elsewhere on The partnership should also use Statement A Section 1293(a)(1)(B) inclusions. • Schedule K-1) on an entity-by-entity basis. to report each partner’s distributive share of Section 959(d) distributions subject to • Excess distributions made by a PFIC for QBI items, W-2 wages, UBIA of qualified section 1411. • which a partner is subject to section 1291. property, qualified PTP items, and section Section 1293(c) distributions subject to • Gains derived from the disposition of 199A dividends reported to the partnership section 1411. • stock of a PFIC for which a partner is subject by another entity. Amount of gain or loss derived from • to section 1291. dispositions of the stock of CFCs and QEFs Partnerships should use Statement that is taken into account for section 1411 Section 199A information (code Z). The B—QBI Pass-Through Entity Aggregation purposes. qualified business income (QBI) deduction Election(s), or a substantially similar • Amounts that are derived from the may be taken by eligible taxpayers, including statement, to report aggregated trades or disposition of the stock of CFCs and QEFs individuals and some trusts and estates. The businesses and provide supporting and included in income as a dividend under deduction is determined at the partner level. information to partners on each section 1248 for section 1411 purposes. Partnerships are required to report Schedule K-1. In the case of stock of CFCs and QEFs information necessary for their partners to Partnerships should use Statement directly or indirectly owned by the figure the deduction. Use code Z with an C—QBI Pass-Through Entity partnership for which an election under asterisk (Z*) on each partner’s Schedule K-1 Reporting—Patrons of Specified Agricultural Regulations section 1.1411-10(g) is in effect, and enter “STMT” in the entry space to and Horticultural Cooperatives, or a the partnership must provide the following indicate that the information is provided on substantially similar statement, to report the information (to the extent such information an attached statement that separately distributive share of QBI and W-2 wages isn't otherwise identifiable elsewhere on identifies the partner’s distributive share of: allocable to qualified payments from a Schedule K-1) on either an aggregate basis 1. Qualified items of income, gain, specified agricultural or horticultural or an entity-by-entity basis. deduction, and loss; cooperative for each trade or business. This statement should also be used to report each • Section 951(a) inclusions. 2. W-2 wages; • Section 1293(a)(1)(A) inclusions. partner’s share of section 199A(g) deduction • Section 1293(a)(1)(B) inclusions. 3. Unadjusted basis immediately after reported to the partnership by the specified acquisition (UBIA) of qualified property; cooperative. In the case of stock of CFCs and QEFs directly or indirectly owned by the 4. Qualified publicly traded partnership Determining the partnership’s partnership with respect to which the (PTP) items; qualified trades or businesses. The partnership is engaged in a trade or business 5. Section 199A dividends, also known partnership’s qualified trades or businesses described in section 1411(c)(2), the as qualified real estate investment trust include its section 162 trades or businesses, partnership must provide the following (REIT) dividends. except for SSTBs, or the trade or business of information (to the extent such information providing services as an employee. A isn't otherwise identifiable elsewhere on the The partnership must make an initial section 162 trade or business generally Schedule K-1) on either an aggregate or an determination of which items are qualified includes any activity if the partnership’s entity-by-entity basis, or may aggregate this items of income, gain, deduction, and loss at primary purpose for engaging in the activity information with other income derived by the its level and report to each partner its is for income or profit and the partnership is partnership that is net investment income distributive share of all items that may be involved in the activity with continuity and under section 1411(c)(1)(A)(ii). qualified items at the partner level. These regularity. For more information on what • Section 951(a) inclusions. items must be separately stated where qualifies as a trade or business for purposes • Section 1293(a)(1)(A) inclusions. necessary for the partner to figure the of section 199A, see the instructions for • Section 1293(a)(1)(B) inclusions. deduction. See Determining the Form 8995, Qualified Business Income partnership’s QBI or qualified PTP items Deduction Simplified Computation, or Form Section 1296 Mark-to-market PFICs. In later. The partner must then determine 8995-A, Qualified Business Income the case of stock of PFICs directly or whether each item is includible in QBI. Deduction. indirectly owned by the partnership for which In addition, the partnership must also an election under section 1296 is in effect, report whether any of its trades or Rental real estate. Rental real estate the partnership must provide the following businesses are specified service trades or may constitute a trade or business for information (to the extent such information businesses (SSTBs) and identify on the purposes of the QBI deduction if the rental isn't otherwise identifiable elsewhere on statement any trades or businesses that are real estate: Schedule K-1) on either an aggregate basis aggregated. The partnership must also • Rises to the level of a trade or business or an entity-by-entity basis (except as report all QBI information reported to it by under section 162, provided below). any entity in which the partnership has an • Satisfies the requirements for the rental • Amounts included in income under ownership interest. real estate safe harbor in Rev. Proc. section 1296(a)(1). 2019-38, or • Amounts deducted from income under Note. The partnership must report each • Meets the self-rental exception (that is, section 1296(a)(2). partner’s share of qualified items of income, the rental or licensing of property to a In the case of PFIC stock owned directly gain, deduction, and loss from a PTP so that commonly controlled trade or business or indirectly by the partnership for which an partners can determine their qualified PTP conducted by an individual or relevant election under section 1296 is in effect and income. However, the W-2 wages and UBIA pass-through entity) described in with respect to which the partnership is of qualified property from the PTP should not Regulations section 1.199A-1(b)(14).

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The determination of whether rental real 2. None of the trades or businesses are section 1231 gains or (losses), section 179 estate constitutes a trade or business for an SSTB. deductions, and interest from debt-financed purposes of the QBI deduction is made by 3. The trades or businesses to be distributions. the partnership. The partnership must first aggregated meet at least two of the following QBI may also include rental income/ make this determination and then only three factors. losses or royalty income, if the activity rises include the distributive share of rental real to the level of a trade or business; and estate items of income, gain, loss, and • They provide products, property, or gambling gains or losses, but only if the deduction from a trade or business on the services that are the same or that are partnership is engaged in the trade or statement provided to partners. Rental real customarily offered together. business of gambling. Whether an activity estate that does not meet any of the three • They share facilities or share significant rises to the level of a trade or business must conditions noted above does not constitute a centralized business elements, such as be determined at the entity level and, once trade or business for purposes of the QBI personnel, accounting, legal, manufacturing, made, is binding on partners. deduction and must not be included in the purchasing, , or information QBI information provided to partners. technology resources. Qualified PTP items include the • They are operated in coordination with, or partnership’s share of qualified items of Specified service trades or reliance upon, one or more of the businesses income, gain, deduction, and loss from an businesses (SSTBs) excluded from in the aggregated group. interest in a PTP and may also include gain qualified trades or businesses. SSTBs or loss recognized on the disposition of the are generally excluded from the definition of If the partnership chooses to aggregate partner’s partnership interest that is not a qualified trade or business. An SSTB is any multiple trades or businesses, it must report treated as a capital gain or loss. If the trade or business providing services in the the aggregation on Statement B, or a reporting partnership is itself a PTP, the PTP fields of health, law, accounting, actuarial substantially similar statement, and attach it should report all qualified items of income, science, performing arts, consulting, to each Schedule K-1. The statement must gain, deduction, and loss separately for each athletics, , brokerage provide the information necessary to identify trade or business engaged in by the PTP. each separate trade or business included in services, investing and investment QBI and qualified PTP items don’t include management, trading or dealing in securities, each aggregation, a description of the aggregated trades or businesses, and an the following. partnership interests, or commodities, or any • Items that aren’t properly includible in other trade or business where the principal explanation of the factors met that allow the aggregation in accordance with Regulations income. asset is the reputation or skill of one or more • Items that are treated as capital gain or of its employees or owners. The term “any section 1.199A-4. The aggregation statement must be completed each year to loss under any provision of the Internal trade or business where the principal asset is Revenue Code. the reputation or skill of one or more of its show the partnership's trade or business aggregations. Failure to disclose the • Dividends or dividend equivalents, employees or owners” means any trade or including qualified REIT dividends. business that consists of (i) a trade or aggregations may cause them to be disaggregated. • Interest income (unless received in business in which a person receives fees, connection with the trade or business). compensation, or other income from The partnership's aggregations must be • Wage income. endorsing products or services; (ii) a trade or reported consistently for all subsequent • Income that is not effectively connected business in which a person licenses or years, unless there is a change in facts and with the conduct of business within the receives fees, compensation, or other circumstances that changes or disqualifies United States (go to IRS.gov/ECI for more income for the use of an individual’s image, the aggregation. The partnership must information). likeness, name, signature, voice, trademark, provide a written explanation for any • Commodities transactions, or foreign or any other symbols associated with the changes to prior year aggregations that currency gains or losses described in section individual’s identity; or (iii) receiving fees, describes the change in facts and 954(c)(1)(C) or (D). compensation, or other income for appearing circumstances. • Income, loss, or deductions from notional at an event or on radio, television, or another If the partnership directly or indirectly principal contracts under section 954(c)(1) media format. owns an interest in another relevant (F). Partnerships must separately report QBI pass-through entity (RPE) that aggregates • Annuities (unless received in connection information for all trades or businesses multiple trades or businesses, it must attach with the trade or business). engaged in by the partnership, including a copy of the RPE’s aggregation to each • Guaranteed payments described in SSTBs, but must identify which trades or Schedule K-1. The partnership cannot break section 707(c) received by the entity for businesses are SSTBs. apart the aggregation of another RPE, but it services rendered to a partnership. may add trades or businesses to the • Payments described in section 707(a) Aggregation of trades or businesses. aggregation, assuming the requirements received by the entity for services rendered A partnership engaged in more than one above are satisfied. to a partnership. trade or business may choose to aggregate multiple trades or businesses into a single Determining the partnership’s QBI or QBI flowchart. Partnerships may use trade or business for purposes of section qualified PTP items. The partnership’s this flowchart to determine if an item of 199A if it meets the following requirements. items of QBI include qualified items of income, gain, deduction, or loss is includible 1. The same person, or group of income, gain, deduction, and loss from the in QBI reportable to partners. persons, either directly or through attribution, partnership’s trades or businesses that are owns 50% or more of each trade or business effectively connected with the conduct of a for a majority of the tax year, including the trade or business within the United States. last day of the tax year, and all trades or This may include, but is not limited to, items businesses use the same tax year-end. such as ordinary business income or losses,

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Flowchart To Help Determine if Items Are Qualified Business Income

Questions Yes No 1. Is the item effectively connected with the conduct of a trade or business within the United States? Continue to next question. Stop. This item is not QBI. 2. Is the item attributable to a trade or business (this may include section 1231 gain/(loss), section 179 Continue to next question. Stop. This item is not QBI. deductions, interest from debt-financed distributions, etc.)? Examples of an item not considered attributable to the trade or business at the entity level include gambling income/(loss) where the entity is not engaged in the trade or business of gambling, income/(loss) from vacation properties when the entity is not in that trade or business, activities not engaged in for profit, etc. 3. Is the item treated as a capital gain or loss under any provision of the Internal Revenue Code or is it a Stop. This item is not QBI. Continue to next question. dividend or dividend equivalent? 4. Is the item interest income other than interest income properly allocable to a trade or business? (Note that Stop. This item is not QBI. Continue to next question. interest income attributable to an investment of , reserves, or similar accounts is not properly allocable to a trade or business.) 5. Is the item an annuity, other than an annuity received in connection with the trade or business? Stop. This item is not QBI. Continue to next question.

6. Is the item gain or loss from a commodities transaction or foreign currency gain or loss described in Stop. This item is not QBI. Continue to next question. section 954(c)(1)(C) or (D)?

7. Is the item gain or loss from a notional principal contract under section 954(c)(1)(F)? Stop. This item is not QBI. Continue to next question. 8. Is the item of income or loss from a qualified publicly traded partnership? This item is a qualified PTP This item is QBI. Report this item. Report this item as item as QBI subject to qualified PTP income or partner-specific loss, subject to determinations. partner-specific determinations, and check the PTP box.

Specific instructions for Statement income (loss)” reported in box 1 of the depreciable period ends on the later of 10 A—QBI Pass-Through Entity Reporting. partner’s Schedule K-1. Each item included years after the property is placed in service under “Other income (loss)” and “Other or the last day of the full year for the QBI or qualified PTP items. The deductions” must be stated separately, applicable recovery period under section partnership (including PTPs) must first identifying the nature and amount of each 168. determine if it is engaged in one or more item. trades or businesses. It must then determine Section 199A dividends. The if any of its trades or businesses are SSTBs. W-2 wages and UBIA of qualified partnership must report the distributive share It must also determine whether it has property. The partnership must determine of any section 199A dividends, also known qualified PTP items from an interest in a the W-2 wages and UBIA of qualified as qualified real estate investment trust PTP. It must indicate the status in the property properly allocable to QBI for each (REIT) dividends, to each partner on appropriate checkboxes for each trade or qualified trade or business and report the Statement A, or a substantially similar business (or aggregated trade or business) distributive share to each partner on statement, attached to Schedule K-1. reported. Statement A, or a substantially similar Section 199A dividends do not have to be statement, attached to Schedule K-1. This separately reported by trades or businesses Note. SSTBs and PTPs cannot be includes the share of W-2 wages and can be reported as a single amount to aggregated with any other trade or business. and UBIA of qualified property reported to partners. Section 199A dividends include So, if the aggregation box is checked, the the partnership from any qualified trades or any dividend the partnership receives from a SSTB and PTP boxes for that specific businesses of an RPE the partnership owns REIT held for more than 45 days, for which aggregated trade or business should not be directly or indirectly. However, partnerships the payment is not obligated to someone checked. that own a direct or indirect interest in a PTP else, is not a capital gain dividend under may not include any amounts for W-2 wages section 857(b)(3), and is not a qualified Next, the partnership must report to each or UBIA of qualified property from the PTP, dividend under section 1(h)(11), plus any partner their distributive share of all items as the W-2 wages and UBIA of qualified qualified REIT dividends received from a that are QBI or qualified PTP items for each property from a PTP are not allowed in RIC. trade or business the partnership owns figuring the W-2 wage and UBIA limitations. directly or indirectly. Use the QBI flowchart Fiscal year partnerships. For above to determine if an item is reportable as The W-2 wages are amounts paid to purposes of determining the QBI or qualified a QBI item or qualified PTP item subject to employees described in sections 6051(a)(3) PTP items, UBIA of qualified property, and partner-specific determinations. and (8). If the partnership conducts more the aggregate amount of qualified section than one trade or business, it must allocate The descriptions on the statement 199A dividends, fiscal year-end partnerships the W-2 wages among its trades or generally match the descriptions reported on include all items from the tax (fiscal) year. businesses. See Rev. Proc. 2019-11, Schedule K-1. So, the amounts should 2019-09 I.R.B. 742, for more information. For purposes of determining W-2 wages, reflect each trade’s or business’s portion of fiscal year-end partnerships include amounts the qualified items of income, gain, The unadjusted basis of qualified paid to employees under sections 6051(a)(3) deduction, or loss reported in the applicable property is figured by adding the unadjusted and (8) for the calendar year ended with or box of the partner’s Schedule K-1. For basis of all qualified assets immediately after within the partnership’s tax year. If the example, the amount reported on the acquisition. Qualified property includes all partnership conducts more than one trade or “Ordinary business income (loss)” line of this tangible property subject to depreciation business, it must allocate W-2 wages among statement should reflect the attributable under section 167, for which the depreciable its trades or businesses. See Rev. Proc. portion of qualified items of income, gain, period hasn’t ended, that is held and used by 2019-11 for more information. deduction, and loss for each trade or the trade or business during the tax year and business included in the “Ordinary business held on the last day of the tax year. The

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Statement A—QBI Pass-Through Entity Reporting

Partnership’s name: Partnership’s EIN: Partner’s name: Partner’s identifying number:

Trade or Business 1 Trade or Business 2 Trade or Business 3

PTP PTP PTP Aggregated Aggregated Aggregated Partner’s share of: SSTB SSTB SSTB QBI or qualified PTP items subject to partner-specific determinations:

Ordinary business income (loss) ......

Rental income (loss) ......

Royalty income (loss) ......

Section 1231 gain (loss) ......

Other income (loss) ......

Section 179 deduction ......

Other deductions ......

W-2 wages ......

UBIA of qualified property ......

Section 199A dividends......

Specific instructions for Statement business and an explanation of the factors aggregations that describes the change in B—QBI Pass-Through Entity Aggregation met that allow the aggregation. facts and circumstances. Election(s). If the partnership elects to The aggregation statement must be If the partnership holds a direct or indirect aggregate more than one trade or business completed each year to show the interest in an RPE that aggregates multiple that meets all the requirements to aggregate, partnership’s trade or business trades or businesses, the partnership must the partnership must report the aggregation aggregations. Failure to disclose the also include a copy of the RPE’s to partners on Statement B, or a substantially aggregations may cause them to be aggregations with each partner’s similar statement, and attach it to each disaggregated. The partnership’s Schedule K-1. The partnership cannot break Schedule K-1. The partnership must indicate aggregations must be reported consistently apart the aggregation of another RPE, but it trades or businesses that were aggregated for all subsequent years, unless there is a may add trades or businesses to the by checking the appropriate box on change in facts and circumstances that aggregation, assuming the aggregation Statement A for each aggregated trade or changes or disqualifies the aggregation. The requirements are satisfied. business. The partnership must also provide partnership must provide a written a description of the aggregated trade or explanation for any changes to prior year

Statement B—QBI Pass-Through Entity Aggregation Election(s)

Partnership’s name: Partnership’s EIN: Trade or business aggregation 1* Provide a description of the aggregated trades or businesses and an explanation of the factors met that allow the aggregation in accordance with Regulations section 1.199A-4. In addition, if the partnership holds a direct or indirect interest in a relevant pass-through entity (RPE) that aggregates multiple trades or businesses, attach a copy of the RPE's aggregations.

Has this trade or business aggregation changed from the prior year? This includes changes in the aggregation due to a trade or business being formed, acquired, or disposed of, or having ceased operations. If yes, explain.

* If the partnership has more than one aggregated group, attach additional Statements B. Name the additional aggregations 2, 3, 4, etc.

Specific instructions for Statement QBI items and W-2 wages allocable to wages allocable to qualified payments from C—QBI Pass-Through Entity Report- qualified payments. If the partnership is a each trade or business to each of its partners ing—Patrons of Specified Agricultural patron of a specified agricultural or on Statement C, or a substantially similar and Horticultural Cooperatives. horticultural cooperative, the partnership statement, and attach it to each must provide the share of QBI items and W-2 Schedule K-1 so each partner can figure

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their patron reduction under section 199A(b) partnership on Form 1099-PATR from the passed through from the cooperative, as (7). cooperative. reported on Form 1099-PATR. Section 199A(g) deductions do not have to be QBI items and W-2 wages allocable to Section 199A(g) deduction. The qualified payments include QBI items reported separately by trades or businesses partnership must report to its partners their and can be reported as a single amount to included on Statement A that are allocable to share of any section 199A(g) deduction the qualified payments reported to the partners.

Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives

Partnership’s name: Partnership’s EIN: Partner’s name: Partner’s identifying number:

Trade or Business Trade or Business Trade or Business

PTP PTP PTP Aggregated Aggregated Aggregated Partner’s share of: SSTB SSTB SSTB QBI items allocable to qualified payments subject to partner-specific determinations:

Ordinary business income (loss) ......

Rental income (loss) ......

Royalty income (loss) ......

Section 1231 gain (loss) ......

Other income (loss) ......

Section 179 deduction ......

Other deductions ......

W-2 wages allocable to qualified payments ......

Section 199A(g) deduction ......

Section 704(c) information (code AA). basis of $0. If Y were newly placed in Section 751 gain (loss) (code AB). For partnerships other than publicly traded service, its depreciable life would be 10 Section 751 “hot assets” (unrealized partnerships, if a partner’s taxable income or years straight line. The partnership adopts receivables and inventory items). loss on any line item on Schedule K-1 (Form the remedial method with respect to property Y. In the first year, P has $10 of section Section 1(h)(5) gain (loss) (code AC). 1065) includes an allocation of any income Section 1(h)(5) collectible assets. or deduction item determined by applying 704(b) book depreciation, which is allocated section 704(c), include the sum of such equally to A and B for book purposes ($5 Deemed section 1250 unrecaptured income and deduction items here. each). However, P has $0 of tax depreciation gain (code AD). Section 1(h)(6) with respect to property Y. Under the unrecaptured section 1250 gain assets Example 1—Single section 704(c) remedial method, for tax purposes, P (depreciable real property) are section 751 allocation. Partnership P has two partners, allocates $5 of remedial income to A and $5 property per Regulations section 1.751-1(c) A and B. A and B share all items of income, of a remedial depreciation deduction to B (4)(v). loss, and deduction equally, except for items with respect to property Y. In this case, the required to be allocated under section partnership would report on Schedule K-1, Excess taxable income (code AE). If the 704(c). A contributes property X with a FMV Line 20, Code AA that A has $4 of taxable partnership is required to file Form 8990, it of $100 and a tax basis of $60. X is income, determined by applying section may determine it has excess taxable income. depreciable over 10 years. B contributes 704(c) ($1 of depreciation deductions from If so, enter the amount from Form 8990, Part $100. The traditional method is used to property X and $5 of remedial income from II, line 36, for excess taxable income. allocate section 704(c) items pertaining to X. property Y) and that B has $10 of deductions In the first year, the partnership has $10 of Schedule K-1. Enter the partner’s for tax purposes, determined by applying amount of excess taxable income. The section 704(b) book depreciation, which is section 704(c) (consisting of $5 depreciation allocated equally to A and B for book partner will enter the amount on Form 8990, from property X and $5 remedial Schedule A, line 43(f), if the partner is purposes ($5 each). However, P only has $6 depreciation from property Y). of tax depreciation. The partnership has no required to file Form 8990. other income or deductions during the tax Required reporting for the sale or ex- Excess business interest income (code year. Under the traditional method, P change of an interest in a partnership AF). If the partnership is required to file allocates $1 to A and $5 to B for tax (codes AB, AC, and AD). When a sale or Form 8990, it may determine it has excess purposes. Assuming this is the only item exchange of a partnership interest occurs business interest income. If so, enter the where taxable income is affected by section and the partnership holds section 751 amount from Form 8990, Part II, line 37, for 704(c) allocations during the current year, property such as unrealized receivables excess business interest income. the partnership would report deductions on defined in section 751(c), property subject to Schedule K-1, Line 20, code AA of $1 for A unrecaptured section 1250 gain, inventory Schedule K-1. Enter the partner’s and $5 for B. items defined in section 751(d), or amount of excess business interest income. collectibles, the partnership must report to The partner will enter the amount on Form Example 2—Multiple section 704(c) the transferor partner their share of the gain 8990, Schedule A, line 43(g), if the partner is allocations. The facts are the same as in or loss figured for the following categories of required to file Form 8990. Example 1, except in addition to the facts in assets. that example, A also contributes property Y Gross receipts for section 448(c) (code with a FMV of $100 and a remaining tax AG). Regulations section 1.163(j)-2(d)(2)(iii)

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requires that partners in a partnership 409A. These regulations don't provide information must be provided in a format that include a share of partnership gross receipts guidance on the application of section 409A references the specific line numbers on in proportion to their share of gross income to arrangements between partnerships and Schedule P for which the information is under section 703 unless the partnership is partners. For interim guidance on such provided. For more information, see the treated as one person under the aggregation arrangements, see Q&A-7 in Notice 2005-1, Instructions for Schedule P (Form 1120-F). rules of section 448(c). For tax years ending 2005-2 I.R.B. 274, and the information Exceptions. The statement isn't required in after December 30, 2020, partnerships with provided in the preamble to these the following situations. current year gross receipts (defined in regulations (T.D. 9321). Also see Notice 1. The direct or indirect foreign corporate Regulations section 1.448-1T(f)(2)(iv)) 2006-79, 2006-43 I.R.B. 763; Notice partner provides the partnership with a valid greater than $5 million are required to report 2007-86, 2007-46 I.R.B. 990; and Notice Form W-8BEN or Form W-8BEN-E (within to partners their distributive share of their 2008-113, 2008-51 I.R.B. 1305, for the meaning of Regulations section current year gross receipts. If a partnership additional information on transitional and 1.1446-2(b)(2)(iii)) on which the corporation and a partner are treated as a single relief rules. claims an exemption from U.S. tax by employer under section 448(c) aggregation • Noncash charitable contributions. If the operation of an income tax treaty or rules, and the partnership has gross receipts partnership made a noncash charitable reciprocal agreement on the grounds that greater than $5 million, then the partnership contribution, report the partner’s share of the none of the income is attributable to a should also report its current year total gross partnership’s adjusted basis of the property permanent establishment of the partner. receipts to those partners. For tax years for basis limitation purposes. 2. The partnership doesn't allocate any ending after December 30, 2021, a • Any income or gain reported on lines 1 effectively connected income to the partner partnership that has current year gross through 11 of Schedule K that qualifies as (foreign corporation or partnership) and the receipts greater than $5 million will be inversion gain, if the partnership is an partnership receives a written statement from required to report gross receipts to partners expatriated entity or is a partner in an the partner (corporation or partnership) for the three immediately preceding tax years expatriated entity. For details, see section indicating that the information isn't needed to as well as gross receipts for the current year. 7874. Attach a statement to Form 1065 that determine its (or its direct or indirect See IRS.gov/newsroom/faqs-regarding-the- shows the amount of each type of income or partner(s)) U.S. federal income tax liabilities. aggregation-rules-under-section-448c2–that- gain included in the inversion gain. The • The partner's distributive share of any apply-to-the-section-163j-small-business- partnership must report each partner's conservation reserve program payments exemption. Partnerships whose current year distributive share of the inversion gain in made to the partnership. gross receipts are less than or equal to $5 box 20 of Schedule K-1 using code AH. • If the partnership is involved in a farming million may also use this code to report gross Attach a statement to Schedule K-1 that or fishing business, report the gross income receipts. shows the partner's distributive share of the and gains as well as the losses and amount of each type of income or gain deductions attributable to such business Other information (code AH). Report the included in the inversion gain. activities. See section 1301. following to each partner. Qualifying advanced coal project If a partnership is a trader in securities, Attach a statement showing each • • • property. Attach a statement to Schedule K-1 commodities, or both, and has properly remaining section 743(b) basis adjustment showing the partner's distributive share of elected under section 475(f) to mark to making up the total and identify the asset to the amounts that the partner will use when market the securities, the commodities, or which it relates. Show the section 743(b) figuring the amounts to report on lines 5a both, the partnership should report ordinary adjustment net of any cost recovery to which through 5c of the partner's Form 3468. See gain or loss from the securities or it relates. A reasonable grouping by asset the Instructions for Form 3468 for details. commodities (or both securities and category may be used, but such grouping Qualifying gasification project property. commodities) trading activities separately should not be less detailed than the asset • Attach a statement to Schedule K-1 showing from any other ordinary gain or loss. categories listed on the Schedule L balance the partner's distributive share of the Transfer of the partnership interest by a sheet. See Section 743(b) positive income • amounts that the partner will use when foreign partner. If a partner that is a adjustments (code F) and Section 743(b) figuring the amounts to report on lines 6a nonresident alien or foreign corporation has negative income adjustments (code V) and 6b of the partner's Form 3468. See the gain or loss from the sale, exchange, or other earlier. Also see IRS.gov/forms-pubs/ Instructions for Form 3468 for details. disposition of its partnership interest, clarifications-for-disregarded-entity- Qualifying advanced energy project provide, on an attached statement, any reporting-and-section-743b-reporting. • credit. Attach a statement to Schedule K-1 information that the partner may need to Any information a partner that is a PTP • showing the partner's distributive share of determine effectively connected gain or loss may need to determine if it meets the 90% the amounts that the partner will use when under section 864(c)(8). qualifying income test of section 7704(c)(2). figuring the amount to report on line 7 of the If the partnership is a section 721(c) Partners are required to notify the • partner's Form 3468. See the Instructions for partnership, line 20c must include the partnership of their status as a PTP. Form 3468 for details. amounts relating to any remedial items made If the partnership participates in a • The information needed to complete under the remedial allocation method transaction that must be disclosed on Form • Schedule P (Form 1120-F), List of Foreign (described in Regulations section 1.704-3(d) 8886, both the partnership and its partners Partner Interests in Partnerships, on an and Regulations section 1.704-3(d)(5)(iii)) may be required to file Form 8886. The attached statement for a partner that is (a) a with respect to section 721(c) property. Enter partnership must determine if any of its corporation (identified as a foreign partner a separate code AH in box 20 of partners are required to disclose the under Regulations section 1.1446-1(c)(3)); Schedule K-1 for each amount for items transaction and provide those partners with or (b) a partnership (domestic or foreign) if allocated to the partner. For the U.S. information they will need to file Form 8886. you know, or have reason to know, that one transferor, enter a separate code AH, if any, This determination is based on the or more of the partners is a foreign for the total remedial income allocated to the category(s) under which a transaction corporation. U.S. transferor, total gain recognized due to qualified for disclosures. See Form 8886 and If the partnership allocates effectively an acceleration event, and/or total gain its instructions for details. connected income to the partner, provide the recognized due to a section 367 transfer Compensation to partners deferred under • information needed to complete lines 1 reflected on Schedule G (Form 8865), Part II, a section 409A nonqualified deferred through 10, 13, 14, 15b, 17a, 17b, and 18 of columns (c), (d), and (e), respectively. For all compensation plan that doesn't meet the Schedule P (Form 1120-F). If the partnership other partners of the section 721(c) requirements of section 409A. Include in this doesn't allocate effectively connected partnership, enter a separate code AH for amount any earnings on these deferrals. income to the partner, provide the the total amount of remedial items allocated This amount must also be included on line 4 information needed to complete lines 13, 14, to such partner relating to section 721(c) of Schedule K, Guaranteed payments. For and 18 of Schedule P (Form 1120-F). The details, see the regulations under section

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property. See Regulations sections business activities; otherwise, classify a reflect the tax prepared and 1.721(c)-3 and 1.721(c)-6. general partner as “passive.” translated into U.S. dollars according to • Provide the necessary information to each 2. If the partnership's principal activity Regulations section 1.985-3(d), and not a partner for its calculation of the deduction consists of a working interest in an oil or gas U.S. GAAP balance sheet. under section 250. well, classify a general partner as “active.” • Any other information the partners need to Partnerships Required To File prepare their tax returns, including 3. If the partnership's principal activity is Schedule M-3 a rental real estate activity, classify a general information needed to prepare state and For partnerships required to file local tax returns. partner as “active” if the partner actively participated in all of the partnership's rental Schedule M-3, the amounts reported on real estate activities; otherwise, classify a Schedule L must be amounts from financial Line 21. More Than One At-Risk general partner as “passive.” statements used to complete Schedule M-3. Activity If the partnership prepares non-tax-basis 4. Classify as “passive” all partners in a financial statements, Schedule M-3 and If the partnership conducted more than one partnership whose principal activity is a Schedule L must report non-tax-basis at-risk activity, the partnership is required to rental activity other than a rental real estate financial statement amounts. If the provide certain information separately for activity. partnership doesn't prepare non-tax-basis each at-risk activity to its partners. This 5. If the partnership's principal activity is financial statements, Schedule L must be information is reported on an attached a portfolio activity, classify all partners as based on the partnership's books and statement to Schedule K-1. Check the box to “active.” records and may show tax-basis balance indicate there is more than one at-risk activity 6. Classify as “passive” all limited sheet amounts if the partnership's books and for which a statement is attached. See partners in a partnership whose principal records reflect only tax-basis amounts. At-risk activity reporting requirements earlier, activity is a trade or business or rental Line 5. Tax-Exempt Securities for details. Also see Notice 2019-66 for activity. certain at-risk reporting. Include on this line: 7. If the partnership cannot make a reasonable determination whether a 1. State and local government Line 22. More Than One Passive partner's participation in a trade or business obligations, the interest on which is Activity activity is material or whether a partner's excludable from gross income under section participation in a rental real estate activity is 103(a); and If the partnership conducted more than one active, classify the partner as “passive.” 2. Stock in a mutual fund or other RIC activity (determined for purposes of the that distributed exempt-interest dividends passive activity loss and credit limitations), during the tax year of the partnership. the partnership is required to provide Schedule L. Balance information separately for each activity to its Line 7a. Loans to Partners (or partners. This information is reported on an Sheets per Books attached statement to Schedule K-1. Check Persons Related to Partners) Schedules L, M-1, and M-2 aren't the box to indicate there is more than one Include on this line loans to partners or TIP required to be completed if the passive activity for which a statement is persons related to partners. Persons are partnership answered “Yes” to attached. See Passive Activity Reporting related if they have a relationship specified in question 4 of Schedule B. Requirements earlier, for details. section 267(b) or 707(b). Amounts included The balance sheets should agree with the here should not be included elsewhere on partnership's books and records. Attach a lines 1 through 13. Analysis of Net Income statement explaining any differences. There Line 14. Total Assets (Loss) are additional requirements for completing Schedule L for partnerships that are required Generally, total assets at the beginning of the For each type of partner shown, enter the to file Schedule M-3 (see the Instructions for year (Schedule L, line 14, column (b)) must portion of the amount shown on line 1 that Schedule M-3 (Form 1065) for details). equal total assets at the close of the prior tax was allocated to that type of partner. Foreign year (Schedule L, line 14, column (d)). If total government partners are treated as Partnerships reporting to the Interstate assets at the beginning of the year don't corporate partners. Report all amounts for Commerce Commission (ICC) or to any equal total assets at the close of the prior LLC members on the line for limited partners. national, state, municipal, or other public year, attach a statement explaining the The sum of the amounts shown on line 2 officer may send copies of their balance difference. must equal the amount shown on line 1. In sheets prescribed by the ICC or national, addition, the amount on line 1 of Analysis of state, or municipal authorities, as of the For purposes of measuring total assets at Net Income (Loss) must equal the amount on beginning and end of the tax year, instead of the end of the year, the partnership's assets line 9, Schedule M-1 (if the partnership is completing Schedule L. However, may not be netted against or reduced by required to complete Schedule M-1). If the statements filed under this procedure must partnership liabilities. In addition, asset partnership files Schedule M-3, the amount contain sufficient information to enable the amounts may not be reported as a negative on line 1 of Analysis of Net Income (Loss) IRS to reconstruct a balance sheet similar to number. If the partnership has an interest in must equal the amount in column (d) of that contained on Form 1065 without another partnership and uses a tax-basis line 26, Part II, of Schedule M-3. contacting the partnership during method for Schedule L, it must show as an processing. asset the adjusted basis of its interest in the In classifying partners who are individuals other partnership and separately show as a as “active” or “passive,” the partnership All amounts on the balance sheet should liability its share of the other partnership's should apply the rules below. In applying be reported in U.S. dollars. If the liabilities (which are included in the these rules, a partnership should classify partnership's books and records are kept in a computation of its adjusted basis). See the each partner to the best of its knowledge and foreign currency, the balance sheet should Partner's Instructions for Schedule K-1 for belief. It is assumed that in most cases the be translated in accordance with U.S. details on how to figure the adjusted basis of level of a particular partner's participation in generally accepted accounting principles a partnership interest. If Schedule L is an activity will be apparent. (GAAP). non-tax-basis, investment in a partnership 1. If the partnership's principal activity is may be shown as appropriate under the a trade or business, classify a general Exception. If the partnership or any non-tax-basis accounting method of the partner as “active” if the partner materially qualified business unit of the partnership partnership including, if required by the participated in all partnership trade or uses the U.S. dollar approximate separate non-tax-basis accounting method of the transactions method, Schedule L should

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partnership, the equity method of accounting than amounts paid for insurance that of the partnership’s assets at the beginning for investments, but must be shown as a constitutes medical care for a partner, a of the year reduced by the partnership’s non-negative amount. partner's spouse, a partner's dependents, liabilities at the beginning of the year. If the Example. Partnership A prepares a and a partner's children under age 27 who partnership’s balance sheet (Schedule L) is tax-basis Schedule L and is a general aren't dependents). reported on the tax basis and if the aggregate of the partners’ beginning and partner in Partnership B, a general Line 4b. Travel and partnership. Partnership A's adjusted basis ending capital accounts differ from the in Partnership B at the end of the tax year is Entertainment amounts reported on Schedule L, attach a $16 million. Partnership A's share of Include the following on this line. statement reconciling any differences. No Partnership B's liabilities is $20 million, which • Entertainment expenses, including such reconciliation is required if Schedule L is included in the $16 million adjusted basis entertainment-related meals and facilities, is not reported on the tax basis. amount. On its Schedule L, Partnership A not deductible under section 274(a). Line 2. Capital Contributed must report $16 million on line 8 as the • Nonentertainment-related meal expenses amount of its investment asset in Partnership not deductible under section 274(n). During Year B and report on line 20 its $20 million share • The part of business gifts over $25. See Include on line 2a the amount of money of Partnership B's liabilities. These amounts section 274(b). contributed by each partner to the cannot be netted on Schedule L. • Expenses of an individual allocable to partnership, as reflected on the partnership's conventions on cruise ships over $2,000. books and records. Include on line 2b the Line 18. All Nonrecourse Loans See section 274(h)(2). adjusted tax basis of property net of liabilities Nonrecourse loans are those liabilities of the • Employee achievement awards of contributed by each partner to the partnership for which no partner bears the non-tangible property or tangible property partnership, as reflected on the partnership’s economic risk of loss. If the partnership's over $400 ($1,600 if part of a qualified plan). books and records. nonrecourse liabilities include its share of the See section 274(j). liabilities of another partnership, the • The part of the cost of luxury water travel Line 3. Net Income (Loss) per partnership's share of those liabilities must expenses not deductible under section Books be reflected on line 18. 274(m). See section 274(m)(1)(A). Enter on line 3 the net income (loss) shown • Expenses for travel as a form of Line 19a. Loans From Partners on the partnership books used in maintaining . See section 274(m)(2). the partners’ tax basis capital accounts for (or Persons Related to • Nondeductible club dues. See section purposes of Schedule K-1. Partners) 274(a)(3). • Qualified transportation fringes under Line 4. Other Increases Include on this line loans from partners or section 274(a)(4). (Itemize) persons related to partners. Persons are • Transportation and commuting expenses related if they have a relationship specified in under section 274(l). Enter on line 4 the sum of all other increases section 267(b) or 707(b). Amounts included • Other nondeductible travel and to the partners’ tax basis capital accounts here should not be included elsewhere on entertainment expenses. during the year not reflected on lines 2 and 3. lines 15 through 21. See instructions for Item L. Partner's Capital Account Analysis. Line 20. Other Liabilities Schedule M-2. Analysis of A partnership that is a partner in a tiered Line 6. Distributions partnership must include as a liability on Partners' Capital Accounts Line 6a. Cash. Enter the amount of money line 20 the partner's share of the tiered distributed to each partner by the partnership's liabilities to the extent they are Show what caused the changes during the partnership. For purposes of line 6a, “money” recourse liabilities to the partner. tax year in the partners' capital accounts as includes marketable securities, as described reflected on the partnership's books and in section 731(c). Schedule M-1. records used in figuring the partnership’s net Line 6b. Property. Enter the sum of the income or loss for tax purposes, the amount adjusted tax bases of property net of Reconciliation of Income of any contributions and distributions of liabilities distributed to each partner by the (Loss) per Books With money or property made by the partnership partnership as reflected on the partnership's to its partners, and any other increases or books and records. Include withdrawals from Income (Loss) per Return decreases to the partners’ capital accounts inventory for the personal use of a partner. determined in a manner generally consistent Schedule M-3 may be required with calculating the partners’ adjusted tax Line 7. Other Decreases TIP instead of Schedule M-1. See Item J. bases in their partnership interests (without (Itemize) Schedule C and Schedule M-3, regard to partnership liabilities), taking into earlier. See the Instructions for account the rules and principles of sections Enter on line 7 the sum of all other decreases Schedule M-3 for more information. 705, 722, 733, and 742. to the partners’ tax basis capital accounts for tax purposes during the year which are not Line 1. Balance at the reflected on line 6. See instructions for Item Line 2 Beginning of the Year L. Partner's Capital Account Analysis. Report on this line income included on Schedule K, lines 1, 2, 3c, 5, 6a, 7, 8, 9a, 10, The balance at the beginning of the year Line 9. Balance at End of Year and 11 not recorded on the partnership's should equal the total of the amounts The balance at the end of the year should books this year. Describe each such item of reported as the partners’ beginning tax basis equal the total of the amounts reported as income. Attach a statement if necessary. capital accounts in item L of all the partners’ the partners’ ending capital accounts in item Schedules K-1. If not, the partnership should L of all the partners’ Schedules K-1. Line 3. Guaranteed Payments attach an explanation of the difference. Include on this line guaranteed payments Generally, the balance at the beginning of shown on Schedule K, lines 4a and 4b (other the year should equal the adjusted tax basis

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Paperwork Reduction Act Notice. We ask for the information on these forms 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.

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.

Estimates of Taxpayer Burden. The following tables show burden estimates based on current statutory requirements as of October 2020, for taxpayers filing 2020 Forms 1065, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1066, 1120-REIT, 1120-RIC, 1120-POL, and related attachments. Time spent and out-of-pocket costs are presented separately. Time burden is broken out by taxpayer activity, with reporting representing the largest component. Out-ofpocket costs include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and submission fees, postage and photocopying costs, and tax preparation software costs. While these estimates don't include burden associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic errors, implying lower post-filing burden.

Reported time and cost burdens are national averages and don't necessarily reflect a “typical” case. Most taxpayers experience lower than average burden, with taxpayer burden varying considerably by taxpayer type. For instance, the estimated average time burden for all business entities is 279 hours, with an average cost of $5,130 per return. This average includes all associated forms and schedules, across all preparation methods and taxpayer activities.

The average burden for partnerships filing Forms 1065 and related attachments is about 290 hours and $5,900; the average burden for corporations filing Form 1120 and associated forms is about 335 hours and $7,700; and the average burden for Forms 1066, 1120-REIT, 1120-RIC, 1120-S, and all related attachments is 245 hours and $3,500. Within each of these estimates there is significant variation in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the taxpayer, the type of software or professional preparer used, and the geographic location. Third-party burden hours are not included in these estimates.

Table 1—Taxpayer Burden for Partnerships

Forms 1065, 1066 and all attachments Primary Form Filed or Type of Taxpayer Total Number of Returns (millions) Average Time (hours) Average Cost All Partnerships 4.5 290 $5,800 Small 4.2 270 $4,400 Large* 0.3 610 $29,000

Table 2—Taxpayer Burden for Taxable Corporations

Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, 1120-POL, and all attachments Primary Form Filed or Type of Taxpayer Total Number of Returns (millions) Average Time (hours) Average Cost All Taxable Corporations 2.0 340 $7,900 Small 1.9 380 $4,000 Large* 0.1 1,250 $69,100

Table 3—Taxpayer Burden for Pass-Through Corporations

Forms 1120-REIT, 1120-RIC, 1120-S, and all attachments Primary Form Filed or Type of Taxpayer Total Number of Returns (millions) Average Time (hours) Average Cost All Pass-Through Corporations 5.4 245 $3,500 Small 5.3 240 $3,100 Large* 0.1 610 $30,800 * A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and pass-through corporations. A small business is any business that doesn't meet the definition of a large business.

Comments and Suggestions. We welcome your comments about this publication and your suggestions for future editions. You can send us comments through IRS.gov/FormComments. Or you can write to:

Internal Revenue Service Tax Forms and Publications 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224

Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. We can’t answer tax questions sent to the above address. Do not send the tax form to this address. Instead, see Where To File, earlier, near the beginning of the instructions.

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Using the list of activities and codes below, determine manufacturer and must use one of the manufacturing codes Codes for Principal Business from which activity the business derives the largest (311110–339900). Activity and Principal Product or percentage of its “total receipts.” Total receipts is defined as the sum of gross receipts or sales (page 1, line 1a); all Once the Principal Business Activity is determined, Service other income (page 1, lines 4 through 7); income reported enter the six-digit code from the list below on page 1, item C. Also enter the business activity in item A and a brief This list of Principal Business Activities and their associated on Schedule K, lines 3a, 5, 6a, and 7; income or net gain reported on Schedule K, lines 8, 9a, 10, and 11; and description of the principal product or service of the codes is designed to classify an enterprise by the type of business in item B. activity in which it is engaged to facilitate the administration income or net gain reported on Form 8825, lines 2, 19, and of the Internal Revenue Code. These Principal Business 20a. If the business purchases raw materials and supplies Activity Codes are based on the North American them to a subcontractor to produce the finished product, Classification System. but retains title to the product, the business is considered a

238900 Other Specialty Trade Contractors 327900 Other Nonmetallic Mineral Product 423500 Metal & Mineral (except Agriculture, , Fishing (including site preparation) Mfg Petroleum) and Hunting Manufacturing Primary Metal Manufacturing 423600 Household Appliances & Electrical Crop Production 331110 Iron & Steel Mills & Ferroalloy Mfg & Electronic Goods Food Manufacturing 111100 Oilseed & Grain Farming 331200 Steel Product Mfg from Purchased 423700 Hardware, & Plumbing & Heating 311110 Animal Food Mfg Equipment & Supplies 111210 Vegetable & Melon Farming Steel (including potatoes & yams) 311200 Grain & Oilseed Milling 331310 Alumina & Aluminum Production & 423800 Machinery, Equipment, & Supplies 111300 Fruit & Tree Nut Farming 311300 Sugar & Confectionery Product Processing 423910 Sporting & Recreational Goods & Mfg Supplies 111400 Greenhouse, Nursery, & 331400 Nonferrous Metal (except Floriculture Production 311400 Fruit & Vegetable Preserving & Aluminum) Production & 423920 Toy & Hobby Goods & Supplies Specialty Food Mfg Processing 111900 Other Crop Farming (including 423930 Recyclable Materials tobacco, cotton, sugarcane, hay, 311500 Dairy Product Mfg 331500 Foundries 423940 Jewelry, Watch, Precious Stone, & peanut, sugar beet & all other crop 311610 Animal Slaughtering & Processing Fabricated Metal Product Manufacturing Precious Metals farming) 311710 Seafood Product Preparation & 332110 Forging & Stamping 423990 Other Miscellaneous Durable Animal Production Packaging 332210 Cutlery & Handtool Mfg Goods 112111 Beef Cattle Ranching & Farming 311800 Bakeries, Tortilla & Dry Pasta Mfg 332300 Architectural & Structural Metals Merchant Wholesalers, Nondurable 112112 Cattle Feedlots 311900 Other Food Mfg (including coffee, Mfg Goods 112120 Dairy Cattle & Milk Production tea, flavorings & seasonings) 332400 Boiler, Tank, & Shipping Container 424100 Paper & Paper Products 112210 Hog & Pig Farming Beverage and Tobacco Product Mfg 424210 Drugs & Druggists' Sundries Manufacturing 112300 Poultry & Egg Production 332510 Hardware Mfg 424300 Apparel, Piece Goods, & Notions 312110 Soft Drink & Ice Mfg 112400 Sheep & Goat Farming 332610 Spring & Wire Product Mfg 424400 Grocery & Related Products 312120 Breweries 112510 Aquaculture (including shellfish & 332700 Machine Shops; Turned Product; & 424500 Farm Product Raw Materials finfish farms & hatcheries) 312130 Wineries Screw, Nut, & Bolt Mfg 424600 Chemical & Allied Products 112900 Other Animal Production 312140 Distilleries 332810 Coating, Engraving, Heat Treating, 424700 Petroleum & Petroleum Products & Allied Activities Forestry and Logging 312200 Tobacco Manufacturing 424800 Beer, Wine, & Distilled Alcoholic Textile Mills and Textile Product Mills 332900 Other Fabricated Metal Product Beverages 113110 Timber Tract Operations Mfg 313000 Textile Mills 424910 Farm Supplies 113210 Forest Nurseries & Gathering of Machinery Manufacturing Forest Products 314000 Textile Product Mills 424920 Book, Periodical, & Newspapers 333100 Agriculture, Construction, & Mining 113310 Logging Apparel Manufacturing Machinery Mfg 424930 Flower, Nursery Stock, & Florists' Supplies Fishing, Hunting and Trapping 315100 Apparel Knitting Mills 333200 Industrial Machinery Mfg 424940 Tobacco & Tobacco Products 114110 Fishing 315210 Cut & Sew Apparel Contractors 333310 Commercial & Service Industry 114210 Hunting & Trapping 315220 Men's & Boys' Cut & Sew Apparel Machinery Mfg 424950 Paint, Varnish, & Supplies Support Activities for Agriculture and Mfg 333410 Ventilation, Heating, 424990 Other Miscellaneous Nondurable Forestry 315240 Women's, Girls' & Infants' Cut & Air-Conditioning, & Commercial Goods 115110 Support Activities for Crop Sew Apparel Mfg Refrigeration Equipment Mfg Wholesale Electronic Markets and Agents Production (including cotton 315280 Other Cut & Sew Apparel Mfg 333510 Metalworking Machinery Mfg and Brokers ginning, soil preparation, planting, 315990 Apparel Accessories & Other 333610 Engine, Turbine & Power 425110 Business to Business Electronic & cultivating) Apparel Mfg Transmission Equipment Mfg Markets 115210 Support Activities for Animal Leather and Allied Product Manufacturing 333900 Other General Purpose Machinery 425120 Wholesale Trade Agents & Brokers Production 316110 Leather & Hide Tanning & Mfg Trade 115310 Support Activities For Forestry Finishing Computer and Electronic Product Motor Vehicle and Parts Dealers Mining 316210 Footwear Mfg (including rubber & Manufacturing plastics) 334110 Computer & Peripheral Equipment 441110 New Car Dealers 211120 Crude Petroleum Extraction 316990 Other Leather & Allied Product Mfg Mfg 441120 Used Car Dealers 211130 Natural Gas Extraction Wood Product Manufacturing 334200 Communications Equipment Mfg 441210 Recreational Vehicle Dealers 212110 Coal Mining 321110 Sawmills & Wood Preservation 334310 Audio & Video Equipment Mfg 441222 Boat Dealers 212200 Metal Ore Mining 321210 Veneer, Plywood, & Engineered 334410 Semiconductor & Other Electronic 441228 Motorcycle, ATV, & All Other Motor 212310 Stone Mining & Quarrying Wood Product Mfg Component Mfg Vehicle Dealers 212320 Sand, Gravel, Clay, & Ceramic & 321900 Other Wood Product Mfg 334500 Navigational, Measuring, 441300 Automotive Parts, Accessories, & Refractory Minerals Mining & Electromedical, & Control Tire Stores Paper Manufacturing Quarrying Instruments Mfg Furniture and Home Furnishings Stores 322100 Pulp, Paper, & Paperboard Mills 212390 Other Nonmetallic Mineral Mining 334610 Manufacturing & Reproducing 442110 Furniture Stores & Quarrying 322200 Converted Paper Product Mfg Magnetic & Optical Media 442210 Floor Covering Stores 213110 Support Activities for Mining Printing and Related Support Activities Electrical Equipment, Appliance, and 442291 Window Treatment Stores Utilities 323100 Printing & Related Support Component Manufacturing Activities 335100 Electric Lighting Equipment Mfg 442299 All Other Home Furnishings Stores 221100 Electric Power Generation, Petroleum and Coal Products 335200 Major Household Appliance Mfg Electronics and Appliance Stores Transmission & Distribution Manufacturing 335310 Electrical Equipment Mfg 443141 Household Appliance Stores 221210 Natural Gas Distribution 324110 Petroleum Refineries (including 335900 Other Electrical Equipment & 443142 Electronics Stores (including 221300 Water, Sewage & Other Systems integrated) Component Mfg Audio, Video, Computer, & Camera Stores) 221500 Combination Gas & Electric 324120 Asphalt Paving, Roofing, & Transportation Equipment Manufacturing Saturated Materials Mfg Building Material and Garden Equipment Construction 336100 Motor Vehicle Mfg 324190 Other Petroleum & Coal Products and Supplies Dealers Construction of Buildings Mfg 336210 Motor Vehicle Body & Trailer Mfg 444110 Home Centers 236110 Residential Building Construction Chemical Manufacturing 336300 Motor Vehicle Parts Mfg 444120 Paint & Wallpaper Stores 236200 Nonresidential Building 325100 Basic Chemical Mfg 336410 Aerospace Product & Parts Mfg 444130 Hardware Stores Construction 325200 Resin, Synthetic Rubber, & 336510 Railroad Rolling Stock Mfg 444190 Other Building Material Dealers Heavy and Civil Engineering Construction Artificial & Synthetic Fibers & 336610 Ship & Boat Building 444200 Lawn & Garden Equipment & 237100 Utility System Construction Filaments Mfg 336990 Other Transportation Equipment Supplies Stores 237210 Land Subdivision 325300 Pesticide, Fertilizer, & Other Mfg Food and Beverage Stores Agricultural Chemical Mfg 237310 Highway, Street, & Bridge Furniture and Related Product 445110 Supermarkets & Other Grocery Construction 325410 Pharmaceutical & Medicine Mfg Manufacturing (except Convenience) Stores 237990 Other Heavy & Civil Engineering 325500 Paint, Coating, & Adhesive Mfg 337000 Furniture & Related Product 445120 Convenience Stores Manufacturing Construction 325600 Soap, Cleaning Compound, & 445210 Meat Markets Toilet Preparation Mfg Miscellaneous Manufacturing Specialty Trade Contractors 445220 Fish & Seafood Markets 325900 Other Chemical Product & 339110 Medical Equipment & Supplies Mfg 238100 Foundation, Structure, & Building 445230 Fruit & Vegetable Markets Exterior Contractors (including Preparation Mfg 339900 Other Miscellaneous framing carpentry, masonry, glass, Plastics and Rubber Products Manufacturing 445291 Baked Goods Stores roofing, & siding) Manufacturing 445292 Confectionery & Nut Stores 238210 Electrical Contractors 326100 Plastics Product Mfg Wholesale Trade 445299 All Other Specialty Food Stores 238220 Plumbing, Heating, & 326200 Rubber Product Mfg Merchant Wholesalers, Durable Goods 445310 Beer, Wine, & Liquor Stores Air-Conditioning Contractors Nonmetallic Mineral Product 423100 Motor Vehicle & Motor Vehicle Health and Personal Care Stores Parts & Supplies 238290 Other Building Equipment Manufacturing 446110 Pharmacies & Drug Stores Contractors 423200 Furniture & Home Furnishings 327100 Clay Product & Refractory Mfg 446120 Cosmetics, Beauty Supplies, & 238300 Building Finishing Contractors 327210 Glass & Glass Product Mfg 423300 Lumber & Other Construction Perfume Stores (including drywall, insulation, Materials 327300 Cement & Concrete Product Mfg 446130 Optical Goods Stores painting, wallcovering, flooring, tile, 423400 Professional & Commercial & finish carpentry) 327400 Lime & Gypsum Product Mfg Equipment & Supplies 446190 Other Health & Personal Care Stores

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Codes for Principal Business Activity and Principal Product or Service (Continued)

Gasoline Stations Couriers and Messengers located under Management of Companies (Holding Companies), below. Administrative and Support and 447100 Gasoline Stations (including 492110 Couriers Waste Management and convenience stores with gas) 492210 Local Messengers & Local Delivery Real Estate and Rental and Clothing and Clothing Accessories Stores Remediation Services Warehousing and Storage Leasing 448110 Men's Clothing Stores 493100 Warehousing & Storage (except Administrative and Support Services Real Estate 448120 Women's Clothing Stores lessors of miniwarehouses & 561110 Office Administrative Services 448130 Children's & Infants' Clothing self-storage units) 531110 Lessors of Residential Buildings & Dwellings (including equity REITs) 561210 Facilities Support Services Stores Information 561300 Employment Services 448140 Family Clothing Stores 531120 Lessors of Nonresidential Publishing Industries (except Internet) Buildings (except Miniwarehouses) 561410 Document Preparation Services 448150 Clothing Accessories Stores 511110 Newspaper Publishers (including equity REITs) 561420 Telephone Call Centers 448190 Other Clothing Stores 511120 Periodical Publishers 531130 Lessors of Miniwarehouses & 561430 Business Service Centers 448210 Shoe Stores Self-Storage Units (including equity 511130 Book Publishers (including private mail centers & 448310 Jewelry Stores REITs) copy shops) 511140 Directory & Mailing List Publishers 448320 Luggage & Leather Goods Stores 531190 Lessors of Other Real Estate 561440 Collection Agencies 511190 Other Publishers Property (including equity REITs) Sporting Goods, Hobby, Book, and Music 561450 Credit Bureaus Stores 511210 Software Publishers 531210 Offices of Real Estate Agents & Brokers 561490 Other Business Support Services 451110 Sporting Goods Stores Motion Picture and Sound Recording (including repossession services, Industries 531310 Real Estate Property Managers 451120 Hobby, Toy, & Game Stores court reporting, & stenotype 512100 Motion Picture & Video Industries 531320 Offices of Real Estate Appraisers services) 451130 Sewing, Needlework, & Piece (except video rental) Goods Stores 531390 Other Activities Related to Real 561500 Travel Arrangement & Reservation 512200 Sound Recording Industries Estate Services 451140 Musical Instrument & Supplies Stores Broadcasting (except Internet) Rental and Leasing Services 561600 Investigation & Security Services 451211 Book Stores 515100 Radio & Television Broadcasting 532100 Automotive Equipment Rental & 561710 Exterminating & Pest Control Leasing Services 451212 News Dealers & Newsstands 515210 Cable & Other Subscription Programming 532210 Consumer Electronics & 561720 Janitorial Services General Merchandise Stores Telecommunications Appliances Rental 561730 Landscaping Services 452200 Department Stores 517000 Telecommunications (including 532281 Formal Wear & Costume Rental 561740 Carpet & Upholstery Cleaning 452300 General Merchandise Stores, incl. paging, cellular, satellite, cable & 532282 Video Tape & Disc Rental Services Warehouse Clubs and other program distribution, 532283 Home Health Equipment Rental 561790 Other Services to Buildings & Supercenters resellers, other Dwellings Miscellaneous Store Retailers telecommunications, & Internet 532284 Recreational Goods Rental 532289 All Other Consumer Goods Rental 561900 Other Support Services (including 453110 Florists service providers) packaging & labeling services, & 453210 Office Supplies & Stationery Stores Data Processing Services 532310 General Rental Centers convention & trade show 453220 Gift, Novelty, & Souvenir Stores 518210 Data Processing, Hosting, & 532400 Commercial & Industrial Machinery organizers) Related Services & Equipment Rental & Leasing 453310 Used Merchandise Stores Waste Management and Remediation Other Information Services Lessors of Nonfinancial Intangible Assets Services 453910 Pet & Pet Supplies Stores 519100 Other Information Services (except copyrighted works) 562000 Waste Management & 453920 Art Dealers (including news syndicates, 533110 Lessors of Nonfinancial Intangible Remediation Services 453930 Manufactured (Mobile) Home libraries, Internet publishing, & Assets (except copyrighted works) Educational Services Dealers broadcasting) Professional, Scientific, and 453990 All Other Miscellaneous Store 611000 Educational Services (including Retailers (including tobacco, and Insurance Technical Services schools, colleges, & universities) candle, & trophy shops) Depository Credit Intermediation Legal Services Health Care and Social Nonstore Retailers 522110 Commercial Banking 541110 Offices of Lawyers 454110 Electronic Shopping & Mail-Order 522120 Savings Institutions Assistance 541190 Other Legal Services Houses 522130 Credit Unions Offices of Physicians and Dentists 454210 Vending Machine Operators Accounting, Tax Preparation, 522190 Other Depository Credit Bookkeeping, and Payroll Services 621111 Offices of Physicians (except 454310 Fuel Dealers (including Heating Oil Intermediation mental health specialists) & Liquefied Petroleum) 541211 Offices of Certified Public Nondepository Credit Intermediation Accountants 621112 Offices of Physicians, Mental 454390 Other Direct Selling Health Specialists 522210 Credit Card Issuing 541213 Tax Preparation Services Establishments (including 621210 Offices of Dentists 522220 Sales Financing 541214 Payroll Services door-to-door retailing, frozen food Offices of Other Health Practitioners plan providers, party plan 522291 Consumer Lending 541219 Other Accounting Services 621310 Offices of Chiropractors merchandisers, & coffee-break 522292 Real Estate Credit (including service providers) Architectural, Engineering, and Related mortgage bankers & originators) Services 621320 Offices of Optometrists Transportation and 522293 Financing 541310 Architectural Services 621330 Offices of Mental Health Practitioners (except Physicians) 522294 Secondary Market Financing 541320 Landscape Architecture Services Warehousing 621340 Offices of Physical, Occupational & 522298 All Other Nondepository Credit 541330 Engineering Services Speech Therapists, & Audiologists Air, Rail, and Water Transportation Intermediation 541340 Drafting Services 621391 Offices of Podiatrists 481000 Air Transportation Activities Related to Credit Intermediation 482110 Rail Transportation 541350 Building Inspection Services 621399 Offices of All Other Miscellaneous 522300 Activities Related to Credit Health Practitioners 483000 Water Transportation Intermediation (including loan 541360 Geophysical Surveying & Mapping Services Truck Transportation brokers, check clearing, & money Outpatient Care Centers transmitting) 541370 Surveying & Mapping (except 621410 Family Planning Centers 484110 General Freight Trucking, Local Geophysical) Services Securities, Contracts, and 621420 Outpatient Mental Health & 484120 General Freight Trucking, Other Financial Investments and Related 541380 Testing Laboratories Long-distance Substance Abuse Centers Activities Specialized Design Services 484200 Specialized Freight Trucking 621491 HMO Medical Centers 523110 Investment Banking & Securities 541400 Specialized Design Services 621492 Kidney Dialysis Centers Transit and Ground Passenger Dealing (including interior, industrial, Transportation graphic, & design) 621493 Freestanding Ambulatory Surgical 523120 Securities Brokerage & Emergency Centers 485110 Urban Transit Systems Computer Systems Design and Related 523130 Commodity Contracts Dealing 621498 All Other Outpatient Care Centers 485210 Interurban & Rural Bus 523140 Commodity Contracts Brokerage Services Transportation 541511 Custom Computer Programming Medical and Diagnostic Laboratories 523210 Securities & Commodity 621510 Medical & Diagnostic Laboratories 485310 Taxi and Ridesharing Services Exchanges Services Home Health Care Services 485320 Limousine Service 523900 Other Financial Investment 541512 Computer Systems Design 485410 School & Employee Bus Activities (including portfolio Services 621610 Home Health Care Services Transportation management & investment advice) 541513 Computer Facilities Management Other Ambulatory Health Care Services Services 485510 Charter Bus Industry Insurance Carriers and Related Activities 621900 Other Ambulatory Health Care 485990 Other Transit & Ground Passenger 524140 Direct Life, Health, & Medical 541519 Other Computer Related Services Services (including ambulance Transportation Insurance & Reinsurance Carriers Other Professional, Scientific, and services & blood & organ banks) Pipeline Transportation 524150 Direct Insurance & Reinsurance Technical Services Hospitals 486000 Pipeline Transportation (except Life, Health & Medical) 541600 Management, Scientific, & 622000 Hospitals Carriers Technical Consulting Services Scenic & Sightseeing Transportation Nursing and Residential Care Facilities 524210 Insurance Agencies & Brokerages 541700 Scientific Research & 487000 Scenic & Sightseeing Development Services 623000 Nursing & Residential Care Transportation 524290 Other Insurance Related Activities Facilities (including third-party administration 541800 Advertising & Related Services Support Activities for Transportation Social Assistance of insurance & pension funds) 541910 Marketing Research & Public 624100 Individual & Family Services 488100 Support Activities for Air Funds, Trusts, and Other Financial Opinion Polling Transportation Vehicles 541920 Photographic Services 624200 Community Food & Housing, & Emergency & Other Relief 488210 Support Activities for Rail 525100 Insurance & Employee Benefit Transportation 541930 Translation & Interpretation Services Funds Services 488300 Support Activities for Water 624310 Vocational Rehabilitation Services 525910 Open-End Investment Funds 541940 Veterinary Services Transportation (Form 1120-RIC) 624410 Child Day Care Services 488410 Motor Vehicle Towing 541990 All Other Professional, Scientific, & 525920 Trusts, Estates, & Agency Technical Services Arts, Entertainment, and 488490 Other Support Activities for Road Accounts Transportation 525990 Other Financial Vehicles (including Management of Companies Recreation 488510 Freight Transportation mortgage REITs & closed-end (Holding Companies) Performing Arts, Spectator Sports, and Arrangement investment funds) Related Industries 551111 Offices of Bank Holding 488990 Other Support Activities for “Offices of Bank Holding Companies” and 711100 Performing Arts Companies Transportation “Offices of Other Holding Companies” are Companies 551112 Offices of Other Holding 711210 Spectator Sports (including sports Companies clubs & racetracks)

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Codes for Principal Business Activity and Principal Product or Service (Continued)

711300 Promoters of Performing Arts, 721120 Casino Hotels 811120 Automotive Body, Paint, Interior, & 812220 Cemeteries & Crematories Sports, & Similar Events 721191 Bed & Breakfast Inns Glass Repair 812310 Coin-Operated Laundries & 711410 Agents & Managers for Artists, 721199 All Other Traveler Accommodation 811190 Other Automotive Repair & Drycleaners Athletes, Entertainers, & Other Maintenance (including oil change 812320 Drycleaning & Laundry Services Public Figures 721210 RV (Recreational Vehicle) Parks & & lubrication shops & car washes) Recreational Camps (except Coin-Operated) 711510 Independent Artists, Writers, & 811210 Electronic & Precision Equipment 812330 Linen & Uniform Supply Performers 721310 Rooming & Boarding Houses, Repair & Maintenance Dormitories, & Workers’ Camps 812910 Pet Care (except Veterinary) Museums, Historical Sites, and Similar 811310 Commercial & Industrial Machinery Services Institutions Food Services and Drinking Places & Equipment (except Automotive & 812920 Photofinishing 712100 Museums, Historical Sites, & 722300 Special Food Services (including Electronic) Repair & Maintenance Similar Institutions food service contractors & 811410 Home & Garden Equipment & 812930 Parking Lots & Garages caterers) Amusement, Gambling, and Recreation Appliance Repair & Maintenance 812990 All Other Personal Services Industries 722410 Drinking Places (Alcoholic 811420 Reupholstery & Furniture Repair Religious, Grantmaking, Civic, Beverages) 713100 Amusement Parks & Arcades 811430 Footwear & Leather Goods Repair Professional, and Similar Organizations 722511 Full-Service Restaurants 713200 Gambling Industries 811490 Other Personal & Household 813000 Religious, Grantmaking, Civic, 722513 Limited Service Restaurants Professional, & Similar 713900 Other Amusement & Recreation Goods Repair & Maintenance 722514 Cafeterias & Buffets Organizations (including Industries (including golf courses, Personal and Laundry Services condominium & homeowners skiing facilities, marinas, fitness 722515 Snack & Non-alcoholic Beverage 812111 Barber Shops associations) centers, & bowling centers) Bars 812112 Beauty Salons Accommodation and Food Other Services 812113 Nail Salons Services Repair and Maintenance 812190 Other Personal Care Services (including diet & weight reducing Accommodation 811110 Automotive Mechanical & Electrical Repair & Maintenance centers) 721110 Hotels (except Casino Hotels) & 812210 Funeral Homes & Funeral Services Motels

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Index

Rehabilitation 41, 46 Low-income housing credit 47 A Rental activities 41 I Mining exploration costs 35 Accounting methods 6 Inclusion amount 21 Section 179 deduction 47 Change in accounting Income: Reconciliation of income (loss) per method 6 D Gross receipts or sales 18 books with income (loss) per Mark-to-market accounting Deductions: Tax-exempt income 18 return 56 method 6 Bad debts 21 Trade or business 18 Recordkeeping 7 Nonaccrual experience Depletion 22 Installment sales 18 Reforestation costs 39 method 18 Depreciation 22 Interest income 33 Rental activities 13 Nonaccrual-experience Employee benefit programs 23 Interest on production Rounding off to whole dollars 7 method 6 Entertainment facilities 24 expenditures 22 Royalties 34 Percentage of completion Guaranteed payments 21 Investment: method 6 How to report 19 Income and expenses 46 Accounting periods 7 Interest 22 Interest expense 38 S Adjusting deductions for certain Limitations 19 Sale of partnership interests 12 credits 20 Meals and entertainment 23 Sale of small business stock: Administrative adjustment Membership dues 24 L Exclusion 36 request 7 Reforestation expenditures 24 Limited liability company 3 Rollover 36 Allocation of partnership items: Rent 21 Limited liability partnership 3 Schedule: Contributed property 29 Repairs and maintenance 21 Limited partner 3 B 24 Liabilities 30 Retirement plans 22 Limited partnership 3 K 28, 33 Nonrecourse liabilities 30 Salaries and wages 20, 33 K-1 28, 33 Partnership agreement 29 Taxes and licenses 21 L 55 Special allocations 33 Transactions between related M-1 56 Alternative minimum tax 44 taxpayers 20 N M-2 56 Adjusted gain (loss) 45 Travel 23 Net section 1231 gain (loss) 35 M-3 56 Depletion (other than oil and Wages 20 Nondeductible expenses 45 Section 179 expense gas) 45 Definitions 2 Nonrecourse liabilities 30 deduction 37 Depreciation adjustment on Depreciation 22 Nonrecourse loans 3, 30 Recapture 47 property placed in service Dispositions of contributed (See also Nonrecourse liabilities) Section 481(a) adjustment 6 after 1986 44 property 11 Notice of inconsistent treatment 7 Section 59(e) expenditures 11, Oil, gas, and geothermal Distributions: 19, 20, 38 properties 45 Cash and marketable Self-charged interest 14 Amended return 7 securities 46 O Self-employment 40 Analysis of net income (loss) 55 Other property 46 Ordinary business income Signatures: Analysis of partner's capital Recognition of precontribution (loss) 33 General partner or LLC account 31 gain 12 member manager 5 Analysis of partners' capital Dividends 34 Paid preparer 5 accounts 56 Special allocations 33 Assembling the return 10 P Substitute forms 28 Paid preparer authorization 5 Syndication costs 20 At-risk activities 31 E Partner contributing property with a Attached statements 29 Elections: built-in gain or loss 32 By each partner 11 Passive activity limitations: By the partnership 10 Grouping activities 14 T B Electronic filing 4 Passive activities defined 12 Tax-exempt income 45 Balance sheets per books 55 Entity classification election 10 Recharacterization of passive Tax shelter: Bipartisan Budget Act of 2015 Extensions 4 income 15 Registration 25 (BBA) 2 Extraterritorial income Rental activities 13 Termination of partnership 4 Business start-up expenses 20 exclusion 17, 44 Reporting requirements 15 Travel and entertainment 23, 56 Trade or business activities 13 Penalties 5 C F Failure to furnish information U Capital gain: Foreign accounts 25 timely 5 Uniform capitalization rules 19 Net long-term 34 Foreign partners, withholding 26 Late filing 5 Unrealized receivables and Net short-term 34 Foreign partnership 3 Trust fund recovery 6 inventory: Change of address 17 Foreign taxes 43 Period covered 4 Sale of partnership Charitable contribution 37 Foreign trusts, transactions 25 Portfolio income 14, 33 interests 12 Codes: Forms: Private delivery services 4 Unrecaptured section 1250 Partner 30 How to get 2 Publicly traded partnerships 4, gain 34 Principal business activity 58 That may be required 8 12, 19 Unrelated business taxable Schedule K-1 reporting 29 Future Developments 1 income 48 Collectibles (28%) gain (loss) 34 Commercial revitalization Q deduction 23 G Qualified Business Income W Consolidated audit procedures 7 General partner 3 Deduction 49 When to file 4 Contributions to the General partnership 3 Where to file 5 partnership 11 Guaranteed payments 33, 56 Who must file 3 Cost of goods sold 18 R Credits 40 Recapture: Low-income housing 40 Investment credit 47

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