Shareholder's Share of Income, Deductions, Credits, etc. (Sch K-1); (Sch K-1 Worksheet)

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Instructions for Schedule K-1 (Form 1120S)

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13:56 - 30-OCT-2009

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2009

Department of the Treasury
Internal Revenue Service

Shareholder’s Instructions
for Schedule K-1
(Form 1120S)
Shareholder’s Share of Income, Deductions, Credits, etc.
(For Shareholder’s Use Only)
Section references are to the Internal
Revenue Code unless otherwise noted.

General Instructions
Purpose of Schedule K-1
The corporation uses Schedule K-1 to
report your share of the corporation’s
income (reduced by any tax the
corporation paid on the income),
deductions, credits, etc. Keep it for
your records. Do not file it with your
tax return. The corporation has filed a
copy with the IRS.
You are liable for tax on your share
of the corporation’s income, whether
or not distributed. Include your share
on your tax return if a return is
required. Use these instructions to
help you report the items shown on
Schedule K-1 on your tax return.
Your share of S corporation
income is not self-employment
income and it is not subject to
self-employment tax.
The amount of loss and deduction
you may claim on your tax return may
be less than the amount reported on
Schedule K-1. It is the shareholder’s
responsibility to consider and apply
any applicable limitations. See
Limitations on Losses, Deductions,
and Credits beginning on this page
for more information.
Schedule K-1 does not show
actual dividend distributions the
corporation made to you. The
corporation must report such
amounts totaling $10 or more for the
calendar year on Form 1099-DIV,
Dividends and Distributions.

Inconsistent Treatment
of Items
Generally, you must report corporate
items shown on your Schedule K-1
(and any attached schedules) the
same way that the corporation treated
the items on its return.

If the treatment on your original or
amended return is inconsistent with
the corporation’s treatment, or if the
corporation has not filed a return, file
Form 8082, Notice of Inconsistent
Treatment or Administrative
Adjustment Request (AAR), with your
original or amended return to identify
and explain any inconsistency (or to
note that a corporate return has not
been filed).
If you are required to file Form
8082 but do not do so, you may be
subject to the accuracy-related
penalty. This penalty is in addition to
any tax that results from making your
amount or treatment of the item
consistent with that shown on the
corporation’s return. Any deficiency
that results from making the amounts
consistent may be assessed
immediately.

Errors
If you believe the corporation has
made an error on your Schedule K-1,
notify the corporation and ask for a
corrected Schedule K-1. Do not
change any items on your copy of
Schedule K-1. Be sure that the
corporation sends a copy of the
corrected Schedule K-1 to the IRS. If
you are unable to reach agreement
with the corporation regarding the
inconsistency, file Form 8082.

International Boycotts
Every corporation that had operations
in, or related to, a boycotting country,
company, or a national of a country
must file Form 5713, International
Boycott Report.
If the corporation cooperated with
an international boycott, it must give
you a copy of its Form 5713. You
must file your own Form 5713 to
report the corporation’s activities and
any other boycott operations that you
may have. You may lose certain tax
benefits if the corporation participated
Cat. No. 11521O

in, or cooperated with, an
international boycott. See Form 5713
and its instructions for details.

Elections
Generally, the corporation decides
how to figure taxable income from its
operations. However, certain
elections are made by you separately
on your income tax return and not by
the corporation. These elections are
made under the following code
sections.
• Section 59(e) (deduction of certain
qualified expenditures ratably over
the period of time specified in that
section). For details, see the
instructions for code J in box 12.
• Section 263A(d) (preproductive
expenses). See the instructions for
code M in box 12.
• Section 617 (deduction and
recapture of certain mining
exploration expenditures).
• Section 901 (foreign tax credit).

Additional Information
For more information on the
treatment of S corporation income,
deductions, credits, etc., see Pub.
535, Business Expenses; Pub. 550,
Investment Income and Expenses;
and Pub. 925, Passive Activity and
At-Risk Rules.
To get forms and publications, see
the instructions for your tax return or
visit the IRS website at www.irs.gov.

Limitations on Losses,
Deductions, and Credits
There are three potential limitations
on corporate losses that you can
deduct on your return. These
limitations and the order in which you
must apply them are as follows: the
basis rules, the at-risk limitations, and
the passive activity limitations. These
limitations are discussed below.

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Other limitations may apply to
specific deductions (for example, the
section 179 expense deduction).
Generally, specific limitations apply
before the basis, at-risk, and passive
loss limitations.

Basis Rules
Generally, the deduction for your
share of aggregate losses and
deductions reported on Schedule K-1
is limited to the basis of your stock
(determined with regard to
distributions received during the tax
year) and loans from you to the
corporation. For details and
exceptions, see section 1366(d). The
basis of your stock is generally
figured at the end of the corporation’s
tax year. Any losses and deductions
not allowed this year because of the
basis limit can be carried forward
indefinitely and deducted in a later
year subject to the basis limit for that
year.
You are responsible for keeping
the information needed to figure the
basis of your stock in the corporation.
Schedule K-1 provides information to
help you figure your stock basis at the
end of each corporate tax year. The
basis of your stock (generally, its
cost) is adjusted as follows and,
except as noted, in the order listed. In
addition, basis may be adjusted
under other provisions of the Internal
Revenue Code. You can generally
use the Worksheet for Figuring a
Shareholder’s Stock Basis to figure
your aggregate stock basis.
1. Basis is increased by (a) all
income (including tax-exempt
income) reported on Schedule K-1
and (b) the excess of the deduction
for depletion (other than oil and gas
depletion) over the basis of the
property subject to depletion.
You must report the taxable
income on your return (if you
are required to file one) for it
to increase your basis.

!

CAUTION

Basis is not increased by
income from discharge of your
CAUTION indebtedness in the S
corporation (nor by any amount
included in income with respect to
clean renewable energy, Gulf tax
credit, Midwestern tax credit, or (for
bonds issued before October 4, 2008)
qualified zone academy bonds).
2. Basis is decreased by (a)
property distributions (including cash)
made by the corporation reported on
Schedule K-1, box 16, code D, minus
(b) the amount of such distributions in
excess of the basis in your stock.

!

3. Basis is decreased by (a)
nondeductible expenses and (b) the
depletion deduction for any oil and
gas property held by the corporation,
but only to the extent your share of
the property’s adjusted basis exceeds
that deduction.
4. Basis is decreased by all
deductible losses and deductions
reported on Schedule K-1 adjusted, if
the corporation made a charitable
contribution of property, by
subtracting the property’s fair market
value and adding the property’s
adjusted basis.
You may elect to decrease your
basis under (4) prior to decreasing

Worksheet for Figuring a Shareholder’s
Stock Basis

your basis under (3). If you make this
election, any amount described under
(3) that exceeds the basis of your
stock and debt owed to you by the
corporation is treated as an amount
described under (3) for the following
tax year.
To make the election, attach a
statement to your timely filed original
or amended return that states you
agree to the carryover rule of
Regulations section 1.1367-1(g) and
the name of the S corporation to
which the rule applies. Once made,
the election applies to the year for
which it is made and all future tax
years for that S corporation, unless

Keep for Your Records

1. Your stock basis at the beginning of the year . . . . . . . . . . .

1.

Increases:
2. Money and your adjusted basis in property contributed to
the corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3. Your share of the corporation’s income (including
tax-exempt income) reduced by any amount included in
income with respect to clean renewable energy, Gulf tax
credit, Midwestern tax credit, or (for bonds issued before
October 4, 2008) qualified zone academy bonds . . . . . . . .

3.

4. Other increases to basis, including your share of the excess
of the deductions for depletion (other than oil and gas
depletion) over the basis of the property subject to depletion

4.

Decreases:
5. Distributions of money and the fair market value of property
(excluding dividend distributions reportable on Form
1099-DIV and distributions in excess of basis (the sum of
lines 1 through 4)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. (

)

6. Enter: (a) your share of the corporation’s nondeductible
expenses and the depletion deduction for any oil and gas
property held by the corporation (but only to the extent your
share of the property’s adjusted basis exceeds the
depletion deduction) or (b) if the election under Regulations
section 1.1367-1(g) applies, your share of the corporation’s
deductions and losses (include your entire share of the
section 179 expense deduction even if your allowable
section 179 expense deduction is smaller) adjusted, if the
corporation made a charitable contribution of property, by
subtracting your share of the fair market value of the
contributed property and adding your share of the
property’s adjusted basis . . . . . . . . . . . . . . . . . . . . . . . . .

6. (

)

7. If the election under Regulations section 1.1367-1(g)
applies, enter the amount from 6(a) above. Otherwise enter
the amount from 6(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. (

)

8. Enter the smaller of (a) the excess, as of the beginning of
the tax year, of the amount you are owed for loans you
made to the corporation over your basis in those loans or
(b) the sum of lines 1 through 7. This amount increases
your loan basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. (

)

9. Your stock basis in the corporation at the end of the year.
Combine lines 1 through 8 . . . . . . . . . . . . . . . . . . . . . . . .

9.

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the IRS agrees to revoke your
election.
The basis of each share of stock is
increased or decreased (but not
below zero) based on its pro rata
share of the above adjustments. If the
total decreases in basis attributable to
a share exceed that share’s basis,
the excess reduces (but not below
zero) the remaining bases of all other
shares of stock in proportion to the
remaining basis of each of those
shares.
Basis of loans. The basis of your
loans to the corporation is generally
the balance the corporation owes
you, adjusted for any reductions and
restorations of loan basis (see the
instructions for box 16, code E). Any
amounts described in (3) and (4) on
page 2 not used to offset amounts in
(1) on page 2, or reduce your stock
basis, are used to reduce your loan
basis (to the extent of such basis
prior to such reduction).
When determining your basis
in loans to the corporation,
CAUTION remember that:
• Distributions do not reduce loan
basis, and
• Loans that a shareholder
guarantees or co-signs are not part of
a shareholder’s loan basis.
See section 1367 and its
regulations for more details.
Worksheet instructions. For lines
6 and 7, do not enter more than the
aggregate sum of the preceding lines.
Any excess of the amounts that
would otherwise be entered on lines 6
and 7 without regard to this limit over
the amounts actually entered on
those lines is a reduction to your
basis, if any, in loans you made to the
corporation (to the extent of such
basis). Any portion of the excess not
used to reduce your basis in stock
and loans is not deductible in the
current year and is carried over to
next year and subject to that year’s
basis limit. See the preceding
instructions for more details.

!

At-Risk Limitations
Generally, you will have to complete
Form 6198, At-Risk Limitations, to
figure your allowable loss, if you
have:
• A loss or other deduction from any
activity carried on by the corporation
as a trade or business or for the
production of income, and
• Amounts in the activity for which
you are not at risk.
The at-risk rules generally limit the
amount of loss and other deductions
that you can claim to the amount you

could actually lose (your economic
loss) in the activity. These losses and
deductions include a loss on the
disposition of assets and the section
179 expense deduction. However, if
you acquired your stock before 1987,
the at-risk rules do not apply to losses
from an activity of holding real
property placed in service before
1987 by the corporation. The activity
of holding mineral property does not
qualify for this exception. The
corporation should identify on an
attachment to Schedule K-1 any
losses that are not subject to the
at-risk limitations.
Generally, you are not at risk for
amounts such as the following.
• The basis of your stock in the
corporation or the basis of your loans
to the corporation if the cash or other
property used to purchase the stock
or make the loans was from a source
(a) covered by nonrecourse
indebtedness (except for certain
qualified nonrecourse financing, as
defined in section 465(b)(6)); (b)
protected against loss by a
guarantee, stop-loss agreement, or
other similar arrangement; or (c) that
is covered by indebtedness from a
person who has an interest in the
activity or from a person related to a
person (except you) having such an
interest, other than a creditor.
• Any cash or property contributed to
a corporate activity, or your interest in
the corporate activity, that is (a)
covered by nonrecourse
indebtedness (except for certain
qualified nonrecourse financing, as
defined in section 465(b)(6)); (b)
protected against loss by a
guarantee, stop-loss agreement, or
other similar arrangement; or (c) that
is covered by indebtedness from a
person who has an interest in the
activity or from a person related to a
person (except you) having such an
interest, other than a creditor.
Any loss from a section 465
activity not allowed for this tax year
will be treated as a deduction
allocable to the activity in the next tax
year.
You should get a separate
statement of income, expenses, etc.,
for each activity from the corporation.

Passive Activity Limitations
Section 469 provides rules that limit
the deduction of certain losses and
credits. These rules apply to
shareholders who:
• Are individuals, estates, or trusts,
and
• Have a passive activity loss or
credit for the tax year.

Instructions for Schedule K-1 (Form 1120S)

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Generally, passive activities
include:
1. Trade or business activities in
which you did not materially
participate and
2. Activities that meet the
definition of rental activities under
Temporary Regulations section
1.469-1T(e)(3) and Regulations
section 1.469-1(e)(3).
Passive activities do not include:
1. Trade or business activities in
which you materially participated.
2. Rental real estate activities in
which you materially participated if
you were a real estate professional
for the tax year. You were a real
estate professional only if you met
both of the following conditions.
a. More than half of the personal
services you performed in trades or
businesses were performed in real
property trades or businesses in
which you materially participated and
b. You performed more than 750
hours of services in real property
trades or businesses in which you
materially participated.
For purposes of this rule, each
interest in rental real estate is a
separate activity, unless you elect to
treat all interests in rental real estate
as one activity. For details on making
this election, see the Instructions for
Schedule E (Form 1040).
If you are married filing jointly,
either you or your spouse must
separately meet both of the above
conditions, without taking into
account services performed by the
other spouse.
A real property trade or business is
any real property development,
redevelopment, construction,
reconstruction, acquisition,
conversion, rental, operation,
management, leasing, or brokerage
trade or business. Services you
performed as an employee are not
treated as performed in a real
property trade or business unless you
owned more than 5% of the stock (or
more than 5% of the capital or profits
interest) in the employer.
3. The rental of a dwelling unit any
shareholder used for personal
purposes during the year for more
than the greater of 14 days or 10% of
the number of days that the residence
was rented at fair rental value.
4. Activities of trading personal
property for the account of owners of
interests in the activities.
If you have a passive activity loss
or credit, use Form 8582, Passive
Activity Loss Limitations, to figure

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your allowable passive losses and
Form 8582-CR, Passive Activity
Credit Limitations, to figure your
allowable passive credits. See the
instructions for these forms for
details.
If the corporation had more than
one activity, it will attach a statement
to your Schedule K-1 that identifies
each activity (trade or business
activity, rental real estate activity,
rental activity other than rental real
estate, etc.) and specifies the income
(loss), deductions, and credits from
each activity.
Material participation. You must
determine if you materially
participated (a) in each trade or
business activity held through the
corporation and (b) if you were a real
estate professional (defined on page
3), in each rental real estate activity
held through the corporation. All
determinations of material
participation are based on your
participation during the corporation’s
tax year.
Material participation standards for
shareholders who are individuals are
listed below. Special rules apply to
certain retired or disabled farmers
and to the surviving spouses of
farmers. See the Instructions for
Form 8582 for details.
Individuals. If you are an
individual, you materially participated
in an activity only if one or more of
the following apply.
1. You participated in the activity
for more than 500 hours during the
tax year.
2. Your participation in the activity
for the tax year constituted
substantially all the participation in
the activity of all individuals (including
individuals who are not owners of
interests in the activity).
3. You participated in the activity
for more than 100 hours during the
tax year, and your participation in the
activity for the tax year was not less
than the participation in the activity of
any other individual (including
individuals who were not owners of
interests in the activity) for the tax
year.
4. The activity was a significant
participation activity for the tax year,
and you participated in all significant
participation activities (including
activities outside the corporation)
during the year for more than 500
hours. A significant participation
activity is any trade or business
activity in which you participated for
more than 100 hours during the year
and in which you did not materially
participate under any of the material

participation tests (other than this
test).
5. You materially participated in
the activity for any 5 tax years
(whether or not consecutive) during
the 10 tax years that immediately
precede the tax year.
6. The activity was a personal
service activity and you materially
participated in the activity for any 3
tax years (whether or not
consecutive) preceding the tax year.
A personal service activity involves
the performance of personal services
in the fields of health, law,
engineering, architecture, accounting,
actuarial science, performing arts,
consulting, or any other trade or
business in which capital is not a
material income-producing factor.
7. Based on all the facts and
circumstances, you participated in the
activity on a regular, continuous, and
substantial basis during the tax year.
Work counted toward material
participation. Generally, any work
that you or your spouse does in
connection with an activity held
through an S corporation (where you
own your stock at the time the work is
done) is counted toward material
participation. However, work in
connection with the activity is not
counted toward material participation
if either of the following applies.
1. The work is not the type of work
that owners of the activity would
usually do and one of the principal
purposes of the work that you or your
spouse does is to avoid the passive
loss or credit limitations.
2. You do the work in your
capacity as an investor and you are
not directly involved in the day-to-day
operations of the activity. Examples
of work done as an investor that
would not count toward material
participation include:
a. Studying and reviewing
financial statements or reports on
operations of the activity,
b. Preparing or compiling
summaries or analyses of the
finances or operations of the activity
for your own use, and
c. Monitoring the finances or
operations of the activity in a
nonmanagerial capacity.
Effect of determination. Income
(loss), deductions, and credits from
an activity are nonpassive if you
determine that:
• You materially participated in a
trade or business activity of the
corporation, or
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• You were a real estate professional

(defined on page 3) in a rental real
estate activity of the corporation.
If you determine that you did not
materially participate in a trade or
business activity of the corporation or
if you have income (loss), deductions,
or credits from a rental activity of the
corporation (other than a rental real
estate activity in which you materially
participated as a real estate
professional), the amounts from that
activity are passive. Report passive
income (losses), deductions, and
credits as follows.
1. If you have an overall gain (the
excess of income over deductions
and losses, including any prior year
unallowed loss) from a passive
activity, report the income,
deductions, and losses from the
activity as indicated in these
instructions.
2. If you have an overall loss (the
excess of deductions and losses,
including any prior year unallowed
loss, over income) or credits from a
passive activity, report the income,
deductions, losses, and credits from
all passive activities using the
Instructions for Form 8582 or Form
8582-CR, to see if your deductions,
losses, and credits are limited under
the passive activity rules.

Special allowance for a rental real
estate activity. If you actively
participated in a rental real estate
activity, you may be able to deduct up
to $25,000 of the loss (or credit
equivalent to a $25,000 deduction)
from the activity from nonpassive
income. This “special allowance” is
an exception to the general rule
disallowing losses in excess of
income from passive activities. The
special allowance is not available if
you were married, file a separate
return for the year, and did not live
apart from your spouse at all times
during the year.
Only individuals can actively
participate in a rental real estate
activity. However, a decedent’s estate
(including a qualified revocable trust
for which a section 645 election has
been made) is treated as actively
participating for its tax years ending
less than 2 years after the decedent’s
death, if the decedent would have
satisfied the active participation
requirement for the activity for the tax
year the decedent died.
You are not considered to actively
participate in a rental real estate
activity if, at any time during the tax
year, your interest (including your
spouse’s interest) in the activity was

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less than 10% (by value) of all
interests in the activity.
Active participation is a less
stringent requirement than material
participation. You may be treated as
actively participating if you
participated, for example, in making
management decisions or arranging
for others to provide services (such
as repairs) in a significant and bona
fide sense. Management decisions
that can count as active participation
include approving new tenants,
deciding rental terms, approving
capital or repair expenditures, and
other similar decisions.
Modified adjusted gross income
limitation. The maximum special
allowance that single individuals and
married individuals filing a joint return
can qualify for is $25,000. The
maximum is $12,500 for married
individuals who file separate returns
and who lived apart at all times during
the year. The maximum special
allowance for which an estate can
qualify is $25,000 reduced by the
special allowance for which the
surviving spouse qualifies.
If your modified adjusted gross
income (defined below) is $100,000
or less ($50,000 or less if married
filing separately), your loss is
deductible up to the maximum special
allowance referred to in the preceding
paragraph. If your modified adjusted
gross income is more than $100,000
(more than $50,000 if married filing
separately), the special allowance is
limited to 50% of the difference
between $150,000 ($75,000 if
married filing separately) and your
modified adjusted gross income.
When modified adjusted gross
income is $150,000 or more ($75,000
or more if married filing separately),
there is no special allowance.
Modified adjusted gross income is
your adjusted gross income figured
without taking into account:
• Any passive activity loss.
• Any rental real estate loss allowed
under section 469(c)(7) to real estate
professionals (defined on page 3).
• Any overall loss from a
publicly-traded partnership.
• Any taxable social security or
equivalent railroad retirement
benefits.
• Any deductible contributions to an
IRA or certain other qualified
retirement plans under section 219.
• The domestic production activities
deduction.
• The student loan interest
deduction.
• The tuition and fees deduction.

• The deduction for one-half of

self-employment taxes.
• The exclusion from income of
interest from Series EE or I U.S.
Savings Bonds used to pay higher
education expenses.
• The exclusion of amounts received
under an employer’s adoption
assistance program.
Commercial revitalization
deduction. The special $25,000
allowance for the commercial
revitalization deduction from rental
real estate activities is not subject to
the active participation rules or
modified adjusted gross income limits
discussed above. See the instructions
for box 12, code N for more
information.
Special rules for certain other
activities. If you have net income
(loss), deductions, or credits from any
activity to which special rules apply,
the corporation will identify the activity
and all amounts relating to it on
Schedule K-1 or on an attachment.
If you have net income subject to
recharacterization under Temporary
Regulations section 1.469-2T(f) and
Regulations section 1.469-2(f), report
such amounts according to the
Instructions for Form 8582.
If you have net income (loss),
deductions, or credits from either of
the following activities, treat such
amounts as nonpassive and report
them as indicated in these
instructions.
1. The rental of a dwelling unit any
shareholder used for personal
purposes during the year for more
than the greater of 14 days or 10% of
the number of days that the residence
was rented at fair rental value.
2. Trading personal property for
the account of owners of interests in
the activity.
Self-charged interest. The
corporation will report any
“self-charged” interest income or
expense that resulted from loans
between you and the corporation (or
between the corporation and another
S corporation or partnership if both
entities have the same owners with
the same proportional interest in each
entity). If there was more than one
activity, the corporation will provide a
statement allocating the interest
income or expense with respect to
each activity. The self-charged
interest rules do not apply to your
interest in the S corporation if the
corporation made an election under
Regulations section 1.469-7(g) to
avoid the application of these rules.

Instructions for Schedule K-1 (Form 1120S)

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See the Instructions for Form 8582
for details.

Specific Instructions
Part III. Shareholder’s
Share of Current Year
Income, Deductions,
Credits, and Other Items
The amounts shown in boxes 1
through 17 reflect your share of
income, loss, deductions, credits,
etc., from corporate business or
rental activities without reference to
limitations on losses, credits, or other
items that may have to be adjusted
because of:
1. The adjusted basis of your
stock and debt in the corporation,
2. The at-risk limitations,
3. The passive activity limitations,
or
4. Any other limitations that must
be taken into account at the
shareholder level in figuring taxable
income (for example, the section 179
expense limitation).
For information on these
provisions, see Limitations on
Losses, Deductions, and Credits
beginning on page 1.
If you are an individual, and the
above limitations do not apply to the
amounts shown on your Schedule
K-1, take the amounts shown and
report them on the lines of your tax
return as indicated in the summarized
reporting information shown on page
2 of the Schedule K-1. If any of the
above limitations apply, adjust the
amounts on Schedule K-1 before you
report them on your return.
When applicable, the passive
activity limitations on losses are
applied after the limitations on losses
for a shareholder’s basis in stock and
debt and the shareholder’s at-risk
amount.
The line numbers in the
summarized reporting information on
page 2 of Schedule K-1 are
references to forms in use for
calendar year 2009. If you file your
tax return on a calendar year basis,
but the corporation files a return for a
fiscal year, report the amounts on
your tax return for the year in which
the corporation’s fiscal year ends. For
example, if the corporation’s tax year
ends in February 2010, report the
amounts on your 2010 tax return.
If you have losses, deductions, or
credits from a prior year that were not

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deductible or usable because of
certain limitations, such as the basis
rules or the at-risk limitations, take
them into account in determining your
income, loss, or credits for this year.
However, except for passive activity
losses and credits, do not combine
the prior-year amounts with any
amounts shown on this Schedule K-1
to get a net figure to report on your
return. Instead, report the amounts on
your return on a year-by-year basis.
If you have amounts other
than those shown on
CAUTION Schedule K-1 to report on
Schedule E (Form 1040), enter each
item separately on line 28 of
Schedule E (Form 1040).

!

Codes. In box 10 and boxes 12
through 17, the corporation will
identify each item by entering a code
in the column to the left of the dollar
amount entry space. These codes are
identified on page 2 of Schedule K-1
and in these instructions.
Attached statements. The
corporation will enter an asterisk (*)
after the code, if any, in the column to
the left of the dollar amount entry
space for each item for which it has
attached a statement providing
additional information. For those
informational items that cannot be
reported as a single dollar amount,
the corporation will enter an asterisk
in the left column and enter “STMT” in
the dollar amount entry space to
indicate the information is provided
on an attached statement.

Income (Loss)
Box 1. Ordinary Business
Income (Loss)
The amount reported in box 1 is your
share of the ordinary income (loss)
from trade or business activities of
the corporation. Generally, where you
report this amount on Form 1040
depends on whether the amount is
from an activity that is a passive
activity to you. If you are an individual
shareholder filing a 2009 Form 1040,
find your situation below and report
your box 1 income (loss) as
instructed after applying the basis
and at-risk limitations on losses. If the
corporation had more than one trade
or business activity, it will attach a
statement identifying the income or
loss from each activity.
1. Report box 1 income (loss)
from corporate trade or business
activities in which you materially
participated on Schedule E (Form
1040), line 28, column (h) or (j).

2. Report box 1 income (loss)
from corporate trade or business
activities in which you did not
materially participate, as follows.
a. If income is reported in box 1,
report the income on Schedule E
(Form 1040), line 28, column (g).
b. If a loss is reported in box 1,
follow the Instructions for Form 8582
to figure how much of the loss can be
reported on Schedule E (Form 1040),
line 28, column (f).

Box 2. Net Rental Real Estate
Income (Loss)
Generally, the income (loss) reported
in box 2 is a passive activity amount
for all shareholders. However, the
income (loss) in box 2 is not from a
passive activity if you were a real
estate professional (defined on page
3) and you materially participated in
the activity. If the corporation had
more than one rental real estate
activity, it will attach a statement
identifying the income or loss from
each activity.
If you are filing a 2009 Form 1040,
use the following instructions to
determine where to report a box 2
amount.
1. If you have a loss from a
passive activity in box 2 and you
meet all the following conditions,
report the loss on Schedule E (Form
1040), line 28, column (f).
a. You actively participated in the
corporate rental real estate activities.
See Special allowance for a rental
real estate activity on page 4.
b. Rental real estate activities with
active participation were your only
passive activities.
c. You have no prior year
unallowed losses from these
activities.
d. Your total loss from the rental
real estate activities was not more
than $25,000 (not more than $12,500
if married filing separately and you
lived apart from your spouse all year).
e. If you are a married person
filing separately, you lived apart from
your spouse all year.
f. You have no current or prior
year unallowed credits from a passive
activity.
g. Your modified adjusted gross
income was not more than $100,000
(not more than $50,000 if married
filing separately and you lived apart
from your spouse all year).
2. If you have a loss from a
passive activity in box 2 and you do
not meet all the conditions in 1 above,
follow the Instructions for Form 8582
to figure how much of the loss you
-6-

can report on Schedule E (Form
1040), line 28, column (f).
3. If you were a real estate
professional and you materially
participated in the activity, report box
2 income (loss) on Schedule E (Form
1040), line 28, column (h) or (j).
4. If you have income from a
passive activity in box 2, report the
income on Schedule E (Form 1040),
line 28, column (g).

Box 3. Other Net Rental
Income (Loss)
The amount in box 3 is a passive
activity amount for all shareholders. If
the corporation had more than one
rental activity, it will attach a
statement identifying the income or
loss from each activity. Report the
income or loss as follows.
1. If box 3 is a loss, follow the
Instructions for Form 8582 to figure
how much of the loss can be reported
on Schedule E (Form 1040), line 28,
column (f).
2. If income is reported in box 3,
report the income on Schedule E
(Form 1040), line 28, column (g).

Portfolio Income
Portfolio income or loss (shown in
boxes 4 through 8b and in box 10,
code A) is not subject to the passive
activity limitations. Portfolio income
includes income (not derived in the
ordinary course of a trade or
business) from interest, ordinary
dividends, annuities, or royalties, and
gain or loss on the sale of property
that produces such income or is held
for investment.

Box 4. Interest Income
Report interest income on line 8a of
Form 1040.

Box 5a. Ordinary Dividends
Report ordinary dividends on line 9a
of Form 1040.

Box 5b. Qualified Dividends
Report any qualified dividends on line
9b of Form 1040.
Note. Qualified dividends are
excluded from investment income,
but you may elect to include part or
all of these amounts in investment
income. See the instructions for line
4g of Form 4952, Investment Interest
Expense Deduction, for important
information on making this election.

Box 6. Royalties
Report royalties on Schedule E (Form
1040), line 4.

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Box 7. Net Short-Term
Capital Gain (Loss)
Report the net short-term capital gain
(loss) on Schedule D (Form 1040),
line 5.

Box 8a. Net Long-Term
Capital Gain (Loss)
Report the net long-term capital gain
(loss) on Schedule D (Form 1040),
line 12.

Box 8b. Collectibles (28%)
Gain (Loss)
Report collectibles gain or loss on line
4 of the 28% Rate Gain
Worksheet —Line 18 in the
Instructions for Schedule D (Form
1040).

Box 8c. Unrecaptured
Section 1250 Gain
There are three types of
unrecaptured section 1250 gain.
Report your share of this
unrecaptured gain on the
Unrecaptured Section 1250 Gain
Worksheet —Line 19 in the
Instructions for Schedule D (Form
1040) as follows.
• Report unrecaptured section 1250
gain from the sale or exchange of the
corporation’s business assets on line
5.
• Report unrecaptured section 1250
gain from the sale or exchange of an
interest in a partnership on line 10.
• Report unrecaptured section 1250
gain from an estate, trust, regulated
investment company (RIC), or real
estate investment trust (REIT) on line
11.
If the corporation reports only
unrecaptured section 1250 gain from
the sale or exchange of its business
assets, it will enter a dollar amount in
box 8c. If it reports the other two
types of unrecaptured gain, it will
provide an attached statement that
shows the amount for each type of
unrecaptured section 1250 gain.

Box 9. Net Section 1231 Gain
(Loss)
The amount in box 9 is generally
passive if it is from a:
• Rental activity, or
• Trade or business activity in which
you did not materially participate.
However, an amount from a rental
real estate activity is not from a
passive activity if you were a real
estate professional (defined on page
3) and you materially participated in
the activity.
If the amount is either (a) a loss
that is not from a passive activity or

(b) a gain, report it on Form 4797, line
2, column (g). Do not complete
columns (b) through (f) on line 2 of
Form 4797. Instead, enter “From
Schedule K-1 (Form 1120S)” across
these columns.
If the amount is a loss from a
passive activity, see Passive Loss
Limitations in the Instructions for
Form 4797. Report the loss following
the Instructions for Form 8582 to
figure how much of the loss is
allowed on Form 4797. If the
corporation had net section 1231 gain
(loss) from more than one activity, it
will attach a statement that will
identify the section 1231 gain (loss)
from each activity.

Box 10. Other Income (Loss)
Code A. Other portfolio income
(loss). The corporation will report
portfolio income other than interest,
ordinary dividend, royalty, and capital
gain (loss) income and attach a
statement to tell you what kind of
portfolio income is reported.
If the corporation held a residual
interest in a real estate mortgage
investment conduit (REMIC), it will
report on the statement your share of
REMIC taxable income (net loss) that
you report on Schedule E (Form
1040), line 38, column (d). The
statement will also report your share
of any “excess inclusion” that you
report on Schedule E (Form 1040),
line 38, column (c), and your share of
section 212 expenses that you report
on Schedule E (Form 1040), line 38,
column (e). If you itemize your
deductions on Schedule A (Form
1040), you may also deduct these
section 212 expenses as a
miscellaneous deduction subject to
the 2% limit on Schedule A (Form
1040), line 23.
Code B. Involuntary conversions.
This is your net loss from involuntary
conversions due to casualty or theft.
The corporation will give you a
schedule that shows the amounts to
be reported on Form 4684,
Casualties and Thefts, line 38,
columns (b)(i), (b)(ii), and (c).
If there was a gain (loss) from a
casualty or theft to property not used
in a trade or business or for
income-producing purposes, the
corporation will provide you with the
information you need to complete
Form 4684.
Code C. Section 1256 contracts
and straddles. The corporation will
report any net gain or loss from
section 1256 contracts. Report this
amount on Form 6781, Gains and

Instructions for Schedule K-1 (Form 1120S)

-7-

Losses From Section 1256 Contracts
and Straddles.
Code D. Mining exploration costs
recapture. The corporation will give
you a schedule that shows the
information needed to recapture
certain mining exploration costs
(section 617). See Pub. 535 for
details.
Code E. Other income (loss).
Amounts with code E are other items
of income, gain, or loss not included
in boxes 1 through 9 or in box 10
using codes A through D. The
corporation should give you a
description and the amount of your
share for each of these items.
Report loss items that are passive
activity amounts to you following the
Instructions for Form 8582.
Code E items may include the
following.
• Income from recoveries of tax
benefit items. A tax benefit item is an
amount you deducted in a prior tax
year that reduced your income tax.
Report this amount on Form 1040,
line 21, to the extent it reduced your
tax.
• Gambling gains and losses.
1. If the corporation was not
engaged in the trade or business of
gambling, (a) report gambling
winnings on Form 1040, line 21 and
(b) deduct gambling losses to the
extent of winnings on Schedule A
(Form 1040), line 28.
2. If the corporation was engaged
in the trade or business of gambling,
(a) report gambling winnings on line
28 of Schedule E (Form 1040) and
(b) deduct gambling losses (to the
extent of winnings) on Schedule E
(Form 1040), line 28, column (h).
• Gain (loss) from the disposition of
an interest in oil, gas, geothermal, or
other mineral properties. The
corporation will attach a statement
that provides a description of the
property, your share of the amount
realized from the disposition, your
share of the corporation’s adjusted
basis in the property (for other than
oil or gas properties), and your share
of the total intangible drilling costs,
development costs, and mining
exploration costs (section 59(e)
expenditures) passed through for the
property. You must figure your gain or
loss from the disposition by
increasing your share of the adjusted
basis by the intangible drilling costs,
development costs, or mine
exploration costs for the property that
you capitalized (that is, costs that you
did not elect to deduct under section
59(e)). Report a loss in Part I of Form
4797. Report a gain in Part III of

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Form 4797 in accordance with the
instructions for line 28. See
Regulations section 1.1254-4 for
details.
• Net short-term capital gain (loss)
and net long-term capital gain (loss)
from Schedule D (Form 1120S) that
is not portfolio income. An example is
gain or loss from the disposition of
nondepreciable personal property
used in a trade or business activity of
the corporation. Report total net
short-term gain (loss) on Schedule D
(Form 1040), line 5. Report the total
net long-term gain (loss) on Schedule
D (Form 1040), line 12.
• Current year section 108(i)
cancellation of debt income. The
corporation will provide your share of
the deferred amount that you must
include in income in the current tax
year under section 108(i)(1) or
section 108(i)(5)(D)(i) or (ii).
• Gain from the sale or exchange of
qualified small business (QSB) stock
(as defined in the Instructions for
Schedule D (Form 1040)) eligible for
the partial section 1202 exclusion.
The corporation should also give you
(a) the name of the corporation that
issued the QSB stock, (b) your share
of the corporation’s adjusted basis
and sales price of the QSB stock, and
(c) the dates the QSB stock was
bought and sold. The following
additional limitations apply at the
shareholder level.
1. You must have held an interest
in the corporation when the
corporation acquired the QSB stock
and at all times thereafter until the
corporation disposed of the QSB
stock.
2. Your share of the eligible
section 1202 gain cannot exceed the
amount that would have been
allocated to you based on your
interest in the corporation at the time
the QSB stock was acquired.
See the Instructions for Schedule
D (Form 1040) for details on how to
report the gain and the amount of the
allowable exclusion.
• Gain eligible for section 1045
rollover (replacement stock
purchased by the corporation). The
corporation should also give you (a)
the name of the corporation that
issued the qualified small business
(QSB) stock, (b) your share of the
corporation’s adjusted basis and
sales price of the QSB stock, and (c)
the dates the QSB stock was bought
and sold. To qualify for the section
1045 rollover:
1. You must have held an interest
in the corporation during the entire
period in which the corporation held

the QSB stock (more than 6 months
prior to the sale), and
2. Your share of the gain eligible
for the section 1045 rollover cannot
exceed the amount that would have
been allocated to you based on your
interest in the corporation at the time
the QSB stock was acquired.
See the Instructions for Schedule
D (Form 1040) for details on how to
report the gain and the amount of the
allowable postponed gain.
• Gain eligible for section 1045
rollover (replacement stock not
purchased by the corporation). The
corporation should also give you (a)
the name of the corporation that
issued the qualified small business
(QSB) stock, (b) your share of the
corporation’s adjusted basis and
sales price of the QSB stock, and (c)
the dates the QSB stock was bought
and sold. To qualify for the section
1045 rollover:
1. You must have held an interest
in the corporation during the entire
period in which the corporation held
the QSB stock (more than 6 months
prior to the sale),
2. Your share of the gain eligible
for the section 1045 rollover cannot
exceed the amount that would have
been allocated to you based on your
interest in the corporation at the time
the QSB stock was acquired, and
3. You must purchase other QSB
stock (as defined in the Instructions
for Schedule D (Form 1040)) during
the 60-day period that began on the
date the QSB stock was sold by the
corporation.
See the Instructions for Schedule
D (Form 1040) for details on how to
report the gain and the amount of the
allowable postponed gain.

Deductions
Box 11. Section 179
Deduction
Use this amount, along with the total
cost of section 179 property placed in
service during the year from other
sources, to complete Part I of Form
4562, Depreciation and Amortization.
The corporation will report on an
attached statement your share of the
cost of any qualified enterprise zone,
renewal community, qualified section
179 Recovery Assistance, or qualified
section 179 disaster assistance
property it placed in service during
the tax year. Report the amount from
line 12 of Form 4562 allocable to a
passive activity using the Instructions
for Form 8582. If the amount is not a
passive activity deduction, report it on
-8-

Schedule E (Form 1040), line 28,
column (i).

Box 12. Other Deductions
Contributions. Codes A through G.
The corporation will give you a
schedule that shows charitable
contributions subject to the 100%,
50%, 30%, and 20% adjusted gross
income limitations.
If the corporation made a property
contribution, it will report on an
attached statement your share of
both the fair market value and
adjusted basis of the property. Use
these amounts to adjust your stock
basis (see page 2). If the corporation
made a qualified conservation
contribution, it will report the fair
market value of the underlying
property before and after the
donation, the type of legal interest
contributed, and a description of the
conservation purpose furthered by
the donation. If the corporation made
a contribution of real property located
in a registered historic district, it will
report any information you will need
to take a deduction.
For more details, see Pub. 526,
Charitable Contributions, and the
Instructions for Schedule A (Form
1040). If your contributions are
subject to more than one of the AGI
limitations, see Pub. 526.
Charitable contribution deductions
are not taken into account in figuring
your passive activity loss for the year.
Do not enter them on Form 8582.
Code A. Cash contributions (50%).
Report this amount, subject to the
50% AGI limitation, on line 16 of
Schedule A (Form 1040).
Code B. Cash contributions (30%).
Report this amount, subject to the
30% AGI limitation, on line 16 of
Schedule A (Form 1040).
Code C. Noncash contributions
(50%). If property other than cash is
contributed, and if the claimed
deduction for one item or group of
similar items of property exceeds
$5,000, the corporation must give you
a copy of Form 8283, Noncash
Charitable Contributions, to attach to
your tax return. Do not deduct the
amount shown on Form 8283. It is the
corporation’s contribution. Instead,
deduct the amount identified by code
C, box 12, subject to the 50% AGI
limitation, on line 17 of Schedule A
(Form 1040).
If the corporation provides you with
information that the contribution was
property other than cash and does
not give you a Form 8283, see the
Instructions for Form 8283 for filing

Instructions for Schedule K-1 (Form 1120S)

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requirements. Do not file Form 8283
unless the total claimed deduction for
all contributed items of property
exceeds $500.
Food inventory contributions.
The corporation will report on an
attached statement your share of
qualified food inventory contributions.
The food inventory contribution is not
included in the amount reported in
box 12 using code C. The corporation
will also report your share of the
corporation’s net income from the
business activities that made the food
inventory contribution(s). Your
deduction for food inventory
contributions cannot exceed 10% of
your aggregate net income for the tax
year from the business activities from
which the food inventory contribution
was made (including your share of
net income from partnership or S
corporation businesses that made
food inventory contributions). Report
the deduction, subject to the 50% AGI
limitation, on line 17 of Schedule A
(Form 1040).
Code D. Noncash contributions
(30%). Report this amount, subject
to the 30% AGI limitation, on line 17
of Schedule A (Form 1040).
Code E. Capital gain property to a
50% organization (30%). Report
this amount, subject to the 30% AGI
limitation, on line 17 of Schedule A
(Form 1040). See Special 30% Limit
for Capital Gain Property in Pub. 526.
Code F. Capital gain property
(20%). Report this amount, subject
to the 20% AGI limitation, on line 17
of Schedule A (Form 1040).
Code G. Contributions (100%).
The corporation will report your share
of qualified conservation contributions
of property used in agriculture or
livestock production. This contribution
is not included in the amount reported
in box 12 using code C. If you are a
farmer or rancher, you qualify for a
100% AGI limitation for this
contribution. Otherwise, your
deduction for this contribution is
subject to a 50% AGI limitation.
Report this deduction on line 17 of
Schedule A (Form 1040). See Pub.
526 for more information on qualified
conservation contributions.
Code H. Investment interest
expense. Enter this amount on
Form 4952, line 1.
If the corporation has investment
income or other investment expense,
it will report your share of these items
in box 17 using codes A and B.
Include investment income and
expenses from other sources to figure

how much of your total investment
interest is deductible.
For more information on the
special provisions that apply to
investment interest expense, see
Form 4952 and Pub. 550.
Code I. Deductions — royalty
income. Enter deductions allocable
to royalties on Schedule E (Form
1040), line 18. For this type of
expense, enter “From Schedule K-1
(Form 1120S).”
These deductions are not taken
into account in figuring your passive
activity loss for the year. Do not enter
them on Form 8582.
Code J. Section 59(e)(2)
expenditures. The corporation will
show on an attached statement the
type and the amount of qualified
expenditures for which you may make
a section 59(e) election. The
statement will also identify the
property for which the expenditures
were paid or incurred. If there is more
than one type of expenditure, the
amount of each type will also be
listed.
If you deduct these expenditures in
full in the current year, they are
treated as adjustments or tax
preference items for purposes of
alternative minimum tax. However,
you may elect to amortize these
expenditures over the number of
years in the applicable period rather
than deduct the full amount in the
current year. If you make this
election, these items are not treated
as adjustments or tax preference
items.
Under the election, you can deduct
circulation expenditures ratably over
a 3-year period. Research and
experimental expenditures and
mining exploration and development
costs can be amortized over a
10-year period. Intangible drilling and
development costs can be amortized
over a 60-month period. The
amortization periods begin with the
month in which such costs were paid
or incurred.
Make the election on Form 4562. If
you make the election, report the
current year amortization of section
59(e) expenditures from Part VI of
Form 4562 on line 28 of Schedule E
(Form 1040). If you do not make the
election, report the section 59(e)(2)
expenditures on line 28 of Schedule
E (Form 1040) and figure the
resulting adjustment or tax preference
item (see Form 6251, Alternative
Minimum Tax — Individuals). Whether
you deduct the expenditures or elect
to amortize them, report the amount

Instructions for Schedule K-1 (Form 1120S)

-9-

on a separate line in column (h) of
line 28 if you materially participated in
the partnership activity. If you did not
materially participate, follow the
Instructions for Form 8582 to figure
how much of the deduction can be
reported in column (f).
Code K. Deductions — portfolio
(2% floor). Amounts entered with
code K are deductions that are clearly
and directly allocable to portfolio
income (other than investment
interest expense and section 212
expenses from a REMIC). Generally,
you should report these amounts on
Schedule A (Form 1040), line 23. See
the Instructions for Schedule A (Form
1040), lines 23 and 28, for details.
These deductions are not taken
into account in figuring your passive
activity loss for the year. Do not enter
them on Form 8582.
Code L. Deductions — portfolio
(other). Generally, you should report
these amounts on Schedule A (Form
1040), line 28. See the Instructions
for Schedule A (Form 1040), lines 23
and 28, for details.
These deductions are not taken
into account in figuring your passive
activity loss for the year. Do not enter
them on Form 8582.
Code M. Preproductive period
expenses. You may be able to
deduct these expenses currently or
you may need to capitalize them
under section 263A. See Pub. 225,
Farmer’s Tax Guide, and Regulations
section 1.263A-4 for details.
Code N. Commercial revitalization
deduction from rental real estate
activities. Follow the Instructions for
Form 8582 to figure how much of the
deduction can be reported on
Schedule E (Form 1040), line 28,
column (f).
Code O. Reforestation expense
deduction. The corporation will
provide a statement that describes
the qualified timber property for these
reforestation expenses. The expense
deduction is limited to $10,000
($5,000 if married filing separately)
for each qualified timber property,
including your share of the
corporation’s expense and any
reforestation expenses you
separately paid or incurred during the
tax year.
If you did not materially participate
in the activity, use Form 8582 to
figure the amount to report on
Schedule E (Form 1040), line 28. If
you materially participated in the
reforestation activity, report the
deduction on line 28, column (h), of
Schedule E (Form 1040).

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Code P. Domestic production
activities information. The
corporation will provide you with a
statement with information that you
must use to figure the domestic
production activities deduction. Use
Form 8903, Domestic Production
Activities Deduction, to figure this
deduction. For details, see the
Instructions for Form 8903.
Code Q. Qualified production
activities income (QPAI). Report
the QPAI reported to you by the
corporation (in box 12 of Schedule
K-1) on line 7 of Form 8903.
Code R. Employer’s Form W-2
wages. Report the portion of Form
W-2 wages reported to you by the
corporation (in box 12 of Schedule
K-1) on line 15 of Form 8903.
Code S. Other deductions.
Amounts with this code may include:
• Itemized deductions that Form
1040 filers report on Schedule A
(Form 1040).
• Soil and water conservation and
endangered species recovery
expenditures. See section 175 for
limitations on the amount you are
allowed to deduct.
• Expenditures for the removal of
architectural and transportation
barriers to the elderly and disabled
that the corporation elected to treat
as a current expense. The deductions
are limited by section 190(c) to
$15,000 per year from all sources.
• Interest expense allocated to
debt-financed distributions. The
manner in which you report such
interest expense depends on your
use of the distributed debt proceeds.
If the proceeds were used in a trade
or business activity, report the
interest on line 28 of Schedule E
(Form 1040). In column (a) enter the
name of the corporation and “interest
expense.” If you materially
participated in the trade or business
activity, enter the interest expense in
column (h). If you did not materially
participate in the activity, follow the
Instructions for Form 8582 to figure
the interest expense you can report in
column (f). See page 4 for a definition
of material participation. If the
proceeds were used in an investment
activity, report the interest on Form
4952. If the proceeds are used for
personal purposes, the interest is
generally not deductible.
• Contributions to a capital
construction fund (CCF). The
deduction for a CCF investment is not
taken on Schedule E (Form 1040).
Instead, you subtract the deduction
from the amount that would normally
be entered as taxable income on line

43 (Form 1040). In the margin to the
left of line 43, enter ‘‘CCF’’ and the
amount of the deduction.
• Penalty on early withdrawal of
savings. Report this amount on Form
1040, line 30.
• Film and television production
expenses. The corporation will
provide a statement that describes
the film or television production
generating these expenses.
Generally, if the aggregate cost of the
production exceeds $15 million, you
are not entitled to the deduction. The
limitation is $20 million for
productions in certain areas (see
section 181 for details). If you did not
materially participate in the activity,
use Form 8582 to determine the
amount that can be reported on
Schedule E (Form 1040), line 28,
column (f). If you materially
participated in the production activity,
report the deduction on Schedule E
(Form 1040), line 28, column (h).
• Current year section 108(i) original
issue discount deduction. The
corporation will provide your share of
the corporation’s original issue
discount deduction deferred under
section 108(i)(2)(A)(i) that is
allowable as a deduction in the
current tax year under section
108(i)(2)(A)(ii) or section
108(i)(5)(D)(i) or (ii).
The corporation will give you a
description and the amount of your
share for each of these items.

Box 13. Credits
If you have credits that are passive
activity credits to you, you must
complete Form 8582-CR in addition
to the credit forms identified below.
See Passive Activity Limitations on
page 3 and the Instructions for Form
8582-CR for details.
In general, shareholders
TIP whose only source for credits
listed only on page 1 of Form
3800 are from pass-through entities
are not required to complete the
source credit form or attach it to Form
3800. Instead, you can report this
credit directly on page 1 of Form
3800. However, when applicable, all
shareholders must complete and
attach the following credit forms to
Form 3800.
• Form 3468, Investment Credit (line
1a of Form 3800).
• Form 8864, Biodiesel and
Renewable Diesel Fuels Credit (line
1l of Form 3800).
Codes A, B, C, and D. Low-income
housing credit. If section 42(j)(5)
applies, the corporation will report
your share of the low-income housing
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credit using code A or code C,
depending on the date the building
was placed in service. If section
42(j)(5) does not apply, your share of
the credit will be reported using code
B or code D, depending on the date
the building was placed in service.
Any allowable low-income housing
credit reported using code A or code
B is reported on line 4 of Form 8586,
Low-Income Housing Credit, or line
1d of Form 3800 (see TIP on this
page). Any allowable low-income
housing credit reported using code C
or code D is reported on line 11 of
Form 8586.
Keep a separate record of the
low-income housing credit from each
separate source so that you can
correctly figure any recapture of
low-income housing credit that may
result from the disposition of all or
part of your stock in the corporation.
For more information on recapture,
see the instructions for Form 8611,
Recapture of Low-Income Housing
Credit.
Code E. Qualified rehabilitation
expenditures (rental real estate).
The corporation will report your share
of the qualified rehabilitation
expenditures and other information
you need to complete Form 3468
related to rental real estate activities
using code E. Your share of qualified
rehabilitation expenditures from
property not related to rental real
estate activities will be reported in
box 17 using code C. See Form 3468
for details. If the corporation is
reporting expenditures from more
than one activity, the attached
statement will separately identify the
expenditures from each activity.
Combine the expenditures (for
Form 3468 reporting) from box 13,
code E, and from box 17, code C.
The expenditures related to rental
real estate activities (box 13, code E)
are reported on Schedule K-1
separately from other qualified
rehabilitation expenditures (box 17,
code C) because they are subject to
different passive activity limitation
rules. See the Instructions for Form
8582-CR for details.
Code F. Other rental real estate
credits. The corporation will identify
the type of credit and any other
information you need to figure these
credits from rental real estate
activities (other than the low-income
housing credit and qualified
rehabilitation expenditures). These
credits may be limited by the passive
activity limitations. If the credits are
from more than one activity, the
corporation will identify the credits

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from each activity on an attached
statement. See Passive Activity
Limitations on page 3 and the
Instructions for Form 8582-CR for
details.
Code G. Other rental credits. The
corporation will identify the type of
credit and any other information you
need to figure these rental credits.
These credits may be limited by the
passive activity limitations. If the
credits are from more than one
activity, the corporation will identify
the credits from each activity on an
attached statement. See Passive
Activity Limitations on page 3 and the
Instructions for Form 8582-CR for
details.
Code H. Undistributed capital
gains credit. Code H represents
taxes paid on undistributed capital
gains by a regulated investment
company or real estate investment
trust. Report these taxes on line 70 of
Form 1040, check box “a” for Form
2439, and enter “Form 1120S.”
Reduce the basis of your stock by
this tax.
Code I. Alcohol and cellulosic
biofuel fuels credit. If this credit
includes the small ethanol producer
credit, the corporation will provide
additional information on an attached
statement. If no statement is
attached, report this amount on line 7
of Form 6478, Alcohol and Cellulosic
Biofuel Fuels Credit. If a statement is
attached, see the instructions for
Form 6478, line 7.
Code J. Work opportunity credit.
Report this amount on line 3 of Form
5884, Work Opportunity Credit.
Code K. Disabled access credit.
Report this amount on line 7 of Form
8826, Disabled Access Credit, or line
1e of Form 3800 (see TIP on page
10).
Code L. Empowerment zone and
renewal community employment
credit. Report this amount on line 3
of Form 8844, Empowerment Zone
and Renewal Community
Employment Credit.
Code M. Credit for increasing
research activities. Report this
amount on line 37 of Form 6765,
Credit for Increasing Research
Activities, or line 1c of Form 3800
(see TIP on page 10).
Code N. Credit for employer social
security and Medicare taxes.
Report this amount on line 5 of Form
8846, Credit for Employer Social
Security and Medicare Taxes Paid on
Certain Employee Tips.
Code O. Backup withholding. This
is your share of the credit for backup

withholding on dividends, interest
income, and other types of income.
Include this amount in the total you
enter on Form 1040, line 61.
Code P. Other credits. On an
attachment to Schedule K-1, the
corporation will identify the type of
credit and any other information you
need to figure credits other than
those reported with codes A through
O. Most credits identified by code P
will be reported on Form 3800 (see
TIP on page 10).
Credits that may be reported with
code P include the following.
• Unused investment credit from
cooperatives (Form 3468, line 8).
• Unused investment credit from
cooperatives (Form 3468, line 12).
• Employer housing credit for
affected Midwestern disaster area
employers (Form 5884-A).
• Orphan drug credit (Form 8820).
• Qualified plug-in electric vehicle
credit (Form 8834).
• Renewable electricity, refined coal,
and Indian coal production credit. The
corporation will provide a statement
showing separately the amount of
credit from Part I and Part II of Form
8835.
• Indian employment credit (Form
8845).
• Credit for contributions to selected
community development corporations
(Form 3800, line 1aa).
• Welfare-to-work credit (Form 3800,
line 1b).
• Biodiesel and renewable diesel
fuels credit. If this credit includes the
small agri-biodiesel producer credit,
the corporation will provide additional
information on an attached statement.
If no statement is attached, report this
amount on line 9 of Form 8864. If a
statement is attached, see the
instructions for Form 8864, line 9.
• New markets credit (Form 8874).
• Credit for small employer pension
plan startup costs (Form 8881).
• Credit for employer-provided
childcare facilities and services (Form
8882).
• Low sulfur diesel fuel production
credit (Form 8896).
• Qualified railroad track
maintenance credit (Form 8900).
• Distilled spirits credit (Form 8906).
• Nonconventional source fuel credit
(Form 8907).
• Energy efficient home credit (Form
8908).
• Energy efficient appliance credit
(Form 8909).
• Alternative motor vehicle credit
(Form 8910).
• Alternative fuel vehicle refueling
property credit (Form 8911).

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• Qualified zone academy bond

credit. Report this amount on Form
8912.
• Clean renewable energy bond
credit. Report this amount on Form
8912.
• New clean renewable energy bond
credit. Report this amount on Form
8912.
• Gulf tax credit bond credit. Report
this amount on Form 8912.
• Qualified forestry conservation
bond credit. Report this amount on
Form 8912.
• Midwestern tax credit bond credit.
Report this amount on Form 8912.
• Qualified energy conservation bond
credit. Report this amount on Form
8912.
• Build America bond credit. Report
this amount on Form 8912.
• Qualified school construction bond
credit. Report this amount on Form
8912.
• Mine rescue team training credit
(Form 8923).
• Agricultural chemicals security
credit (Form 8931).
• Credit for employer differential
wage payments (Form 8932).
• Carbon dioxide sequestration credit
(Form 8933).
• Qualified plug-in electric drive
motor vehicle credit (Form 8936).
• General credits from an electing
large partnership. Report these
credits on Form 3800, line 1bb.

Box 14. Foreign
Transactions
Codes A through N. Use the
information identified by codes A
through N, code Q, and any attached
schedules to figure your foreign tax
credit. For details, see Form 1116,
Foreign Tax Credit, and its separate
instructions. Also see Pub. 514,
Foreign Tax Credit for Individuals.
Codes O and P. Extraterritorial
income exclusion.
1. Corporation did not claim the
exclusion. If the corporation reports
your share of foreign trading gross
receipts (code O) and the
extraterritorial income exclusion
(code P), the corporation was not
entitled to claim the exclusion
because it did not meet the foreign
economic process requirements. You
may still qualify for your share of this
exclusion if the corporation’s foreign
trading gross receipts for the tax year
were $5 million or less. To qualify for
this exclusion, your foreign trading
gross receipts from all sources for the
tax year also must have been $5
million or less. If you qualify for the

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exclusion, report the exclusion
amount in accordance with the
instructions on page 6 for box 1, 2, or
3, whichever applies. See Form 8873,
Extraterritorial Income Exclusion, for
details.
2. Corporation claimed the
exclusion. If the corporation reports
your share of foreign trading gross
receipts but not the amount of the
extraterritorial income exclusion, the
corporation met the foreign economic
process requirements and claimed
the exclusion when figuring your
share of corporate income. You also
may need to know your share of
foreign trading gross receipts from
this corporation to determine if you
met the $5 million or less exception
discussed above for purposes of
qualifying for an extraterritorial
income exclusion from other sources.
Note. Upon request, the corporation
should furnish you a copy of the
corporation’s Form 8873 if there is a
reduction for international boycott
operations, illegal bribes, kickbacks,
etc.
Code Q. Other foreign
transactions. On an attachment to
Schedule K-1, the corporation will
report any other information on
foreign transactions that you may
need using code Q.

Box 15. Alternative
Minimum Tax (AMT)
Items
Use the information reported in box
15 (as well as your adjustments and
tax preference items from other
sources) to prepare your Form 6251,
Alternative Minimum
Tax—Individuals, or Schedule I
(Form 1041), Alternative Minimum
Tax—Estates and Trusts.
Code A. This amount is your share
of the corporation’s post-1986
depreciation adjustment. If you are an
individual shareholder, report this
amount on line 19 of Form 6251.
Code B. This amount is your share
of the corporation’s adjusted gain or
loss. If you are an individual
shareholder, report this amount on
line 18 of Form 6251.
Code C. This amount is your share
of the corporation’s depletion
adjustment. If you are an individual
shareholder, report this amount on
line 10 of Form 6251.
Codes D and E. Oil, gas, &
geothermal properties —gross
income and deductions. The
amounts reported on these lines
include only the gross income (code

D) from, and deductions (code E)
allocable to, oil, gas, and geothermal
properties included in box 1 of
Schedule K-1. The corporation should
have attached a schedule that shows
any income from or deductions
allocable to such properties that are
included in boxes 2 through 12, 16,
and 17 of Schedule K-1. Use the
amounts reported here and any other
reported amounts to help you figure
the net amount to enter on line 27 of
Form 6251.
Code F. Other AMT items. Enter
the information on the statement
attached by the corporation on the
applicable lines of Form 6251 or
Schedule I (Form 1041).

Box 16. Items Affecting
Shareholder Basis
Code A. Tax-exempt interest
income. Report on your return, as
an item of information, your share of
the tax-exempt interest received or
accrued by the corporation during the
year. Individual shareholders include
this amount on Form 1040, line 8b.
Generally, you must increase the
basis of your stock by this amount.
Code B. Other tax-exempt income.
Generally, you must increase the
basis of your stock by the amount
shown, but do not include it in income
on your tax return.
Code C. Nondeductible expenses.
The nondeductible expenses paid or
incurred by the corporation are not
deductible on your tax return.
Generally, you must decrease the
basis of your stock by this amount.
Code D. Property distributions.
Reduce the basis of your stock (as
explained on page 2) by distributions,
not reported on Form 1099-DIV, of
property or money. This amount will
include any amounts included in
income with respect to new clean
renewable energy, qualified energy
conservation, qualified forestry
conservation, qualified school
construction, build America, or (for
bonds issued after October 3, 2008)
qualified zone academy bonds. If
these distributions exceed the basis
of your stock, the excess is treated as
capital gain from the sale or
exchange of property and is reported
on Schedule D (Form 1040).
Code E. Repayment of loans from
shareholders. If these payments
are made on a loan with a reduced
basis, the repayments must be
allocated in part to a return of your
basis in the loan and in part to the
receipt of income. See Regulations
section 1.1367-2 for information on
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reduction in basis of a loan and
restoration in basis of a loan with a
reduced basis. See Rev. Rul. 64-162,
1964-1 (Part 1) C.B. 304 and Rev.
Rul. 68-537, 1968-2 C.B. 372, for
details.

Box 17. Other
Information
Code A. Investment income.
Report this amount on line 4a of Form
4952.
Code B. Investment expenses.
Report this amount on line 5 of Form
4952.
Code C. Qualified rehabilitation
expenditures (other than rental real
estate). The corporation will report
your share of qualified rehabilitation
expenditures and other information
you need to complete Form 3468 for
property not related to rental real
estate activities in box 17 using code
C. Your share of qualified
rehabilitation expenditures related to
rental real estate activities is reported
in box 13 using code E. See Form
3468 for details. If the corporation is
reporting expenditures from more
than one activity, the attached
statement will separately identify the
expenditures from each activity.
Combine the expenditures (for
Form 3468 reporting) from box 13,
code E and from box 17, code C. The
expenditures related to rental real
estate activities (box 13, code E) are
reported on Schedule K-1 separately
from other qualified rehabilitation
expenditures (box 17, code C)
because they are subject to different
passive activity limitation rules. See
the Instructions for Form 8582-CR for
details.
Code D. Basis of energy property.
If the corporation provides an
attached statement for code D, report
the information shown on the
attached statement on Form 3468.
Codes E and F. Recapture of
low-income housing credit. The
corporation will identify by code E
your share of any recapture of a
low-income housing credit from its
investment in partnerships to which
the provisions of section 42(j)(5)
apply. All other recapture of
low-income housing credits will be
identified by code F.
Keep a separate record of each
type of recapture so that you will be
able to correctly figure any credit
recapture that may result from the
disposition of all or part of your
corporate stock. For details, see
Form 8611.

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Code G. Recapture of investment
credit. The corporation will provide
any information you need to figure
your recapture tax on Form 4255,
Recapture of Investment Credit. See
the Form 3468 on which you took the
original credit for other information
you need to complete Form 4255.
You may also need Form 4255 if
your proportionate stock interest in
the corporation is reduced by more
than one-third after you were
allocated part of an investment credit.
.
Code H. Recapture of other credits.
On an attachment to Schedule K-1,
the corporation will report any
information you need to figure the
recapture of other credits including
the new markets credit, qualified
electric vehicle credit, qualified
plug-in electric vehicle credit, Indian
employment credit, credit for
employer-provided childcare facilities
and services, alternative motor
vehicle credit, alternative fuel vehicle
refueling property credit, and qualified
plug-in electric drive motor vehicle
credit.
Code I. Look-back
interest—completed long-term
contracts. The corporation will
report any information you need to
figure the interest due or to be
refunded under the look-back method
of section 460(b)(2) on certain
long-term contracts. Use Form 8697,
Interest Computation Under the
Look-Back Method for Completed
Long-Term Contracts, to report any
such interest.
Code J. Look-back
interest—income forecast method.
The corporation will report any
information you need to figure the
interest due or to be refunded under
the look-back method of section
167(g)(2) for certain property placed
in service after September 13, 1995,
and depreciated under the income
forecast method. Use Form 8866,
Interest Computation Under the
Look-Back Method for Property
Depreciated Under the Income
Forecast Method, to report any such
interest.
Code K. Dispositions of property
with section 179 deductions. The
corporation will report your share of
gain or loss on the sale, exchange, or
other disposition of property for which
a section 179 expense deduction was
passed through to shareholders with
code K. If the corporation passed
through a section 179 expense
deduction for the property, you must
report the gain or loss, if any, and any
recapture of the section 179 expense

deduction for the property on your
income tax return (see the
Instructions for Form 4797 for
details). The corporation will provide
all the following information.
1. Description of the property.
2. Date the property was acquired
and placed in service.
3. Date of the sale or other
disposition of the property.
4. Your share of the gross sales
price or amount realized.
5. Your share of the cost or other
basis plus the expense of sale.
6. Your share of the depreciation
allowed or allowable.
7. Your share of the section 179
expense deduction (if any) passed
through for the property and the
corporation’s tax year(s) in which the
amount was passed through.
To figure the depreciation allowed
or allowable for Form 4797, line 22,
add to the amount from item 6 above
the amount of your share of the
section 179 expense deduction,
reduced by any unused carryover of
the deduction for this property. This
amount may be different than the
amount of section 179 expense you
deducted for the property if your
interest in the corporation has
changed.
8. If the disposition is due to a
casualty or theft, any information you
need to complete Form 4684.
9. If the sale was an installment
sale made during the corporation’s
tax year, any information you need to
complete Form 6252, Installment
Sale Income. The corporation will
separately report your share of all
payments received for the property in
the following tax years. See the
instructions for Form 6252 for details.
Code L. Recapture of section 179
deduction. The corporation will
report your share of any recapture of
section 179 expense deduction if
business use of any property for
which the section 179 expense
deduction was passed through to
shareholders dropped to 50% or less.
If this occurs, the corporation must
provide the following information.
1. Your share of the depreciation
allowed or allowable (not including
the section 179 expense deduction).
2. Your share of the section 179
expense deduction (if any) passed
through for the property and the
corporation’s tax year(s) in which the
amount was passed through. Reduce
this amount by the portion, if any, of
your unused (carryover) section 179
expense deduction for this property.

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Code M. Section 453(l)(3)
information. The corporation will
report any information you need to
figure the interest due under section
453(l)(3) with respect to the
disposition of certain timeshares and
residential lots on the installment
method. If you are an individual,
report the interest on Form 1040, line
60. Enter “453(l)(3)” and the amount
of the interest on the dotted line to
the left of line 60.
Code N. Section 453A(c)
information. The corporation will
report any information you need to
figure the interest due under section
453A(c) with respect to certain
installment sales. If you are an
individual, report the interest on Form
1040, line 60. Enter “453A(c)” and the
amount of the interest on the dotted
line to the left of line 60. See section
453A(c) for details on how to figure
the interest.
Code O. Section 1260(b)
information. The corporation will
report any information you need to
figure the interest due under section
1260(b). If the corporation had gain
from certain constructive ownership
transactions, your tax liability must be
increased by the interest charge on
any deferral of gain recognition under
section 1260(b). Report the interest
on Form 1040, line 60. Enter
“1260(b)” and the amount of the
interest on the dotted line to the left of
line 60. See section 1260(b) for
details, including how to figure the
interest.
Code P. Interest allocable to
production expenditures. The
corporation will report any information
you need relating to interest you are
required to capitalize under section
263A for production expenditures.
See Regulations sections 1.263A-8
through 1.263A-15 for details.
Code Q. CCF nonqualified
withdrawals. The corporation will
report your share of nonqualified
withdrawals from a capital
construction fund (CCF). These
withdrawals are taxed separately
from your other gross income at the
highest marginal ordinary income or
capital gains tax rate. Attach a
statement to your federal income tax
return to show your computation of
both the tax and interest for a
nonqualified withdrawal. Include the
tax and interest on Form 1040, line
60. On the dotted line to the left of
line 60, enter the amount of tax and
interest and “CCF.”
Code R. Depletion information — oil
and gas. This is your share of gross
income from the property, share of

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production for the tax year, etc.,
needed to figure your depletion
deduction for oil and gas wells. The
corporation should also allocate to
you a proportionate share of the
adjusted basis of each corporate oil
or gas property. See Pub. 535 for
details on how to figure your
depletion deduction.
Reduce the basis of your stock by
the amount of this deduction up to the
extent of your adjusted basis in the
property.
Code S. Amortization of
reforestation costs. The
corporation will provide a statement
identifying your share of the
amortizable basis of reforestation
expenditures paid or incurred before
October 23, 2004. The corporation
will separately report your share of
the amortizable basis of reforestation
expenditures for 2002 through 2004.
Your amortizable basis of
reforestation expenditures for each
tax year from all properties is limited
to $10,000 ($5,000 if married filing
separately), including your share of
the corporation’s expenditures and
any qualified reforestation
expenditures you separately paid or
incurred. To figure your allowable
amortization, see section 194 and
Pub. 535.
Follow the Instructions for Form
8582 to report a deduction allocable
to a passive activity. If you materially
participated in the reforestation
activity, report the deduction on line
28, column (h), of Schedule E (Form
1040).
Code T. Section 108(i) information.
If the corporation made a section
108(i) election, it will provide all the
information you will need to
determine your share of the following.
• Deferred cancellation of debt
income.
• Deferred original issue discount
deduction.
Code U. Other information. The
corporation will report:
1. Any information you need to
complete a disclosure statement for
reportable transactions in which the
corporation participates. If the
corporation participates in a
transaction that must be disclosed on
Form 8886, Reportable Transaction
Disclosure Statement, both you and

the corporation may be required to
file Form 8886 for the transaction.
The determination of whether you are
required to disclose a transaction of
the corporation is based on the
category(s) under which the
transaction qualifies for disclosure
and is determined by the corporation.
You may have to pay a penalty if you
are required to file Form 8886 and do
not do so. See the Instructions for
Form 8886 for details.
2. Gross farming and fishing
income. If you are an individual
shareholder, report this income, as an
item of information, on Schedule E
(Form 1040), Part V, line 42. Do not
report this income elsewhere on Form
1040.
For a shareholder that is an estate
or trust, report this income to the
beneficiaries, as an item of
information, on Schedule K-1 (Form
1041). Do not report it elsewhere on
Form 1041.
3. The amount included in gross
income with respect to qualified zone
academy bonds issued before
October 4, 2008. Income with respect
to these qualified zone academy
bonds cannot be used to increase
your stock basis. Because this
amount is already included in income
elsewhere on Schedule K-1, you
must reduce your stock basis by this
amount. See line 3 of the worksheet
on page 2.
4. The amount included in gross
income with respect to clean
renewable energy bonds. Income
with respect to clean renewable
energy bonds cannot be used to
increase your stock basis. Because
this amount is already included in
income elsewhere on Schedule K-1,
you must reduce your stock basis by
this amount. See line 3 of the
worksheet on page 2.
5. The amount included in gross
income with respect to Gulf tax credit
bonds. Income with respect to Gulf
tax credit bonds cannot be used to
increase your stock basis. Because
this amount is already included in
income elsewhere on Schedule K-1,
you must reduce your stock basis by
this amount. See line 3 of the
worksheet on page 2.
6. The amount included in gross
income with respect to Midwestern

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tax credit bonds. Income with respect
to Midwestern tax credit bonds
cannot be used to increase your
stock basis. Because this amount is
already included in income elsewhere
on Schedule K-1, you must reduce
your stock basis by this amount. See
line 3 of the worksheet on page 2.
7. Qualified investment in
qualifying advanced coal project
property. The corporation will provide
an attached statement that shows
your share of the corporation’s
qualified investment you will need to
figure the amounts to report on Form
3468, lines 5a, 5b, and 5c.
8. Qualified investment in
qualifying gasification property. The
corporation will provide an attached
statement that shows your share of
the corporation’s qualified investment
you will need to figure the amounts to
report on Form 3468, lines 6a and 6b.
9. Qualified investment in
qualifying advanced energy project
credit property. The corporation will
provide an attached statement that
shows your share of the corporation’s
qualified investment you will need to
figure the amounts to report on Form
3468, line 7.
10. Inversion gain. The corporation
will provide a statement showing the
amounts of each type of income or
gain that is included in inversion gain.
The corporation has included
inversion gain in income elsewhere
on Schedule K-1. Inversion gain is
also reported under code U because
your taxable income and alternative
minimum taxable income cannot be
less than the inversion gain. Also,
your inversion gain (a) is not taken
into account in figuring the net
operating loss (NOL) for the tax year
or the NOL that can be carried over
to each tax year, (b) may limit your
credits, and (c) is treated as income
from sources within the U.S. for the
foreign tax credit. See section 7874
for details.
11. Any other information you may
need to file your return not shown
elsewhere on Schedule K-1.
The corporation should give you a
description and the amount of your
share for each of these items.

Instructions for Schedule K-1 (Form 1120S)