1120-S Schedule K- Instructions for Form 1120-S Schedule K-1

2019

Department of the Treasury
Internal Revenue Service

Shareholder's Instructions
for Schedule K-1
(Form 1120-S)
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

Future Developments

Purpose of Schedule K-1

For the latest information about
developments related to
Schedule K-1 (Form 1120-S) and its
instructions, such as legislation
enacted after they were published, go
to IRS.gov/Form1120S.

What’s New
New boxes 18 and 19. Boxes 18
and 19 will be checked when the
corporation is reporting information for
more than one at-risk or passive
activity. See the instructions for
box 18 and box 19.

Reminders
Qualified business income deduction. Individuals and some estates
and trusts may be entitled to a
deduction of up to 20% of their
qualified business income from a
trade or business. For more
information, see Code V. Section
199A information, under Box 17.
Other Information.
S corporation shareholder deferral
of tax (section 965(i)). A
shareholder of an S corporation may
have elected under section 965(i) to
defer payment of its section 965 net
tax liability, with respect to an S
corporation, until the shareholder’s tax
year that includes a triggering event
with respect to the section 965 net tax
liability. Triggering events include (1)
the corporation ceases to be an S
corporation; (2) a liquidation or sale of
substantially all assets of the S
corporation, a cessation of business
by the S corporation, the S
corporation ceases to exist, or any
similar circumstance; and (3) a
transfer of any share of stock in the S
corporation.

Jan 16, 2020

The corporation uses Schedule K-1 to
report your share of the corporation's
income, deductions, credits, and other
items. Keep it for your records. Don't
file it with your tax return unless
backup withholding is reported in
box 13 using code O. (See the
instructions for Code O. Backup
withholding, later.) The corporation
files a copy of Schedule K-1 with the
IRS.
For your protection, Schedule K-1
may show only the last four digits of
your identifying number (social
security number (SSN), employer
identification number (EIN), or
individual taxpayer identification
number (ITIN)). However, the
corporation has reported your
complete identifying number to the
IRS.
You may be 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
isn't self-employment income and it
isn't subject to self-employment tax.
The amount of loss and
deduction you may claim on
CAUTION 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, later, for more
information.

!

Schedule K-1 doesn't show actual
dividend distributions the corporation
Cat. No. 11521O

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 statements) 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 hasn't 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 hasn't
been filed).
If you are required to file Form 8082
but don't 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. Don't 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 an agreement
with the corporation regarding the
inconsistency, file Form 8082.

Sale of S Corporation
Stock

Gain or loss from the disposition of
your S corporation stock may be net
investment income under section
1411 and could be subject to the net
investment income tax. See Form
8960, Net Investment Income
Tax—Individuals, Estates, and Trusts,
and its instructions for information
about how to figure and report the tax.

International Boycotts

Every corporation that had operations
in, or related to, a boycotting country,
company, or a national of a boycotting
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 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, and other items, 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 IRS.gov.

Limitations on Losses,
Deductions, and Credits

There are 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
limitations, the at-risk limitations, the
passive activity limitations, and the
excess business loss limitations.
These limitations are discussed
below.
Other limitations may apply to
specific deductions (for example, the
section 179 expense deduction).
Specific limitations apply before
at-risk and passive loss limitations.

Basis Limitations

Generally, the deduction for your
share of aggregate losses and
deductions reported on Schedule K-1
is limited to the basis of your stock
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 annually 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 should generally
use the Worksheet for Figuring a
Shareholder’s Stock and Debt Basis
to figure your aggregate stock and
debt 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 on your return
(if you are required to file one)
CAUTION any amount required to be
included in gross income for it to
increase your basis.

!

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 (but not
below zero) 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 (but not
below zero) by all losses and
deductions reported on Schedule K-1.
You may elect to decrease your
basis under (4) prior to decreasing
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
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),
earlier, not used to offset amounts in
(1), earlier, or to reduce your stock
basis, are used to reduce your loan
basis (to the extent of such basis prior
to such reduction).

2. Basis is decreased (but not
below zero) by (a) property
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Instructions for Schedule K-1 (Form 1120-S) (2019)

!

CAUTION

When determining your basis
in loans to the corporation,
remember that:

• Distributions don't reduce loan
basis, and
• Loans that a shareholder
guarantees or co-signs aren't part of a
shareholder's loan basis.
Shareholders only obtain basis from
acting as a guarantee or in a similar
capacity to the extent the shareholder
makes a payment pursuant to the
guarantee.
See Regulations section
1.1366-2(a) and section 1367 and its
regulations for more details.

Worksheet Instructions for
Figuring a Shareholder’s Stock
and Debt Basis
Don’t use this worksheet if you
have made an election under
CAUTION Regulations section
1.1367-1(g).

!

Part I. Shareholder Stock Basis
This worksheet addresses
adjustments to stock basis as
CAUTION provided under section 1367.
Other code sections might also cause
a reduction in S corporation stock
basis. For example, certain credits
require the reduction of both an S
corporation’s assets as well as the
shareholder’s stock basis. See
sections 50(c)(1) and (5) for details.

!

Line 1. Enter your basis in the stock
of the S corporation at the beginning
of the corporation’s tax year. Unless
this is your initial year owning stock in
the S corporation, this amount should
be the same as your ending stock
basis from the prior tax year.
Stock basis can’t be less than zero.
Don’t include any basis from
indebtedness on this line. Stock basis
and debt basis must be figured
separately. Debt basis is addressed in
Part II of this worksheet.
Line 2. Enter any additional
contributions to the capital of the
S corporation or any additional
acquisitions of stock. Don’t include
any loans to the S corporation.
The basis of stock you purchased
is usually its cost.
If you contributed property to the
S corporation in exchange for stock in
a section 351 transaction, your stock
basis is generally figured by taking the

carryover basis of assets transferred
to the corporation, less the liabilities
assumed by the corporation. If the
assumed liabilities exceed the
adjusted tax basis of the contributed
assets, see section 357(c). See
section 358 for more information on
the basis of stock received in a
section 351 transaction.
The basis of inherited property is
generally the fair market value (FMV)
at the date of death or the alternate
valuation date.
The basis of stock acquired by gift
is generally the basis of the stock in
the hands of the donor. There are
special rules if the FMV of the stock is
less than the donor’s adjusted basis.
See Regulations section 1.1015-1.
The basis for stock received as
compensation is the FMV on the date
the compensation is included in
income. See Pub. 551 for details.
Line 3. Enter on lines 3a through 3m
all separately figured and
non-separately figured items of
income from the Schedule K-1. See
below for special instructions.
Reminder. Enter only positive
amounts from the Schedule K-1 on
line 3. Negative amounts (decreases
to stock basis) are entered on Part III.
Line 3i. Enter the amount of other
income that increases basis. Special
rules apply to basis adjustments
resulting from section 965 inclusions
and deductions. Report the amount
reported on Schedule K-1, box 10,
code F, reduced by box 12, code K.
The amount reported as section
965(c) deductions on Schedule K-1,
box 12, code K, is not treated as a
deduction that will separately reduce
basis under Part III of this worksheet.
See Regulations section 1.965-3(f)(2)
for more information.
Line 3j. Enter the amount by which
your cumulative depletion deduction
exceeds your proportionate share of
basis in the property subject to
depletion. See information reported in
Schedule K-1, box 15, using code C.
For oil and gas depletion, don’t
enter an amount. See the instructions
for line 8b for the decrease to basis.
Line 3k. Enter the sum of the
amounts from Schedule K-1, box 16,
codes A and B. Also add the amount
from Schedule K-1, box 12, code K.
See Regulations section 1.965-3(f)(2)
for more information.

Instructions for Schedule K-1 (Form 1120-S) (2019)

-3-

Basis isn’t increased by
excluded discharge of
CAUTION indebtedness income of the
S corporation under sections 108(a)
and 108(d)(7)(A).

!

The income reported on line 3 should
be reported on the appropriate areas
of your return. See specific
instructions for Income (Loss), later.
Line 6. Enter the distributions
reported on Schedule K-1, box 16,
code D. Don’t include any Form
1099-DIV distributions on this line.
Note. If the amount of the distribution
is more than the stock basis before
distributions, report the excess
amount as a capital gain on Form
8949 and Schedule D. Don’t increase
your stock basis for the amount of
capital gain reported for the excess.
See Nondividend distributions in the
Instructions for Form 8949.
Line 8a. Enter the amount from
Schedule K-1, box 16, code C.
Line 8b. Enter the amount of oil and
gas depletion claimed on your
personal return up to your
proportionate share of basis in the
property subject to depletion. Any
cumulative depletion in excess of your
proportionate share of basis in the
property subject to depletion won’t
reduce your basis.
Don’t enter an amount for depletion
not related to oil and gas property.
Line 11. Use Part III to figure the total
allowable loss and deduction items
from stock basis. Enter the total from
Part III, line 13, column (c). This
amount can’t exceed the amount on
line 10.
Line 12. Use Part II to figure the debt
basis restoration, if any. Enter the total
from Part II, line 8.
Line 13. Enter any other decreases
to stock basis not accounted for on
the lines above. This includes the
reduction to basis for the sale or
redemption of part of your stock.
If a portion of your stock is

TIP redeemed, sold, or otherwise

disposed of during the year,
attach two separate worksheets. Use
the first to figure your stock basis at
the date of sale and the second to
figure your stock and debt basis at
year end.

Worksheet for Figuring a Shareholder’s Stock and Debt Basis
Part I—Shareholder Stock Basis
1. Stock basis at the beginning of the corporation’s tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

2. Basis from any capital contributions made or additional stock acquired during the tax year . . . . . . . . . . . . . . . .

2.

3a. Ordinary business income (losses go on Part III)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3a.

b. Net rental real estate income (losses go on Part III) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3b.

c. Other net rental income (losses go on Part III) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3c.

d. Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3d.

e. Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3e.

f.

3f.

Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

g. Net capital gains (losses go on Part III)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3g.

h. Net section 1231 gain (losses go on Part III) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3h.

i.

Other income (losses go on Part III)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3i.

j.

Excess depletion adjustment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3j.

k. Tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3k.

l.

3l.

Recapture of business credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

m. Other items that increase stock basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3m.

4. Add lines 3a through 3m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

5. Stock basis before distributions. Add lines 1, 2, and 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

6. Distributions (excluding dividend distributions)

6.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note. If line 6 is larger than line 5, subtract line 5 from line 6 and report the result as a capital gain on Form 8949 and
Schedule D. See instructions.
7. Stock basis after distributions. Subtract line 6 from line 5. If the result is zero or less, enter -0-, skip lines 8 through 14,
and enter -0- on line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8a. Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8a.

b. Depletion for oil and gas

8b.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

9. Add lines 8a and 8b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.

10. Stock basis before loss and deduction items. Subtract line 9 from line 7. If the result is zero or less, enter -0-, skip lines
11 through 14, and enter -0- on line 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

11. Allowable loss and deduction items. Enter the amount from Part III, line 13, column (c)

. . . . . . . . . . . . . . . . . .

11.

. . . . . . . . . . . . . . . . . . . . . . . . . . .

12.

13. Other items that decrease stock basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.

14. Add lines 11, 12, and 13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.

15. Stock basis at the end of the corporation’s tax year. Subtract line 14 from line 10. If the result is zero or less,
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15.

12. Debt basis restoration (see net increase in instructions for Part II, line 8)

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Instructions for Schedule K-1 (Form 1120-S) (2019)

Part II. Shareholder Debt Basis
You must complete this section if you
have personally loaned money to the
corporation.
You must account for each formal
note (notes with a written instrument)
made to your S corporation by
entering it separately in its own
column. You can’t aggregate multiple
loans into a single column. If you have
more than three loans, use additional
copies of Part II.
Loans made to the S corporation
that aren’t evidenced by a written
instrument are referred to as an open
account debt and aren’t separately
tracked. If an open account debt has a
year-end balance of more than
$25,000, it will be classified as a
formal note at the beginning of the
next tax year and must be separately
tracked.
Loans that a shareholder
guarantees or co-signs aren’t
CAUTION part of a shareholder’s loan
basis except to the extent the
shareholder makes a payment on the
loan guaranteed or co-signed.

!

Line 1. Enter the balance of each
loan to the S corporation at the
beginning of the corporation’s tax year
in a separate column.
Line 2. Enter any new loans made
during the tax year and evidenced by
a formal note in a separate column. If
a formal note is refinanced, any
increase should be entered on line 2
under the same column as the original
loan.
Advances and repayments made
during the S corporation’s tax year on
an open account are netted at the
close of the S corporation’s tax year to
determine the amount of any net
advance or net repayment. See
Regulations section 1.1367-2(d)(2).
Enter any net advances on line 2
under the same column as the open
account debt. If this is the first year of

the open account debt, enter the net
advance in its own column on line 2.

restore debt basis to the face of the
loan.

Any debt that exceeded
$25,000 at the end of the prior
CAUTION year is treated as a formal
note for purposes of calculating the
gain on loan repayment. See
Regulations section 1.1367-2(a)(2)(ii).

If you have multiple debts, the
net increase is applied first to
CAUTION restore the reduction of basis
in any debt repaid in the tax year to
the extent necessary to offset any
gain that would otherwise be realized.
Any remaining net increase is applied
to each debt in proportion to its
reduced basis. See Regulations
section 1.1367-2(c)(2).

!

Line 4. For a formal note, enter the
amount of principal repayment
specific to each loan.
For open account debt, if the
repayments exceed the advances for
the tax year, the net repayment should
be entered on line 4.
Line 6. Enter the debt basis of your
loan(s) to the S corporation at the
beginning of the corporation’s tax
year.
Line 7. Enter the amount from line 2
on line 7.
Line 8. You have reduced debt basis
if line 6 is less than line 1.
Per section 1367(b)(2)(B), if debt
basis has been reduced, it can only
be restored with a net increase. The
net increase is the amount by which
the items that increase stock basis per
section 1367(a)(1) (for example,
income, tax exempt income, and
excess depletion) exceed the items
that decrease stock basis per section
1367(a)(2) (for example, losses,
deductions, nondeductibles,
nondividend distributions, etc.). See
Regulations section 1.1367-2(c)(1).
The net increase is figured as
follows:
Part I, line 4
Minus Part I, line 6
Minus Part I, line 9
Minus Part I, line 13 (as applicable)
Minus Part III, line 13(a)
Minus Part III, line 13(b)
If the net increase figured exceeds
the total reduction in debt basis (line 1
minus line 6), then the restoration is
limited to the amount needed to

Instructions for Schedule K-1 (Form 1120-S) (2019)

-5-

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Line 13. Enter the smaller of the
nondeductible expenses and oil and
gas depletion deductions in excess of
stock basis (Part I, line 9 minus line 7)
or Part II, line 12.
Nondeductible expenses in excess
of stock and debt basis don’t carry
forward (unless an election under
Regulations section 1.1367-1(g) is
made. As noted earlier, don’t use this
worksheet if that election has been
made).
Line 15. Enter the amount from Part
III, line 13(d), in the total column on
line 15.
If you have more than one
loan to the corporation, any
CAUTION allocated reduction is prorated
to the loans based on the ratio that
each individual loan basis bears to the
aggregate bases of the loans. See
Regulations section 1.1367-2(b)(3).

!

Line 19. The character of the gain on
repayment is dependent on whether
the debt is evidenced by a formal note
or is an open account.
Debt evidenced by a formal note
will result in capital gain, and should
be reported on Form 8949 and
Schedule D.
Any open account debt will result in
ordinary gain, and should be reported
on Form 4797.

!

CAUTION

Gain recognized on loan
repayment doesn’t increase
basis.

Part II—Shareholder Debt Basis
Debt 1
Formal note
Open account
debt

Debt 2
Formal note
Open account
debt

Debt 3
Formal note
Open account
debt

Total

Amount of Debt:
1.

Loan balance at the beginning of the corporation’s tax
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

Additional loans (see instructions) . . . . . . . . . . .

3.

Loan balance before repayment. Combine lines 1 and
2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

Principal portion of debt repayment (this line doesn’t
include interest) . . . . . . . . . . . . . . . . . . . . . . .

5.

Loan balance at the end of the corporation’s tax year.
Combine lines 3 and 4 . . . . . . . . . . . . . . . . . . .

(

)

(

)

(

)

(

)

Adjustments to Debt Basis:
6.

Debt basis at the beginning of the corporation’s tax
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

Enter the amount, if any, from line 2 . . . . . . . . . .

8.

Debt basis restoration (see instructions)

9.

Debt basis before repayment. Combine lines 6, 7, and
8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Divide line 9 by line 3

. . . . . . .

. . . . . . . . . . . . . . . . . . .

11. Nontaxable debt repayment. Multiply line 10 by
line 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Debt basis before nondeductible expenses and losses.
Subtract line 11 from line 9 . . . . . . . . . . . . . . . .
13. Nondeductible expenses and oil and gas depletion
deductions in excess of stock basis . . . . . . . . . .
14. Debt basis before losses and deductions. Subtract
line 13 from line 12. If the result is zero or less,
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. Allowable losses in excess of stock basis. Enter the
amount from Part III, line 13, column (d) . . . . . . . .
16. Debt basis at the end of the corporation’s tax year.
Subtract line 15 from line 14. If the result is zero or less,
enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Loan Repayment:
17. Repayment. Enter the amount from line 4 . . . . . . .
18. Nontaxable repayments. Enter the amount from
line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19. Reportable gain. Subtract line 18 from line 17 . . .

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Instructions for Schedule K-1 (Form 1120-S) (2019)

Part III. Allowable Loss and
Deduction Items
The corporate losses and other
deduction items are limited to the sum
of your stock and debt basis. When
stock and debt basis is insufficient,
and there is more than one type of
loss or deduction item that reduces
basis, the amounts allowed as a loss
or deduction are allocated on a pro
rata basis. See Regulations sections
1.1366-2(a)(4) and (5).
Loss and deductions in excess of
basis are suspended and carried
forward indefinitely and the character
of the loss and deduction items is
retained.
Part III shows the pro rata
allocation and tracks any loss or
deduction carryforward.
Column (a). Enter the loss and
deduction amounts for each item as
reported on your Schedule K-1.

Column (b). Enter any loss or
deduction items disallowed due to
basis limitations in prior years that
were carried forward.
Column (c). If Part I, line 10, is zero,
skip column (c).
If stock basis, as reported on Part I,
line 10, is greater than the sum of
column (a) and column (b), line 13,
enter the sum of each line for column
(a) plus column (b) in column (c). If
stock basis, as reported on Part I,
line 10, is less than the sum of column
(a) and column (b), line 13, enter the
pro rata amount on the corresponding
line in column (c). The total allocation
amount reported in column (c),
line 13, can’t exceed the amount
reported on Part I, line 10.
Column (d). If Part II, line 14, is zero,
skip column (d).
If column (c), line 13, is less than
Part I, line 10, skip column (d).

If debt basis, as reported on Part II,
line 14, is greater than column (a) plus
column (b) minus column (c), line 13,
enter column (a) plus column (b)
minus column (c), in column (d) for
each line item. If debt basis, as
reported on Part II, line 14, is less than
column (a) plus column (b) minus
column (c), line 13, enter the pro rata
amount on the corresponding line in
column (d). The total allocation
amount reported in column (d),
line 13, can’t exceed the amount
reported on Part II, line 14.
The allowable losses and
deductions from columns (c) and (d)
should be reported on the appropriate
areas of your return (subject to any
additional limitations).
Column (e). If the sum of column (a)
plus (b) exceeds the sum of column
(c) plus (d), enter the excess in
column (e) for each line item. If you
disposed of all your stock, see
Regulations section 1.1366-2(a)(6).

Part III—Allowable Loss and Deduction Items
(a) Current year
losses and
deductions
1.

Ordinary business loss . . . . . . . . .

2.

Net rental real estate loss . . . . . . . .

3.

Other net rental loss . . . . . . . . . . .

4.

Net capital loss . . . . . . . . . . . . . .

5.

Net section 1231 loss . . . . . . . . . .

6.

Other loss . . . . . . . . . . . . . . . . .

7.

Section 179 deductions . . . . . . . . .

8.

Charitable contributions . . . . . . . . .

9.

Investment interest expense . . . . . .

(b) Carryover
amounts (column (c) Allowable loss (d) Allowable loss
(e)) from the
from stock basis
from debt basis
previous year

10. Section 59(e)(2) expenditures . . . . .
11. Other deductions . . . . . . . . . . . . .
12. Foreign taxes paid or accrued . . . . .
13. Total Loss. Combine lines 1 through 12
for each column. Enter the total loss in
column (c) on line 11 of Part I and enter
the total loss in column (d) on line 15 of
Part II . . . . . . . . . . . . . . . . . . . .

Instructions for Schedule K-1 (Form 1120-S) (2019)

-7-

(e) Carryover
amounts

At-Risk Limitations

Generally, if you have (a) a loss or
other deduction from any activity
carried on as a trade or business or
for the production of income by the
corporation, and (b) amounts in the
activity for which you aren't at risk, you
will have to complete Form 6198,
At-Risk Limitations, to figure your
allowable loss for the activity.
The at-risk rules generally limit the
amount of loss and other deductions
that you can claim to the amount you
could actually lose 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 don't
apply to losses from an activity of
holding real property placed in service
before 1987 by the corporation. The
activity of holding mineral property
doesn't qualify for this exception.
Generally, you aren't 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.
Since at-risk limitations apply for
each activity, you should get a

separate statement of income,
expenses, and other items, for each
activity from the corporation.
Note. Schedule K-1, box 18 will be
checked when a statement is
attached.

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.
Generally, passive activities
include:
1. Trade or business activities in
which you didn't 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 don't include the
following.
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.
b. You performed more than 750
hours of services in real property
trades or businesses in which you
materially participated.
If you are married filing jointly,
either you or your spouse must
separately meet both (a) and (b) 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 aren't
treated as performed in a real
property trade or business unless you
-8-

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 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 has 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, portfolio income) and specifies
the income (loss), deductions, and
credits from each activity.
Note. Schedule K-1, box 19 will be
checked when a statement is
attached.
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 earlier),
in each rental real estate activity held
through the corporation.
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 or 1040-SR),
Supplemental Income and Loss.
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

Instructions for Schedule K-1 (Form 1120-S) (2019)

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 aren't 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 wasn't less
than the participation in the activity of
any other individual (including
individuals who weren’t 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 didn't 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 isn't 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 isn't
counted toward material participation
if either of the following applies.
1. The work isn't 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 aren't
directly involved in the day-to-day
operations of the activity. Examples of
work done as an investor that wouldn't
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
• You were a real estate professional
(defined earlier) in a rental real estate
activity of the corporation.
If you determine that you didn't
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,

Instructions for Schedule K-1 (Form 1120-S) (2019)

-9-

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 isn't available if you
were married, file a separate return for
the year, and didn't 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 aren't 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
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 the
following amounts, if applicable.
• Any passive activity loss.
• Any rental real estate loss allowed
under section 469(c)(7) to real estate
professionals (defined earlier).
• 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 deductible part 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 isn't subject to the
active participation rules or modified
adjusted gross income limits
discussed above. See section 469(i)
(3)(C) as in effect before March 23,
2018, and 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 attached
statement.
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 don't 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.
See the Instructions for Form 8582 for
details.

Excess Business Loss
Limitations

Losses attributable to your trade or
business may be limited, pursuant to
section 461. See Form 461 and the
Instructions for Form 461 for more
information.

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, and
other items, 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, and
3. The passive activity limitations.
For information on these
provisions, see Limitations on Losses,
Deductions, and Credits, earlier.
Other limitations may apply to
specific deductions (for example, the
section 179 expense deduction).
Generally, specific limitations apply
before the at-risk and passive loss
limitations.
If you are an individual, and the
above limitations don't 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 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 2019. 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 2020, report the
amounts on your 2020 tax return.
If you have losses, deductions, or
credits from a prior year that weren’t
deductible or usable because of

-10-

Instructions for Schedule K-1 (Form 1120-S) (2019)

certain limitations, such as the basis
limitations 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, don't
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 or 1040-SR),
enter each item separately on
Schedule E (Form 1040 or 1040-SR),
line 28.

!

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 can't 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 or
1040-SR depends on whether the
amount is from an activity that is a
passive activity to you. If you are an
individual shareholder filing a 2019
Form 1040 or 1040-SR, find your
situation below and report your box 1
income (loss) as instructed after
applying the basis and at-risk
limitations on losses. See Limitations
on Losses, Deductions, and Credits,
earlier. 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 or 1040-SR),
line 28, column (i) or (k).
2. Report box 1 income (loss) from
corporate trade or business activities
in which you didn't materially
participate, as follows.
a. If income is reported in box 1,
report the income on Schedule E
(Form 1040 or 1040-SR), line 28,
column (h).
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
or 1040-SR), line 28, column (g).

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 isn't from a
passive activity if you were a real
estate professional (defined earlier)
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 2019 Form 1040
or 1040-SR, use the following
instructions to determine where to
report a box 2 amount after applying
the basis and at-risk limitations on
losses. See Limitations on Losses,
Deductions, and Credits, earlier.
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 or
1040-SR), line 28, column (g).
a. You actively participated in the
corporate rental real estate activities.
See Special allowance for a rental real
estate activity, earlier.
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. If you are a married person filing
separately, you lived apart from your
spouse all year.
e. Your total loss from the rental
real estate activities wasn't more than

Instructions for Schedule K-1 (Form 1120-S) (2019)

-11-

$25,000 (not more than $12,500 if
married filing separately).
f. You have no current or prior
year unallowed credits from a passive
activity.
g. Your modified adjusted gross
income wasn't 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 don't
meet all the conditions in (1) above,
follow the Instructions for Form 8582
to figure how much of the loss you can
report on Schedule E (Form 1040 or
1040-SR), line 28, column (g).
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 or 1040-SR), line 28,
column (i) or (k).
4. If you have income from a
passive activity in box 2, report the
income on Schedule E (Form 1040 or
1040-SR), line 28, column (h).

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. After applying the
limitations on losses and deductions,
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 or
1040-SR), line 28, column (g).
2. If income is reported in box 3,
report the income on Schedule E
(Form 1040 or 1040-SR), line 28,
column (h).
See Limitations on Losses,
Deductions, and Credits, earlier.

Portfolio Income

Portfolio income or loss (shown in
boxes 4 through 8b and in box 10,
code A) isn't 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 Form 1040
or 1040-SR, line 2b.

Box 5a. Ordinary Dividends

Report ordinary dividends on Form
1040 or 1040-SR, line 3b.

Box 5b. Qualified Dividends

Report any qualified dividends on
Form 1040 or 1040-SR, line 3a.

Qualified dividends are
TIP 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.

!

CAUTION

If you have any foreign source
qualified dividends, see the
instructions for box 14, later.

Box 6. Royalties

Report royalties on Schedule E (Form
1040 or 1040-SR), line 4.

Box 7. Net Short-Term Capital
Gain (Loss)

After applying the limitations on losses
and deductions, report the net
short-term capital gain (loss) on
Schedule D (Form 1040 or 1040-SR),
line 5. See Limitations on Losses,
Deductions, and Credits, earlier.

Box 8a. Net Long-Term Capital
Gain (Loss)

After applying the limitations on losses
and deductions, report the net
long-term capital gain (loss) on
Schedule D (Form 1040 or 1040-SR),
line 12. See Limitations on Losses,
Deductions, and Credits, earlier.

If you have any foreign source
net long-term capital gain
CAUTION (loss), see the instructions for
box 14, later.

!

Box 8b. Collectibles (28%) Gain
(Loss)

After applying the limitations on losses
and deductions, report collectibles
gain or loss on line 4 of the 28% Rate
Gain Worksheet—Line 18 in the
Instructions for Schedule D (Form
1040 or 1040-SR). See Limitations on
Losses, Deductions, and Credits,
earlier.

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 or 1040-SR) 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.
If you have any foreign source
unrecaptured section 1250
CAUTION gain, see the instructions for
box 14, later.

!

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 didn't materially participate.
However, an amount from a rental
real estate activity isn't from a passive
activity if you were a real estate
professional (defined earlier) and you
materially participated in the activity.
If the amount is either (a) a loss that
isn't from a passive activity or (b) a
gain, report it on Form 4797, line 2,
column (g), after applying the basis
and at-risk limitations on losses. See
Limitations on Losses, Deductions,
and Credits, earlier. Don't complete
columns (b) through (f) on line 2 of
Form 4797, Sales of Business
Property. Instead, enter “From
Schedule K-1 (Form 1120-S)” across
these columns.
If the amount is a loss from a
passive activity, see Passive Loss
Limitations in the Instructions for Form
-12-

4797. After applying the limitations on
losses and deductions, 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.

!

CAUTION

later.

If you have any foreign source
net section 1231 gain (loss),
see the instructions for box 14,

Box 10. Other Income (Loss)
Losses reported in box 10
may be limited. See
CAUTION Limitations on Losses,
Deductions, and Credits, earlier.

!

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
or 1040-SR), line 38, column (d). The
statement will also report your share
of any “excess inclusion” that you
report on Schedule E (Form 1040 or
1040-SR), line 38, column (c), and
your share of section 212 expenses
that you report on Schedule E (Form
1040 or 1040-SR), line 38, column (e).
Code B. Involuntary conversions.
This is your net loss from involuntary
conversions due to casualty or theft.
The corporation will give you a
statement that shows the amounts to
be reported on Form 4684, Casualties
and Thefts, line 34, 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 1120-S) (2019)

Losses From Section 1256 Contracts
and Straddles.
Code D. Mining exploration costs
recapture. The corporation will give
you a statement that shows the
information needed to recapture
certain mining exploration costs
(section 617). See Pub. 535 for
details.
Code E. Reserved for future use.
Code F. Section 965(a) inclusion.
The corporation will provide your
share of its section 965(a) inclusions.
Subtract from this amount the section
965(c) deductions reported in box 12,
code K, if applicable. Report the net
amount on Schedule 1 (Form 1040 or
1040-SR), line 8. See the Instructions
for Forms 1040 and 1040-SR, the
Instructions for Form 965, and the
Instructions for Form 965-A for details.
Code G. Income under subpart F
(other than inclusions under sections 951A and 965). The
corporation will provide your share of
its subpart F inclusions other than
sections 951A and 965 inclusions.
Report this amount on your Form
1040, 1040-SR, or relevant income
tax return.
Code H. Other income (loss).
Amounts with code H are other items
of income, gain, or loss not included in
boxes 1 through 9 or in box 10 using
codes A through G. 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 H 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 Schedule 1
(Form 1040 or 1040-SR), line 8, to the
extent it reduced your tax in the prior
year.
• Gambling gains and losses.
1. If the corporation wasn't
engaged in the trade or business of
gambling, (a) report gambling
winnings on Schedule 1 (Form 1040
or 1040-SR), line 8, and (b) deduct
gambling losses to the extent of
winnings on Schedule A (Form 1040
or 1040-SR), line 16.
2. If the corporation was engaged
in the trade or business of gambling,

(a) report gambling winnings on
Schedule E (Form 1040 or 1040-SR),
line 28, and (b) deduct gambling
losses (to the extent of winnings) on
Schedule E (Form 1040 or 1040-SR),
line 28, column (i).
• 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
didn't elect to deduct under section
59(e)). Report a loss in Part I of Form
4797. Report a gain in Part III of 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 1120-S) that
isn't 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 or 1040-SR), line 5.
Report the total net long-term gain
(loss) on Schedule D (Form 1040 or
1040-SR), 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 or 1040-SR))
eligible for the 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

Instructions for Schedule K-1 (Form 1120-S) (2019)

-13-

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 can't 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 Form 8949, Sales and Other
Dispositions of Capital Assets,
Schedule D (Form 1040 or 1040-SR),
and the related instructions 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 can't
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 Form 8949, Schedule D (Form
1040 or 1040-SR), and the related
instructions 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 can't
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 or
1040-SR)) during the 60-day period
that began on the date the QSB stock
was sold by the corporation.
See Form 8949, Schedule D (Form
1040 or 1040-SR), and the related
instructions for details on how to
report the gain and the amount of the
allowable postponed gain.
• The corporation will provide the
information you need to figure your
global intangible low-taxed income
(GILTI) inclusion. See the Instructions
for Form 8992 for details.

Deductions
There are potential limitations
on corporate losses you can
CAUTION deduct on your return. These
limitations and the order in which you
must apply them are as follows: the
basis limitations, the at-risk
limitations, the passive activity
limitations, and the excess business
loss limitations. See Limitations on
Losses, Deductions, and Credits,
earlier.

!

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
property or qualified real property it
placed in service during its 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 isn't a passive
activity deduction, report it on
Schedule E (Form 1040 or 1040-SR),
line 28, column (j), after applying the
basis and at-risk limitations on losses.
See Limitations on Losses,
Deductions, and Credits, earlier.

Box 12. Other Deductions
Deductions reported in box 12
may be limited. See
CAUTION Limitations on Losses,
Deductions, and Credits, earlier.

!

Contributions. Codes A through G.
The corporation will give you a
statement that shows charitable
contributions subject to the 100%,
60%, 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. 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 or 1040-SR). If your
contributions are subject to more than
one of the AGI limitations, see Pub.
526.
Charitable contribution deductions
aren't taken into account in figuring
your passive activity loss for the year.
Don't enter them on Form 8582.
Code A. Cash contributions (60%).
Report this amount, subject to the
60% AGI limitation, on Schedule A
(Form 1040 or 1040-SR), line 11.
Code B. Cash contributions (30%).
Report this amount, subject to the
30% AGI limitation, on Schedule A
(Form 1040 or 1040-SR), line 11.
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. Don't 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
-14-

limitation, on Schedule A (Form 1040
or 1040-SR), line 12.
If the corporation provides you with
information that the contribution was
property other than cash and doesn't
give you a Form 8283, see the
Instructions for Form 8283 for filing
requirements. Don't 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 isn't
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 can't exceed 15% 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).
Amounts that exceed the 15%
limitation may be carried over for up to
5 years. Report the deduction, subject
to the 50% AGI limitation, on
Schedule A (Form 1040 or 1040-SR),
line 12.
Code D. Noncash contributions
(30%). Report this amount, subject to
the 30% AGI limitation, on Schedule A
(Form 1040 or 1040-SR), line 12.
Code E. Capital gain property to a
50% organization (30%). Report
this amount, subject to the 30% AGI
limitation, on Schedule A (Form 1040
or 1040-SR), line 12. See Worksheet
2. Applying the Deduction Limits in
Pub. 526.
Code F. Capital gain property
(20%). Report this amount, subject to
the 20% AGI limitation, on Schedule A
(Form 1040 or 1040-SR), line 12.
Code G. Contributions (100%).
The corporation will report your share
of qualified cash contributions that
were donated for relief efforts in
certain disaster areas. You can elect
to deduct 100% of these contributions
on Schedule A (Form 1040 or
1040-SR), line 11. If you don’t make
this election, add this amount to the
cash contributions reported in box 12

Instructions for Schedule K-1 (Form 1120-S) (2019)

using code A and enter the total
amount, subject to a 60% AGI
limitation, on Schedule A (Form 1040
or 1040-SR), line 11.
Qualified conservation
contributions of property used in
agriculture or livestock
production. The corporation will
report on an attached statement your
share of qualified conservation
contributions of property used in
agriculture or livestock production.
This contribution isn't included in the
amount reported in box 12 using code
C or G. 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 Schedule A
(Form 1040 or 1040-SR), line 12. See
Pub. 526 for more information on
qualified conservation contributions.
Code H. Investment interest expense. Report 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. Report deductions allocable to
royalties on Schedule E (Form 1040
or 1040-SR), line 19. For this type of
expense, enter “From Schedule K-1
(Form 1120-S).”
These deductions aren't taken into
account in figuring your passive
activity loss for the year. Don't 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 aren't 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 Schedule E (Form
1040 or 1040-SR), line 28. If you don't
make the election, report the section
59(e)(2) expenditures on Schedule E
(Form 1040 or 1040-SR), line 28, 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 on a
separate line in column (i) of line 28 if
you materially participated in the
activity. If you didn't materially
participate, follow the Instructions for
Form 8582 to figure how much of the
deduction can be reported in column
(g).
Code K. Section 965(c) deduction.
See the instructions for box 10, code
F, section 965(a) inclusion, earlier,
and the Instructions for Form 965 and
the Instructions for Form 965-A for
details.
Code L. Deductions—Portfolio
(other). Generally, you should report
these amounts on Schedule A (Form
1040 or 1040-SR), line 16. See the
instructions for Schedule A (Form
1040 or 1040-SR), line 16, for details.
These deductions aren't taken into
account in figuring your passive
activity loss for the year. Don't 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

Instructions for Schedule K-1 (Form 1120-S) (2019)

-15-

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 or 1040-SR),
line 28, column (g).
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 didn't materially participate in
the activity, use Form 8582 to figure
the amount to report on Schedule E
(Form 1040 or 1040-SR), line 28,
column (g). If you materially
participated in the reforestation
activity, report the deduction on
Schedule E (Form 1040 or 1040-SR),
line 28, column (i).
Codes P through R. Reserved for
future use.
Code S. Other deductions.
Amounts with this code may include
the following.
• Itemized deductions that Form
1040 or 1040-SR filers report on
Schedule A (Form 1040 or 1040-SR).
• Soil and water conservation
expenditures 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 Schedule E (Form 1040 or
1040-SR), line 28. 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 (i). If you didn't materially
participate in the activity, follow the
Instructions for Form 8582 to figure
the interest expense you can report in
column (g). Material participation is
defined earlier under Passive Activity
Limitations. 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 isn't
taken on Schedule E (Form 1040 or
1040-SR). Instead, you subtract the
deduction from the amount that would
normally be entered as taxable
income on Form 1040 or 1040-SR,
line 11b. In the margin to the left of
line 11b, enter "CCF" and the amount
of the deduction.
• Penalty on early withdrawal of
savings. Report this amount on
Schedule 1 (Form 1040 or 1040-SR),
line 17.
• Film, television, and live theatrical
production expenses. The corporation
will provide a statement that describes
the film, television, or live theatrical
production generating these
expenses. Generally, if the aggregate
cost of the production exceeds $15
million, you aren't entitled to the
deduction. The limitation is $20 million
for productions in certain areas (see
section 181 for details). If you didn't
materially participate in the activity,
use Form 8582 to determine the
amount that can be reported on
Schedule E (Form 1040 or 1040-SR),
line 28, column (g). If you materially
participated in the production activity,
report the deduction on Schedule E
(Form 1040 or 1040-SR), line 28,
column (i).
• Current year section 108(i) original
issue discount (OID) deduction. The
corporation will provide your share of
the corporation's OID 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 provide you
with a statement with domestic
production activities 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.

• Report the qualified production
activities income reported to you by
the corporation (in box 12 of
Schedule K-1) in the applicable
column of Form 8903, line 7.
• Report the portion of employer's
Form W-2 wages reported to you by
the corporation (in box 12 of
Schedule K-1) on Form 8903, line 17.
• Report the domestic production
activity deduction from cooperatives
reported to you by the corporation (in
box 12 of Schedule K-1) on Form
8903, line 23.
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, earlier,
and the Instructions for Form
8582-CR for details.
In general, shareholders

TIP whose only sources for a

credit listed on Form 3800,
General Business Credit, Part III, are
partnerships, S corporations, estates,
trusts, and cooperatives, aren't
required to complete the applicable
credit form or attach it to their return.
Instead, they can report the credit
amounts reported to them by these
pass-through entities directly on Form
3800, Part III, and enter the EIN of the
entity in column (b) of Part III.
However, when applicable, all
shareholders must complete and
attach the following credit forms to
their return.

• Form 3468, Investment Credit
(Form 3800, Part III, line 1a).
• Form 8864, Biodiesel and
Renewable Diesel Fuels Credit (Form
3800, Part III, line 1l).

See the Instructions for Form 3800 for
more details.
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
credit using code A or code C,
depending on the date the building
was placed in service. If section 42(j)
(5) doesn't 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
-16-

reported using code A or code B is
reported on line 4 of Form 8586,
Low-Income Housing Credit, or Form
3800, Part III, line 1d (see TIP,
earlier). Any allowable low-income
housing credit reported using code C
or code D is reported on line 11 of
Form 8586 or Form 3800, Part III,
line 4d (see TIP, earlier).
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 the
Instructions for Form 3468 for details.
If the corporation is reporting
expenditures from more than one
activity, an 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
from each activity on an attached
statement. See Passive Activity

Instructions for Schedule K-1 (Form 1120-S) (2019)

Limitations, earlier, 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, earlier, 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 Schedule
3 (Form 1040 or 1040-SR), line 13,
check box “a” for Form 2439, and
enter “Form 1120-S” to the right of
line 13. Reduce the basis of your
stock by this tax.
Code I. Biofuel producer credit.
Report this amount on line 3 of Form
6478, Biofuel Producer Credit, or
Form 3800, Part III, line 4c (see TIP,
earlier).
Code J. Work opportunity credit.
Report this amount on line 3 of Form
5884, Work Opportunity Credit, or
Form 3800, Part III, line 4b (see TIP,
earlier).
Code K. Disabled access credit.
Report this amount on line 7 of Form
8826, Disabled Access Credit, or
Form 3800, Part III, line 1e (see TIP,
earlier).
Code L. Empowerment zone employment credit. Report this amount
on line 3 of Form 8844, Empowerment
Zone Employment Credit, or Form
3800, Part III, line 3 (see TIP, earlier).
Code M. Credit for increasing research activities. Report this
amount on line 37 of Form 6765,
Credit for Increasing Research
Activities, or in Part III of Form 3800
(see TIP, earlier) as follows.
• The S corporation will provide
information necessary to determine if
it is an eligible small business under
section 38(c)(5)(A). If you and the
S corporation are eligible small
businesses, report the credit on
line 4i. For more information, see the
Instructions for Form 3800.

• All others, report the credit on
line 1c.
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, or Form 3800,
Part III, line 4f (see TIP, earlier).
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 or 1040-SR,
line 17, and attach a copy of your
Schedule K-1 to your tax return.
Instead of attaching a copy of your
Schedule K-1 to your tax return, you
can include a statement with your
return that provides the corporation's
name, address, EIN, and backup
withholding amount.
Code P. Other credits. On a
statement attached 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, Part III
(see TIP, earlier).
Credits that may be reported with
code P include the following.
• Unused investment credit from the
qualifying advanced coal project
credit, qualifying gasification project
credit, or qualifying advanced energy
project credit allocated from
cooperatives (Form 3468, line 9).
• Unused investment credit from the
rehabilitation credit or energy credit
allocated from cooperatives (Form
3468, line 13).
• Employee retention credit (Form
5884-A).
• Orphan drug credit (Form 8820).
• Enhanced oil recovery credit (Form
8830).
• Renewable electricity, refined coal,
and Indian coal production credit
(Form 8835). The corporation will
provide a statement showing the
allocation of the credit for production
during the 4-year period beginning on
the date the facility was placed in
service and for production after that
period.
• Indian employment credit (Form
8845).
• Biodiesel and renewable diesel
fuels credit. If this credit includes the
small agri-biodiesel producer credit,

Instructions for Schedule K-1 (Form 1120-S) (2019)

-17-

the corporation will provide additional
information on an attached statement.
If no statement is attached, report this
amount on Form 8864, line 9. 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).
• Credit for oil and gas production
from marginal wells (Form 8904).
• Distilled spirits credit (Form 8906).
• Energy efficient home credit (Form
8908).
• Alternative motor vehicle credit
(Form 8910).
• Alternative fuel vehicle refueling
property credit (Form 8911).
• 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.
• 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).
• Credit for employer differential
wage payments (Form 8932).
• Carbon oxide sequestration credit
(Form 8933).
• Qualified plug-in electric drive
motor vehicle credit (Form 8936).
• Qualified two-wheeled plug-in
electric vehicle credit (Form 8936), if
applicable.
• Credit for small employer health
insurance premiums (Form 8941).
• Employer credit for paid family and
medical leave (Form 8994).

Box 14. Foreign
Transactions
Codes A through R, U, and V. Use
the information identified by codes A
through R, code U, code V, and any

attached statements to figure your
foreign tax credit.
The amounts used to figure your
foreign tax credit or deduction may be
limited. See Limitations on Losses,
Deductions, and Credits, earlier.
If you have any qualified
dividends, capital gains
CAUTION (including any capital gain
distributions), capital losses, net
section 1231 gains, or net section
1231 losses, you may have to make
certain adjustments to those amounts
before taking them into account on
Form 1116, Foreign Tax Credit.

!

For details, see Form 1116 and its
separate instructions and Pub. 514,
Foreign Tax Credit for Individuals.
Codes D and K. Reserved for future
use.
Codes S and T. Extraterritorial income exclusion.
1. Corporation didn't claim the
exclusion. If the corporation reports
your share of foreign trading gross
receipts (code S) and the
extraterritorial income exclusion (code
T), the corporation wasn't entitled to
claim the exclusion because it didn't
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 exclusion,
report the exclusion amount in
accordance with the instructions 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 may
also 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.

When asked for, the

TIP corporation should furnish you

a copy of the corporation's
Form 8873 if there is a reduction for
international boycott operations,
illegal bribes, kickbacks, or similar
items.

Code U. Section 965 information.
If the corporation had a section 965(a)
inclusion, it will attach a copy of the
Form 965, including Schedules F and
H, to your Schedule K-1.
Code V. Other foreign transactions. On a statement attached to
Schedule K-1, the corporation will
report any other information on foreign
transactions that you may need using
code V.

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 Form 6251, line 2l.
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
Form 6251, line 2k.
Code C. This amount is your share of
the corporation's depletion
adjustment. If you are an individual
shareholder, report this amount on
Form 6251, line 2d.
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 statement 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 Form 6251, line 2t.
-18-

Code F. Other AMT items. Report
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 or
1040-SR, line 2a. 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 don't include it in income
on your tax return.
Code C. Nondeductible expenses.
The nondeductible expenses paid or
incurred by the corporation aren't
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 earlier) 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 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 Form
8949 and Schedule D (Form 1040 or
1040-SR).
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 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.

Instructions for Schedule K-1 (Form 1120-S) (2019)

Box 17. Other Information
Code A. Investment income.
Report this amount on Form 4952,
line 4a.
Code B. Investment expenses.
Report this amount on Form 4952,
line 5.
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 the
Instructions for 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, use
the information on the statement to
complete lines 12a–12e, 12g, 12h,
12j, 12k, 12m, 12n, 12p, 12q, 12s,
and 12u–12aa of 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.

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 a statement attached to
Schedule K-1, the corporation will
report any information you need to
figure the recapture of other credits
including the new markets 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

Instructions for Schedule K-1 (Form 1120-S) (2019)

-19-

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, 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
before the end of the recapture
period. 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.
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. Report the
interest on Schedule 2 (Form 1040 or
1040-SR), line 8. Check box “c” and
enter “453(l)(3)” and the amount of the
interest in the space next to that box.
See section 453(l)(3) for details on
how to figure the interest.
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. Report the interest on Schedule
2 (Form 1040 or 1040-SR), line 8.
Check box “c” and enter “453A(c)”
and the amount of the interest in the
space next to that box. 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
Schedule 2 (Form 1040 or 1040-SR),
line 8. Enter “1260(b)” and the amount
of the interest in the space to the left
of line 8. See section 1260(b) for
details on 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
Schedule 2 (Form 1040 or 1040-SR),
line 10. In the space to the left of
line 10, enter the amount of tax and
interest and “CCF.” See Pub. 595 for
details.
Code R. Depletion information—Oil
and gas. This is your share of gross
income from the property, share of
production for the tax year, and other
information 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. Reserved for future use.
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. Net investment income.
The corporation may use code U to
report information you may need to
determine your net investment income
tax under section 1411, including
information regarding income from
controlled foreign corporations
(CFCs) and passive foreign
investment companies (PFICs), the
stock of which is owned by the
corporation. Any information not
provided elsewhere on Schedule K-1
(or an attachment to Schedule K-1) is
provided using code U. For CFCs and
PFICs that you treat as qualified
electing funds (QEFs), the information
that is relevant to you will depend on
whether you, the corporation, or a
subsidiary pass-through entity has
made an election under Regulations
section 1.1411-10(g) with respect to
the CFC or QEF. For example, if the
corporation made an election under
Regulations section 1.1411-10(g) for
a CFC, the stock of which is owned by
the corporation, and the relevant
income and deduction items derived
-20-

from that CFC are reported elsewhere
on Schedule K-1, you will not need
the information provided using code U
to complete your Form 8960, Net
Investment Income Tax—Individuals,
Estates, and Trusts.
Follow the Instructions for Form
8960 to figure and report your net
investment income and adjusted
gross income or modified adjusted
gross income. See Regulations
sections 1.1411-1 through 1.1411-10
for more details.
Code V. Section 199A information.
Generally, you may be allowed a
deduction of up to 20% of your net
qualified business income (QBI) plus
20% of your qualified REIT dividends,
also known as section 199A
dividends, and qualified publicly
traded partnership (PTP) income from
your S corporation. The S corporation
will provide the information you need
to figure your deduction. You will use
one of these two forms to figure your
QBI deduction.
1. Use Form 8995, Qualified
Business Income Deduction
Simplified Computation, if:
a. You have QBI, section 199A
dividends, or PTP income (defined
below),
b. Your 2019 taxable income
before the QBI deduction is equal to
or less than $160,700 ($321,400 if
married filing jointly or $160,725 if
married filing separately or a married
nonresident alien), and
c. You aren’t a patron in a
specified agricultural or horticultural
cooperative.
2. Use Form 8995-A, Qualified
Business Income Deduction, if you
don’t meet all three of these
requirements.
QBI pass-through entity
reporting information. Use the
information provided to you by your S
corporation to complete the
appropriate form identified above.
QBI or qualified PTP items
subject to shareholder-specific
determinations. The amounts
reported to you reflect your pro rata
share of items from the S
corporation’s trade(s) or business(es),
or aggregation(s) and may include
items that aren’t includible in your
calculation of the QBI deduction.
When determining QBI or qualified
PTP income, you must include only
those items that are qualified items of

Instructions for Schedule K-1 (Form 1120-S) (2019)

income, gain, deduction, and loss
included or allowed in determining
taxable income for the tax year. To
determine your QBI or your qualified
PTP income amounts and for
information on where to report them,
see the instructions for Form 8995 or
Form 8995-A.

W-2 wages allocable to qualified
payments from specified
cooperatives. The amounts reported
reflect your pro rata share of the S
corporation’s W-2 wages allocable to
qualified payments of each qualified
trade or business, or aggregation. See
the Instructions for Form 8995-A.

W-2 wages. The amounts
reported reflect your pro rata share of
the S corporation’s W-2 wages
allocable to the QBI of each qualified
trade or business, or aggregation. See
the instructions for Form 8995 or Form
8995-A.

Section 199A(g) deduction from
specified cooperatives. The
amount reported reflects your pro rata
share of the S corporation’s net
section 199A(g) deduction. See the
Instructions for Form 8995-A.

Unadjusted basis immediately
after acquisition (UBIA) of
qualified property. The amounts
reported reflect your pro rata share of
the S corporation’s UBIA of qualified
property of each qualified trade or
business, or aggregation. See the
instructions for Form 8995 or Form
8995-A.
Section 199A dividends. The
amount reported reflects your pro rata
share of the S corporation’s net
section 199A dividends. See the
instructions for Form 8995 or Form
8995-A.
Patrons of specified agricultural
and horticultural cooperatives. If
the S corporation was a patron of an
agricultural or horticultural cooperative
(specified cooperative), you must use
Form 8995-A to figure your QBI
deduction. In addition, you must
complete Schedule D (Form 8995-A),
Special Rules for Patrons of
Agricultural or Horticultural
Cooperatives, to determine your
patron reduction.
QBI items allocable to qualified
payments from specified
cooperatives subject to
shareholder-specific
determinations. The amounts
reported to you reflect your pro rata
share of items from the S
corporation’s trade(s) or business(es),
or aggregation(s) and include items
that may not be includible in your
calculation of the QBI deduction and
patron reduction. When determining
QBI items allocable to qualified
payments, you must include only
qualified items that are included or
allowed in determining taxable
income for the tax year. To determine
your QBI items allocable to qualified
payments, see the Instructions for
Form 8995-A.

Codes W through Z. Reserved for
future use.
Code AA. Excess taxable income.
If the S corporation is required to file
Form 8990, Limitation on Business
Interest Expense Under Section
163(j), it may determine it has excess
taxable income. Report this amount of
excess taxable income on Form 8990,
Schedule B, line 45(c), if you are
required to file Form 8990. See the
Instructions for Form 8990 for details.
Code AB. Excess business interest
income. If the S corporation is
required to file Form 8990, Limitation
on Business Interest Expense Under
Section 163(j), it may determine it has
excess business interest income.
Report this amount of excess
business interest income on Form
8990, Schedule B, line 45(d), if you
are required to file Form 8990. See
the Instructions for Form 8990 for
details.
Code AC. Other information. The
corporation will use code AC to report
the following to shareholders.
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(ies) under which the
transaction qualifies for disclosure
and is determined by you and the
corporation. You may have to pay a
penalty if you are required to file Form
8886 and don't do so. See the
Instructions for Form 8886 for details.

Instructions for Schedule K-1 (Form 1120-S) (2019)

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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 or 1040-SR), Part V,
line 42. Don't report this income
elsewhere on Form 1040 or 1040-SR.
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). Don't report it elsewhere on
Form 1041.
3. Excess business loss limitation.
If the corporation has deductions
attributable to a business activity, it
will provide a statement showing the
aggregate gross income or gain and
the aggregate deductions from the
business activity that you need to
figure any excess business loss
limitation. See section 461 and the
Instructions for Form 461 for details.
4. 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 can't 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
Part I, line 13, of the Worksheet for
Figuring a Shareholder's Stock and
Debt Basis.
5. The amount included in gross
income with respect to clean
renewable energy bonds. Income with
respect to clean renewable energy
bonds can't 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
Part I, line 13, of the Worksheet for
Figuring a Shareholder's Stock and
Debt Basis.
6. Qualified investment in
qualifying advanced coal project
property. Use the amounts the
corporation provides you to figure the
amounts to report on Form 3468, lines
5a, 5b, and 5c.
7. Qualified investment in
qualifying gasification property. Use
the amounts the corporation provides
you to figure the amounts to report on
Form 3468, lines 6a and 6b.
8. Qualified investment in
qualifying advanced energy project
credit property. Use the amounts the

corporation provides you to figure the
amount to report on Form 3468, line 7.
9. 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 AC because your
taxable income and alternative
minimum taxable income can't be less
than the inversion gain. Also, your
inversion gain (a) isn't 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 United States for the foreign
tax credit. See section 7874 for
details.

10. The corporation will provide
information you need to figure your
section 951A income. Report your
global intangible low-taxed income
(GILTI) under section 951A on
Schedule 1 (Form 1040 or 1040-SR),
line 8, or the comparable line of your
income tax return. See the
Instructions for Form 8992 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.

Box 18. More Than One
Activity for At-Risk
Purposes

check this box and attach a
statement. Use the information in the
attached statement to correctly
determine your at-risk limitations. For
more information, see At-Risk
Limitations, earlier.

Box 19. More Than One
Activity for Passive
Activity Purposes

When the corporation has more than
one activity for passive activity
purposes, it will check this box and
attach a statement. Use the
information in the attached statement
to correctly determine your passive
activity limitations. For more
information, see Passive Activity
Limitations, earlier.

When the corporation has more than
one activity for at-risk purposes, it will

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Instructions for Schedule K-1 (Form 1120-S) (2019)