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2021
Partner’s Instructions for
Schedule K-1 (Form 1065)
Department of the Treasury
Internal Revenue Service
DRAFT AS OF
November 24, 2021
Partner's Share of Income, Deductions, Credits, etc.
(For Partner's Use Only)
Contents
General Instructions . . . . . . . .
Worksheet for Adjusting the Basis
of a Partner's Interest in the
Partnership . . . . . . . . . . .
Specific Instructions . . . . . . . .
Part I. Information About the
Partnership . . . . . . . . . . .
Part II. Information About the
Partner . . . . . . . . . . . . . .
Part III. Partner's Share of Items .
Income (Loss) . . . . . . . . . . . .
Box 11. Other Income (Loss) . . .
Box 12. Section 179 Deduction .
Box 13. Other Deductions . . . .
Box 14. Self-Employment
Earnings (Loss) . . . . . . . .
Box 15. Credits . . . . . . . . . . .
Box 16. International
Transactions . . . . . . . . . .
Box 17. Alternative Minimum Tax
(AMT) Items . . . . . . . . . .
Box 18. Tax-Exempt Income and
Nondeductible Expenses . .
Box 19. Distributions . . . . . . . .
Box 20. Other Information . . . . .
List of Codes . . . . . . . . . . . . .
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Section references are to the Internal Revenue Code
unless otherwise noted.
Future Developments
For the latest information about
developments related to Schedule K-1 (Form
1065) and the Partner's Instructions for
Schedule K-1 (Form 1065), such as
legislation enacted after they were
published, go to IRS.gov/Form1065.
What’s New
Schedule K-3 (Form 1065). New
Schedule K-3 replaces prior lines 16 and 20
for certain international items on
Schedule K-1. The new schedule is
designed to provide greater clarity for
partners on how to compute their U.S.
income tax liability with respect to items of
international tax relevance, including
claiming deductions and credits.
Section 743(b) adjustment. New code U
under line 20 is used to report the total
remaining section 743(b) adjustment for
applicable partners. This was reported in
previous years on line 20, code AH.
gains of a partner that holds one or more
applicable partnership interests as
short-term capital gains. An applicable
partnership interest is an interest in a
partnership that is transferred to or held by a
taxpayer, directly or indirectly, in connection
with the performance of substantial services
by the taxpayer or any other related person,
in an applicable trade or business. See
section 1061 FAQs for
owner-taxpayer filing and reporting
requirements.
Self-employment clarification.
Information has been added to help with
determining which partners qualify as limited
partners for purposes of self-employment
tax. See Limited Partner, later.
Reminders
Changed format of Schedule K-1.
Schedule K-1 no longer has a page 2 with
the list of codes. The list of codes and
descriptions are provided under List of
Codes and References Used in
Schedule K-1 (Form 1065) at the end of
these instructions.
Decedent’s Schedule K-1. An executor is
responsible to notify the partnership of the
name and tax identification number of the
decedent’s estate when the partnership
interest is part of a decedent’s estate. See
Decedent’s Schedule K-1, later.
Code N, box 20. Loss class under section 704(d). Regulations section
1.163(j)-6(h) created a new section 704(d)
loss class for business interest expense
effective for tax years beginning after
November 12, 2020, for purposes of loss
limitation. As a result, all partnerships must
report to partners, business interest expense
separately for purposes of section 704(d).
Code AG, box 20. Gross receipts for section 448(c). For tax years ending after
December 30, 2020, partners in a
partnership must include a share of
partnership gross receipts in proportion to
their share of gross income under section
703 unless the partnership and the partner
are treated as a single employer under
section 448(c). See Regulations section
1.163(j)-2(d)(iii) and IRS.gov/newsroom/
faqs-regarding-the-aggregation-rules-undersection-448c2-that-apply-to-thesection-163j-small-business-exemption.
Section 1061 reporting. Section 1061
recharacterizes certain long-term capital
Oct 28, 2021
General Instructions
Purpose of Schedule K-1
The partnership uses Schedule K-1 to report
your share of the partnership's income,
deductions, credits, etc. Keep it for your
records. Do not file it with your tax return
unless you are specifically required to do so.
(See the instructions for Code O. Backup
withholding, later.) The partnership files a
copy of Schedule K-1 (Form 1065) with the
IRS.
For your protection, Schedule K-1 may
show only the last four digits of your
identifying number (social security number
(SSN), etc.). However, the partnership has
reported your complete identifying number to
the IRS.
Although the partnership generally isn't
subject to income tax, you may be liable for
tax on your share of the partnership 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.
The amount of loss and deduction you
may claim on your tax return may be less
than the amount reported on Schedule K-1. It
is the partner's responsibility to consider and
apply any applicable limitations. See
Limitations on Losses, Deductions, and
Credits, later, for more information.
Inconsistent Treatment of
Items
If you are a partner in a partnership that has
not elected out of the centralized partnership
audit regime enacted by the Bipartisan
Budget Act of 2015 (BBA), you must report
the items shown on your Schedule K-1 (and
any attached statements) the same way that
the partnership treated the items on its
return.
If the treatment on your original or
amended return is inconsistent with the
partnership's treatment, or if the partnership
was required to but has not filed a return, you
must 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 partnership
return has not been filed).
If you are required to file Form 8082 but
do not do so, you may be subject to the
Cat. No. 11396N
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
partnership's return. Any deficiency that
results from making the amounts consistent
may be assessed immediately.
Errors
Gain or loss from the disposition of
TIP your partnership interest 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 report and figure
the tax due.
See Form 5713 and its instructions for more
information.
Definitions
General Partner
A general partner is a partner who is
personally liable for partnership debts.
DRAFT AS OF
November 24, 2021
If you believe the partnership has made an
error on your Schedule K-1, notify the
partnership and ask for a corrected
Schedule K-1. Do not change any items on
your copy of Schedule K-1. Be sure that the
partnership sends a copy of the corrected
Schedule K-1 to the IRS.
Decedent’s Schedule K-1
If you are the executor of an estate and you
have received a decedent's Schedule K-1,
then you have the responsibility to notify the
partnership of the name and taxpayer
identification number (TIN) of the decedent's
estate if the partnership interest is part of the
decedent's estate. If a decedent died in a
prior year and the partnership continues to
send the decedent a Schedule K-1 after
being notified of the decedent's death, then
you should request that the partnership send
a corrected Schedule K-1. If you receive an
interest in a partnership by reason of a
former partner's death, you must provide the
partnership with your name and TIN. For
treatment of partnership income upon the
death of a partner, see Pub. 559.
Sale or Exchange of
Partnership Interest
Generally, a partner who sells or exchanges
a partnership interest in a section 751(a)
exchange must notify the partnership, in
writing, within 30 days of the exchange (or, if
earlier, by January 15 of the calendar year
following the calendar year in which the
exchange occurred). A “section 751(a)
exchange” is any sale or exchange of a
partnership interest in which any money or
other property received by the partner in
exchange for that partner's interest is
attributable to unrealized receivables (as
defined in section 751(c)) or inventory items
(as defined in section 751(d)).
The written notice to the partnership must
include the names and addresses of both
parties to the exchange, the identifying
numbers of the transferor and (if known) of
the transferee, and the exchange date.
An exception to this rule is made for sales
or exchanges of publicly traded partnership
interests for which a broker is required to file
Form 1099-B, Proceeds From Broker and
Barter Exchange Transactions.
If a partner is required to notify the
partnership of a section 751(a) exchange but
fails to do so, the partner will be subject to a
penalty for each such failure. However, no
penalty will be imposed if the partner can
show that the failure was due to reasonable
cause and not willful neglect.
Three-year holding period
requirement for applicable
CAUTION partnership interests. Section
1061 increases the required long-term
capital gains holding period for an applicable
partnership interest from more than 1 year to
more than 3 years. The holding period
applies only to applicable partnership
interests held in connection with the
performance of services as defined in
section 1061. See section 1061 and Pub.
541 for details. Also see Section 1061
FAQs.
!
Nominee Reporting
Any person who holds, directly or indirectly,
an interest in a partnership as a nominee for
another person must furnish a written
statement to the partnership by the last day
of the month following the end of the
partnership's tax year. This statement must
include the name, address, and identifying
number of the nominee and such other
person; description of the partnership
interest held as nominee for that person; and
other information required by Temporary
Regulations section 1.6031(c)-1T. A
nominee that fails to furnish this statement
must furnish to the person for whom the
nominee holds the partnership interest a
copy of Schedule K-1 and related
information within 30 days of receiving it from
the partnership.
A nominee who fails to furnish all the
information required by Temporary
Regulations section 1.6031(c)-1T when due,
or who furnishes incorrect information, is
subject to a $280 penalty for each failure.
The maximum penalty is $3,392,000 for all
such failures during a calendar year. If the
nominee intentionally disregards the
requirement to report correct information,
each $280 penalty increases to $560 or, if
greater, 10% of the aggregate amount of
items required to be reported, and there is no
limit to the amount of the penalty.
International Boycotts
Every partnership 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 partnership 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 partnership's
activities and any other boycott operations
that you may have. You may lose certain tax
benefits if the partnership participated in, or
cooperated with, an international boycott.
-2-
Limited Partner
A limited partner is a partner in a partnership
formed under a state limited partnership law,
whose personal liability for partnership debts
is limited to the amount of money or other
property that the partner contributed or is
required to contribute to the partnership.
Some members of other entities, such as
domestic or foreign business trusts or limited
liability companies (LLCs) that are classified
as partnerships, may be treated as limited
partners for certain purposes.
However, whether a partner (including a
member of an LLC treated as a partnership
for federal income tax purposes) qualifies as
a limited partner for purposes of
self-employment tax depends upon whether
the partner meets the definition of a limited
partner under section 1402(a)(13); whether a
partner is a limited partner under state
limited partnership law is not determinative.
Relevant to this determination is whether the
partner merely invested in the partnership
and is not actively participating in the
partnership's business operations; a partner
who is performing services for a partnership
in their capacity as a partner and who is,
based on the facts and circumstances,
acting in the manner of a self-employed
person is not a limited partner for
self-employment tax purposes. See
Renkemeyer, Campbell & Weaver, LLP v.
Commissioner, 136 T.C. 137, 150 (2011).
Nonrecourse Loans
Nonrecourse loans are those liabilities of the
partnership for which no partner or related
person bears the economic risk of loss.
Elections
Generally, the partnership 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 partnership. 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 13.
• Section 108(b)(5) (election related to
reduction of tax attributes due to exclusion
from gross income of discharge of
indebtedness).
• Section 263A(d) (preproductive
expenses). See the instructions for code P in
box 13.
• Section 617 (deduction and recapture of
certain mining exploration expenditures).
• Section 901 (foreign tax credit).
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
Additional Information
For more information on the treatment of
partnership income, deductions, credits, and
other items, see Pub. 535, Business
Expenses.
To get forms and publications, see the
instructions for your tax return or visit the IRS
website at IRS.gov.
Worksheet for Adjusting the Basis of a
Partner's Interest in the Partnership
Keep for Your Records
1. Your adjusted basis at the end of the prior year. Do not enter less than zero. Enter -0- if
this is your first tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
Increases:
2. Money and your adjusted basis in property contributed to the partnership less the
associated liabilities (but not less than zero) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3. Your increased share of or assumption of partnership liabilities. (Subtract your share of
liabilities shown in item K of your 2020 Schedule K-1 from your share of liabilities shown
in item K of your 2021 Schedule K-1 and add the amount of any partnership liabilities you
assumed during the tax year (but not less than zero).) . . . . . . . . . . . . . . . . . . . . . .
3.
DRAFT AS OF
November 24, 2021
Limitations on Losses,
Deductions, and Credits
There are potential limitations on partnership
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, and the
passive activity limitations. These limitations
are discussed below.
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.
Basis Limitations
Generally, you may not claim your share of a
partnership loss (including a capital loss) to
the extent that it is greater than the adjusted
basis of your partnership interest at the end
of the partnership'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.
The partnership isn't responsible for
keeping the information needed to figure the
basis of your partnership interest. Although
the partnership does provide an analysis of
the changes to your capital account in item L
of Schedule K-1, that information is based on
the partnership's books and records and
cannot be used to figure your basis.
4a. Your share of the partnership's income or gain (including tax-exempt
income) reduced by any amount included in interest income with respect
to the credit to holders of clean renewable energy bonds . . . . . . . . . .
4a. ____________
4b. Enter the amount of business interest expense included on 4a . . . . . . .
4b. ____________
4c. Add lines 4a and 4b. If the result is less than zero, include this amount on
line 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4c.
5. Any gain recognized this year on contributions of property. Do not include gain from
transfer of liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
6. Your share of the excess of the deductions for depletion (other than oil and gas depletion)
over the basis of the property subject to depletion . . . . . . . . . . . . . . . . . . . . . . . .
6.
Decreases:
7. Withdrawals and distributions of money and the adjusted basis of property distributed to
you from the partnership. Do not include the amount of property distributions included in
the partner's income (taxable income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Your decreased share of partnership liabilities and any decrease in your individual
liabilities because they were assumed by the partnership. (Subtract your share of
liabilities shown in item K of your 2021 Schedule K-1 from your share of liabilities shown
in item K of your 2020 Schedule K-1 and add the amount of your individual liabilities that
the partnership assumed during the tax year (but not less than zero).) . . . . . . . . . . . .
8.
9. Your share of the partnership's nondeductible expenses that are not capital expenditures
(excluding business interest expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.
10. Your share of the partnership's losses and deductions (including capital losses).
However, include your share of the partnership's section 179 expense deduction for this
year even if you cannot deduct all of it because of limitations. Include business interest
expense as a separate loss class. See Note below. . . . . . . . . . . . . . . . . . . . . . . .
10.
11. The amount of your deduction for depletion of any partnership oil and gas property, not to
exceed your allocable share of the adjusted basis of that property . . . . . . . . . . . . . .
11.
12. Your adjusted basis in the partnership at the end of this tax year. (Add lines 1 through 6
and subtract lines 7 through 11 from the total. If zero or less, enter -0-.) . . . . . . . . . . .
12.
Caution: The deduction for your share of the partnership's losses and deductions is
limited to your adjusted basis in your partnership interest. If you entered zero on line 12
and the amount figured for line 12 was less than zero, a portion of your share of the
partnership losses and deductions may not be deductible. (See Basis Limitations, earlier,
for more information.) Also see Part III. Partner's Share of Current Year Income,
Deductions, Credits, and Other Items, later.
Note: Include on line 10 business interest expense that was removed from the amount on
line 4a. Business interest expense is considered a separate loss class under Proposed
Regulations section 1.163(j)-6(h)(1). However, to the extent basis is proportionately
allocated to this loss class, interest expense is absorbed by applying currently deductible
business interest expense to basis first. Excess business interest expense is applied to
basis second. Excess business interest expense is only applicable to partnerships
subject to section 163(j). In addition, if a partnership has negative section 704(d) expense
(interest expense that is limited by basis), negative section 704(d) expense becomes
excess business interest expense in the year that the basis limitation no longer applies.
This is effective for tax years beginning after November 12, 2020.
You can figure the adjusted basis of your
partnership interest by adding items that
increase your basis and then subtracting
items that decrease your basis.
Use the Worksheet for Adjusting the
Basis of a Partner’s Interest in the
Partnership to figure the basis of your
interest in the partnership.
For partnership tax years beginning after
2017, a partner's share of the adjusted basis
in partnership charitable contributions
(defined in section 170(c)) and taxes,
described in section 901, paid or accrued to
foreign countries and to possessions of the
United States are subject to this basis
limitation (defined in section 704(d)).
For more details on the basis limitations,
and special rules for charitable contributions
and foreign taxes paid and accrued, see
Pub. 541, Partnerships.
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 partnership, and (b) amounts
7.
Caution: A distribution may be taxable if the amount exceeds your adjusted basis of your
partnership interest immediately before the distribution.
in the activity for which you are not 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
partnership interest before 1987, the at-risk
rules do not apply to losses from an activity
of holding real property placed in service
before 1987 by the partnership. The activity
of holding mineral property doesn't qualify for
this exception. The partnership should
identify on a statement attached to
Schedule K-1 any losses that are not subject
to the at-risk limitations.
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
-3-
Generally, you are not at risk for amounts
such as the following.
• Nonrecourse loans used to finance the
activity, to acquire property used in the
activity, or to acquire your interest in the
activity that are not secured by your own
property (other than the property used in the
activity). See the instructions for item K, later,
for the exception for qualified nonrecourse
financing secured by real property.
• Cash, property, or borrowed amounts
used in the activity (or contributed to the
activity, or used to acquire your interest in
the activity) that are protected against loss
by a guarantee, stop-loss agreement, or
other similar arrangement (excluding
casualty insurance and insurance against
tort liability).
• Amounts borrowed for use in the activity
from a person who has an interest in the
activity, other than as a creditor, or who is
related, under section 465(b)(3), to a person
(other than you) having such an interest.
You should get a separate statement of
income, expenses, and other items for each
activity from the partnership.
Note. Box 22 in Part III of Schedule K-1
(Form 1065) will be checked when a
statement is attached.
conversion, rental, operation, management,
leasing, or brokerage trade or business.
Services you performed as an employee are
not treated as performed in a real property
trade or business unless you owned more
than 5% of the stock (or more than 5% of the
capital or profits interest) in the employer.
3. Working interests in oil or gas wells if
you were a general partner.
4. The rental of a dwelling unit any
partner 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.
5. Activities of trading personal property
for the account of owners of interests in the
activities.
(including individuals who are not owners of
interests in the activity).
3. You participated in the activity for
more than 100 hours during the tax year, and
your participation in the activity for the tax
year wasn't less than the participation in the
activity of any other individual (including
individuals who were not owners of interests
in the activity) for the tax year.
4. The activity was a significant
participation activity for the tax year, and you
participated in all significant participation
activities (including activities outside the
partnership) 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 field
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.
DRAFT AS OF
November 24, 2021
Passive Activity Limitations
Section 469 provides rules that limit the
deduction of certain losses and credits.
These rules apply to partners who:
• Are individuals, estates, trusts, closely
held C corporations, or personal service
corporations; and
• Have a passive activity loss or credit for
the tax year.
Generally, passive activities include the
following.
1. Trade or business activities in which
you didn't materially participate.
2. Activities that meet the definition of
rental activities under Temporary
Regulations section 1.469-1T(e)(3) and
Regulations section 1.469-1(e)(3).
Passive activities do not include 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.
For a closely held C corporation
TIP (defined in section 465(a)(1)(B)), the
above conditions are treated as met
if more than 50% of the corporation's gross
receipts were from real property trades or
businesses in which the corporation
materially participated.
For purposes of this rule, each interest in
rental real estate is a separate activity,
unless you elect to treat all interests in rental
real estate as one activity. For details on
making this election, see the Instructions for
Schedule E (Form 1040), Supplemental
Income and Loss.
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,
If you are an individual, an estate, or a
trust, and 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. For a corporation, use Form
8810, Corporate Passive Activity Loss and
Credit Limitations. See the instructions for
these forms for details.
If the partnership had more than one
activity, it will attach a statement to your
Schedule K-1 that identifies each activity
(trade or business activity, rental real estate
activity, rental activity other than rental real
estate, and other activity) and specifies the
income (loss), deductions, and credits from
each activity.
Note. Box 23 in Part III of Schedule K-1
(Form 1065) 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 partnership, and (b) if you were a real
estate professional (defined earlier) in each
rental real estate activity held through the
partnership. All determinations of material
participation are based on your participation
during the partnership's tax year.
Material participation standards for
partners 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.
Corporations should refer to the
Instructions for Form 8810 for the material
participation standards that apply to them.
Individuals (other than limited
partners). If you are an individual (either a
general partner or a limited partner who
owned a general partnership interest at all
times during the tax year), you materially
participated in an activity only if one or more
of the following apply.
1. You participated in the activity for
more than 500 hours during the tax year.
2. Your participation in the activity for
the tax year constituted substantially all the
participation in the activity of all individuals
-4-
Limited partners. If you are a limited
partner, you must meet item item 1, 5, or 6
above to qualify as having materially
participated.
Work counted toward material
participation. Generally, any work that you
or your spouse does in connection with an
activity held through a partnership (where
you own your partnership interest 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 are not directly involved
in the day-to-day operations of the activity.
Examples of work done as an investor that
would not count toward material participation
include:
a. Studying and reviewing financial
statements or reports on operations of the
activity,
b. Preparing or compiling summaries or
analyses of the finances or operations of the
activity for your own use, and
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
c. Monitoring the finances or operations
of the activity in a non-managerial 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 partnership, or
• You were a real estate professional
(defined earlier) in a rental real estate activity
of the partnership.
If you determine that you didn't materially
participate in a trade or business activity of
the partnership or if you have income (loss),
deductions, or credits from a rental activity of
the partnership (other than a rental real
estate activity in which you materially
participated as a real estate professional),
the amounts from that activity are passive.
Report passive income (losses), deductions,
and credits as follows.
1. If you have an overall gain (the
excess of income over deductions and
losses, including any prior year unallowed
loss) from a passive activity, report the
income, deductions, and losses from the
activity as indicated in these instructions.
2. If you have an overall loss (the
excess of deductions and losses, including
any prior year unallowed loss, over income)
or credits from a passive activity, report the
income, deductions, losses, and credits from
all passive activities using the Instructions for
Form 8582 or the Instructions for Form
8582-CR (or Form 8810), to see if your
deductions, losses, and credits are limited
under the passive activity rules.
925, Passive Activity and At-Risk Rules, for
more details.
2. If you have an overall gain, the net
gain portion (total gain minus total losses) is
nonpassive income. On the form or schedule
you normally use, report the net gain portion
as nonpassive income and the remaining
income and the total losses as passive
income and loss. To the left of the entry
space, enter “From PTP.” It is important to
identify the nonpassive income because the
nonpassive portion is included in modified
adjusted gross income for purposes of
figuring on Form 8582 the “special
allowance” for active participation in a
non-PTP rental real estate activity. In
addition, the nonpassive income is included
in investment income when figuring your
investment interest expense deduction on
Form 4952, Investment Interest Expense
Deduction.
loss from the PTP by each ratio in column (b)
and enter the result in Part VII, column (c).
Then, complete Part VIII if all the loss from
the same activity is to be reported on one
form or schedule. Use Part IX instead of Part
VIII if you have more than one loss to be
reported on different forms or schedules for
the same activity. Enter the net loss plus any
prior year unallowed losses in Part VIII,
column (a) (or Part IX, if applicable). The
losses in Part VIII, column (c) (Part IX,
column (e)) are the allowed losses to report
on the forms or schedules. Report both these
losses and any income from the PTP on the
forms and schedules you normally use.
DRAFT AS OF
November 24, 2021
Publicly traded partnerships (PTPs).
The passive activity limitations are applied
separately for items (other than the
low-income housing credit and the
rehabilitation credit) from each PTP. Thus, a
net passive loss from a PTP may not be
deducted from other passive income.
Instead, a passive loss from a PTP is
suspended and carried forward to be applied
against passive income from the same PTP
in later years. If the partner's entire interest in
the PTP is completely disposed of, any
unused losses are allowed in full in the year
of disposition.
If you have an overall gain from a PTP,
the net gain is nonpassive income. In
addition, the nonpassive income is included
in investment income to figure your
investment interest expense deduction.
Do not report passive income, gains, or
losses from a PTP on Form 8582. Instead,
use the following rules to figure and report on
the proper form or schedule your income,
gains, and losses from passive activities that
you held through each PTP you owned
during the tax year.
1. Combine any current year income,
gains, and losses, and any prior year
unallowed losses to see if you have an
overall gain or loss from the PTP. Include
only the same types of income and losses
you would include in your net income or loss
from a non-PTP passive activity. See Pub.
Example. If you have Schedule E (Form
1040) income of $8,000, and a Form 4797,
Sales of Business Property, prior year
unallowed loss of $3,500 from the passive
activities of a particular PTP, you have a
$4,500 overall gain ($8,000 − $3,500). On
Schedule E (Form 1040), line 28, report the
$4,500 net gain as nonpassive income in
column (k). In column (h), report the
remaining Schedule E (Form 1040) gain of
$3,500 ($8,000 − $4,500). On the
appropriate line of Form 4797, report the
prior year unallowed loss of $3,500. Be sure
to enter “From PTP” to the left of each entry
space.
3. If you have an overall loss (but didn't
dispose of your entire interest in the PTP to
an unrelated person in a fully taxable
transaction during the year), the losses are
allowed to the extent of the income, and the
excess loss is carried forward to use in a
future year when you have income to offset
it. Report as a passive loss on the schedule
or form you normally use the portion of the
loss equal to the income. Report the income
as passive income on the form or schedule
you normally use.
Example. You have a Schedule E (Form
1040) loss of $12,000 (current year losses
plus prior year unallowed losses) and a Form
4797 gain of $7,200. Report the $7,200 gain
on the appropriate line of Form 4797. On
Schedule E (Form 1040), line 28, report
$7,200 of the losses as a passive loss in
column (g). Carry forward the unallowed loss
of $4,800 ($12,000 − $7,200).
If you have unallowed losses from more
than one activity of the PTP or from the same
activity of the PTP that must be reported on
different forms, you must allocate the
unallowed losses on a pro rata basis to figure
the amount allowed from each activity or on
each form.
To allocate and keep a record of the
TIP unallowed losses, use Parts VII, VIII,
and IX of Form 8582. List each
activity of the PTP in Part VII. Enter the
overall loss from each activity in column (a).
Complete Part VII, column (b), according to
its instructions. Multiply the total unallowed
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
-5-
4. If you have an overall loss and you
disposed of your entire interest in the PTP to
an unrelated person in a fully taxable
transaction during the year, your losses
(including prior year unallowed losses)
allocable to the activity for the year are not
limited by the passive loss rules. A fully
taxable transaction is one in which you
recognize all your realized gain or loss.
Report the income and losses on the forms
and schedules you normally use.
For rules on the disposition of an
TIP entire interest reported using the
installment method, see the
Instructions for Form 8582.
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 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, qualifying estates, and
qualifying revocable trusts that made a
section 645 election can actively participate
in a rental real estate activity. Estates (other
than qualifying estates), trusts (other than
qualifying revocable trusts that made a
section 645 election), and corporations
cannot actively participate. Limited partners
cannot actively participate unless future
regulations provide an exception.
You are not considered to actively
participate in a rental real estate activity if, at
any time during the tax year, your interest
(including your spouse's interest) in the
activity was 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.
An estate is a qualifying estate if the
decedent would have satisfied the active
participation requirement for the activity for
the tax year the decedent died. A qualifying
estate is treated as actively participating for
tax years ending less than 2 years after the
date of the decedent's death.
Modified adjusted gross income
(MAGI) 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 MAGI (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 MAGI 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 MAGI. When MAGI is
$150,000 or more ($75,000 or more if
married filing separately), there is no special
allowance.
If you have net income subject to
recharacterization under Temporary
Regulations section 1.469-2T(f) and
Regulations sections 1.469-2(f)(5) and (6),
report such amounts according to the
Instructions for Form 8582 (or Form 8810).
If you have net income (loss), deductions,
or credits from any of the following activities,
treat such amounts as nonpassive and report
them as indicated in these instructions.
1. Working interests in oil and gas wells
if you are a general partner.
2. The rental of a dwelling unit any
partner 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.
3. Trading personal property for the
account of owners of interests in the activity.
partnership has reported your complete
identification number to the IRS.
Item H2
If the partner is a DE, such as a
single-member LLC that did not elect to be
treated as a corporation, the partnership will
check the DE box and enter the name and
TIN of the DE.
DRAFT AS OF
November 24, 2021
Modified adjusted gross income
(MAGI). This is your adjusted gross income
from Form 1040, 1040-SR, or 1040-NR,
line 11, figured without taking into account:
1. The taxable amount of social security
or equivalent tier 1 railroad retirement
benefits,
2. The deductible contributions to
traditional individual retirement accounts
(IRAs) and section 501(c)(18) pension plans,
3. The exclusion from income of interest
from series EE or I U.S. savings bonds used
to pay higher education expenses,
4. The exclusion of amounts received
under an employer's adoption assistance
program,
5. Any passive activity income or loss
included on Form 8582,
6. Any rental real estate loss allowed to
real estate professionals,
7. Any overall loss from a PTP (see
Publicly Traded Partnerships (PTPs) in the
Instructions for Form 8582),
8. The deduction allowed for one-half of
self-employment tax,
9. The deduction allowed for interest
paid on student loans, and
10. The deduction allowed for
foreign-derived intangible income and global
intangible low-taxed income.
Special rules for certain other activities.
If you have net income (loss), deductions, or
credits from any activity to which special
rules apply, the partnership will identify the
activity and all amounts relating to it on
Schedule K-1 or on an attached statement.
Self-charged interest. The partnership will
report any self-charged interest income or
expense that resulted from loans between
you and the partnership (or between the
partnership and another partnership or S
corporation if both entities have the same
owners with the same proportional
ownership interest in each entity). If there
was more than one activity, the partnership
will provide a statement allocating the
interest income or expense with respect to
each activity. The self-charged interest rules
do not apply to your partnership interest if the
partnership 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.
Specific Instructions
Part I. Information About
the Partnership
Item D
If the box in item D is checked, you are a
partner in a PTP and must follow the rules
discussed earlier under Publicly traded
partnerships.
Part II. Information About
the Partner
Item E
If the partner is an individual, the partnership
will enter the partner's SSN or individual
taxpayer identification number (ITIN). For all
other partners, the partnership will enter the
partner's employer identification number
(EIN). However, if the partner is an IRA, the
partnership will enter the identifying number
of the custodian of the IRA. In the case of a
disregarded entity (DE), the partnership will
enter the TIN of the beneficial owner of the
DE in item E and the beneficial owner's
address in item F.
For your protection, this form may show
only the last four digits of the TIN in items E
and H2, as noted under Purpose of
Schedule K-1, earlier. However, the
-6-
Item J
Generally, the amounts reported in item J are
based on the partnership agreement. If your
interest commenced after the beginning of
the partnership's tax year, the partnership
will have entered, in the Beginning column,
the percentages that existed for you
immediately after admission. If your interest
terminated before the end of the
partnership's tax year, the partnership will
have entered, in the Ending column, the
percentages that existed immediately before
termination.
The ending percentage share shown on
the Capital line is the portion of the capital
you would receive if the partnership was
liquidated at the end of its tax year by the
distribution of undivided interests in the
partnership's assets and liabilities. If your
capital account is negative or zero, the
partnership will have entered zero on this
line.
The "Check if decrease is due to sale or
exchange of partnership interest" box will be
checked if you sold or exchanged all or part
of your partnership interest to a new or
pre-existing partner during this tax year,
regardless of whether you recognized gain or
loss on the transaction(s). You may have
realized a gain or loss on the transfer or
disposition of your interest. See codes AB,
AC, and AD on line 20 for items that have
special gain or loss treatment. For more
information, see Disposition of a Partner's
Interest and Partnership Distributions in Pub.
541.
Item K
Item K should show your share of the
partnership's nonrecourse liabilities,
partnership-level qualified nonrecourse
financing, and other recourse liabilities at the
beginning and the end of the partnership's
tax year. If you terminated your interest in the
partnership during the tax year, item K
should show the share that existed
immediately before the total disposition. A
partner's “recourse liability” is any
partnership liability for which a partner is
personally liable.
If this partnership invested in other
partnerships, item K will include your share
of partnership liabilities from those other
partnerships, except to the extent the
liabilities from those other partnerships are
owed to this partnership.
Use the total of the three amounts for
figuring the adjusted basis of your
partnership interest.
Generally, you may use only the amounts
shown next to “Qualified nonrecourse
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
financing” and “Recourse” to figure your
amount at risk. Do not include any amounts
that are not at risk if such amounts are
included in either of these categories.
If your partnership is engaged in two or
more different types of activities subject to
the at-risk provisions, or a combination of
at-risk activities and any other activity, the
partnership should give you a statement
showing your share of nonrecourse liabilities,
partnership-level qualified nonrecourse
financing, and other recourse liabilities for
each activity.
interest. Generally, this is because a
partner's adjusted tax basis in its partnership
interest includes the partner's share of
partnership liabilities (and capital accounts
determined by using the tax basis method do
not). In addition, your partnership may not
have all the necessary information from you
to accurately figure the adjusted tax basis in
your partnership interest due to partner-level
adjustments. You are responsible for
maintaining an annual record of the adjusted
tax basis in your partnership interest as
determined under the principles and
provisions of subchapter K, including, for
example, those under sections 705, 722,
733, and 742. Regulations section
1.705-1(a)(1) provides that a partner is
required to determine the adjusted basis of
its interest in a partnership when necessary
to determine its tax liability or that of any
other person. For example, a determination
is required in ascertaining the extent to which
a partner's share of loss is allowed, when
there is a sale or exchange of all or part of a
partnership interest, and when a partner's
entire partnership interest is liquidated. The
adjusted basis of a partner's interest in a
partnership is determined without regard to
any amount shown in the partnership books
as the partner's “capital,” “equity,” or similar
account.
allocated unrecognized section 704(c) gain
or loss if:
• You contributed property with FMV in
excess of adjusted tax basis (built-in gain
property);
• You contributed property with FMV less
than adjusted tax basis (built-in loss
property); or
• The partnership elected, under certain
circumstances, to revalue property (book-up
or book-down) on its books to reflect
changes in the FMV of such property. These
revaluations are sometimes referred to as
reverse section 704(c) allocations.
Item M
Part III. Partner's Share of
Current Year Income,
Deductions, Credits, and
Other Items
DRAFT AS OF
November 24, 2021
Qualified nonrecourse financing secured
by real property used in an activity of holding
real property that is subject to the at-risk
rules is treated as an amount at risk.
Qualified nonrecourse financing generally
includes financing for which no one is
personally liable for repayment that is
borrowed for use in an activity of holding real
property and that is loaned or guaranteed by
a federal, state, or local government or
borrowed from a “qualified” person.
Qualified persons include any persons
actively and regularly engaged in the
business of lending money, such as a bank
or savings and loan association. Qualified
persons generally do not include related
parties (unless the nonrecourse financing is
commercially reasonable and on
substantially the same terms as loans
involving unrelated persons), the seller of the
property, or a person who receives a fee for
the partnership's investment in the real
property.
See Pub. 925 for more information on
qualified nonrecourse financing.
Both the partnership and you must meet
the qualified nonrecourse rules on this debt
before you can include the amount shown
next to “Qualified nonrecourse financing” in
your at-risk computation.
See Limitations on Losses, Deductions,
and Credits, earlier, for more information on
the at-risk limitations.
Item L
The partnership must report your beginning
capital account and ending capital account
for the year using the Tax Basis Method,
including the amount of capital you
contributed to the partnership during the
year, your share of the partnership's current
year net income or loss as computed for tax
purposes, any withdrawals and distributions
made to you by the partnership, and any
other increases or decreases to your capital
account determined in a manner generally
consistent with figuring the partner's
adjusted tax basis in its partnership interest
(without regard to partnership liabilities),
taking into account the rules and principles of
sections 705, 722, 733, and 742. See the
Instructions for Form 1065 for more details.
For many reasons, your ending capital
account as reported to you by the
partnership in item L may not equal the
adjusted tax basis in your partnership
If you have contributed property with a
built-in gain or loss during the tax year, the
partnership will check the “Yes” box. Also,
the partnership will attach a statement
showing the property contributed, the date of
the contribution, and the amount of any
built-in gain or loss. A built-in gain or loss is
the difference between the FMV of the
property and your adjusted basis in the
property at the time it was contributed to the
partnership. If you contributed more than 10
properties on a single date during the tax
year, the statement may instead show the
number of properties contributed on that
date, the total amount of built-in gain, and the
total amount of built-in loss.
The partnership is providing this for your
information. Contributions of property with a
built-in gain or loss could affect a partner's
tax liability (in matters concerning
precontribution gain or loss, and distributions
subject to section 737), and may also affect
how the partnership allocated certain items
on your Schedule K-1. For information on
precontribution gain or loss, see the
instructions for box 20, code W. For
information on distributions subject to
section 737, see the instructions for box 19,
code B.
Item N
If you are allocated a share of section 704(c)
gain or loss, the partnership will report your
net unrecognized section 704(c) gain or loss
both at the beginning and at the end of the
partnership's tax year in item N. The
partnership can use any reasonable method
in reporting net unrecognized section 704(c)
built-in gain or loss to you. You will be
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
-7-
The partnership is providing this for your
information. If the partnership disposes of the
property or there are special allocations due
to depreciation, depletion, or amortization,
the partnership will report these items on
other parts of Schedule K-1.
Note. Although the partnership is reporting
the beginning and ending balances on an
aggregate net basis, it is generally required
to keep records of this information on a
property-by-property basis.
These rules do not apply to PTPs, and
their partners, for 2019 partnership tax years
and thereafter, until further notice.
The amounts shown in boxes 1 through 20
reflect your share of income, loss,
deductions, credits, and other items from
partnership business or rental activities
without reference to limitations on losses or
adjustments that may be required of you
because of:
1. The adjusted basis of your
partnership interest,
2. The amount for which you are at risk,
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 passive
activity rules do not apply to the amounts
shown on your Schedule K-1, take the
amounts shown and enter them on the
appropriate lines of your tax return. If the
passive activity rules do apply, report the
amounts shown as indicated in these
instructions.
If you are not an individual, report the
amounts in each box as instructed on your
tax return.
If you file your tax return on a calendar
year basis, but your partnership files a return
for a fiscal year, report the amounts on your
tax return for the year in which the
partnership's fiscal year ends. For example,
if the partnership's tax year ends in February
2022, report the amounts on your 2022 tax
return.
If you have losses, deductions, or credits
from a prior year that were not deductible or
usable because of certain limitations, such
as the basis limitations or the at-risk
limitations, take them into account in
determining your net income, loss, or credits
for this year. However, except for passive
activity losses and credits, do not combine
the prior year amounts with any amounts
shown on this Schedule K-1 to get a net
figure to report on any supporting schedules,
statements, or forms attached to your return.
Instead, report the amounts on the attached
schedule, statement, or form on a
year-by-year basis.
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 partner filing a 2021 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. If the partnership 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
partnership trade or business activities in
which you materially participated on
Schedule E (Form 1040), line 28, column (i)
or (k).
2. Report box 1 income (loss) from
partnership 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),
line 28, column (h). However, if the box in
item D is checked, report the income
following the rules for Publicly traded
partnerships, earlier.
b. If a loss is reported in box 1, follow
the Instructions for Form 8582 to figure how
much of the loss can be reported on
Schedule E (Form 1040), line 28, column (g).
However, if the box in item D is checked,
report the loss following the rules for Publicly
traded partnerships, earlier.
e. If you are a married person filing
separately, you lived apart from your spouse
all year.
f. You have no current or prior year
unallowed credits from a passive activity.
g. Your MAGI wasn’t more than
$100,000 (not more than $50,000 if married
filing separately and you lived apart from
your spouse all year).
h. Your interest in the rental real estate
activity wasn't held as a limited partner.
2. If you have a loss from a passive
activity in box 2 and you do not meet all the
conditions in (1) above, follow the
Instructions for Form 8582 to figure how
much of the loss you can report on
Schedule E (Form 1040), line 28, column (g).
However, if the box in item D is checked,
report the loss following the rules for Publicly
traded partnerships, earlier.
3. If you were a real estate professional
and you materially participated in the activity,
report box 2 income (loss) on Schedule E
(Form 1040), line 28, column (i) or (k).
4. If you have income from a passive
activity in box 2, report the income on
Schedule E (Form 1040), line 28, column (h).
However, if the box in item D is checked,
report the income following the rules for
Publicly traded partnerships, earlier.
DRAFT AS OF
November 24, 2021
If the partnership reports a section 743(b)
adjustment to partnership items, report these
adjustments as separate items on Form
1040 or 1040-SR in accordance with the
reporting instructions for the partnership item
being adjusted. A section 743(b) adjustment
increases or decreases your share of
income, deduction, gain, or loss for a
partnership item. For example, if the
partnership reports a section 743(b)
adjustment to depreciation for property used
in its trade or business, report the adjustment
on Schedule E (Form 1040), line 28, in
accordance with the instructions for box 1 of
Schedule K-1.
If you have amounts other than
TIP those shown on Schedule K-1 to
report on Schedule E (Form 1040),
enter each item separately on Schedule E
(Form 1040), line 28.
Codes. In box 11, boxes 13 through 15,
and boxes 17 through 20, the partnership will
identify each item by entering a code in the
column to the left of the dollar amount entry
space. These codes are identified under List
of Codes and References Used in
Schedule K-1 (Form 1065) at the end of
these instructions.
Attached statements. The partnership will
enter an asterisk (*) after the code, if any, in
the column to the left of the dollar amount
entry space for each item for which it has
attached a statement providing additional
information. For those informational items
that cannot be reported as a single dollar
amount, the partnership 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 partnership.
Box 2. Net Rental Real Estate
Income (Loss)
Generally, the income (loss) reported in
box 2 is a passive activity amount for all
partners. 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 partnership 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 2021 Form 1040 or
1040-SR, use the following instructions to
determine where to report a box 2 amount.
1. If you have a loss from a passive
activity in box 2 and you meet all the
following conditions, report the loss on
Schedule E (Form 1040), line 28, column (g).
a. You actively participated in the
partnership 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. Your total loss from the rental real
estate activities wasn't more than $25,000
(not more than $12,500 if married filing
separately and you lived apart from your
spouse all year).
-8-
Box 3. Other Net Rental Income
(Loss)
The amount in box 3 is a passive activity
amount for all partners. If the partnership had
more than one rental activity, it will attach a
statement identifying the income or loss from
each activity. Report the income or loss as
follows.
1. If box 3 is a loss, follow the
Instructions for Form 8582 to figure how
much of the loss can be reported on
Schedule E (Form 1040), line 28, column (g).
However, if the box in item D is checked,
report the loss following the rules for Publicly
traded partnerships, earlier.
2. If income is reported in box 3, report
the income on Schedule E (Form 1040),
line 28, column (h). However, if the box in
item D is checked, report the income
following the rules for Publicly traded
partnerships, earlier.
Box 4a. Guaranteed Payments
for Services
Guaranteed payments are payments made
by a partnership to a partner that are
determined without regard to the
partnership's income. Generally, amounts on
this line are not passive income, and you
should report them on Schedule E (Form
1040), line 28, column (k) (for example,
guaranteed payments for personal services).
Box 4b. Guaranteed Payments
for Capital
These are guaranteed payments other than
for services, such as for the use of capital or
attributable to section 736(a)(2) payments for
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
unrealized receivables or goodwill. Amounts
on this line should be reported on
Schedule E (Form 1040), line 28, column (k)
(for example, guaranteed payments for
capital).
Box 4c. Total Guaranteed
Payments
Amounts on this line include total guaranteed
payments paid to you by the partnership.
provided for persons that are not U.S.
persons, who are generally required to treat
dividend equivalents as U.S. source
dividends, and domestic partnerships with
partners who may need this information. The
ordinary dividends amount on line 6a does
not include the amount of dividend
equivalents.
Box 7. Royalties
Box 10. Net Section 1231 Gain
(Loss)
The amount in box 10 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). Do not
complete columns (b) through (f) on line 2 of
Form 4797. Instead, enter “From
Schedule K-1 (Form 1065)” across these
columns.
If the amount is a loss from a passive
activity, see Passive Loss Limitations in the
Instructions for Form 4797. Report the loss
following the Instructions for Form 8582 to
figure how much of the loss is allowed on
Form 4797. However, if the box in item D is
checked, report the loss following the rules
for Publicly traded partnerships, earlier. If the
partnership 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.
DRAFT AS OF
November 24, 2021
Portfolio Income
Portfolio income or loss (shown in boxes 5
through 9b and in box 11, 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 5. Interest Income
Report interest income on Form 1040 or
1040-SR, line 2b. If the amount of interest
income included in box 5 includes interest
from the credit for holders of clean
renewable energy bonds, the partnership will
attach a statement to Schedule K-1 showing
your share of interest income from these
credits. Because the basis of your interest in
the partnership has been increased by your
share of the interest income from these
credits, you must reduce your basis by the
same amount. See line 4 of the Worksheet
for Adjusting the Basis of a Partner's Interest
in the Partnership.
Box 6a. Ordinary Dividends
Report ordinary dividends on Form 1040 or
1040-SR, line 3b.
Box 6b. Qualified Dividends
Report any qualified dividends on Form 1040
or 1040-SR, line 3a.
Qualified dividends are excluded
TIP from investment income, but you
may elect to include part or all of
these amounts in investment income. See
the instructions for Form 4952, line 4g, for
important information on making this
election.
!
CAUTION
If you have any foreign source
qualified dividends, see the Partner’s
Instructions for Schedule K-3.
Attach a statement to the Schedule K-1
identifying the dividends included in box 6a
or 6b that are:
• Eligible for the deduction for dividends
received under section 243(a), (b), or (c);
• Eligible for the deduction for dividends
received under section 245;
• Eligible for the deduction for dividends
received under section 245A; and
• Hybrid dividends as defined in section
245A(e)(4).
Box 6c. Dividend Equivalents
Dividend equivalents are not reported on
Form 1040 or 1040-SR. This information is
Report royalties on Schedule E (Form 1040),
line 4.
Box 8. Net Short-Term Capital
Gain (Loss)
Report the net short-term capital gain (loss)
on Schedule D (Form 1040), line 5.
Box 9a. Net Long-Term Capital
Gain (Loss)
Report the net long-term capital gain (loss)
on Schedule D (Form 1040), line 12.
If you have any foreign source net
long-term capital gain (loss), see the
CAUTION Partner’s Instructions for
Schedule K-3.
!
Box 9b. Collectibles (28%) Gain
(Loss)
Report collectibles gain or loss on line 4 of
the 28% Rate Gain Worksheet—Line 18 in
the Instructions for Schedule D (Form 1040).
If you have any foreign source
collectibles (28%) gain (loss), see
CAUTION the Partner’s Instructions for
Schedule K-3.
!
Box 9c. Unrecaptured Section
1250 Gain
There are three types of unrecaptured
section 1250 gain. Report your share of this
unrecaptured gain on the Unrecaptured
Section 1250 Gain Worksheet—Line 19 in
the Instructions for Schedule D (Form 1040)
as follows.
• Report unrecaptured section 1250 gain
from the sale or exchange of the
partnership'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 partnership reports only
unrecaptured section 1250 gain from the
sale or exchange of its business assets, it
will enter a dollar amount in box 9c. 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 gain, see
CAUTION the Partner’s Instructions for
Schedule K-3.
!
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
If you have any foreign source net
section 1231 gain (loss), see the
CAUTION Partner’s Instructions for
Schedule K-3.
!
Box 11. Other Income (Loss)
Code A. Other portfolio income (loss).
The partnership 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 partnership held a residual interest
in a real estate mortgage investment conduit
(REMIC), it will report on the statement your
share of REMIC taxable income (net loss)
that you report on Schedule E (Form 1040),
line 38, column (d). The statement will also
report your share of any “excess inclusion”
that you report on Schedule E (Form 1040),
line 38, column (c), and your share of section
212 expenses that you report on Schedule E
(Form 1040), line 38, column (e).
Code B. Involuntary conversions. This is
your net gain (loss) from involuntary
conversions due to casualty or theft. The
partnership 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 partnership will provide you with the
information you need to complete Form
4684.
Code C. Section 1256 contracts and
straddles. The partnership will report any
-9-
net gain or loss from section 1256 contracts.
Report this amount on Form 6781, Gains and
Losses From Section 1256 Contracts and
Straddles.
Code D. Mining exploration costs recapture. The partnership will give you a
statement that shows the information needed
to recapture certain mining exploration costs
(section 617). See Pub. 535 for details.
for Form 8949. If a partner is a financial
institution referred to in section 582(c)(2) or a
depositary institution holding company (as
defined in section 3(w)(1) of the Federal
Deposit Insurance Act), report the gain or
loss in accordance with the Instructions for
Form 4797, and Rev. Proc. 2008-64,
2008-47 I.R.B. 1195.
• Partnership gains from the disposition of
farm recapture property (see the instructions
for Form 4797, line 27) and other items to
which section 1252 applies.
• 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), line 8z, to the
extent it reduced your tax in the prior tax
year.
• Gambling gains and losses.
1. If the partnership wasn't engaged in
the trade or business of gambling, (a) report
gambling winnings on Schedule 1 (Form
1040), line 8b; and (b) deduct gambling
losses to the extent of winnings on
Schedule A (Form 1040), line 16.
2. If the partnership was engaged in the
trade or business of gambling, (a) report
gambling winnings on Schedule E (Form
1040), line 28; and (b) deduct gambling
losses (to the extent of winnings) on
Schedule E (Form 1040), line 28, column (i).
• Gain (loss) from the disposition of an
interest in oil, gas, geothermal, or other
mineral properties. The partnership will
attach a statement that provides a
description of the property, your share of the
amount realized from the disposition, your
share of the partnership'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
on Form 4797, Part I. Report a gain on Form
4797, Part III, in accordance with the
instructions for line 28. See Regulations
section 1.1254-5 for details.
• Any income, gain, or loss to the
partnership under section 751(b) (certain
distributions treated as sales or exchanges).
Report this amount on Form 4797, line 10.
• Specially allocated ordinary gain (loss).
Report this amount on Form 4797, line 10.
• Net short-term capital gain (loss) and net
long-term capital gain (loss) from
Schedule D (Form 1065) 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 partnership. Report total net short-term
gain (loss) on Schedule D (Form 1040),
line 5. Report the total net long-term gain
(loss) on Schedule D (Form 1040), line 12.
• Gain from the sale or exchange of
qualified small business (QSB) stock (as
defined in the Instructions for Schedule D
(Form 1065)) that is eligible for a section
1202 exclusion. The partnership should also
give you (a) the name of the corporation that
issued the QSB stock, (b) your share of the
partnership's adjusted basis and sales price
of the QSB stock, and (c) the dates the QSB
stock was bought and sold. Corporate
partners are not eligible for the section 1202
exclusion. The following additional limitations
apply at the partner level.
1. You must have held an interest in the
partnership when the partnership acquired
the QSB stock and at all times thereafter until
the partnership disposed of the QSB stock.
2. Your share of the eligible section
1202 gain cannot exceed the amount that
would have been allocated to you based on
your interest in the partnership at the time the
QSB stock was acquired.
DRAFT AS OF
November 24, 2021
Code E. Cancellation of debt. Generally,
this cancellation of debt (COD) amount is
included in your gross income (Schedule 1
(Form 1040), line 8c). Under section 108(b)
(5), you may elect to apply any portion of the
COD amount excluded from gross income to
the reduction of the basis of depreciable
property. See Form 982 for more details.
Code F. Section 743(b) positive income
adjustments. The partnership will use this
code to report the net positive income
adjustment resulting from all section 743(b)
basis adjustments. The partnership will
provide your section 743(b) adjustment net
of cost recovery at year end by asset
grouping in box 20, code U.
Code G. Reserved for future use.
Code H. Income under subpart F (other
than inclusions under section 951A).
The partnership will provide your share of
subpart F inclusions other than section 951A
inclusions.
The partnership will attach a statement to
the Schedule K-1 identifying any subpart F
inclusion attributable to:
• The sale or exchange by a controlled
foreign corporation (CFC) of stock in another
foreign corporation described in section
964(e)(4), or
• Hybrid dividends of tiered corporations
under section 245A(e)(2).
Code I. Other income (loss). Amounts
with code I are other items of income, gain,
or loss not included in boxes 1 through 10 or
reported in box 11 using codes A through H.
The partnership 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. However, if the box in item D is
checked, report the loss following the rules
for Publicly traded partnerships, earlier.
Code I items may include the following.
• Gain or loss attributable to the sale or
exchange of qualified preferred stock of the
Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac). The
partnership will report on an attached
statement the amount of gain or loss
attributable to the sale or exchange of the
qualified preferred stock, the date the stock
was acquired by the partnership, and the
date the stock was sold or exchanged by the
partnership. If the partner is not a financial
institution, report the gain or loss on
Schedule D (Form 1040), line 5 or line 12, in
accordance with the Instructions for
Schedule D (Form 1040) and the Instructions
-10-
See the Instructions for Schedule D
(Form 1040) and the Instructions for Form
8949 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
partnership. The partnership should give
you (a) the name of the corporation that
issued the QSB stock, (b) your share of the
partnership's adjusted basis and sales price
of the QSB stock, (c) the dates the QSB
stock was bought and sold, (d) your share of
gain from the sale of the QSB stock, and (e)
your share of the gain that was deferred by
the partnership under section 1045.
Corporate partners are not eligible for the
section 1045 rollover. To qualify for the
section 1045 rollover:
1. You must have held an interest in the
partnership during the entire period in which
the partnership held the QSB stock (more
than 6 months prior to the sale), and
2. Your share of the gain eligible for the
section 1045 rollover cannot exceed the
amount that would have been allocated to
you based on your interest in the partnership
at the time the QSB stock was acquired.
See the Instructions for Schedule D
(Form 1040) and the Instructions for Form
8949 for details on how to report the gain
and the amount of the allowable postponed
gain.
Opting out of partnership election. You
can opt out of the partnership's section 1045
election and either (1) recognize the gain, or
(2) elect to purchase different replacement
QSB stock, either directly or through
ownership of a different partnership that
acquired replacement QSB stock. You
satisfy the requirement to purchase
replacement QSB stock if you own an
interest in a partnership that purchases QSB
stock during the 60-day period. You must
also notify the partnership, in writing, if you
opt out of the partnership's section 1045
election. If you recognize gain, you must
notify the partnership, in writing, of the
amount of the gain that you are recognizing.
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
Replacement stock not purchased by the
partnership. The partnership should give
you (a) the name of the corporation that
issued the QSB stock, (b) your share of the
partnership's adjusted basis and sales price
of the QSB stock, (c) the dates the QSB
stock was bought and sold, and (d) your
share of gain from the sale of the QSB stock.
Corporate partners are not eligible for the
section 1045 rollover. To qualify for the
section 1045 rollover:
1. You must have held an interest in the
partnership during the entire period in which
the partnership held the QSB stock,
2. Your share of the gain eligible for the
section 1045 rollover cannot exceed the
amount that would have been allocated to
you based on your interest in the partnership
at the time the QSB stock was acquired, and
3. You must purchase other QSB stock
(as defined in the Instructions for Schedule D
(Form 1040)) during the 60-day period that
began on the date the QSB stock was sold
by the partnership.
QSB stock held by a partnership. The
amount of gain that you must recognize is
based on the amount of gain that you would
recognize upon a sale of the distributed
replacement QSB stock for its FMV on the
date of the distribution, but not to exceed the
amount you previously deferred under
section 1045 with respect to the distributed
replacement QSB stock. If the partnership
distributed your share of replacement QSB
stock to another partner, the partnership
should give you (a) the name of the
corporation that issued the replacement QSB
stock, (b) the date the replacement QSB
stock was distributed to another partner or
partners, and (c) your share of the
partnership's adjusted basis and FMV of the
replacement QSB stock on such date.
For more information, see Regulations
section 1.1045-1.
limitation, on Schedule A (Form 1040),
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
$500, the partnership must give you a copy
of Form 8283, Noncash Charitable
Contributions, to attach to your tax return. Do
not deduct the amount shown on Form 8283.
It is the partnership's contribution. Instead,
deduct the amount identified by code C,
box 13, subject to the 50% AGI limitation, on
Schedule A (Form 1040), line 12.
If the partnership 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. Do not file
Form 8283 unless the total claimed
deduction for all contributed items of
property exceeds $500.
DRAFT AS OF
November 24, 2021
See the Instructions for Schedule D
(Form 1040) and the Instructions for Form
8949 for details on how to report the gain
and the amount of the allowable postponed
gain.
Making the section 1045 election.
You make a section 1045 election on a
timely filed return for the tax year during
which the partnership's tax year ends. See
the Instructions for Form 8949 and the
Instructions for Schedule D (Form 1040) for
more information. Attach to your Schedule D
(Form 1040) a statement that includes the
following information for each amount of gain
that you do not recognize under section
1045.
• The name of the corporation that issued
the QSB stock.
• The name and EIN of the selling
partnership.
• The dates the QSB stock was purchased
and sold.
• The amount of gain that isn't recognized
under section 1045.
• If a partner purchases QSB stock, the
name of the corporation that issued the
replacement QSB stock, the date the stock
was purchased, and the cost of the stock.
• If a partner treats the partner's interest in
QSB stock that is purchased by a purchasing
partnership as the partner's replacement
QSB stock, the name and EIN of the
purchasing partnership, the name of the
corporation that issued the replacement QSB
stock, the partner's share of the cost of the
QSB stock that was purchased by the
partnership, the computation of the partner's
adjustment to basis with respect to that QSB
stock, and the date the stock was purchased
by the partnership.
Distribution of replacement QSB stock to
a partner that reduces another partner's
interest in replacement QSB stock. You
must recognize gain upon a distribution of
replacement QSB stock to another partner
that reduces your share of the replacement
Deductions
Box 12. 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 partnership will report on
an attached statement your allowable share
of the cost of any qualified enterprise zone or
qualified real property it placed in service
during the tax year. Report the amount from
Form 4562, line 12, 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), line 28, column (j). However, if the
box in item D is checked, report this amount
following the rules for Publicly traded
partnerships, earlier.
Box 13. Other Deductions
Contributions. Codes A through G. The
partnership will give you a statement that
shows charitable contributions subject to the
100%, 60%, 50%, 30%, and 20% adjusted
gross income (AGI) limitations. For more
details, see Pub. 526, Charitable
Contributions, and the Instructions for
Schedule A (Form 1040). If your
contributions are subject to more than one of
the AGI limitations, see Worksheet 2.
Applying the Deduction Limits in Pub. 526.
Charitable contribution deductions are
not taken into account in figuring your
passive activity loss for the year. Do not
include them on Form 8582.
Note. If you are not filing Schedule A, you
can elect to deduct cash contributions on
Form 1040 or 1040–SR, line 12, subject to
the $300 limit.
Code A. Cash contributions (60%).
Report this amount, subject to the 60% AGI
limitation, on Schedule A (Form 1040),
line 11.
Code B. Cash contributions (30%).
Report this amount, subject to the 30% AGI
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
-11-
Food inventory contributions. The
partnership 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 13 using code C. The
partnership will also report your share of the
partnership's net income from the business
activities that made the food inventory
contribution(s). Your deduction for food
inventory contributions made during 2021
cannot exceed 25% 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 25% limitation may be carried
over for up to 5 years. Report this amount,
subject to the 50% AGI limitation, on
Schedule A (Form 1040), line 12.
Code D. Noncash contributions (30%).
Report this amount, subject to the 30% AGI
limitation, on Schedule A (Form 1040),
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), 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),
line 12.
Code G. Contributions (100%). The
partnership will report your distributive share
of the following contributions (both cash and
noncash) that may be subject to the 100%
AGI limitation.
Cash contributions for relief efforts in
certain disaster areas. The partnership
will report your share of qualified cash
contributions that were donated for relief
efforts in certain disaster areas. Individuals
can elect to deduct 100% of these
contributions made before February 19,
2020, on Schedule A (Form 1040), line 11. If
you do not make this election, add this
amount to the cash contributions reported in
box 13 using code A and enter the total
amount, subject to a 60% AGI limitation, on
Schedule A (Form 1040), line 11.
Corporations can elect to deduct 100% of
these contributions made between January
1, 2020, and February 25, 2021, on Form
1120.
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 deducting the
full amount in the current year. If you make
this election, these items are not treated as
adjustments or tax preference items.
Under the election, you can deduct
circulation expenditures ratably over a 3-year
period. Research and experimental
expenditures and mining exploration and
development costs can be amortized over a
10-year period. Intangible drilling and
development costs can be amortized over a
60-month period. The amortization period
begins 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), line 28. If you do not make the
election, report the section 59(e)(2)
expenditures on Schedule E (Form 1040),
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 on line 28, column (i), if you
materially participated in the partnership
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 M. Amounts paid for medical insurance. Any amounts paid during the tax year
for insurance that constitutes medical care
for you, your spouse, your dependents, and
your children under age 27 who are not
dependents. On Schedule 1 (Form 1040),
line 17, you may be allowed to deduct such
amounts, even if you do not itemize
deductions. If you do itemize deductions,
enter on Schedule A (Form 1040), line 1, any
amounts not deducted on Schedule 1 (Form
1040), line 17.
DRAFT AS OF
November 24, 2021
Increased limit for certain cash
contributions during 2021. The
partnership will report your distributive share
of certain cash contributions under section
2205(a) of the Coronavirus Aid, Relief, and
Economic Security Act. You can elect to
deduct 100% of these contributions on
Schedule A (Form 1040), line 11.
Qualified conservation contributions
of property used in agriculture or
livestock production. The partnership will
report 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 13
using code C. If you are a farmer or rancher,
you qualify for a 100% AGI limitation for this
contribution. Otherwise, your deduction for
this contribution is subject to a 50% AGI
limitation. Report this amount on Schedule A
(Form 1040), line 12. See Pub. 526 for more
information on qualified conservation
contributions.
Code H. Investment interest expense.
Include this amount on Form 4952, line 1. If
the partnership has investment income or
other investment expense, it will report your
share of these items in box 20 using codes A
and B. Include investment income and
expenses from other sources to figure how
much of your total investment interest is
deductible. You will also need this
information to figure your investment interest
expense deduction.
If the partnership paid or accrued interest
on debts properly allocable to investment
property, the amount of interest you are
allowed to deduct may be limited.
For more information on the special
provisions that apply to investment interest
expense, see Form 4952 and Pub. 550,
Investment Income and Expenses.
Code I. Deductions—royalty income.
Include deductions allocable to royalties on
Schedule E (Form 1040), line 19. For this
type of expense, enter “From Schedule K-1
(Form 1065).”
These deductions are not taken into
account in figuring your passive activity loss
for the year. Do not enter them on Form
8582.
Code J. Section 59(e)(2) expenditures.
On an attached statement, the partnership
will show 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
Code K. Excess business interest expense. If the partnership reports excess
business interest expense to the partner, the
partner is required to file Form 8990. See the
Instructions for Form 8990 for additional
information.
For tax years beginning after 2017, the
partner’s basis in its partnership interest at
the end of the tax year is reduced (but not
below zero) by the amount of excess
business interest allocated to the partner for
the tax year, even if the partner is not
allowed a deduction for the allocated excess
business interest in the year of the basis
reduction. If the partner disposes of a
partnership interest in which the basis has
been reduced before all of the allocated
excess business interest was used, the
partner increases its basis immediately
before the sale for the amount not yet
deducted.
Code L. Deductions—portfolio income
(other). Generally, you should report these
amounts on Schedule A (Form 1040),
line 16. See the instructions for Schedule A,
line 16, for details. These deductions are not
taken into account in figuring your passive
activity loss for the year. Do not enter them
on Form 8582.
-12-
Code N. Educational assistance benefits.
Deduct your educational assistance benefits
on a separate line of Schedule E (Form
1040), line 28, up to the $5,250 limitation. If
your benefits exceed $5,250, you may be
able to use the excess amount on Form 8863
to figure the education credits.
Code O. Dependent care benefits. The
partnership will report the dependent care
benefits you received. You must use Form
2441, Part III, to figure the amount, if any, of
the benefits you may exclude from your
income.
Code P. Preproductive period expenses.
You may be able to deduct these expenses
currently or you may need to capitalize them
under section 263A. See Pub. 225, Farmer's
Tax Guide, and Regulations section
1.263A-4 for details.
Code Q. Reserved for future use.
Code R. Pensions and IRAs. Payments
made on your behalf to an IRA, a qualified
plan, a simplified employee pension (SEP),
or a SIMPLE IRA plan. See the Schedule 1
(Form 1040) instructions for line 20 to figure
your IRA deduction. Enter payments made to
a qualified plan, SEP, or SIMPLE IRA plan
on Schedule 1 (Form 1040), line 16. If the
payments to a qualified plan were to a
defined benefit plan, the partnership should
give you a statement showing the amount of
the benefit accrued for the current tax year.
Code S. Reforestation expense deduction. The partnership 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 partnership'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), line 28,
column (g). If you materially participated in
the reforestation activity, report the
deduction on Schedule E (Form 1040),
line 28, column (i).
Codes T through U. Reserved for future
use.
Code V. Section 743(b) negative income
adjustments. The partnership will use this
code to report the net negative income
adjustment resulting from all section 743(b)
basis adjustments. The partnership will
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
provide your section 743(b) adjustment net
of cost recovery at year end by asset
grouping in box 20, code U.
Code W. 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).
• 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 partnership
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), line 28. In
column (a), enter the name of the partnership
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). See the definition of material
participation, earlier. 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.
• Interest paid or accrued on debt properly
allocable to your share of a working interest
in any oil or gas property (if your liability isn't
limited). If you didn't materially participate in
the oil or gas activity, this interest is
investment interest reportable as described
earlier under Code H. Investment interest
expense; otherwise, it is trade or business
interest. If you didn't materially participate in
the oil or gas activity, this interest is
investment interest expense and should be
reported on Form 4952. If you materially
participated in the activity, report the interest
on Schedule E (Form 1040), line 28. On a
separate line, enter “interest expense” and
the name of the partnership in column (a)
and the amount in column (i).
• Contributions to a capital construction
fund (CCF). The deduction for a CCF
investment isn't taken on Schedule E (Form
1040). Instead, you subtract the deduction
from the amount that would normally be
entered as taxable income on Form 1040 or
1040-SR, line 15. In the margin to the left of
line 15, enter "CCF" and the amount of the
deduction.
• Penalty on early withdrawal of savings.
Report this amount on Schedule 1 (Form
1040), line 18.
• Film, television, and live theatrical
production expenses. The partnership 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 are not 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), line 28, column (g).
If you materially participated in the
production activity, report the deduction on
Schedule E (Form 1040), line 28, column (i).
• Deductions—portfolio income (formerly
deductible by individuals under section 67
subject to 2% AGI floor). For taxpayers other
than individuals, deduct amounts that are
clearly and directly allocable to portfolio
income (other than investment interest
expense and section 212 expenses from a
REMIC).
The partnership will give you a
description and the amount of your share for
each of these items.
addition to the credit forms identified below.
See Passive Activity Limitations, earlier, and
the Instructions for Form 8582-CR (or Form
8810) for details.
Generally, you are not required to
TIP complete the source credit form or
attach it to Form 3800 if you are a
taxpayer that isn't a partnership or S
corporation, and your only source for a credit
listed in Form 3800, Part III, is from a
partnership, S corporation, estate, trust, or
cooperative. (Instead, you can report this
credit directly on Form 3800, Part III, and
enter the EIN of the partnership in column (b)
of Part III.) The following exceptions apply.
DRAFT AS OF
November 24, 2021
Code X. Reserved for future use.
Box 14. Self-Employment
Earnings (Loss)
If you and your spouse are both partners,
each of you must complete and file your own
Schedule SE (Form 1040), Self-Employment
Tax, to report your partnership net earnings
(loss) from self-employment.
Code A. Net earnings (loss) from
self-employment. If you are a general
partner, reduce this amount before entering it
on Schedule SE (Form 1040) by any section
179 expense deduction claimed,
unreimbursed partnership expenses
claimed, and depletion claimed on oil and
gas properties. Do not reduce net earnings
from self-employment by any separately
stated deduction for health insurance
expenses.
If the amount on this line is a loss, enter
only the deductible amount on Schedule SE
(Form 1040). See Limitations on Losses,
Deductions, and Credits, earlier.
If your partnership is an options dealer or
a commodities dealer, see section 1402(i).
If your partnership is an investment club,
see Rev. Rul. 75-525, 1975-2 C.B. 350.
Code B. Gross farming or fishing income. If you are an individual partner, enter
the amount from this line, as an item of
information, on Schedule E (Form 1040),
line 42. Also use this amount to figure net
earnings from self-employment under the
farm optional method on Schedule SE (Form
1040), Part II.
Code C. Gross nonfarm income. If you
are an individual partner, use this amount to
figure net earnings from self-employment
under the nonfarm optional method on
Schedule SE (Form 1040), Part II.
Box 15. Credits
If you have credits that are passive activity
credits to you, you must complete Form
8582-CR (or Form 8810 for corporations) in
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
-13-
• You are claiming the investment credit
(Form 3468) or the biodiesel and renewable
diesel fuels credit (Form 8864) in Part III with
box A or B checked.
• The taxpayer is an estate or trust and the
source credit can be allocated to
beneficiaries. For more details, see the
instructions for Form 1041, U.S. Income Tax
Return for Estates and Trusts, Schedule K-1,
box 13.
• The taxpayer is a cooperative and the
source credit can or must be allocated to
patrons. For more details, see the
instructions for Form 1120-C, U.S. Income
Tax Return for Cooperative Associations,
Schedule J, line 5c.
Codes A and B. Reserved for future use.
Codes C and D. Low-income housing
credit. If section 42(j)(5) applies, the
partnership will report your share of the
low-income housing credit using code C. If
section 42(j)(5) doesn't apply, your share of
the credit will be reported using code D. Any
allowable low-income housing credit
reported using code C or code D is reported
on Form 8586, line 4; or Form 3800, Part III,
line 4d.
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 partnership interest. 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 partnership
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 20 using code D. See the Instructions for
Form 3468 for details. If the partnership 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 15, code E, and
box 20, code D. The expenditures related to
rental real estate activities (box 15, code E)
are reported on Schedule K-1 separately
from other qualified rehabilitation
expenditures (box 20, code D) 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 partnership 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 partnership 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.
Certain Employee Tips, line 5; 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 25,
and attach a copy of the Schedule K-1 to
your tax return. Instead of attaching a copy of
the Schedule K-1 to the tax return, you can
include a statement with the return that
provides the partnership's name, address,
EIN, and backup withholding amount.
• Qualified zone academy bond credit.
Report this amount on Form 8912.
• Qualified school construction bond credit.
Report this amount on Form 8912.
• Build America 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).
• Credit for small employer health insurance
premiums (Form 8941).
• Employer credit for paid family and
medical leave (Form 8994).
• Employee retention credit (Form 5884-A).
DRAFT AS OF
November 24, 2021
Code G. Other rental credits. The
partnership 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 partnership 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 RIC or REIT.
Report these taxes on Schedule 3 (Form
1040), line 13a.
Code I. Biofuel producer credit. Report
this amount on Form 6478, Biofuel Producer
Credit, line 3, or Form 3800, Part III (see TIP,
earlier), line 4c.
Code J. Work opportunity credit. Report
this amount on Form 5884, Work Opportunity
Credit, line 3, or Form 3800, Part III (see TIP,
earlier), line 4b.
Code K. Disabled access credit. Report
this amount on Form 8826, Disabled Access
Credit, line 7, or Form 3800, Part III (see TIP,
earlier), line 1e.
Code L. Empowerment zone employment
credit. Report this amount on Form 8844,
Empowerment Zone Employment Credit,
line 3, or Form 3800, Part III (see TIP,
earlier), line 3.
Code M. Credit for increasing research
activities. Report this amount on Form
6765, Credit for Increasing Research
Activities, line 37; or on Form 3800, Part III
(see TIP, earlier) as follows.
• The partnership will provide information
necessary to determine if it is an eligible
small business under section 38(c)(5)(A). If
you and the partnership 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 Form 8846, Credit for Employer
Social Security and Medicare Taxes Paid on
Code P. Other credits. On a statement
attached to Schedule K-1, the partnership
will identify the type of credit and any other
information you need to figure credits other
than those reported with codes A through O.
Most credits identified by code P will be
reported on Form 3800 (see TIP, earlier).
Credits that may be reported with code P
include the following.
• New markets credit (Form 8874).
• Qualified railroad track maintenance
credit (Form 8900).
• 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).
• Renewable electricity, refined coal, and
Indian coal production credit. The
partnership 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).
• Orphan drug credit (Form 8820).
• Credit for small employer pension plan
startup costs and auto enrollment (Form
8881).
• Credit for employer-provided childcare
facilities and services (Form 8882).
• Biodiesel and renewable diesel fuels
credit. If this credit includes the small
agri-biodiesel producer credit, the
partnership 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.
• Low sulfur diesel fuel production credit
(Form 8896).
• 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).
• 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.
-14-
Box 16. International
Transactions
If the partnership checked the box, see the
attached Schedule K-3 with respect to items
of international tax relevance.
For additional information, see the
Partner’s Instructions for Schedule K-3.
Box 17. Alternative
Minimum Tax (AMT) Items
Use the information reported in box 17 (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. Post-1986 depreciation adjustment. This amount is your share of the
partnership's post-1986 depreciation
adjustment. If you are an individual partner,
report this amount on Form 6251, line 2l.
Code B. Adjusted gain or loss. This
amount is your share of the partnership's
adjusted gain or loss. If you are an individual
partner, report this amount on Form 6251,
line 2k.
Code C. Depletion (other than oil & gas).
This amount is your share of the
partnership's depletion adjustment. If you are
an individual partner, 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 partnership
should have attached a statement that
shows any income from or deductions
allocable to such properties that are included
in boxes 2 through 13, 18, and 20 of
Schedule K-1. Use the amounts reported
and the amounts on the attached statement
to help you figure the net amount to enter on
Form 6251, line 2t.
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
Code F. Other AMT items. Enter the
information on the statement attached by the
partnership on the applicable lines of Form
6251 or Schedule I (Form 1041).
Box 18. Tax-Exempt
Income and Nondeductible
Expenses
Decrease the adjusted basis of your
interest in the partnership (but not below
zero) by the amount of cash distributed to
you and the partnership's adjusted basis of
the distributed securities. Advances or
drawings of money or property against your
share are treated as current distributions
made on the last day of the partnership's tax
year.
Your basis in the distributed marketable
securities (other than in liquidation of your
interest) is the smaller of:
• The partnership's adjusted basis in the
securities immediately before the distribution
increased by any gain recognized on the
distribution of the securities, or
• The adjusted basis of your partnership
interest reduced by any cash distributed in
the same transaction and increased by any
gain recognized on the distribution of the
securities.
If you received the securities in liquidation
of your partnership interest, your basis in the
marketable securities is equal to the
adjusted basis of your partnership interest
reduced by any cash distributed in the same
transaction and increased by any gain
recognized on the distribution of the
securities.
Computation of Section 737 Gain
1. Enter the FMV of the distributed
property (other than
money)
. . . . . . . . . . .
2. Enter your adjusted basis in the
partnership immediately before
the distribution. See Basis
Limitations, earlier . . . . . .
3. Enter the amount of money
received in the distribution .
4. Subtract line 3 from line 2. If zero
or less, enter -0- . . . . . . .
$
DRAFT AS OF
November 24, 2021
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
partnership during the year. Individual
partners include this amount on Form 1040
or 1040-SR, line 2a. Increase the adjusted
basis of your interest in the partnership by
this amount.
Code B. Other tax-exempt income.
Increase the adjusted basis of your interest
in the partnership by the amount shown, but
do not include it in income on your tax return.
The partnership will attach a
TIP statement for the amount included
under code B that is exempt by
reason of section 892 and describe the
nature of the income.
Code C. Nondeductible expenses. The
nondeductible expenses paid or incurred by
the partnership are not deductible on your
tax return. Decrease the adjusted basis of
your interest in the partnership by this
amount.
Box 19. Distributions
Code A. Cash and marketable securities.
Code A shows the distributions the
partnership made to you of cash and certain
marketable securities. The marketable
securities are included at their FMV on the
date of distribution (minus your share of the
partnership's gain on the securities
distributed to you). If the amount shown as
code A exceeds the adjusted basis of your
partnership interest immediately before the
distribution, the excess is treated as gain
from the sale or exchange of your
partnership interest. Generally, this gain is
treated as gain from the sale of a capital
asset and should be reported on Form 8949
and the Schedule D for your return.
However, if you receive cash or property in
exchange for any part of a partnership
interest, the amount of the distribution
attributable to your share of the partnership's
unrealized receivable or inventory items
results in ordinary income (see Regulations
section 1.751-1(a) and Sale or Exchange of
Partnership Interest, earlier). For details, see
Pub. 541.
The partnership will separately identify
both of the following.
• The FMV of the marketable securities
when distributed (minus your share of the
gain on the securities distributed to you).
• The partnership's adjusted basis of those
securities immediately before the
distribution.
Code B. Distribution subject to section
737. If a partner contributed section 704(c)
built-in gain property within the last 7 years
and the partnership made a distribution of
property to that partner other than the
previously contributed built-in gain property,
the partner may be required to recognize
gain under section 737. This gain is in
addition to any gain recognized under
section 731 on the distribution.
When this occurs, the partnership will
enter code B in box 19 of the contributing
partner's Schedule K-1 and attach a
statement that provides the information the
partner needs to figure the recognized gain
under section 737. The partnership is
required to provide the following information.
• The FMV of the distributed property (other
than money).
• The amount of money received in the
distribution.
• The net precontribution gain of the
partner.
Using the information from the attached
statement, complete the worksheet below to
figure your recognized gain under section
737.
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
5. Subtract line 4 from line 1 . .
6. Enter your net precontribution
gain . . . . . . . . . . . . .
7. Section 737 gain. Enter the
lesser of the amount on line 5 or
line 6 . . . . . . . . . . . . .
The type of gain (section 1231 gain,
capital gain) generated is determined by the
type of gain you would have recognized if
you sold the property rather than contributing
it to the partnership. Accordingly, report the
amount from line 7, above, on Form 4797 or
Form 8949 and the Schedule D of your tax
return.
Code C. Other property. Code C shows
the partnership's adjusted basis of property
other than money immediately before the
property was distributed to you. In addition,
the partnership should report the adjusted
basis and FMV of each property distributed.
Decrease the adjusted basis of your interest
in the partnership by the amount of your
basis in the distributed property. Your basis
in the distributed property (other than in
liquidation of your interest) is the smaller of:
• The partnership's adjusted basis
immediately before the distribution, or
• The adjusted basis of your partnership
interest reduced by any cash distributed in
the same transaction.
If you received the property in liquidation
of your interest, your basis in the distributed
property is equal to the adjusted basis of
your partnership interest reduced by any
cash distributed in the same transaction.
If you receive cash or property in
exchange for any part of a partnership
interest, the amount of the distribution
attributable to your share of the partnership's
unrealized receivable or inventory items
results in ordinary income (see Regulations
section 1.751-1(a) and Sale or Exchange of
Partnership Interest, earlier).
Box 20. 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. Fuel tax credit information. The
partnership will report the number of gallons
of each fuel sold or used during the tax year
for a nontaxable use qualifying for the credit
for taxes paid on fuels, type of use, and the
-15-
applicable credit per gallon. Use this
information to complete Form 4136, Credit
for Federal Tax Paid on Fuels.
Code D. Qualified rehabilitation expenditures (other than rental real estate). The
partnership 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 20 using code D. Your share
of qualified rehabilitation expenditures
related to rental real estate activities is
reported in box 15 using code E. See the
Instructions for Form 3468 for details. If the
partnership 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 15, code E, and
box 20, code D. The expenditures related to
rental real estate activities (box 15, code E)
are reported on Schedule K-1 separately
from other qualified rehabilitation
expenditures (box 20, code D) because they
are subject to different passive activity
limitation rules. See the Instructions for Form
8582-CR for details.
qualified plug-in electric drive motor vehicle
credit (see section 30D(f)(5)).
Code J. Look-back interest—completed
long-term contracts. The partnership 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.
partnership will separately report your share
of all payments received for the property in
future tax years. See the Form 6252
instructions for details.
Code M. Recapture of section 179 deduction. The partnership 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 partners dropped to
50% or less. If this occurs, the partnership
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 partnership'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.
DRAFT AS OF
November 24, 2021
Code E. Basis of energy property. If the
partnership provides an attached statement
for code E, use the information on the
statement to complete the applicable energy
credit on Form 3468, line 12. See Energy
Credit in the Instructions for Form 3468.
Codes F and G. Recapture of low-income
housing credit. A section 42(j)(5)
partnership will report recapture of a
low-income housing credit with code F. All
other partnerships will report recapture of a
low-income housing credit with code G.
Keep a separate record of recapture from
each of these sources so that you will be
able to correctly figure any recapture of
low-income housing credit that may result
from the disposition of all or part of your
partnership interest. For details, see Form
8611.
Code H. Recapture of investment credit.
The partnership 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 you
disposed of more than one-third of your
interest in a partnership.
Code I. Recapture of other credits. On a
statement attached to Schedule K-1, the
partnership will report any information you
need to figure the recapture of the new
markets credit (see Form 8874 and Form
8874-B, Notice of Recapture Event for New
Markets Credit); the Indian employment
credit (see section 45A(d)); any credit for
employer-provided childcare facilities and
services (see Form 8882); the alternative
motor vehicle credit (see section 30B(h)(8));
the alternative fuel vehicle refueling property
credit (see section 30C(e)(5)); or the new
Code K. Look-back interest—income
forecast method. The partnership 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 L. Dispositions of property with
section 179 deductions. The partnership
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 partners
with code L. If the partnership passed
through a section 179 expense deduction for
the property, you must report the gain or loss
and any recapture of the section 179
expense deduction for the property on your
income tax return (see the Instructions for
Form 4797 for details). The partnership 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 partnership's tax
year(s) in which the amount was passed
through. To figure the amount of 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 from the
amount of section 179 expense you
deducted for the property if your interest in
the partnership has changed.
8. If the disposition is due to a casualty
or theft, a statement providing the
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
-16-
Code N. Business interest expense. For
tax years beginning after November 12,
2020, the partnership will report your share
of the partnership's deductible business
interest expense for inclusion in the separate
loss class for computing any basis limitation
(defined in section 704(d), Regulations
section 1.163(j)-6(h)). This information is
necessary if your losses are limited under
section 704(d). Deductible business interest
expense is reported elsewhere on
Schedule K-1 and the total amount is
reported here for information only and was
already included as a deduction on
another line of your Schedule K-1.
Included in the code N information is a
statement providing the allocation of the
business interest expense already deducted
by the partnership by line number on the
Schedule K-1.
The partner must remove the
business interest expense
CAUTION deductions from these referenced
lines when computing any basis limitation.
!
Any excess business interest expense
not deductible under section 163(j) will be
included in box 13, code K, for inclusion in
the basis limitation and is not reported here.
See Worksheet for Adjusting the Basis of a
Partner's Interest in the Partnership for
additional information about computing the
loss limitation.
Code O. Section 453(l)(3) information.
The partnership will report any information
you need to figure the interest due under
section 453(l)(3) with respect to the
disposition of certain timeshares and
residential lots on the installment method. If
you are an individual, report the interest on
Schedule 2 (Form 1040), line 14.
Code P. Section 453A(c) information.
The partnership will report any information
you need to figure the interest due under
section 453A(c) with respect to certain
installment sales. This information will
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
include the following from each Form 6252
where line 5 is greater than $150,000.
1. Description of property.
2. Date acquired.
3. Date property sold.
4. Selling price, including mortgages
and other debts (not including interest,
whether stated or unstated), less mortgages,
debts, and other liabilities the buyer
assumed or took the property subject to.
5. Gross profit.
6. Gross profit percentage.
7. Contract price less (4) above, plus
payments received during the year, not
including interest, whether stated or
unstated.
8. Payments received in prior years, not
including interest whether stated or unstated.
9. Installment sale income.
10. Character of the income—capital or
ordinary.
11. Partner's share of the deferred
obligation. See computation below.
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), line 17z. In the
space to the left of line 17z, enter the amount
of tax and interest and “CCF.” See Pub. 595
for details.
Code T. 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 partnership should also
allocate to you a share of the adjusted basis
of each partnership oil or gas property. See
Pub. 535 for details on how to figure your
depletion deduction.
relevant to you will depend on whether you,
the partnership, or a lower-tier entity has
made an election under Regulations section
1.1411-10(g) with respect to the CFC or
QEF. For example, if the partnership made
an election under Regulations section
1.1411-10(g) for a CFC the stock of which is
owned by the partnership, and the relevant
income and deduction items derived from
that CFC are reported elsewhere on the
Schedule K-1, then you will not need the
information provided in code Y to complete
your Form 8960.
If you are an individual who is a U.S.
citizen or resident, or a domestic trust or
estate, follow the Instructions for Form 8960
to figure and report your net investment
income and AGI or MAGI. Corporate
partners are not subject to the net investment
income tax. See Regulations sections
1.1411-1 through -10 for details.
DRAFT AS OF
November 24, 2021
Deferred obligation computation. For
each Form 6252 where line 5 is greater than
$150,000, figure the Schedule K-1 deferred
obligation as follows.
• Item (4) from the list above, less the sum
of items (7) and (8). This equals the
Schedule K deferred obligation.
• Multiply the Schedule K deferred
obligation by the partner’s profit percentage.
This equals the partner’s share of the
deferred obligation.
If you are an individual, report the interest
on Schedule 2 (Form 1040), line 15. See the
Form 6252 instructions for more information.
Also see section 453A(c) for details on how
to figure the interest.
Code Q. Section 1260(b) information.
The partnership will report any information
you need to figure the interest due under
section 1260(b). If the partnership 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), line 17z. Enter “1260(b)” and
the amount of the interest in the space to the
left of line 17z. See section 1260(b) for
details, including how to figure the interest.
Code R. Interest allocable to production
expenditures. The partnership 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 S. Capital construction fund (CCF)
nonqualified withdrawals. The
partnership will report your share of
nonqualified withdrawals from a 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
Code U. Section 743(b) basis adjustment. The partnership will provide your
section 743(b) adjustment, net of cost
recovery, by asset grouping. See IRS.gov/
forms-pubs/clarifications-for-disregardedentity-reporting-and-section-743b-reporting
for more information.
Code V. Unrelated business taxable income. The partnership will report any
information you need to figure unrelated
business taxable income under section
512(a)(1) (but excluding any modifications
required by paragraphs (8) through (15) of
section 512(b)) for a partner that is a
tax-exempt organization.
A partner is required to notify the
TIP partnership of its tax-exempt status.
Code W. Precontribution gain (loss). If
the partnership distributed any property with
precontribution gain or loss to any partner
other than the contributing partner, and the
date of the distribution was within 7 years of
the date the property was contributed to the
partnership, the contributing partner must
recognize a gain or loss under section 704(c)
(1)(B). If the partnership made such a
distribution during its tax year, it will enter
code W in box 20 of the contributing
partner's Schedule K-1 and attach a
statement providing the amount of the
partner's precontribution gain (loss) and
identifying the character of the gain or loss
(for example, capital gain (loss) or section
1231 gain (loss)). Report the precontribution
gain or loss on Form 8949 and/or
Schedule D (Form 1040) or Form 4797 in
accordance with the information provided by
the partnership.
Code X. Reserved for future use.
Code Y. Net investment income. The
partnership may use this code Y to report
information you may need to determine your
net investment income tax under section
1411, including information regarding
income from CFCs and passive foreign
investment companies (PFICs) the stock of
which is owned by the partnership. Any
information that isn't provided elsewhere on
Schedule K-1 (or an attachment to
Schedule K-1) is provided using code Y. For
CFCs and PFICs that you treat as qualified
electing funds (QEFs), the information that is
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
-17-
Code Z. 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 PTP income from
your partnership. The partnership will
provide the information you need to figure
your deduction. Use one of these forms to
figure your QBI deduction.
1. Use Form 8995, Qualified Business
Income Deduction Simplified Computation, if
all of the following apply.
a. You have QBI, section 199A
dividends, or PTP income (defined below).
b. Your 2021 taxable income before the
QBI deduction is equal to or less than
$164,925 ($329,800 if married filing jointly).
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 the above requirements.
Use the information provided by your
partnership to complete the appropriate form
listed above. For definitions and more
information, see the Instructions for Form
8995 or the Instructions for Form 8995-A, as
appropriate.
QBI/qualified PTP items subject to
partner-specific determinations. The
amounts reported to you reflect your
distributive share of items from the
partnership’s trade(s), business(es), or
aggregation(s), and may include items that
are not 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
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 the Instructions
for Form 8995-A, as appropriate.
W-2 wages. The amounts reported
reflect your distributive share of the
partnership’s W-2 wages allocable to the
QBI of each qualified trade, business, or
aggregation. See the Instructions for Form
8995 or the Instructions for Form 8995-A, as
appropriate.
Unadjusted basis immediately after
acquisition (UBIA) of qualified property.
The amounts reported reflect your
distributive share of the partnership’s UBIA
of qualified property of each qualified trade,
business, or aggregation. See the
Instructions for Form 8995 or the Instructions
for Form 8995-A, as applicable.
interest subject to taxation at ordinary
income tax rates.
A partner is required to notify the
TIP partnership of its status as a PTP.
Code AC. Section 1(h)(5) gain (loss).
This code is used to report the partner’s
share of gain or loss on the sale of the
partnership interest subject to taxation at the
rate for collectible assets as defined in
section 1(h)(5).
2. Any information you need to
complete a disclosure statement for
reportable transactions in which the
partnership participates. If the partnership
participates in a transaction that must be
disclosed on Form 8886, Reportable
Transaction Disclosure Statement, both you
and the partnership may be required to file
Form 8886 for the transaction. The
determination of whether you are required to
disclose a transaction of the partnership is
based on the category(s) under which the
transaction qualifies for disclosure and is
determined by you and the partnership. You
may have to pay a penalty if you are required
to file Form 8886 and do not do so. See the
Instructions for Form 8886 for details.
3. Noncash charitable contributions. If
the partnership made a noncash charitable
contribution, your share of the partnership’s
adjusted basis in the property is limited to
basis and is reported here.
4. Interest and additional tax on
compensation deferred under a section
409A nonqualified deferred compensation
plan that doesn't meet the requirements of
section 409A. See section 409A(a)(1)(B) to
figure the interest and additional tax on this
income. Report this interest and tax on
Schedule 2 (Form 1040), line 17h. This
income is included in the amount in either
box 4a, Guaranteed payments for services;
or box 4b, Guaranteed payments for capital.
5. Inversion gain. The partnership will
provide a statement showing the amounts of
each type of income or gain that is included
in inversion gain. The partnership has
included inversion gain in income elsewhere
on Schedule K-1. Inversion gain is also
reported under code AH because your
taxable income and alternative minimum
taxable income cannot 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.
6. Qualifying advanced coal project
property. Use the amounts the partnership
provides you to figure the amounts to report
on Form 3468, lines 5a through 5c.
7. Qualifying gasification project
property. Use the amounts the partnership
provides you to figure the amounts to report
on Form 3468, lines 6a and 6b.
8. Qualifying advanced energy project
property. Use the amount the partnership
provides you to figure the amount to report
on Form 3468, line 7.
9. Conservation reserve program
payments. Individuals who received social
security retirement or disability benefits, and
are partners in farm partnerships that receive
conservation reserve program payments, do
not pay self-employment tax on their portion
DRAFT AS OF
November 24, 2021
Section 199A dividends. The amount
reported reflects your distributive share of
the partnership's net section 199A dividends.
See the Instructions for Form 8995 or the
Instructions for Form 8995-A, as applicable.
Patrons of specified agricultural and
horticultural cooperatives. If the
partnership was a patron of an agricultural or
horticultural cooperative (specified
cooperative), you must use Form 8995-A to
figure your QBI deduction. You must also
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 partner-specific
determinations. The amounts reported to
you reflect your distributive share of items
from the partnership’s trade(s), 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.
W-2 wages allocable to qualified
payments from specified cooperatives.
The amounts reported reflect your
distributive share of the partnership's W-2
wages allocable to the qualified payments of
each qualified trade, business, or
aggregation. See the Instructions for Form
8995-A.
Section 199A(g) deduction from
specified cooperatives. The amount
reported reflects your distributive share of
the partnership’s net section 199A(g)
deduction. See the Instructions for Form
8995-A.
Code AA. Section 704(c) information.
The partnership will show the portion of
income or deduction items allocated to you
under section 704(c). These items are
included elsewhere in other income or
deduction items on Schedule K-1.
Code AB. Section 751 gain (loss). This
code is used to report the partner's share of
gain or loss on the sale of the partnership
Code AD. Deemed section 1250 unrecaptured gain. This code is used to report the
partner’s share of gain or loss on the sale of
the partnership interest subject to taxation at
the rate for unrecaptured section 1250 gain
assets as defined in section 1(h)(6).
Code AE. Excess taxable income. If the
partnership was required to file Form 8990,
Limitation on Business Interest Expense
Under Section 163(j), it may determine it has
excess taxable income. Report the amount
of excess taxable income on Form 8990,
Schedule A, line 43, column (f), if you are
required to file Form 8990. See the
Instructions for Form 8990 for additional
information.
Code AF. Excess business interest income. If the partnership is required to file
Form 8990, it may determine it has excess
business interest income. Enter the amount
of excess business interest income on Form
8990, Schedule A, line 43, column (g), if you
are required to file Form 8990. See the
Instructions for Form 8990 for additional
information.
Code AG. Gross receipts for section
448(c). For tax years ending after
December 30, 2020, partners in a
partnership must include a share of
partnership gross receipts (defined in
Proposed Regulations section 1.448-1T(f)(2)
(iv)) in proportion to their share of gross
income under section 703 (unless the
partnership is treated as one person under
the aggregation rules of section 448(c)).
Partnerships with gross receipts greater than
$5 million are required to report to their
partners their distributive share of current
year gross receipts. If a partnership and a
partner are treated as a single employer
under the section 448(c) aggregation rules,
and the partnership has current year gross
receipts greater than $5 million, then the
partnership should report its total current
year gross receipts to that partner. See
Regulations section 1.163(j)-2(d)(2)(iii) and
IRS.gov/newsroom/faqs-regarding-theaggregation-rules-under-section-448c2–thatapply-to-the-section-163j-small-businessexemption.
If a partner needs gross receipts
information from a partnership in order to
figure the gross receipts test under section
448(c), and the partnership did not report
gross receipts on the Schedule K-1, the
partner should request this information from
the partnership.
Code AH. Other information. The
partnership will report the following.
1. Any information a PTP needs to
determine whether it meets the 90%
qualifying income test of section 7704(c)(2).
-18-
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
of the payments. The partnership will report
your portion of the conservation reserve
program payments in box 20 using code AH.
See Schedule SE (Form 1040) for
information on excluding the payment from
your calculation of self-employment tax.
10. The information needed to complete
Form 8990, Schedule A, for foreign partners
which are required to report their allocable
share of excess business interest expense,
excess taxable income, and excess
business interest income, if any, that is
attributable to income effectively connected
with a U.S. trade or business. When
required, the partnership will make this report
on an attached statement to partners that are
a foreign corporation or a nonresident alien
or partners that are a partnership (domestic
or foreign) in which the reporting partnership
knows, or has a reason to know, that one or
more of the partners is a foreign corporation
or nonresident alien.
11. If the partnership is a section 721(c)
partnership, the partnership should include
the amounts relating to any remedial items
made under the remedial allocation method
(described in Regulations section 1.704-3(d)
and Regulations section 1.704-3(d)(5)(iii))
with respect to section 721(c) property
allocable to each partner. The partnership
will include a separate code AH for the total
remedial income, if any, allocated to the U.S.
transferor; total gain recognized due to an
acceleration event; or total gain recognized
due to a section 367 transfer reflected on
Form 8865, Schedule G, Part II, columns (c),
(d), and (e), respectively. Only the amount of
the total remedial income allocated to the
U.S. transferor will be included on
Schedule K-1, Part III, line 1. Any recognized
gain due to an acceleration event or section
367 transfer must be separately reported by
the U.S. transferor on its own federal income
tax return. For all other partners of the
section 721(c) partnership, a separate code
AH is used to provide the remedial items
allocated to that partner relating to section
721(c) property that was taken into account
to determine Part III, line 1. See Regulations
sections 1.721(c)-3 and 1.721(c)-6.
12. Section 1061 information. The
partnership will furnish to the partners any
information needed to figure their capital
gains with respect to an applicable
partnership interest.
13. Partner’s share of the adjusted basis
of noncash and capital gain property
contributions, and share of the excess of the
FMV over the adjusted basis of noncash and
capital gain property contributions.
14. Any other information you may need
to file your return not shown elsewhere on
Schedule K-1.
The partnership should give you a
description and the amount of your share for
each of these items.
Box 21. Foreign Taxes Paid or
Accrued
Foreign taxes paid or accrued reduce a
partner's basis and are limited to basis. Do
not use this amount to complete your Form
1116 or 1118. See Schedule K-3 to complete
your Form 1116 or 1118.
DRAFT AS OF
November 24, 2021
Box 22. More Than One Activity
for At-Risk Purposes
When the partnership has more than one
activity for at-risk purposes, it will check this
box and attach a statement. Use the
information in the attached statement to
correctly figure your at-risk limitation. For
more information, see the discussion under
At-Risk Limitations, earlier.
Box 23. More than One Activity
for Passive Activity Purposes
When the partnership 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 figure your passive activity
limitation. For more information, see the
discussion under Passive Activity
Limitations, earlier.
List of Codes and References Used in Schedule K-1 (Form 1065)
Box Number / Item
Where to report or where to find further reporting information.
Page numbers refer to these instructions.
1. Ordinary business income (loss). Determine whether the income (loss) is passive or
nonpassive and enter on your return as follows.
Passive loss
See page 8
Passive income
Schedule E (Form 1040), line 28, column (h)
Nonpassive loss
See page 8
Nonpassive income
Schedule E (Form 1040), line 28, column (k)
2. Net rental real estate income (loss)
See page 8
3. Other net rental income (loss)
Net income
Schedule E (Form 1040), line 28, column (h)
Net loss
See Instructions for Form 8582
4a. Guaranteed payment services
See Instructions for Schedule E (Form 1040)
4b. Guaranteed payment capital
See Instructions for Schedule E (Form 1040)
4c. Guaranteed payment total
See page 9
5. Interest income
Form 1040 or 1040-SR, line 2b
6a. Ordinary dividends
Form 1040 or 1040-SR, line 3b
6b. Qualified dividends
Form 1040 or 1040-SR, line 3a
6c. Dividend equivalents
See page 9
7. Royalties
Schedule E (Form 1040), line 4
8. Net short-term capital gain (loss)
Schedule D (Form 1040), line 5
9a. Net long-term capital gain (loss)
Schedule D (Form 1040), line 12
9b. Collectibles (28%) gain (loss)
28% Rate Gain Worksheet, line 4 (Schedule D instructions)
9c. Unrecaptured section 1250 gain
See page 9
10. Net section 1231 gain (loss)
See page 9
11. Other income (loss)
Code A. Other portfolio income (loss)
See page 9
Code B. Involuntary conversions
See page 9
Code C. Section 1256 contracts & straddles
Form 6781, line 1
Code D. Mining exploration costs recapture
See Pub. 535
Code E. Cancellation of debt
See page 10
Code F. Section 743(b) positive adjustments
See page 10
Code G. Reserved for future use
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
-19-
Box Number / Item
Where to report or where to find further reporting information.
Page numbers refer to these instructions.
Code H. Income under subpart F (other than inclusions under section 951A)
See page 10
Code I. Other income (loss)
See page 10
12. Section 179 deduction
See page 11
13. Other deductions
Code A. Cash contributions (60%)
See page 11
Code B. Cash contributions (30%)
See page 11
Code C. Noncash contributions (50%)
See page 11
Code D. Noncash contributions (30%)
See page 11
Code E. Capital gain property to a 50% organization (30%)
See page 11
Code F. Capital gain property (20%)
See page 12
Code G. Contributions (100%)
See page 12
Code H. Investment interest expense
Form 4952, line 1
Code I. Deductions—royalty income
Schedule E (Form 1040), line 19
Code J. Section 59(e)(2) expenditures
See page 12
Code K. Excess business interest expense
See page 12
Code L. Deductions—portfolio income (other)
Schedule A (Form 1040), line 16
Code M. Amounts paid for medical insurance
Schedule A (Form 1040), line 1; or Schedule 1 (Form 1040), line 16
Code N. Educational assistance benefits
See page 12
Code O. Dependent care benefits
Form 2441, line 12
Code P. Preproductive period expenses
See page 12
DRAFT AS OF
November 24, 2021
Code Q. Reserved for future use
Code R. Pensions and IRAs
See page 12
Code S. Reforestation expense deduction
See page 12
Codes T through U. Reserved for future use
Code V. Section 743(b) negative adjustments
See page 13
Code W. Other deductions
See page 13
Code X. Reserved for future use
14. Self-employment earnings (loss)
Note. If you have a section 179 deduction or any partner-level deductions, see page 13 before completing Schedule SE (Form 1040).
Code A. Net earnings (loss) from self-employment
Schedule SE (Form 1040)
Code B. Gross farming or fishing income
See page 13
Code C. Gross nonfarm income
See page 13
15. Credits
Code A. Reserved for future use
Code B. Reserved for future use
Code C. Low-income housing credit (section 42(j)(5)) from post-2007 buildings
See page 13
Code D. Low-income housing credit (other) from post-2007 buildings
See page 13
Code E. Qualified rehabilitation expenditures (rental real estate)
See page 14
Code F. Other rental real estate credits
See page 14
Code G. Other rental credits
See page 14
Code H. Undistributed capital gains credit
Schedule 3 (Form 1040), line 13a
Code I. Biofuel producer credit
See page 14
Code J. Work opportunity credit
See page 14
Code K. Disabled access credit
See page 14
Code L. Empowerment zone employment credit
See page 14
Code M. Credit for increasing research activities
See page 14
Code N. Credit for employer social security and Medicare taxes
See page 14
Code O. Backup withholding
See page 14
Code P. Other credits
See page 14
17. Alternative minimum tax (AMT) items
Code A. Post-1986 depreciation adjustment
See Instructions for Form 6251
Code B. Adjusted gain or loss
See Instructions for Form 6251
Code C. Depletion (other than oil & gas)
See Instructions for Form 6251
Code D. Oil, gas, and geothermal—gross income
See Instructions for Form 6251
Code E. Oil, gas, and geothermal—deductions
See Instructions for Form 6251
Code F. Other AMT items
See Instructions for Form 6251
18. Tax-exempt income and nondeductible expenses
Code A. Tax-exempt interest income
Form 1040 or 1040-SR, line 2a
Code B. Other tax-exempt income
See page 15
Code C. Nondeductible expenses
See page 15
19. Distributions
Code A. Cash and marketable securities
See page 15
Code B. Distribution subject to section 737
See page 16
Code C. Other property
See page 16
-20-
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
Box Number / Item
Where to report or where to find further reporting information.
Page numbers refer to these instructions.
20. Other information
Code A. Investment income
Form 4952, line 4a
Code B. Investment expenses
Form 4952, line 5
Code C. Fuel tax credit information
Form 4136
Code D. Qualified rehabilitation expenditures (other than rental real estate)
See page 16
Code E. Basis of energy property
See page 16
DRAFT AS OF
November 24, 2021
Code F. Recapture of low-income housing credit for section 42(j)(5) partnerships See page 16
Code G. Recapture of low-income housing credit for other partnerships
See page 16
Code H. Recapture of investment credit
See Form 4255
Code I. Recapture of other credits
See page 16
Code J. Look-back interest—completed long-term contracts
See Form 8697
Code K. Look-back interest—income forecast method
See Form 8866
Code L. Dispositions of property with section 179 deductions
See page 17
Code M. Recapture of section 179 deduction
See page 17
Code N. Business interest expense (information item)
See page 17
Code O. Section 453(l)(3) information
Schedule 2 (Form 1040), line 14
Code P. Section 453A(c) information
Schedule 2 (Form 1040), line 15
Code Q. Section 1260(b) information
Schedule 2 (Form 1040), line 17z
Code R. Interest allocable to production expenditures
See Regulations sections 1.263A-8 through -15
Code S. Capital construction fund (CCF) nonqualified withdrawals
Schedule 2 (Form 1040), line 17z
Code T. Depletion deduction
See Pub. 535
Code U. Section 743(b) basis adjustment
See page 18
Code V. Unrelated business taxable income
See page 18
Code W. Precontribution gain (loss)
Form 8949 and/or Schedule D (Form 1040); or Form 4797
Code X. Reserved for future use
Code Y. Net investment income
See Instructions for Form 8960
Code Z. Section 199A information
Form 8995 or Form 8995-A
Code AA. Section 704(c) information
See page 18
Code AB. Section 751 gain (loss)
See page 19
Code AC. Section 1(h)(5) gain (loss)
See page 19
Code AD. Deemed section 1250 unrecaptured gain
See page 19
Code AE. Excess taxable income
See Instructions for Form 8990
Code AF. Excess business interest income
See page 19
Code AG. Gross receipts for section 448(c)
See page 19
Code AH. Other information
See page 19
21. Foreign taxes paid or accrued
Partner's Inst. for Sch. K-1 (Form 1065) (2021)
See page 19
-21-
File Type
application/pdf
File Title
2021 Partner’s Instructions for Schedule K-1 (Form 1065)
Subject
Partner’s Instructions for Schedule K-1 (Form 1065) , Partner's Share of Income, Deductions, Credits, etc. (For Partner's Use O