1065 Schedule K-1 Instruction Form 1065 Schedule K-1

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2022

Partner’s Instructions for
Schedule K-1 (Form 1065)

Department of the Treasury
Internal Revenue Service

DRAFT AS OF
December 9, 2022

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
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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
Domestic partnerships treated as aggregates for purposes of
sections 951, 951A, and 956(a). Final regulations announced in
Treasury Decision 9960 treat domestic partnerships as aggregates
of their partners for purposes of sections 951, 951A, and 956(a), and
any provision that specifically applies by reference to any of those
sections, for tax years of foreign corporations beginning on or after
January 25, 2022, and for tax years of U.S. persons in which or with
which such tax years of foreign corporations end. Domestic
partnerships may apply the final regulations to tax years of foreign
corporations beginning after December 31, 2017, and to tax years of
the domestic partnership in which or with which such tax years of the
foreign corporations end, provided certain consistency requirements
are met. See What's New in the 2022 Partner's Instructions for
Schedule K-3 (Form 1065).
Line 16. International transactions new notice requirement. If
box 16 is not checked, you should receive notification from the
partnership that you will not be receiving a Schedule K-3 unless you
request one.

Dec 8, 2022

IRA partners. The partnership has entered the identifying number
of the IRA custodian in item E. The partnership has entered the
identifying number of the IRA itself in box 20, code AH, if there is
unrelated business taxable income reported in box 20, code V. The
IRA partner uses this information in filing Form 990-T, Exempt
Organization Business Income Tax Return.

Reminders

Schedule K-3 (Form 1065). Schedule K-3 replaced prior boxes 16
and 20 for certain international items on Schedule K-1. The
schedule was 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.
Box 21. Foreign taxes paid and accrued. Box 21 replaced
information previously provided in box 16 for foreign taxes paid or
accrued with respect to basis adjustments and income
reconciliation.
Section 743(b) adjustment. Code U in box 20 is used to report the
total remaining section 743(b) adjustment for applicable partners.
This was reported in previous years in box 20, code AH.
Section 1061 reporting. Section 1061 recharacterizes certain
long-term capital 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 Reporting Instructions in Pub 541,
Partnerships, for owner-taxpayer filing and reporting requirements.
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.

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. Don’t 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

Cat. No. 11396N

Gain or loss from the disposition of your partnership interest

the partner's responsibility to consider and apply any applicable
limitations. See Limitations on Losses, Deductions, and Credits,
later, for more information.

TIP 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.

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.

Three-year holding period requirement for applicable
partnership interests. Section 1061 increases the required
CAUTION 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.

!

DRAFT AS OF
December 9, 2022

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).

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.

If you are required to file Form 8082 but do not do so, you may be
subject to the accuracy-related penalty. This penalty is in addition to
any tax that results from making your amount or treatment of the
item consistent with that shown on the partnership's return. Any
deficiency that results from making the amounts consistent may be
assessed immediately.

Errors

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.

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 $290 penalty for each
failure. The maximum penalty is $3,532,500 for all such failures
during a calendar year. If the nominee intentionally disregards the
requirement to report correct information, each $290 penalty
increases to $580 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.

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,
Survivors, Executors, and Administrators.

Definitions
General Partner

A general partner is a partner who is personally liable for partnership
debts.

Limited Partner

Sale or Exchange of Partnership
Interest

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.

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)).

However, whether a partner 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).

Nonrecourse Loans

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.

Nonrecourse loans are those liabilities of the partnership for which
no partner or related person bears the economic risk of loss.

Elections

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.

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).

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.
-2-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

• 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). See Schedule K-3.

Schedule K-1 any losses that are not subject to the at-risk
limitations.
Generally, you are not at risk for amounts such as the following.

• 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.

Additional Information

For more information on the treatment of partnership income,
deductions, credits, and other items, see Pub. 535, Business
Expenses.

DRAFT AS OF
December 9, 2022

To get forms and publications, see the instructions for your tax
return or visit the IRS website at IRS.gov.

Limitations on Losses, Deductions,
and Credits

There are potential limitations on 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.

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.

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.

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.

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.

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).

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.

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.

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 a closely held C corporation (defined in section 465(a)

TIP (1)(B)), the above conditions are treated as met if more than

For more details on the basis limitations, and special rules for
charitable contributions and foreign taxes paid and accrued, see
Pub. 541.

50% of the corporation's gross receipts were from real
property trades or businesses in which the corporation materially
participated.

At-Risk Limitations

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, 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.

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 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

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

-3-

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 2021
Schedule K-1 from your share of liabilities shown in item K of your 2022 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
December 9, 2022
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5. Any gain recognized this year on contributions of property. Do not include gain from transfer of liabilities

4c.

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

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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

Caution: A distribution may be taxable if the amount exceeds your adjusted basis of your partnership interest immediately before the
distribution.

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 2022 Schedule K-1 from your share of liabilities shown in item K of
your 2021 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 first 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 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.
Note: Section 961(a) adjusted basis increases. Your adjusted basis may be increased under section 961(a) for amounts that you are
required to include in income with respect to a controlled foreign corporation (CFC) under sections 951(a) (for example, subpart F income)
and 951A (GILTI) because you are a U.S. shareholder of the CFC and you own (within the meaning of section 958(a)(2)) stock of the CFC
through the partnership. For purposes of section 951(a), if the partnership is a domestic partnership, then you will be treated as owning
(within the meaning of section 958(a)) stock of a CFC through the partnership (i) for a tax year of the foreign corporation that begins before
January 25, 2022, only if the partnership applies Regulations section 1.958-1(d)(1) to treat it as not owning stock of the foreign corporation
within the meaning of section 958(a) for purposes of section 951; and (ii) for any tax year of the foreign corporation that begins on or after
January 25, 2022. See the instructions for Schedule K-3 for more information on section 951(a) inclusions and section 951A inclusions.
Section 961(b)(1) adjusted basis decreases. Your adjusted basis may be decreased under section 961(b)(1) by the sum of (1) the dollar
basis in previously taxed earnings and profits (PTEP) in your annual PTEP accounts that you exclude from your gross income under
section 959(a) by reason of a distribution made to the partnership; and (2) the dollar amount of any foreign income taxes allowed as a
credit under section 960(b) with respect to such PTEP.

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.

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.

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
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Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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.

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
(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
December 9, 2022

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. 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.

Limited partners. If you are a limited partner, you must meet
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
c. Monitoring the finances or operations of the activity in a
non-managerial capacity.

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.

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

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

Example. You have a Schedule E (Form 1040) loss of $12,000
(current year losses plus prior year unallowed losses) and a Form
-5-

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.
Modified adjusted gross income (MAGI). This is your adjusted
gross income (AGI) from Form 1040 or 1040-SR, 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.

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.

DRAFT AS OF
December 9, 2022
To allocate and keep a record of the unallowed losses, use

TIP 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 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.
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 entire interest reported

TIP 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

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.
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.
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.

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Partner's Inst. for Sch. K-1 (Form 1065) (2022)

Excess Business Loss

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.

Your distributive share of losses attributable to all of the
partnership's trades or businesses may be limited under section
461(l). See Form 461, Limitation on Business Losses, and its
instructions for more information.

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.

Specific Instructions

DRAFT AS OF
December 9, 2022

Part I. Information About the
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 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.

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.

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.

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). 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.

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.

If the partner is an IRA, the partnership will enter the identifying
number of the custodian of the IRA.

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.

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 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.

See Pub. 925 for more information on qualified nonrecourse
financing.

Item J

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.

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.

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.

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 in box 20
for items that have special gain or loss treatment. For more
information, see Disposition of Partner's Interest and Partnership
Distributions in Pub. 541.

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 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

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

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

-7-

For information on these provisions, see Limitations on Losses,
Deductions, and Credits, earlier.

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.

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.

DRAFT AS OF
December 9, 2022
If you are not an individual, report the amounts in each box as
instructed on your tax return.

Item M

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 2023, report
the amounts on your 2023 tax return.

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.

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.

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.

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.

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 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.

If you have amounts other than those shown on

TIP 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.

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.

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
can’t 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.

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.

Part III. Partner's Share of Current
Year Income, Deductions, Credits,
and Other Items

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. 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 2022 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.

The amounts shown in boxes 1 through 21 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.
-8-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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.

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.

DRAFT AS OF
December 9, 2022
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 2. Net Rental Real Estate Income (Loss)

Box 4b. Guaranteed Payments for Capital

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.

These are guaranteed payments other than for services, such as for
the use of capital or attributable to section 736(a)(2) payments for
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

If you are filing a 2022 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).
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.

Amounts on this line include total guaranteed payments paid to you
by the partnership.

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.
Some of the amounts reported in this box may be attributable to
previously taxed earnings and profits (PTEP) in annual PTEP
accounts that you have with respect to a foreign corporation and are
therefore excludable from your gross income. Do not include the
amount attributable to PTEP in your annual PTEP accounts on Form
1040 or 1040-SR, line 3b. Use Schedule K-3, Part V, to determine
your share of distributions by foreign corporations to the partnership
that are attributable to PTEP in your annual PTEP accounts with
respect to the foreign corporations.

Box 6b. Qualified Dividends

Report any qualified dividends on Form 1040 or 1040-SR, line 3a.
Some of the amounts reported in this box may be attributable to
PTEP in annual PTEP accounts that you have with respect to a
foreign corporation and are therefore excludable from your gross
income. Do not include the amount attributable to PTEP in your
annual PTEP accounts on Form 1040 or 1040-SR, line 3a. Use
Schedule K-3, Part V, to determine your share of distributions by
foreign corporations to the partnership that are attributable to PTEP
in your annual PTEP accounts with respect to the foreign
corporations.

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.

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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Box 10. Net Section 1231 Gain (Loss)

Qualified dividends are excluded from investment income,

TIP but you may elect to include part or all of these amounts in

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.

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 for additional
information.

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.

DRAFT AS OF
December 9, 2022

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).

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.

Box 6c. Dividend Equivalents

Dividend equivalents are not reported on Form 1040 or 1040-SR.
This information is 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 in box 6a
does not include the amount of dividend equivalents.

!

CAUTION

Box 7. Royalties

Box 11. Other Income (Loss)

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

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).

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.

!

CAUTION

If you have any foreign source net long-term capital gain
(loss), see the Partner’s Instructions for Schedule K-3 for
additional information.

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.

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).

!

CAUTION

If you have any foreign source collectibles (28%) gain (loss),
see the Partner’s Instructions for Schedule K-3 for additional
information.

Box 9c. Unrecaptured Section 1250 Gain

Code C. Section 1256 contracts and straddles. The partnership
will report any net gain or loss from section 1256 contracts. Report
this amount on Form 6781, Gains and Losses From Section 1256
Contracts and Straddles.

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.

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.
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,
Reduction of Tax Attributes Due to Discharge of Indebtedness (and
Section 1082 Basis Adjustment), for more details.

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.

!

CAUTION

If you have any foreign source net section 1231 gain (loss),
see the Partner’s Instructions for Schedule K-3 for additional
information.

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.

If you have any foreign source unrecaptured section 1250
gain, see the Partner’s Instructions for Schedule K-3 for
additional information.
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Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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.

Code G. Reserved for future use.
Code H. Section 951(a) income inclusions. If the partnership is a
domestic partnership that does not apply Regulations section
1.958-1(d)(1) through (3) to a tax year of a foreign corporation that
begins before January 25, 2022, to treat it as not owning stock of the
foreign corporation within the meaning of section 958(a) for
purposes of section 951, and is a U.S. shareholder of the foreign
corporation, then any section 951(a) income inclusions with respect
to the foreign corporation and such tax year are section 951(a)
income inclusions of the partnership, a distributive share of which
you generally include in gross income. The partnership will use this
code to report your share of its section 951(a) income inclusions.
Additionally, if the partnership has a distributive share of a lower-tier
partnership's section 951(a) income inclusions, the partnership will
use this code to report your share of that inclusion.

DRAFT AS OF
December 9, 2022

Note. In all other cases, the partnership will report information
needed for you to determine section 951(a) income inclusions with
respect to CFCs owned by the partnership, directly or indirectly, on
Schedule K-3, Part VI.
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 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, column (k); 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

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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
-11-

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.

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.
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.

DRAFT AS OF
December 9, 2022
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% 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.
Code A. Cash contributions (60%). Report this amount, subject
to the 60% AGI limitation, on Schedule A (Form 1040), line 11.

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.

Code B. Cash contributions (30%). Report this amount, subject
to the 30% AGI 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.
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 2022 cannot
exceed 15% of your aggregate net income for the tax year from the
business activities from which the food inventory contribution was
made (including your share of net income from partnership or S
corporation businesses that made food inventory contributions).
Amounts that exceed the 15% limitation may be carried over for up
to 5 years. Report this amount, subject to the 50% AGI limitation, on
Schedule A (Form 1040), line 12.

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
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.

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.

Deductions

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.
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,

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
-12-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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.

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 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 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.

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.

DRAFT AS OF
December 9, 2022

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 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 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 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
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 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 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).
• Penalty on early withdrawal of savings. Report this amount on
Schedule 1 (Form 1040), line 18.

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,
Limitation on Business Interest Expense Under Section 163(j), 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

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

-13-

• 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.
• 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).
• 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.
• 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.

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.

DRAFT AS OF
December 9, 2022

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 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 complete the source

TIP 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.

• 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 X. Reserved for future use.

Box 14. Self-Employment Earnings
(Loss)

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

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.
-14-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

• 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.
• 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, Part IV, line 10).
• Carbon oxide sequestration credit recapture (Form 8933, Part IV,
line 12). Enter as a negative number.
• Qualified plug-in electric motor vehicle credit (including qualified
two-wheeled plug-in electric vehicles and new clean vehicles) (Form
8936).
• Credit for small employer health insurance premiums (Form
8941).
• Employee retention credit for employers affected by qualified
disasters (Form 5884-A).
• Employer credit for paid family and medical leave (Form 8994).
• Qualified commercial clean vehicle credit for vehicles acquired
after 2022.

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.

DRAFT AS OF
December 9, 2022

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 Certain Employee Tips, line 5;
or Form 3800, Part III, line 4f (see TIP, earlier).

Box 16. International Transactions

If the partnership checked the box, see the attached Schedule K-3
with respect to items of international tax relevance.

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 25c, 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.

If the partnership did not check the box, the partnership attached
a statement to the Schedule K-1 (or issued a statement prior to
furnishing the Schedule K-1) notifying the partner that the partner
will not receive Schedule K-3 from the partnership unless the partner
requests the schedule.

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).

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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
-15-

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.

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.

DRAFT AS OF
December 9, 2022

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.

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.

Code F. Other AMT items. Enter the information on the statement
attached by the partnership on the applicable lines of Form 6251,
Form 466, or Schedule I (Form 1041).

Box 18. Tax-Exempt Income and
Nondeductible Expenses
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.

Computation of Section 737 Gain

The partnership will attach a statement for the amount

1.

892 and describe the nature of the income.

2.

TIP included under code B that is exempt by reason of section
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.

3.
4.

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.
Decrease the adjusted basis of your interest in the partnership
(but not below zero) by the amount of cash distributed to you and the

Enter the FMV of the distributed property (other than
money)
. . . . . . . . . . . . . . . . . . . . . .
Enter your adjusted basis in the partnership
immediately before the distribution. See Basis
Limitations, earlier . . . . . . . . . . . . . . . . .
Enter the amount of money received in the
distribution
. . . . . . . . . . . . . . . . . . . .
Subtract line 3 from line 2. If zero or less,
enter -0- . . . . . . . . . . . . . . . . . . . . . .

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
-16-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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 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).

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.

Box 20. Other Information

DRAFT AS OF
December 9, 2022

Code A. Investment income. Report this amount on Form 4952,
line 4a.

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 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 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 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.

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 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.

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 qualified plug-in electric drive motor vehicle credit
(see section 30D(f)(5)).

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

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

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

-17-

from your other gross income at the highest marginal ordinary
income or capital gains tax rate. Attach a statement to your federal
income tax return to show your computation of both the tax and
interest for a nonqualified withdrawal. Include the tax and interest on
Schedule 2 (Form 1040), 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.

interest expense already deducted by the partnership by line
number on Schedule K-1.

!

CAUTION

The partner must remove the business interest expense
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 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.

DRAFT AS OF
December 9, 2022

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 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-fordisregarded-entity-reporting-and-section-743b-reporting for more
information.

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 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.

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 partnership of its

TIP 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.

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 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 that is not reported
elsewhere on the Schedule K-1 or K-3. Code Y is used to report
information not provided elsewhere on Schedule K-3 (or an
attachment) regarding income from CFCs and passive foreign
investment companies (PFICs) the stock of which is owned by the
partnership. For CFCs and PFICs that you treat as qualified electing
funds (QEFs), the information that is relevant to you will depend on
whether you, the 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-3, 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.

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 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

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
-18-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

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 2022 taxable income before the QBI deduction is equal
to or less than $170,050 ($340,100 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.

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 interest
subject to taxation at ordinary income tax rates.
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).
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).

DRAFT AS OF
December 9, 2022

Code AE. Excess taxable income. If the partnership was required
to file Form 8990, 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.

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.
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 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). Regulations
section 1.163(j)-2(d)(2)(iii) requires that partners in a partnership
include a share of partnership gross receipts 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 current year gross receipts (defined in
Regulations section 1.448-1T(f)(2)(iv)) greater than $5 million are
required to report to their partners their distributive share of current
year gross receipts, as well as their distributive share of gross
receipts for the 3 immediately preceding tax years. 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 also
report its total current year gross receipts, as well as its total gross
receipts for the 3 immediately preceding tax years, to that partner.
See IRS.gov/newsroom/faqs-regarding-the-aggregation-rulesunder-section-448c2–that-apply-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.
• Any information a PTP needs to determine whether it meets the
90% qualifying income test of section 7704(c)(2).
A partner is required to notify the partnership of its status as

TIP a PTP.

• 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.
• 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.

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.

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

-19-

• 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.
• 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.
• 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.
• Qualifying gasification project property. Use the amounts the
partnership provides you to figure the amounts to report on Form
3468, lines 6a and 6b.
• Qualifying advanced energy project property. Use the amount the
partnership provides you to figure the amount to report on Form
3468, line 7.
• 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
• 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
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.
• Gross income and gains, as well as losses and deductions
attributable to a farming or fishing trade, or business of the
partnership.
• If a partnership is a trader in securities, commodities, or both, and
has properly elected under section 475(f) to mark to market the
securities, the commodities, or both, the partnership reports ordinary
gain or loss from the securities or commodities (or both securities
and commodities) trading activities separately from any other
ordinary gain or loss.
• 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, box 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, box 1. See Regulations sections
1.721(c)-3 and 1.721(c)-6.
• Excess business loss limitation. If the partnership has deductions
attributable to a business activity, it will provide a statement showing
your distributive share of the aggregate gross income or gain, and
aggregate deductions, from the business activity of all of the
partnership's trades or businesses. You can use this to figure any
excess business loss limitation that may apply. See section 461(l)
and Form 461 and its instructions for details.
• 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. See Section 1061
Reporting Instructions in Pub. 541.
• 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.
• If the partnership reported an amount in box 20, code V, the
partnership also reported an IRA partner's unique EIN in box 20,
code AH. See the Instructions for Form 990-T; and Pub. 598, Tax on
Unrelated Business Income of Exempt Organizations.
• 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.

DRAFT AS OF
December 9, 2022
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.

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 9

Passive income

Schedule E (Form 1040), line 28, column (h)

Nonpassive loss

See page 9

Nonpassive income

Schedule E (Form 1040), line 28, column (k)

2. Net rental real estate income (loss)

See page 9

-20-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

Box Number / Item

Where to report or where to find further reporting information.
Page numbers refer to these instructions.

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 10

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 10

10. Net section 1231 gain (loss)

See page 10

DRAFT AS OF
December 9, 2022

11. Other income (loss)

Code A. Other portfolio income (loss)

See page 10

Code B. Involuntary conversions

See page 11

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 11

Code F. Section 743(b) positive adjustments

See page 11

Code G. Reserved for future use
Code H. Section 951(a) income inclusions

See page 11

Code I. Other income (loss)

See page 11

12. Section 179 deduction

See page 12

13. Other deductions
Code A. Cash contributions (60%)

See page 12

Code B. Cash contributions (30%)

See page 12

Code C. Noncash contributions (50%)

See page 12

Code D. Noncash contributions (30%)

See page 13

Code E. Capital gain property to a 50% organization (30%)

See page 13

Code F. Capital gain property (20%)

See page 13

Code G. Contributions (100%)

See page 13

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 13

Code K. Excess business interest expense

See page 13

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 17

Code N. Educational assistance benefits

See page 13

Code O. Dependent care benefits

Form 2441, line 12

Code P. Preproductive period expenses

See page 13

Code Q. Reserved for future use
Code R. Pensions and IRAs

See page 13

Code S. Reforestation expense deduction

See page 14

Codes T through U. Reserved for future use
Code V. Section 743(b) negative adjustments

See page 14

Code W. Other deductions

See page 14

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 14 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 14

Code C. Gross nonfarm income

See page 14

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 15

Code D. Low-income housing credit (other) from post-2007 buildings

See page 15

Code E. Qualified rehabilitation expenditures (rental real estate)

See page 15

Code F. Other rental real estate credits

See page 15

Code G. Other rental credits

See page 15

Partner's Inst. for Sch. K-1 (Form 1065) (2022)

-21-

Box Number / Item

Where to report or where to find further reporting information.
Page numbers refer to these instructions.

Code H. Undistributed capital gains credit

Schedule 3 (Form 1040), line 13a

Code I. Biofuel producer credit

See page 15

Code J. Work opportunity credit

See page 15

Code K. Disabled access credit

See page 15

Code L. Empowerment zone employment credit

See page 15

Code M. Credit for increasing research activities

See page 15

Code N. Credit for employer social security and Medicare taxes

See page 15

Code O. Backup withholding

See page 15

Code P. Other credits

See page 15

DRAFT AS OF
December 9, 2022

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 16

Code C. Nondeductible expenses

See page 16

19. Distributions
Code A. Cash and marketable securities

See page 16

Code B. Distribution subject to section 737

See page 16

Code C. Other property

See page 17

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 17

Code E. Basis of energy property

See page 17

Code F. Recapture of low-income housing credit for section 42(j)(5) partnerships See page 17
Code G. Recapture of low-income housing credit for other partnerships

See page 17

Code H. Recapture of investment credit

See Form 4255

Code I. Recapture of other credits

See page 17

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 18

Code N. Business interest expense (information item)

See page 18

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 19

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 20

21. Foreign taxes paid or accrued

See page 20

-22-

Partner's Inst. for Sch. K-1 (Form 1065) (2022)