1065 Instructions for Form 1065

U.S. Business Income Tax Returns

2024 Instructions for Form 1065

U. S. Business Income Tax Return

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2024

Instructions for Form 1065
U.S. Return of Partnership Income

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Section references are to the Internal Revenue Code unless
otherwise noted.
Contents

How To Get Forms and Publications . . . . . . . .
General Instructions . . . . . . . . . . . . . . . . . . . .
Purpose of Form . . . . . . . . . . . . . . . . . . . .
Definitions . . . . . . . . . . . . . . . . . . . . . . . .
Who Must File . . . . . . . . . . . . . . . . . . . . .
Termination of the Partnership . . . . . . . . . .
Electronic Filing . . . . . . . . . . . . . . . . . . . .
When To File . . . . . . . . . . . . . . . . . . . . . .
Where To File . . . . . . . . . . . . . . . . . . . . .
Who Must Sign . . . . . . . . . . . . . . . . . . . .
Penalties . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting Methods . . . . . . . . . . . . . . . .
Accounting Periods . . . . . . . . . . . . . . . . .
Rounding Off to Whole Dollars . . . . . . . . .
Recordkeeping . . . . . . . . . . . . . . . . . . . .
Administrative Adjustment Request (AAR) .
Amended Return . . . . . . . . . . . . . . . . . . .
Assembling the Return . . . . . . . . . . . . . . .
Entity Classification Election . . . . . . . . . . .
Elections Made by the Partnership . . . . . .
Elections Made by Each Partner . . . . . . . .
Partner’s Dealings With Partnership . . . . . .
Contributions to the Partnership . . . . . . . . .
Dispositions of Contributed Property . . . . .
Recognition of Precontribution Gain on
Certain Partnership Distributions . . . . . .
Unrealized Receivables and Inventory Items
At-Risk Limitations . . . . . . . . . . . . . . . . . .
Passive Activity Limitations . . . . . . . . . . . .
Specific Instructions . . . . . . . . . . . . . . . . . . . .
Income . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions . . . . . . . . . . . . . . . . . . . . . . .
Schedule B. Other Information . . . . . . . . . .
Schedules K and K-1. Partners' Distributive
Share Items . . . . . . . . . . . . . . . . . . . . .
Specific Instructions (Schedule K-1 Only) . .
Part I. Information About the Partnership . . .
Part II. Information About the Partner . . . . .
Specific Instructions (Schedules K and K-1,
Part III, Except as Noted) . . . . . . . . . . . .
Flowchart To Help Determine if Items Are
Qualified Business Income . . . . . . . . . .
Analysis of Net Income (Loss) per Return . .
Schedule L. Balance Sheets per Books . . .

Nov 20, 2024

Contents

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Schedule M-1. Reconciliation of Income
(Loss) per Books With Analysis of Net
Income (Loss) per Return . . . . . . . . . . . . .
Schedule M-2. Analysis of Partners' Capital
Accounts . . . . . . . . . . . . . . . . . . . . . . . . .
Codes for Principal Business Activity and Principal
Product or Service . . . . . . . . . . . . . . . . . . . .
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Future Developments

For the latest information about developments related to Form
1065 and its instructions, such as legislation enacted after they
were published, go to IRS.gov/Form1065.

What’s New

Schedule B. New question 32 has been added regarding
entities that elect out of subchapter K under section 761(a).
Previous question 31 has been renumbered to 33.

Schedules K and K-1, line 13, Contributions. Additional
information under Contributions of property is being provided as
it relates to Treasury Decision (T.D.) 9999 and section 170(h)(7).
Schedules K and K-1, line 15, Credits. Three codes have
been activated for line 15: code S, Unused investment credit
from the clean electricity investment credit allocated from
cooperatives; code W, Clean electricity production credit; and
code X, Clean fuel production credit. Code AN was set to
Reserved for future use.

Schedules K and K-1, line 15, Credits, code ZZ. If the
partnership has made an election under section 6418 to transfer
a portion or all of the section 48, 48C, or 48E credits, see Other
(code ZZ) under Line 15f. Other Credits, later.
Schedules K and K-1, line 19, code C, Other property.
Updated to clarify information partners may need when filing
Form 7217, Partner’s Report of Property Distributed by a
Partnership.
Schedules K and K-1, line 20, Other information. Two codes
have been activated for line 20: code AV, Clean electricity
investment property; and code AX, Corporate alternative
minimum tax (CAMT). Titles to codes AC and AD have been
updated to better reflect the cited code sections.

Reminders
Electronically filed returns. Beginning January 1, 2024,
partnerships were required to file Form 1065 and related forms
and schedules electronically if they file 10 or more returns of any
type during the tax year, including information, income tax,
employment tax, and excise tax returns. Certain exceptions
apply. See Electronic Filing, later.

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Instructions for Form 1065 (2024) Catalog Number 11392V
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How To Get Tax Help

If you have questions about a tax issue; need help preparing
your tax return; or want to download free publications, forms, or
instructions, go to IRS.gov to find resources that can help you
right away.

How Do I Contact TAS?
TAS has offices in every state, the District of Columbia, and
Puerto Rico. To find your local advocate’s number:
• Go to www.TaxpayerAdvocate.IRS.gov/Contact-Us,
• Check your local directory, or
• Call TAS toll free at 877-777-4778.

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Online tax information in other languages. You can find
information on IRS.gov/MyLanguage if English isn’t your native
language.

Free Over-the-Phone Interpreter (OPI) Service. The IRS is
committed to serving taxpayers with limited-English proficiency
(LEP) by offering OPI services. The OPI Service is a federally
funded program and is available at Taxpayer Assistance Centers
(TACs), most IRS offices, and every VITA/TCE tax return site.
The OPI Service is accessible in more than 350 languages.
Accessibility Helpline available for taxpayers with disabilities. Taxpayers who need information about accessibility
services can call 833-690-0598. The Accessibility Helpline can
answer questions related to current and future accessibility
products and services available in alternative media formats (for
example, braille, large print, audio, etc.). The Accessibility
Helpline doesn't have access to your IRS account. For help with
tax law, refunds, or account-related issues, go to IRS.gov/
LetUsHelp.
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Below is a message to you from the Taxpayer Advocate
Service, an independent organization established by Congress.

The Taxpayer Advocate Service (TAS) Is Here To
Help You
What Is the Taxpayer Advocate Service?

The Taxpayer Advocate Service (TAS) is an independent
organization within the Internal Revenue Service (IRS). TAS
helps taxpayers resolve problems with the IRS, makes
administrative and legislative recommendations to prevent or
correct the problems, and protects taxpayer rights. We work to
ensure that every taxpayer is treated fairly and that you know and
understand your rights under the Taxpayer Bill of Rights. We are
Your Voice at the IRS.

How Can TAS Help Me?
TAS can help you resolve problems that you haven’t been able to
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• TAS helps all taxpayers (and their representatives), including
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with the IRS, or if you believe an IRS system, process, or
procedure just isn't working as it should.
• To get help any time with general tax topics, visit
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• TAS works to resolve large-scale (systemic) problems that
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What Are My Rights as a Taxpayer?

The Taxpayer Bill of Rights describes ten basic rights that all
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information about the rights, what they mean to you, and how
they apply to specific situations you may encounter with the IRS.
TAS strives to protect taxpayer rights and ensure the IRS is
administering the tax law in a fair and equitable way.

How To Get Forms and Publications

Getting tax forms and publications. Go to IRS.gov/Forms to
view, download, or print all the forms, instructions, and
publications you may need. Or, you can go to IRS.gov/
OrderForms to place an order.

Mobile-friendly forms. You'll need an IRS Online Account
(OLA) to complete mobile-friendly forms that require signatures.
You'll have the option to submit your form(s) online or download
a copy for mailing. You'll need scans of your documents to
support your submission. Go to IRS.gov/MobileFriendlyForms for
more information.
Getting tax publications and instructions in eBook format.
Download and view most tax publications and instructions
(including the Instructions for Form 1040) on mobile devices as
eBooks at IRS.gov/eBooks.
IRS eBooks have been tested using Apple's iBooks for iPad.
Our eBooks haven't been tested on other dedicated eBook
readers, and eBook functionality may not operate as intended.

General Instructions
Purpose of Form

Form 1065 is an information return used to report the income,
gains, losses, deductions, credits, and other information from the
operation of a partnership. Generally, a partnership doesn't pay
tax on its income but passes through any profits or losses to its
partners. Partners must include partnership items on their tax or
information returns.

Definitions
Centralized Partnership Audit Regime

The Bipartisan Budget Act of 2015 (BBA) created a new
centralized partnership audit regime effective for partnership tax
years beginning after 2017. The new audit regime replaces the
consolidated audit proceedings under the Tax Equity and Fiscal
Responsibility Act (TEFRA). The new audit regime applies to all
partnerships unless the partnership is an eligible partnership and
elects out by making a valid election using Schedule B-2 (Form
1065).
Electing out of the centralized partnership audit regime.
See Electing Out of the Centralized Partnership Audit Regime,
later.
Adjustment year. An adjustment year is a tax year in which:
• In the case of an adjustment pursuant to the decision of a
court in a proceeding brought under section 6234, such decision
becomes final;
Instructions for Form 1065 (2024)

• In the case of an administrative adjustment request (AAR)
under section 6227, such AAR is filed; or
• In any other case, a notice of final partnership adjustment is
mailed under section 6231 or, if the partnership waives the
restrictions under section 6232(b) (regarding limitations on
assessments), the waiver is executed by the IRS.
Reviewed year. A reviewed year is a partnership’s tax year to
which a partnership adjustment relates.

spouse credit for social security earnings on which retirement
benefits are based, provided neither spouse exceeds the social
security wage base limitation.
Once made, the election can't be revoked without IRS
consent. If you and your spouse filed a Form 1065 for the year
prior to the election, you don't need to amend that return or file a
final Form 1065 for the year the election takes effect.
For more information on QJVs, go to IRS.gov/QJV.

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Partnership

A partnership is the relationship between two or more persons
who join to carry on a trade or business, with each person
contributing money, property, labor, or skill and each expecting to
share in the profits and losses of the business whether or not a
formal partnership agreement is made.
The term “partnership” includes a limited partnership,
syndicate, group, pool, joint venture, or other unincorporated
organization, through or by which any business, financial
operation, or venture is carried on, that isn't, within the meaning
of regulations under section 7701, a corporation, trust, estate, or
sole proprietorship.
A joint undertaking merely to share expenses isn't a
partnership. Mere co-ownership of property that is maintained
and leased or rented isn't a partnership. However, if the
co-owners provide services to the tenants, a partnership exists.

Business owned and operated by spouses. Generally, if you
and your spouse jointly own and operate an unincorporated
business and share in the profits and losses, you're partners in a
partnership and you must file Form 1065.
Exception—qualified joint venture (QJV). If you and your
spouse materially participate as the only members of a jointly
owned and operated business, and you file a joint return for the
tax year, you can make an election to be treated as a QJV
instead of a partnership. By making the election, you won't be
required to file Form 1065 for any year the election is in effect
and will instead report the income and deductions directly on
your joint return.
A QJV conducts a trade or business where the only members
of the joint venture are a married couple who file a joint return,
both spouses materially participate in the trade or business
(because mere joint ownership of property isn’t enough), both
spouses elect not to be treated as a partnership, and the
business is co-owned by both spouses and isn't held in the
name of a state law entity such as a partnership or limited liability
company (LLC).
To make this election, you must divide all items of income,
gain, loss, deduction, and credit between you and your spouse in
accordance with your respective interests in the venture. Each of
you must file a separate Schedule C (Form 1040), Profit or Loss
From Business; or Schedule F (Form 1040), Profit or Loss From
Farming. On each line of your separate Schedule C or F (Form
1040), you must enter your share of the applicable income,
deduction, or loss. Each of you must also file a separate
Schedule SE (Form 1040), Self-Employment Tax, to pay
self-employment tax, as applicable.
If you and your spouse make the election for your rental real
estate business, you each must report your share of income and
deductions on Schedule E (Form 1040), Supplemental Income
and Loss. Rental real estate income isn’t generally included in
net earnings from self-employment subject to self-employment
tax and is generally subject to the passive loss limitation rules.
Electing QJV status doesn't alter the application of the
self-employment tax or the passive loss limitation rules.
To make the QJV election for 2024, jointly file the 2024 Form
1040 or 1040-SR with the required schedules. This generally
doesn't increase the total tax on the return, but it does give each
Instructions for Form 1065 (2024)

Foreign Partnership

A foreign partnership is a partnership that isn't created or
organized in the United States or under the law of the United
States or of any state. In certain instances, a partnership created
or organized in the United States can be treated as a foreign
partnership. See, for example, Regulations section 1.958-1(d)
(1).
In addition, if a domestic section 721(c) partnership is formed
after January 17, 2017, and the gain deferral method is applied,
then a U.S. transferor must treat the section 721(c) partnership
as a foreign partnership and file a Form 8865, Return of U.S.
Persons With Respect to Certain Foreign Partnerships, with
respect to the partnership. See Form 8865 and its instructions.
See also Regulations section 1.721(c)-6(b)(4).

General Partner

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

General Partnership

A general partnership is composed only of general partners.

Limited Partner

A limited partner is a partner in a partnership formed under a
state limited partnership law, whose personal liability for
partnership debts is limited to the amount of money or other
property that the partner contributed or is required to contribute
to the partnership. Some members of other entities, such as
domestic or foreign business trusts or LLCs that are classified as
partnerships, may be treated as limited partners for certain
purposes.
However, whether a partner qualifies as a limited partner for
purposes of self-employment tax depends on whether the
partner is considered a limited partner under section 1402(a)
(13). See Self-Employment, later.

Limited Partnership

A limited partnership is formed under a state limited partnership
law and composed of at least one general partner and one or
more limited partners.

Limited Liability Partnership (LLP)

An LLP is formed under a state limited liability partnership law.
Generally, a partner in an LLP isn't personally liable for the debts
of the LLP or any other partner, nor is a partner liable for the acts
or omissions of any other partner solely by reason of being a
partner.

Limited Liability Company (LLC)

An LLC is an entity formed under state law by filing articles of
organization as an LLC. Unlike a partnership, none of the
members of an LLC are personally liable for its debts. An LLC
may be classified for federal income tax purposes as a
partnership, a corporation, or an entity disregarded as an entity
separate from its owner by applying the rules in Regulations
section 301.7701-3. See Form 8832, Entity Classification
Election, for more details.
3

A domestic LLC with at least two members that doesn't

TIP file Form 8832 is classified as a partnership for federal
income tax purposes.

Nonrecourse Loans

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

Schedule K, line 6a, and each member's distributive share in
box 6a of Schedule K-1 (Form 1065). Net operating losses aren't
deductible by the members but may be carried back or forward
by the organization under the rules of section 172. The religious
or apostolic organization must also make its annual information
return available for public inspection. For this purpose, an annual
information return includes an exact copy of Form 1065 and all
accompanying schedules and attached statements, except
Schedules K-1. For more details, see Regulations section
301.6104(d)-1.

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Section 721(c) Partnership

A partnership (domestic or foreign) is a section 721(c)
partnership if there is a contribution of section 721(c) property to
the partnership and, after the contribution (and all transactions
related to the contribution), (a) a related foreign person with
respect to the U.S. transferor is a direct or indirect partner in the
partnership; and (b) the U.S. transferor and related persons own
80% or more of the interests in partnership capital, profits,
deductions, or losses. See Regulations section 1.721(c)-1(b)
(14).

U.S. Transferor

A U.S. transferor is a U.S. person other than a domestic
partnership. See Regulations section 1.721(c)-1(b)(18).

Section 721(c) Property

Section 721(c) property is property (other than excluded
property) with built-in gain that is contributed to a partnership by
a U.S. transferor, including pursuant to a contribution described
in Regulations section 1.721(c)-2(d) (partnership look-through
rule). See Regulations section 1.721(c)-1(b)(15).

Gain Deferral Contribution

A gain deferral contribution is a contribution of section 721(c)
property to a section 721(c) partnership with respect to which
the recognition of gain is deferred under the gain deferral
method. See Regulations section 1.721(c)-1(b)(7).

Gain Deferral Method

The gain deferral method is the method described in Regulations
section 1.721(c)-3(b) applied to avoid the immediate recognition
of gain on a contribution of section 721(c) property to a section
721(c) partnership under Regulations section 1.721(c)-2(b).

Who Must File
Domestic Partnerships

Except as provided below, every domestic partnership must file
Form 1065, unless it neither receives income nor incurs any
expenditures treated as deductions or credits for federal income
tax purposes.
Note. To be certified as a qualified opportunity fund (QOF), the
partnership must file Form 1065 and attach Form 8996, Qualified
Opportunity Fund, even if the partnership had no income or
expenses to report. See Schedule B, question 25, and the
Instructions for Form 8996.
Entities formed as LLCs that are classified as partnerships for
federal income tax purposes have the same filing requirements
as domestic partnerships.
A religious or apostolic organization exempt from income tax
under section 501(d) must file Form 1065 to report its taxable
income, which must be allocated to its members as a dividend,
whether distributed or not. Such an organization must figure its
taxable income on an attached statement to Form 1065 in the
same manner as a corporation. The organization may use Form
1120, U.S. Corporation Income Tax Return, for this purpose.
Enter the organization's taxable income, if any, on Form 1065,
4

Real estate mortgage investment conduits (REMICs) must file
Form 1066, U.S. Real Estate Mortgage Investment Conduit
(REMIC) Income Tax Return.
Certain publicly traded partnerships (PTPs) treated as
corporations under section 7704 must file Form 1120.

Note. Notwithstanding the preceding, a partnership that is, or
has a branch that is, a qualified derivatives dealer (QDD) must
file Form 1065. See Qualified derivatives dealers (QDDs), later.

Foreign Partnerships

Generally, a foreign partnership that has gross income that is (or
is treated as) effectively connected with the conduct of a trade or
business within the United States (effectively connected income)
or has gross income derived from sources in the United States
(U.S. source income) must file Form 1065, even if its principal
place of business is outside the United States or all its members
are foreign persons. A foreign partnership required to file a return
must generally report all of its foreign and U.S. partnership items.

A foreign partnership with U.S. source income isn't required to
file Form 1065 if it qualifies for either of the following two
exceptions.
Note. Notwithstanding the preceding, a partnership that is, or
has a branch that is, a QDD must file Form 1065. See Qualified
derivatives dealers (QDDs), later.
Exception for foreign partnerships with U.S. partners. A
return isn't required if:
• The partnership had no effectively connected income during
its tax year;
• The partnership had U.S. source income of $20,000 or less
during its tax year;
• Less than 1% of any partnership item of income, gain, loss,
deduction, or credit was allocable in the aggregate to direct U.S.
partners at any time during its tax year; and
• The partnership isn't a withholding foreign partnership as
defined in Regulations section 1.1441-5(c)(2)(i).
Exception for foreign partnerships with no U.S. partners
and no effectively connected income. A foreign partnership
with U.S. source income isn't required to file a return if it meets
the following requirements.
• The partnership had no effectively connected income during
its tax year.
• The partnership had no U.S. partners at any time during its tax
year.
• The partnership isn't a withholding foreign partnership as
defined in Regulations section 1.1441-5(c)(2)(i).
• All required Forms 1042, Annual Withholding Tax Return for
U.S. Source Income of Foreign Persons, and 1042-S, Foreign
Person's U.S. Source Income Subject to Withholding, were filed
by the partnership or another withholding agent as required by
Regulations sections 1.1461-1(b) and (c).
Instructions for Form 1065 (2024)

• The tax liability of each partner for amounts reportable under
Regulations sections 1.1461-1(b) and (c) has been fully satisfied
by the withholding of tax at the source.
A foreign partnership filing Form 1065 solely to make an
election (such as an election to amortize organization expenses)
need only provide its name, address, and employer identification
number (EIN) on page 1 of Form 1065 and attach a statement
citing “Regulations section 1.6031(a)-1(b)(5)” and identifying the
election being made. A foreign partnership filing Form 1065
solely to make an election must obtain an EIN if it doesn't
already have one.

Internal Revenue Service
Ogden Submission Processing Center
Attn: Form 1065 e-file Waiver Request, Stop 1056
1973 N. Rulon White Blvd.
Ogden, UT 84404
Waiver requests can also be faxed to 877-477-0575.
Contact the e-Help Desk at 866-255-0654 for questions
regarding the waiver procedures or process. For more
information, go to Guidance on Waivers for Partnerships Unable
to Meet e-file Requirements.
Religious. If using the technology required to file
electronically conflicts with the religious beliefs of the partners,
the partnership is exempt from the requirement and may file
using paper forms. Enter “Religious Exemption” at the top of
page 1 of Form 1065 filed in paper form. Also, most filers
claiming the religious exemption who file information returns
subject to the general electronic filing requirements prescribed
by Regulations section 301.6011-2 (for example, Forms 1099
and Forms W-2) have the option to notify the IRS that they
qualify for a religious exemption in advance of filing returns and
other documents. Filers are encouraged to notify the IRS in
advance that they're claiming a religious exemption by filing
Form 8508, Application for a Waiver from Electronic Filing of
Information Returns, in accordance with the form's instructions.
For additional information, see Notice 2024-18.

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Qualified derivatives dealers (QDDs) A partnership that is, or
has a branch that is, a QDD (QDD partnership) must file Form
1065 even if it wouldn't be required to file otherwise. A QDD
partnership must attach a statement (QDD statement) to its
Form 1065 with certain required information as provided in
section 7.01(C) of the qualified intermediary agreement in Rev.
Proc. 2022-43, 2022-52 I.R.B. 570. If the only reason the
partnership is filing Form 1065 is because it's a QDD
partnership, then the only information it must provide on Form
1065 in addition to the QDD statement is its tax year, name,
address, and EIN; and it must check item G on page 1 of Form
1065. While a partnership is generally required to use an EIN, if
the only reason the partnership is filing Form 1065 is because it's
a QDD partnership and it doesn't have an EIN, it may use its
QI-EIN instead.

Termination of the Partnership

A partnership terminates when all its operations are discontinued
and no part of any business, financial operation, or venture is
continued by any of its partners in a partnership.
The partnership’s tax year ends on the date of termination
which is the date the partnership winds up its affairs. Special
rules apply in the case of a merger, consolidation, or division of a
partnership. See Regulations sections 1.708-1(c) and (d) for
details. Also see IRS.gov/newsroom/questions-and-answersabout-technical-terminations-internal-revenue-code-irc-sec-708.

Electronic Filing

Beginning January 1, 2024, partnerships were required to file
Form 1065 and related forms and schedules electronically if they
file 10 or more returns of any type during the tax year, including
information, income tax, employment tax, and excise tax returns.
See Regulations section 301.6011-3, updated by T.D. 9972.
Partnerships with more than 100 partners are required to file
Form 1065, Schedules K-1, and other related forms and
schedules electronically.

Exclusions From Electronic Filing

The IRS may waive the electronic filing rules if the partnership
demonstrates that a hardship would result if it were required to
file its return electronically. A partnership interested in requesting
a waiver of the mandatory electronic filing requirement must file
a written request, and request one in the manner prescribed by
the Ogden Submission Processing Center.
All written requests for waivers should be mailed to:
Internal Revenue Service
Ogden Submission Processing Center
Attn: Form 1065 e-file Waiver Request, Stop 1057
Ogden, UT 84201
Use the following address if using an overnight delivery
service.

Instructions for Form 1065 (2024)

The requirement to file electronically doesn't apply to certain
returns, including:
• Bankruptcy returns, and
• Returns with pre-computed penalty and interest.
See Rev. Proc. 2012-17, available at IRS.gov/pub/irs-irbs/
irb12-10.pdf, for the requirements for furnishing substitute
Schedule K-1 in electronic format.

For more details on electronic filing using the Modernized
e-file system, see:
• Pub. 3112, IRS e-file Application & Participation;
• Pub. 4163, Modernized e-File (MeF) Information for
Authorized IRS e-File Providers for Business Returns;
• Pub. 4164, Modernized e-File (MeF) Guide for Software
Developers and Transmitters;
• Form 8453-PE, E-file Declaration for Form 1065; and
• Form 8879-PE, E-file Authorization for Form 1065.

For More Information on Filing Electronically
• Call the e-Help Desk at 866-255-0654.
• Go to IRS.gov/Filing.

When To File

Generally, a domestic partnership must file Form 1065 by the
15th day of the 3rd month following the date its tax year ended
as shown at the top of Form 1065. For calendar year
partnerships, the due date is March 15.
If the due date falls on a Saturday, Sunday, or legal holiday in
the District of Columbia or the state in which you file your return,
a return filed by the next day that isn't a Saturday, Sunday, or
legal holiday will be treated as timely. Calendar year partnerships
may therefore timely file their returns for the 2024 partnership
year by March 17, 2025.

Private Delivery Services (PDSs)

Partnerships can use certain PDSs designated by the IRS to
meet the “timely mailing as timely filing/paying” rule for tax
returns. Go to IRS.gov/PDS for the current list of designated
services. The PDS can tell you how to get written proof of the
mail date.
5

Where To File
File Form 1065 at the applicable IRS address listed below. If Schedule M-3 is filed, Form 1065 must be filed at the Ogden Internal
Revenue Service Center as shown below.
If the partnership's principal business,
office, or agency is located in:

And the total assets at the end of the tax Use the following address:
year (Form 1065, page 1, item F) are:

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Connecticut, Delaware, District of Columbia,
Georgia, Illinois, Indiana, Kentucky, Maine,
Maryland, Massachusetts, Michigan, New
Hampshire, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Vermont, Virginia,
West Virginia, Wisconsin

Less than $10 million and Schedule M-3
isn't filed

Department of the Treasury
Internal Revenue Service Center
Kansas City, MO 64999-0011

Connecticut, Delaware, District of Columbia,
Georgia, Illinois, Indiana, Kentucky, Maine,
Maryland, Massachusetts, Michigan, New
Hampshire, New Jersey, New York, North
Carolina, Ohio, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Vermont, Virginia,
West Virginia, Wisconsin

$10 million or more or
less than $10 million and
Schedule M-3 is filed

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0011

Any amount

Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0011

Any amount

Internal Revenue Service
P.O. Box 409101
Ogden, UT 84409

Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Florida, Hawaii, Idaho, Iowa, Kansas,
Louisiana, Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Mexico,
North Dakota, Oklahoma, Oregon, South
Dakota, Texas, Utah, Washington, Wyoming
A foreign country or U.S. territory

For the IRS mailing address to use if you're using a PDS, go
to IRS.gov/PDSStreetAddresses.

CAUTION

A PDS can’t deliver items to P.O. boxes. You must use
the U.S. Postal Service to mail any item to an IRS P.O.
box address.

Extension of Time To File

File Form 7004, Application for Automatic Extension of Time To
File Certain Business Income Tax, Information, and Other
Returns, to request an extension of time to file. File Form 7004
by the regular due date of the partnership return. Form 7004 can
be electronically filed. See the Instructions for Form 7004.

Period Covered

The 2024 Form 1065 is an information return for calendar year
2024 and fiscal years that begin in 2024 and end in 2025. For a
fiscal year or a short tax year, fill in the tax year space at the top
of Form 1065 and each Schedule K-1 and Schedules K-2 and
K-3, if applicable.
The 2024 Form 1065 may also be used if:

• The partnership has a tax year of less than 12 months that

begins and ends in 2025, and
• The 2025 Form 1065 isn't available by the time the
partnership is required to file its return.

However, the partnership must show its 2025 tax year on the
2024 Form 1065 and incorporate any tax law changes that are
effective for tax years beginning after 2024.

Who Must Sign

Any Partner or LLC Member

Form 1065 isn't considered to be a return unless it's signed by a
partner or LLC member. When a return is made for a partnership
by a receiver, trustee, or assignee, the fiduciary must sign the
return, instead of the partner or LLC member. Returns and forms
signed by a receiver or trustee in bankruptcy on behalf of a
partnership must be accompanied by a copy of the order or
instructions of the court authorizing signing of the return or form.
Signatures required when filing an AAR. When filing an
AAR, Form 1065 must be signed by the partnership
representative (PR) (or the designated individual (DI) if the PR is
an entity) for the reviewed year.

Paid Preparer’s Information

If a partner, member, or employee of the partnership completes
Form 1065, the paid preparer's space should remain blank. Only
paid preparers with a valid preparer tax identification number
(PTIN) should complete this section.

Generally, anyone who is paid to prepare the partnership
return must do the following.
• Sign the return in the space provided for the preparer's
signature.
• Fill in the other blanks in the “Paid Preparer Use Only” area of
the return. A paid preparer can't use a social security number
(SSN) in the “Paid Preparer Use Only” box. The paid preparer
must use a PTIN.
• Give the partnership a copy of the return in addition to the
copy to be filed with the IRS.

Instructions for Form 1065 (2024)

A paid preparer may sign original or amended returns by

TIP rubber stamp, mechanical device, or computer software
program.

Paid Preparer Authorization

If the partnership wants to allow the paid preparer to discuss its
2024 Form 1065 with the IRS, check “Yes” in the signature area
of the return. The authorization applies only to the individual
whose signature appears in the “Paid Preparer Use Only”
section of its return. It doesn't apply to the firm, if any, shown in
the section.

• Form 720, Quarterly Federal Excise Tax Return;
• Form 941, Employer's QUARTERLY Federal Tax Return;
• Form 943, Employer's Annual Federal Tax Return for

Agricultural Employees;
• Form 944, Employer's ANNUAL Federal Tax Return; and
• Form 945, Annual Return of Withheld Federal Income Tax.
The trust fund recovery penalty may be imposed on all
persons who are determined by the IRS to have been
responsible for collecting, accounting for, or paying over these
taxes, and who acted willfully in not doing so. The penalty is
equal to the unpaid trust fund tax. See the Instructions for Form
720; Pub. 15 (Circular E), Employer's Tax Guide; Pub. 51
(Circular A), Agricultural Employer's Tax Guide; or Pub. 15-T,
Federal Income Tax Withholding Methods, for more details,
including the definition of a responsible person.

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If “Yes” is checked, the partnership is authorizing the IRS to
call the paid preparer to answer any questions that may arise
during the processing of its return. The partnership is also
authorizing the paid preparer to:
• Give the IRS any information that is missing from its return,
• Call the IRS for information about the processing of its return,
and
• Respond to certain IRS notices about math errors and return
preparation.

The partnership isn't authorizing the paid preparer to bind the
partnership to anything or otherwise represent the partnership
before the IRS. If the partnership wants to expand the paid
preparer's authorization, see Pub. 947, Practice Before the IRS
and Power of Attorney.
The authorization can't be revoked. However, the
authorization will automatically end no later than the due date
(excluding extensions) for filing the 2025 return.

Penalties

Accounting Methods

An accounting method is a set of rules used to determine when
and how income and expenditures are reported. The method of
accounting used must be reconcilable with the partnership's
books and records. In all cases, the method used must clearly
reflect income. Generally, the following rules apply. For more
information, see Pub. 538, Accounting Periods and Methods.
Permissible overall methods of accounting include:

• Cash,
• Accrual, or
• Any other method authorized by the Internal Revenue Code

(the Code).

Late Filing of Return

Generally, a partnership may use the cash method of
accounting unless it’s required to maintain inventories, has a C
corporation as a partner, or is a tax shelter (as defined in section
448(d)(3)). However, for tax years beginning after 2017, any
partnership qualifying as a small business taxpayer (defined
below) may use the cash method.

Failure To Furnish Information Timely

Tax shelter election. A taxpayer that is a tax shelter, as defined
in section 448(d)(3), isn't permitted to use the cash method
pursuant to section 448(a)(3), and is also not permitted to use
the small business taxpayer exemptions contained in sections
163(j)(3) (limitation on business interest), 263A(i) (uniform
capitalization), 460(e)(1)(B) (percentage of completion method),
and 471(c) (general inventory method). Under section 448(d)(3),
a taxpayer that is a syndicate is considered a tax shelter. For
purposes of section 448(d)(3), a syndicate is a partnership or
other entity (other than a C corporation) if more than 35% of the
losses of such entity during the tax year are allocated to limited
partners or limited entrepreneurs.
The final regulations under section 448 permit a taxpayer to
make an annual election to use its allocations made in the
immediately preceding tax year, instead of using the current tax
year's allocation, to determine whether the taxpayer is a
syndicate under section 448(d)(3) for the current tax year. The
election is made on the timely filed original return (including
extensions) for the tax year for which it's made. The election is
valid only for the tax year for which it's made and, once made,
can't be revoked. See Regulations section 1.448-2(b)(2)(iii)(B)
(2) for guidance on the time and manner of making the annual
election and effective dates.

Trust Fund Recovery Penalty

Small business taxpayer. For tax years beginning after 2017,
a small business taxpayer (defined below) can adopt or change
its accounting method to account for inventories (a) in the same
manner as materials and supplies that are nonincidental; or (b)
to conform to the taxpayer's treatment of inventories in an
applicable financial statement (as defined in section 451(b)(3)),
or, if the taxpayer doesn't have an applicable financial statement,
the method of accounting used in the taxpayer's books and
records prepared in accordance with the taxpayer's accounting

A penalty is assessed against the partnership if it's required to
file a partnership return and it (a) fails to file the return by the due
date, including extensions; or (b) files a return that fails to show
all the information required, unless such failure is due to
reasonable cause. The penalty is $245 for each month or part of
a month (for a maximum of 12 months) the failure continues,
multiplied by the total number of persons who were partners in
the partnership during any part of the partnership's tax year for
which the return is due. If the partnership receives a notice about
a penalty after it files the return, the partnership may send the
IRS an explanation and the IRS will determine if the explanation
meets reasonable-cause criteria. Don’t attach an explanation
when filing the return.

For each failure to furnish Schedule K-1 (and K-3, if applicable)
to a partner when due and each failure to include on
Schedule K-1 (and K-3, if applicable) all the information required
to be shown (or the inclusion of incorrect information), a $330
penalty may be imposed for each Schedule K-1 (and K-3, if
applicable) for which a failure occurs. For all such failures during
a calendar year, the maximum penalty for entities with gross
receipts over $5,000,000 is $3,987,000; and $1,329,000 for
entities with gross receipts at or below $5,000,000. If the
requirement to report correct information is intentionally
disregarded, each $330 penalty is increased to $660 or, if
greater, 10% of the aggregate amount of items required to be
reported. There's no limit to the amount of the penalty in the case
of intentional disregard.
This penalty may apply if certain excise, income, social security,
and Medicare taxes that must be collected or withheld aren't
collected or withheld, or these taxes aren't paid. These taxes are
generally reported on:
Instructions for Form 1065 (2024)

procedures. See section 471(c)(1), and Change in accounting
method, later.
For tax years beginning after 2017, a small business taxpayer
can adopt or change its accounting method to not capitalize
costs to property produced or acquired for resale under section
263A. See section 263A(i), and Change in accounting method
and Limitations on Deductions, later.
Small business taxpayer defined. For 2024, a small
business taxpayer is a taxpayer that (a) has average annual
gross receipts of $30 million or less for the prior 3 tax years, and
(b) isn't a tax shelter (as defined in section 448(d)(3)).

business day of the tax year, and any gain or loss must be taken
into account in determining gross income. The gain or loss taken
into account is generally treated as ordinary gain or loss. For
details, including exceptions, see section 475, the related
regulations, and Rev. Rul. 97-39, 1997-39 I.R.B. 4.
Dealers in commodities and traders in securities and
commodities can elect to use the mark-to-market accounting
method. To make the election, the partnership must file a
statement describing the election, the first tax year the election is
to be effective, and, in the case of an election for traders in
securities or commodities, the trade or business for which the
election is made. Except for new taxpayers, the statement must
be filed by the due date (not including extensions) of the return
for the tax year immediately preceding the election year and
attached to that return or, if applicable, to a request for an
extension of time to file that return. For more details, see Rev.
Proc. 99-17, 1999-7 I.R.B. 52, as superseded in part by Rev.
Proc. 99-49; and sections 475(e) and (f).

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Accrual method. Generally, under the accrual method, an
amount is includible in income when:
1. All the events have occurred that fix the right to receive
income, which is the earliest date:
a. Payment is earned through the required performance,
b. Payment is due to the taxpayer,
c. Payment is received by the taxpayer,
d. When title passes, or
e. When the income is reported as revenue in an applicable
financial statement (AFS); and
2. When the amount can be determined with reasonable
accuracy.

See Regulations sections 1.451-1(a) and 1.451-3(c) for
details.
Generally, an accrual basis taxpayer can deduct accrued
expenses in the tax year in which:
• All events that establish the liability have occurred,
• The amount of the liability can be figured with reasonable
accuracy, and
• Economic performance takes place with respect to the
expense.
For property and service liabilities, for example, economic
performance occurs as the property or service is provided.
There are special economic performance rules for certain items,
including recurring expenses. See section 461(h) and the related
regulations for the rules for determining when economic
performance takes place.

Nonaccrual-experience method. Accrual method
partnerships aren't required to accrue certain amounts to be
received from the performance of services that, on the basis of
their experience, won't be collected if:
• The services are in the field of health, law, engineering,
architecture, accounting, actuarial science, performing arts, or
consulting; or
• The partnership's average annual gross receipts don’t exceed
$30 million for all prior tax years. For more details, see section
448(d)(5).
This provision doesn't apply to any amount if interest is
required to be paid on the amount or if there's any penalty for
failure to timely pay the amount. For information, see section
448(d)(5) and Regulations section 1.448-2. For reporting
requirements, see the instructions for line 1a, later.
Percentage of completion method. Long-term contracts
(except for certain real property construction contracts) must
generally be accounted for using the percentage of completion
method described in section 460. See section 460 and the
underlying regulations for rules on long-term contracts.
Mark-to-market accounting method. Dealers in securities
must use the mark-to-market accounting method described in
section 475. Under this method, any security that is inventory to
the dealer must be included in inventory at its fair market value
(FMV). Any security that isn't inventory and that is held at the
close of the tax year is treated as sold at its FMV on the last
8

Change in accounting method. Generally, the partnership
must get IRS consent to change its method of accounting used
to report income or expense (for income or expense as a whole
or for any material item). To do so, the partnership must
generally file Form 3115, Application for Change in Accounting
Method, during the tax year for which the change is requested.
See the Instructions for Form 3115 and Pub. 538 for more
information and exceptions.
Section 481(a) adjustment. The partnership may have to
make an adjustment to prevent amounts of income or expenses
from being omitted or duplicated. This is called a section 481(a)
adjustment. The section 481(a) adjustment period is generally 1
year for a net negative adjustment and 4 years for a net positive
adjustment. However, in some instances, a partnership can elect
to modify the section 481(a) adjustment period. The partnership
must complete the appropriate lines of Form 3115 to make the
election. See the Instructions for Form 3115.
Include any net positive section 481(a) adjustment on page 1
of Form 1065, line 7. If the net section 481(a) adjustment is
negative, report it on page 1, line 21.
There are some instances when the partnership can obtain
automatic consent from the IRS to change to certain accounting
methods. See the Instructions for Form 3115.

Accounting Periods

A partnership is generally required to have one of the following
tax years.
1. The tax year of a majority of its partners (majority tax
year).
2. If there's no majority tax year, then the tax year common
to all of the partnership's principal partners (partners with an
interest of 5% or more in the partnership profits or capital).
3. If there's neither a majority tax year nor a tax year
common to all principal partners, then the tax year that results in
the least aggregate deferral of income.
Note. In determining the tax year of a partnership under (1), (2),
or (3) above, the tax years of certain tax-exempt and foreign
partners are disregarded. See Regulations section 1.706-1(b) for
more details.
4. Some other tax year if one of the following applies.
a. The partnership can establish that there's a business
purpose for the tax year.
b. The partnership elects under section 444 to have a tax
year other than a required tax year by filing Form 8716, Election
To Have a Tax Year Other Than a Required Tax Year. For a
partnership to have this election in effect, it must make the
payments required by section 7519 and file Form 8752,
Required Payment or Refund Under Section 7519.
Instructions for Form 1065 (2024)

A section 444 election ends if a partnership changes its
accounting period to its required tax year or some other
permitted year or it's penalized for willfully failing to comply with
the requirements of section 7519. If the termination results in a
short tax year, enter at the top of the first page of Form 1065 for
the short tax year, “SECTION 444 ELECTION TERMINATED.”
c. The partnership elects to use a 52–53-week tax year that
ends with reference to either its required tax year or a tax year
elected under section 444.

audit regime, which is filing an AAR and that doesn't elect to
have its partners take adjustments into account, and that has
adjustments that result in an imputed underpayment (IU), should
report the IU and any interest and penalties on Form 1065,
page 1, line 26. See the Instructions for Form 8082 for
information on how to figure a BBA IU and what to do when an
adjustment requested by an AAR doesn't result in an IU. See
section 6233 for information about interest and penalties on the
IU. Include the following information on your payment.
• Name of partnership.
• Form 1065.
• Taxpayer identification number (TIN).
• Tax year.
• BBA AAR Imputed Underpayment.
• Checks must be made payable to “United States Treasury.”
Mail payment to:

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Change of tax year. To change its tax year or to adopt or
retain a tax year other than its required tax year, the partnership
must file Form 1128, Application To Adopt, Change, or Retain a
Tax Year, unless the partnership is making an election under
section 444.
The tax year of a common trust fund must be the

TIP calendar year.

Rounding Off to Whole Dollars

The partnership may enter decimal points and cents when
completing its return. However, it should round off cents to whole
dollars on its return, forms, and schedules to make completing
its return easier. The partnership must either round off all
amounts on the return to whole dollars, or use cents for all
amounts. To round, drop amounts under 50 cents and increase
amounts from 50 to 99 cents to the next dollar. For example,
$8.40 rounds to $8 and $8.50 rounds to $9.
If two or more amounts are added to figure the amount to
enter on a line, include cents when adding the amounts and
round off only the total.

Recordkeeping

The partnership must keep its records as long as they may be
needed for the administration of any provision of the Code. The
partnership must usually keep records that support an item of
income, deduction, or credit on the partnership return for 3 years
from the date the return is due or is filed, whichever is later.
These records must usually be kept for 3 years from the date
each partner's return is due or is filed, whichever is later. It must
also keep records that verify the partnership's basis in property
for as long as they are needed to figure the basis of the original
or replacement property.
The partnership should also keep copies of all returns it has
filed. They help in preparing future returns and in making
computations when filing an amended return.

Administrative Adjustment Request
(AAR)

A partnership that is subject to the BBA centralized partnership
audit regime must file an AAR to request an administrative
adjustment in the amount or other treatment of one or more
partnership-related items.
A BBA partnership filing an AAR shouldn't file an amended
tax return or amended Schedules K-1 and/or K-3. For an
exception where a BBA partnership is itself a partner in a BBA
partnership and is filing an amended return, see Partner
amended return filed as part of modification of the IU during a
BBA examination, later.
Electronically filed AARs. If the AAR will be filed electronically,
complete Form 1065 with the corrected amounts and check box
G(5). In addition, complete Form 8082, Notice of Inconsistent
Treatment or Administrative Adjustment Request (AAR). See the
Instructions for Form 8082 for detailed instructions. For AARs
filed on paper, see Paper-filed amended returns and AARs, later.
AARs for which payment is made. A partnership that hasn't
made a valid election out of the BBA centralized partnership
Instructions for Form 1065 (2024)

Ogden Service Center
Ogden, UT 84201-0011

Payments can be made by check or electronically. If making an
electronic payment, choose the payment description “BBA AAR
Imputed Underpayment” from the list of payment types.
If the partnership has an IU, the partnership may elect to have
its partners take the adjustments into account instead of paying
the IU. See the Instructions for Form 8082 for information on how
to make the election.

Amended Return

The procedures to follow when filing an amended partnership
return depend on whether the amended return is filed
electronically or on paper. The rules for determining when a
return must be filed electronically (see Electronic Filing, earlier)
also apply to amended returns.

Electronically filed amended returns. If the amended return
will be filed electronically, complete Form 1065 and check box
G(5) to indicate that you're filing an amended return. Attach a
statement that identifies the line number of each amended item,
the corrected amount or other treatment of the item, and an
explanation of the reason(s) for each change. If the income,
deductions, credits, or other information provided to any partner
on Schedule K-1 or K-3, as applicable, is incorrect, file an
amended Schedule K-1 or K-3 for that partner with the amended
Form 1065. Also give a copy of the amended Schedule K-1 or
K-3 to that partner. Check the “Amended K-1” or “Amended K-3”
box at the top of the Schedule K-1 or K-3 to indicate that it's an
amended Schedule K-1 or K-3.

Partner amended return filed as part of modification of the
IU during a BBA examination. Section 6225(c)(2) allows a
BBA partnership under examination to request specific types of
modifications of any IU proposed by the IRS. One type of
modification that may be requested is when one or more
partners, including partnership-partners, file amended returns for
the tax years of the partners which include the end of the
reviewed year of the BBA partnership under examination and for
any tax year with respect to which tax attributes are affected. Go
to IRS.gov/bbaaar.
A modification amended return filing must meet a number of
requirements. Therefore, a partnership-partner filing a
modification amended return must refer to Form 8982, Affidavit
for Partner Modification Amended Return Under IRC 6225(c)(2)
(A) or Partner Alternative Procedure Under IRC 6225(c)(2)(B).
The instructions for Form 8982, Section A, explain the
modification of amended returns, requirements for payment and
submission, and the requirement to provide Form 8982,
Section A, to the PR of the BBA partnership. See Filing
Instructions for Partner Modification Amended Returns and
Paying the Amount You Owe in the instructions for Form 8982.
9

Partnership-partners who are filing amended returns
electronically as part of the modification will report the applicable
payment of tax and interest and any penalties on Form 1065,
page 1, line 26. A payment made with an amended Form 1065
should detail the amount of the payment to be applied separately
to tax, interest, and penalties. The partnership should consider
all guidance issued by the IRS when figuring the amount due. In
general, the partnership should figure its amount due in
accordance with Regulations sections 301.6225-2(d)(2)(vi)(A)
and 301.6226-3(e)(4)(iii).

When a partnership's federal return is amended or

TIP changed for any reason, it may affect the partnership's

state tax return. For more information, contact the state
tax agency for the state in which the partnership return was filed.

What if You Can’t Pay Now?

Go to IRS.gov/Payments for more information about your
options.
• Apply for an online payment agreement (IRS.gov/OPA) to
meet your tax obligation in monthly installments if you can’t pay
your taxes in full today. Once you complete the online process,
you will receive immediate notification of whether your
agreement has been approved.
• Use the Offer in Compromise Pre-Qualifier to see if you can
settle your tax debt for less than the full amount you owe.

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Paper-filed amended returns and AARs. If the amended
return or AAR won't be filed electronically, complete Form
1065-X, Amended Return or Administrative Adjustment Request
(AAR), to file the amended return or AAR. See Form 1065-X and
its separate instructions for information on completing and filing
the form.

Other Forms, Returns, and Statements That May Be Required
Form, Return, or Statement

Use this to—

W-2 and W-3—Wage and Tax Statement; and Transmittal of
Wage and Tax Statements

Report wages, tips, other compensation, and withheld income, social security, and Medicare
taxes for employees.

720—Quarterly Federal Excise Tax Return

Report and pay environmental excise taxes, communications and air transportation taxes, fuel
taxes, manufacturers taxes, ship passenger tax, and certain other excise taxes. Also see Trust
Fund Recovery Penalty, earlier.

940—Employer's Annual Federal Unemployment (FUTA) Tax
Return

Report and pay FUTA tax.

941—Employer's QUARTERLY Federal Tax Return

Report quarterly income tax withheld on wages and employer and employee social security and
Medicare taxes. Also see Trust Fund Recovery Penalty, earlier.

943—Employer's Annual Federal Tax Return for Agricultural
Employees

Report income tax withheld and employer and employee social security and Medicare taxes on
farmworkers. Also see Trust Fund Recovery Penalty, earlier.

944—Employer's ANNUAL Federal Tax Return

File annual Form 944 instead of filing quarterly Forms 941 if the IRS notified you in writing.

945—Annual Return of Withheld Federal Income Tax

Report income tax withheld from nonpayroll payments, including pensions, annuities, individual
retirement accounts (IRAs), gambling winnings, and backup withholding. Also see Trust Fund
Recovery Penalty, earlier.

1042 and 1042-S—Annual Withholding Tax Return for U.S.
Source Income of Foreign Persons; and Foreign Person's U.S.
Source Income Subject to Withholding

Report tax withheld on payments or distributions made to nonresident alien individuals, foreign
partnerships, or foreign corporations to the extent these payments or distributions constitute
gross income from sources within the United States that isn't effectively connected with a U.S.
trade or business. A domestic partnership must also withhold tax on a foreign partner's
distributive share of such income, including amounts that aren't actually distributed. Withholding
on amounts not previously distributed to a foreign partner must generally be made and paid over
by the earlier of:
• The date on which Schedules K-1 and K-3 are sent to that partner, or
• The 15th day of the 3rd month after the end of the partnership's tax year.
These forms are also used to report tax withheld on distributions of effectively connected taxable
income (ECTI) made by PTPs and certain transfers of interests in PTPs. For more details, see the
instructions for Forms 1042 and 1042-S and Pub. 515, Withholding of Tax on Nonresident Aliens
and Foreign Entities.

1042-T—Annual Summary and Transmittal of Forms 1042-S

Transmit paper Forms 1042-S to the IRS.

1065-X—Amended Return or Administrative Adjustment
Request (AAR)

Use Form 1065-X to correct a previously filed partnership return or to make an AAR for a
previously filed return.

1095-B and 1094-B—Health Coverage; and Transmittal of Forms Required to be filed by certain health insurance issuers and others who provide minimum
1095-B
essential coverage to report information on the primary insured and other individuals covered
under the plan.
1095-C and 1094-C—Employer-Provided Health Insurance Offer
and Coverage; and Transmittal of Forms 1095-C

Used by certain employers to report information about the health care coverage the employer
offered with regard to each full-time employee.

1096—Annual Summary and Transmittal of U.S. Information
Returns

Transmit paper Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G to the IRS.

1097-BTC—Bond Tax Credit

Report tax credits to bond holders and tax credits passed to another person.

1098—Mortgage Interest Statement

Report the receipt from any individual of $600 or more of mortgage interest (including certain
points) in the course of the partnership's trade or business.

Instructions for Form 1065 (2024)

Form, Return, or Statement

Use this to—

1099-A, B, C, INT, K, LS, LTC, MISC, NEC, OID, R, S, and SA.

Report the following.
• Acquisitions or abandonments of secured property.
• Proceeds from broker and barter exchange transactions.
• Cancellation of debts.
• Interest income.
• Payment card and third-party network transactions.
• Payments of long-term care and accelerated death benefits.
• Acquisition of a life insurance contract, or interest therein, in a reportable policy sale.
• Miscellaneous income.
• Nonemployee compensation
• Original issue discount.
• Distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance
contracts, etc.
• Proceeds from real estate transactions.
• Distributions from an HSA, Archer MSA, or Medicare Advantage MSA.

Important. Every partnership must file Forms 1099-MISC or
1099-NEC if, in the course of its trade or business, it makes
payments of rents, commissions, or other fixed or determinable
income (see section 6041) totaling $600 or more to any one
person during the calendar year.

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5471—Information Return of U.S. Persons With Respect to
Certain Foreign Corporations

A partnership may have to file Form 5471 if it:
• Controls a foreign corporation,
• Acquires or owns 10% or more of the total combined voting power or value of shares of all
classes of stock, or
• Disposes of sufficient stock to reduce its interest to less than 10% of the total combined
voting power or value of shares of all classes of stock.

5713—International Boycott Report

Report operations in, or related to, a boycotting country, company, or national of a country and to
figure the loss of certain tax benefits. The partnership must give each partner a copy of the Form
5713 filed by the partnership if there has been participation in, or cooperation with, an
international boycott.

8275—Disclosure Statement

Disclose items or positions, except those contrary to a regulation, that aren't otherwise
adequately disclosed on a tax return. The disclosure is made to avoid the parts of the
accuracy-related penalty imposed for disregard of rules or substantial understatement of tax.
Also use Form 8275 for disclosures relating to preparer penalties for understatements due to
unrealistic positions or disregard of rules.

8275-R—Regulation Disclosure Statement

Disclose any item on a tax return for which a position has been taken that is contrary to Treasury
regulations.

8288, 8288-A, and 8288-C—U.S. Withholding Tax Return for
Certain Dispositions by Foreign Persons; Statement of
Withholding on Certain Dispositions by Foreign Persons; and
Statement of Withholding Under Section 1446(f)(4) on
Dispositions by Foreign Persons of Partnership Interests

Report and send withheld tax on the sale of U.S. real property or the transfer of certain
partnership interests by a foreign person. See sections 1445 and 1446(f), and the related
regulations, for additional information.

8300—Report of Cash Payments Over $10,000 Received in a
Trade or Business

Report the receipt of more than $10,000 in cash or foreign currency in one transaction or a series
of related transactions.

8308—Report of a Sale or Exchange of Certain Partnership
Interests

Report the sale or exchange by a partner of all or part of a partnership interest where any money
or other property received in exchange for the interest is attributable to unrealized receivables or
inventory items.

8594—Asset Acquisition Statement Under Section 1060

Report a sale of assets if goodwill or going concern value attaches, or could attach, to such
assets. Both the seller and buyer of a group of assets that makes up a trade or business must
use this form.

8621—Information Return by a Shareholder of a Passive Foreign Report an ownership interest in, make elections for, and compute inclusions with respect to
Investment Company or Qualified Electing Fund
passive foreign investment companies and qualified electing funds.
8697—Interest Computation Under the Look-Back Method for
Completed Long-Term Contracts

Figure the interest due or to be refunded under the look-back method of section 460(b)(2) on
certain long-term contracts that are accounted for under either the percentage of
completion-capitalized cost method or the percentage of completion method. Partnerships that
aren't closely held use this form. Closely held partnerships should see Line 20c. Other Items and
Amounts and Look-back interest completed long-term contracts (code J) under Specific
Instructions (Schedules K and K-1, Part III, Except as Noted), later, for details on the Form 8697
information they must provide to their partners.

8804, 8805, and 8813—Annual Return for Partnership
Withholding Tax (Section 1446); Foreign Partner's Information
Statement of Section 1446 Withholding Tax; and Partnership
Withholding Tax Payment Voucher (Section 1446)

Use Forms 8804 and 8805 to figure and report the withholding tax on foreign partners' allocable
shares of ECTI. Form 8804 must also be filed to report effectively connected gross income
allocable to foreign partners even if the partnership has no ECTI on which to withhold. Use Form
8813 to send installment payments of withheld tax based on ECTI allocable to foreign partners.
Exception. PTPs don't file these forms. They must instead withhold tax on distributions to foreign
partners and report and send payments using Forms 1042 and 1042-S. See Regulations section
1.1446-4 for more information.

8832—Entity Classification Election

See Entity Classification Election, later.

8865—Return of U.S. Persons With Respect to Certain Foreign
Partnerships

Report the information required under section 6038 (reporting with respect to controlled foreign
partnerships), section 6038B (reporting of transfers to foreign partnerships), section 6046A
(reporting of acquisitions, dispositions, and changes in foreign partnership interests), or section
721(c) (reporting related to the application of the gain deferral method). See Form 8865 and its
instructions for more details.

Instructions for Form 1065 (2024)

Form, Return, or Statement

Use this to—

8866—Interest Computation Under the Look-Back Method for
Property Depreciated Under the Income Forecast Method

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, depreciated under the income
forecast method. Partnerships that aren't closely held use this form. Closely held partnerships
should see Look-back interest income forecast method (code K) under Specific Instructions
(Schedules K and K-1, Part III, Except as Noted), later, for details on the Form 8866 information
they must provide to their partners.

8876—Excise Tax on Structured Settlement Factoring
Transactions

Report and pay the 40% excise tax imposed under section 5891.

8886—Reportable Transaction Disclosure Statement

Disclose information for each reportable transaction in which the partnership participated. Form
8886 must be filed for each tax year the partnership participated in the reportable transaction.
The partnership may have to pay a penalty if it's required to file Form 8886 and doesn't do so.
The following are reportable transactions.
• Any listed transaction, which is a transaction that is the same as or substantially similar to one
of the types of transactions that the IRS has determined to be a tax avoidance transaction and
identified by notice, regulation, or other published guidance as a listed transaction.
• Any transaction offered under conditions of confidentiality for which the partnership (or a
related party) paid an adviser a fee of at least $50,000 ($250,000 for partnerships if all partners
are corporations).
• Certain transactions for which the partnership (or a related party) has contractual protection
against disallowance of the tax benefits.
• Certain transactions resulting in a loss of at least $2 million in any single year or $4 million in
any combination of years.
• Any transaction of interest, which is a transaction that is the same as, or substantially similar
to, one of the types of transactions identified by the IRS by notice, regulation, or other published
guidance. See Notice 2009-55, 2009-31 I.R.B. 170.
See Regulations section 1.6011-4; the Instructions for Form 8886; and Line 20c. Other Items and
Amounts and Reportable transactions (code AW) under Specific Instructions (Schedules K and
K-1, Part III, Except as Noted), later, for more information.

8918—Material Advisor Disclosure Statement

Material advisors to any reportable transaction must disclose certain information about the
reportable transaction by filing a Form 8918 with the IRS. See Form 8918 and its instructions for
more details.

8925—Report of Employer-Owned Life Insurance Contracts

Report the number of employees covered by employer-owned life insurance contracts issued
after August 17, 2006, and the total amount of employer-owned life insurance in force on those
employees at the end of the tax year.

8990—Limitation on Business Interest Expense Under Section
163(j)

Business interest expense may be limited. See section 163(j) and Form 8990 and its instructions.
Also see Schedule B, questions 23 and 24, and the related instructions.

8994—Employer Credit for Paid Family and Medical Leave

Report if the partnership has a credit for paid family and medical leave. See the Instructions for
Form 8994 for more information.

8996—Qualified Opportunity Fund

Certify that the requirements to be a QOF investing in qualified opportunity zone property, as
defined in section 1400Z-2, have been fulfilled. Entities attaching Form 8996 must also complete
Form 1065, Schedule B, question 25. For more information, see the Instructions for Form 8996.

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Assembling the Return

When submitting Form 1065, organize the pages of the return in
the following order.
• Pages 1–6.
• Schedule F (Form 1040), Profit or Loss From Farming (if
required).
• Form 8825, Rental Real Estate Income and Expenses of a
Partnership or an S Corporation (if required).
• Schedule D (Form 1065), Capital Gains and Losses (if
required).
• Form 4797, Sales of Business Property (if required).
• Form 8949, Sales and Other Dispositions of Capital Assets (if
required).
• Form 8996, Qualified Opportunity Fund (if required).
• Form 1125-A, Cost of Goods Sold (if required).
• Form 8941, Credit for Small Employer Health Insurance
Premiums (if required).
• Form 3800, General Business Credit (if required).
• Form 6252, Installment Sale Income (if required).
• Form 8997, Initial and Annual Statement of Qualified
Opportunity Fund (QOF) Investments (if required).
• Schedule A (Form 8936), Clean Vehicle Credit Amount (if
required).
• Form 4255, Certain Recapture, Excessive Payments, and
Penalties.
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• Schedule K-1 (Form 1065), Partner’s Share of Income,
Deductions, Credits, etc.
• Form 8938, Statement of Specified Foreign Financial Assets
(if required).
• Any other schedules in alphabetical order, including
Schedules K-2 and K-3.
• Any other forms in numerical order.
Complete every applicable entry space on Form 1065 and
Schedule K-1. Don't enter “See attached” instead of completing
the entry spaces. Penalties may be assessed if the partnership
files an incomplete return. If you need more space on the forms
or schedules, attach separate sheets and place them at the end
of the return using the same size and format as on the printed
forms. Show the totals on the printed forms. Also be sure to put
the partnership's name and EIN on each supporting statement.

Entity Classification Election

Use Form 8832 to make a change in classification. Except for
certain business entities always classified as corporations, a
business entity with at least two members may choose to be
classified either as a partnership or an association taxable as a
corporation. A domestic eligible entity with at least two members
that doesn't file Form 8832 is classified under the default rules as
a partnership. However, a foreign eligible entity with at least two
members is classified under the default rules as a partnership
only if the entity doesn't provide limited liability to at least one
Instructions for Form 1065 (2024)

member. File Form 8832 only if the entity doesn't want to be
classified under these default rules or if it wants to change its
classification.

Attach a copy of Form 8832 to the partnership's Form
1065 for the tax year of the election.

CAUTION

Elections Made by the Partnership

a. Includes an amount in gross income for chapter 1
purposes under section 951(a) or section 1293(a)(1)(A) for the
CFC or QEF, and
b. Has a direct or indirect owner that is subject to tax under
section 1411 or would have been if the election were made.
This election must be made on an entity-by-entity basis, and
applies only to the particular CFCs and QEFs for which an
election is made. In general, for purposes of section 1411, if an
election is in effect for a CFC or QEF, the amounts included in
income under section 951 and section 1293 derived from the
CFC or QEF are included in net investment income, and
distributions described in section 959(d) or section 1293(c) are
excluded from net investment income. An election that is made
under Regulations section 1.1411-10(g) can't be revoked. For
more information regarding this election, see Regulations
section 1.1411-10(g).
The election must be made in a statement that is filed with the
partnership’s original or amended return for the tax year in which
the election is made. An election can be made on an amended
return only if the tax year for which the election is made, and all
tax years affected by the election, aren't closed by the period of
limitations on assessments under section 6501. The statement
must include:
a. The name and EIN of the partnership making the election;
b. A declaration that the partnership elects under
Regulations section 1.1411-10(g) to apply the rules in
Regulations section 1.1411-10(g) to the CFCs and QEFs
identified in the statement; and
c. The following information for each CFC and QEF for
which an election is made: (a) the name of the CFC or QEF; and
(b) either the EIN of the CFC or QEF, or, if an EIN isn’t available,
the reference ID number of the CFC or QEF.
7. Section 41(h) (payroll tax credit election).

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Generally, the partnership decides how to figure income from its
operations. For example, it chooses the accounting method and
depreciation methods it will use. The partnership also makes
elections under the following sections.
1. Section 179 (election to expense certain property).
2. Section 614 (definition of property—mines, wells, and
other natural deposits). This election must be made before the
partners figure their individual depletion allowances under
section 613A(c)(7)(D).
3. Section 1033 (involuntary conversions).
4. Section 754 (manner of electing optional adjustment to
basis of partnership property).
Under section 754, a partnership may elect to adjust the
basis of partnership property when property is distributed or
when a partnership interest is transferred. If the election is made
regarding a transfer of a partnership interest (section 743(b)) and
the assets of the partnership constitute a trade or business for
purposes of section 1060(c), then the value of any goodwill
transferred must be determined in the manner provided in
Regulations section 1.1060-1. Once an election is made under
section 754, it applies both to all distributions and to all transfers
made during the tax year and in all subsequent tax years unless
the election is revoked.
This election must be made in a statement that is filed with
the partnership's timely filed return (including any extension) for
the tax year during which the distribution or transfer occurs. See
Regulations section 1.754-1(b)(1). The statement must include:
a. The name and address of the partnership, and
b. A declaration that the partnership elects under section
754 to apply the provisions of section 734(b) and section 743(b).
The partnership can get an automatic 12-month extension to
make the section 754 election, provided corrective action is
taken within 12 months of the original deadline for making the
election. For details, see Regulations section 301.9100-2.
See section 754 and the related regulations for more
information.
If there's a distribution of property consisting of an interest in
another partnership, see section 734(b).
The partnership is required to attach a statement for any
section 743(b) basis adjustments. See below for details.
To revoke a section 754 election, the partnership must file the
revocation request using Form 15254, Request for Section 754
Revocation. See the instructions for Form 15254 for more
information.
5. Section 743(e) (electing investment partnership).
6. Regulations section 1.1411-10(g) (section 1411 election
regarding controlled foreign corporations (CFCs) and qualified
electing fund (QEF)).
A domestic partnership that directly or indirectly owns stock
of a CFC (within the meaning of section 953(c)(1)(B) or section
957(a)) or a passive foreign investment company (PFIC) (within
the meaning of section 1297(a)) that the domestic partnership
treats as a QEF under section 1293 may make the election
provided in Regulations section 1.1411-10(g). The election must
be made no later than the first tax year beginning after 2013
during which the partnership:
Instructions for Form 1065 (2024)

Effect of Section 743(b) Basis Adjustment on
Partnership Items

If the basis of partnership property has been adjusted for a
transferee partner under section 743(b), the partnership must
adjust the transferee's distributive share of the items of
partnership income, deduction, gain, or loss in accordance with
Regulations sections 1.743-1(j)(3) and (4). These adjustments
(other than adjustments to depletable oil and gas property
allocable to the partner under section 613A(c)(7)(D)) must be
reported on Schedule K and the transferee partner's
Schedule K-1. Report the adjustments on an attached statement
to Schedule K, line 20c, code U. See the instructions for
Schedule K, line 20. Identify the partnership item being adjusted
and the amount of the adjustment. If the adjustments are to
partnership items from more than one trade or business, report
the adjustments separately for each activity.

Electing Out of the Centralized Partnership
Audit Regime

A partnership can elect out of the centralized partnership audit
regime for a tax year if the partnership is an eligible partnership
that year. See Question 33 under Schedule B, later.

Elections Made by Each Partner

Elections under the following sections are made by each partner
separately on the partner's tax return.
• Section 59(e) (election to deduct ratably certain qualified
expenditures such as intangible drilling costs, mining exploration
expenses, or research and experimental (R&E) expenditures).
• Section 108 (income from discharge of indebtedness).
• Section 617 (deduction and recapture of certain mining
exploration expenditures paid or incurred).
13

• Section 901 (foreign tax credit).

Partner’s Dealings With Partnership

If a partner engages in a transaction with the partnership, other
than in the capacity as a partner, the partner is treated as not
being a member of the partnership for that transaction. Special
rules apply to sales or exchanges of property between
partnerships and certain persons, as explained in Pub. 541.

adjusted basis of the partner’s partnership interest just before
the distribution. Precontribution gain is the net gain, if any, that
would have been recognized under section 704(c)(1)(B) if the
partnership had distributed to another partner all the property
that had been contributed to the partnership by the distributee
partner within 7 years of the distribution and that was held by the
partnership just before the distribution.
Appropriate basis adjustments are to be made to the adjusted
basis of the distributee partner's interest in the partnership and
the partnership's basis in the contributed property to reflect the
gain recognized by the partner.

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Contributions to the Partnership

Generally, no gain (loss) is recognized to the partnership or any
of the partners when property is contributed to the partnership in
exchange for an interest in the partnership. This rule doesn't
apply to any gain realized on a transfer of property to a
partnership that would be treated as an investment company
(within the meaning of section 351(e)) if the partnership were
incorporated. If, as a result of a transfer of property to a
partnership, there's a direct or indirect transfer of money or other
property to the transferring partner, the partner may have to
recognize gain on the exchange.
The basis to the partnership of property contributed by a
partner is the adjusted basis in the hands of the partner at the
time it was contributed, plus any gain recognized (under section
721(b)) by the partner at that time. See section 723 for more
information.

See Regulations sections 1.721(c)-1(b)(7) and 1.721(c)-3(b)
for more information on a gain deferral contribution of section
721(c) property to a section 721(c) partnership. Also see Section
721(c) Partnership, Section 721(c) Property, and Gain Deferral
Method under Definitions, earlier.

Dispositions of Contributed Property

Generally, if the partnership disposes of property contributed to
the partnership by a partner, income, gain, loss, and deductions
from that property must be allocated among the partners to take
into account the difference between the property's basis and its
FMV at the time of the contribution. However, if the adjusted
basis of the contributed property exceeds its FMV at the time of
the contribution, the built-in loss can only be taken into account
by the contributing partner. For all other partners, the basis of the
property in the hands of the partnership is treated as equal to its
FMV at the time of the contribution (see section 704(c)(1)(C)).
For property contributed to the partnership, the contributing
partner must recognize gain or loss on a distribution of the
property to another partner within 7 years of being contributed.
The gain or loss is equal to the amount that the contributing
partner should have recognized if the property had been sold for
its FMV when distributed, because of the difference between the
property's basis and its FMV at the time of contribution.
See section 704(c) for details and other rules on dispositions
of contributed property. See section 724 for the character of any
gain or loss recognized on the disposition of unrealized
receivables, inventory items, or capital loss property contributed
to the partnership by a partner.

See Regulations sections 1.721(c)-4 and 1.721(c)-5 for more
information on certain dispositions of contributed 721(c) property
to which the gain deferral method applies. Also see Section
721(c) Partnership, Section 721(c) Property, and Gain Deferral
Method under Definitions, earlier.

Recognition of Precontribution Gain
on Certain Partnership Distributions

A partner who contributes appreciated property to the
partnership must include in income any precontribution gain to
the extent the FMV of other property (other than money)
distributed to the partner by the partnership exceeds the
14

For more details and exceptions, see Pub. 541.

Unrealized Receivables and Inventory
Items

Generally, if a partner sells or exchanges a partnership interest
where unrealized receivables or inventory items are involved, the
transferor partner must notify the partnership, in writing, within 30
days of the exchange. The partnership must then file Form 8308,
Report of a Sale or Exchange of Certain Partnership Interests.
If a partnership distributes unrealized receivables or
substantially appreciated inventory items in exchange for all or
part of a partner's interest in other partnership property
(including money), treat the transaction as a sale or exchange
between the partner and the partnership. Treat the partnership
gain (loss) as ordinary business income (loss). The income
(loss) is specially allocated only to partners other than the
distributee partner.

If a partnership gives other property (including money) for all
or part of that partner's interest in the partnership's unrealized
receivables or substantially appreciated inventory items, treat the
transaction as a sale or exchange of the property.
See Rev. Rul. 84-102, 1984-2 C.B. 119, for information on the
tax consequences that result when a new partner joins a
partnership that has liabilities and unrealized receivables. Also
see Pub. 541 for more information on unrealized receivables and
inventory items.

At-Risk Limitations

In general, section 465 limits the amount of deductible losses
partners can claim from certain activities. The at-risk limitations
don't apply to the partnership, but instead apply to each partner's
share of net losses attributable to each activity. Because the
treatment of each partner's share of partnership losses depends
on the nature of the activity that generated it, the partnership
must report the items of income, loss, and deduction separately
for each activity. The at-risk limitation applies to individuals,
estates, trusts, and certain closely held C corporations. See Pub.
925, Passive Activity and At-Risk Rules, for additional
information.

Activities covered by the at-risk rules. If the partnership is
involved in one of the following activities as a trade or business
or for the production of income, the partner may be subject to the
at-risk rules.
1. Holding, producing, or distributing motion picture films or
videotapes.
2. Farming.
3. Leasing section 1245 property, including personal
property and certain other tangible property that's depreciable or
amortizable.
4. Exploring for, or exploiting, oil and gas.
5. Exploring for, or exploiting, geothermal deposits (for wells
started after September 1978).
Instructions for Form 1065 (2024)

6. Any other activity not included in items 1 through 5,
above, that's carried on as a trade or business or for the
production of income.
Aggregation of activities. Activities described in item 6 above
that constitute a trade or business are treated as one activity if:
• You actively participate in the management of the trade or
business, or
• The trade or business is carried on by a partnership or S
corporation and 65% or more of its losses for the tax year are
allocable to persons who actively participate in the management
of the trade or business.
Similar rules apply to activities described in items 1 through 5
above. For more information, see Pub. 925.
If you aggregate your activities under these rules for section
465 purposes, check the appropriate box in item K below the
name and address block on page 1 of Form 1065.

To allow each partner to correctly apply the passive activity
limitations, the partnership must report income or loss and
credits separately by activity for each of the following.
• Trade or business activities.
• Rental real estate activities.
• Rental activities other than real estate.
• Portfolio income.

Activities That Aren’t Passive Activities

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At-risk activity reporting requirements. If the partnership
items of income, loss, or deduction reported on Schedule K-1
are from more than one activity covered by the at-risk rules, the
partnership should report on an attachment to Schedule K-1
information relating to each activity as is required by Item K1.
Partner's Share of Liabilities, later. See the Instructions for Form
6198 and Pub. 925 for additional information needed to help the
partner compute the profit or loss from each at-risk activity and
the amount at risk that may be required to be separately
reported.

Passive Activity Limitations

In general, section 469 limits the amount of losses, deductions,
and credits that partners can claim from passive activities. The
passive activity limitations don't apply to the partnership.
Instead, they apply to each partner's share of any income or loss
and credit attributable to a passive activity. Because the
treatment of each partner's share of partnership income or loss
and credit depends on the nature of the activity that generated it,
the partnership must report income or loss and credits
separately for each activity.
The following instructions and the instructions for Schedules
K and K-1, later, explain the applicable passive activity limitation
rules and specify the type of information the partnership must
provide to its partners for each activity. If the partnership had
more than one activity, it must report information for each activity
on an attached statement to Schedules K and K-1.
Generally, passive activities include (a) activities that involve
the conduct of a trade or business if the partner doesn't
materially participate in the activity, and (b) all rental activities
(defined later) regardless of the partner's participation. For
exceptions, see Activities That Aren’t Passive Activities, later.
The level of each partner's participation in an activity must be
determined by the partner.

The passive activity rules provide that losses and credits from
passive activities can generally be applied only against income
and tax from passive activities. Thus, passive losses and credits
can't be applied against income from salaries, wages,
professional fees, or a business in which the partner materially
participates; against portfolio income (defined later); or against
the tax related to any of these types of income.
Special provisions apply to certain activities. First, the passive
activity limitations must be applied separately for a net loss from
passive activities held through a PTP. Second, special rules
require that net income from certain activities that would
otherwise be treated as passive income must be recharacterized
as nonpassive income for purposes of the passive activity
limitations.
Instructions for Form 1065 (2024)

The following aren't passive activities.
1. Trade or business activities in which the partner materially
participated for the tax year.
2. Any rental real estate activity in which the partner
materially participated if the partner met both of the following
conditions for the tax year.
a. More than half of the personal services the partner
performed in trades or businesses were performed in real
property trades or businesses in which the partner materially
participated.
b. The partner performed more than 750 hours of services in
real property trades or businesses in which the partner materially
participated.

Note. For a partner that is a closely held C corporation (defined
in section 465(a)(1)(B)), the above conditions are treated as met
if more than 50% of the corporation's gross receipts are from real
property trades or businesses in which the corporation materially
participated.
For purposes of this rule, each interest in rental real estate is
a separate activity, unless the partner elects to treat all interests
in rental real estate as one activity.
If the partner is married filing jointly, either the partner or the
partner’s spouse must separately meet both of the above
conditions, without taking into account services performed by
the other spouse.
A real property trade or business is any real property
development, redevelopment, construction, reconstruction,
acquisition, conversion, rental, operation, management, leasing,
or brokerage trade or business. Services the partner performed
as an employee aren't treated as performed in a real property
trade or business unless the partner owned more than 5% of the
stock (or more than 5% of the capital or profits interest) in the
employer.
3. An interest in an oil or gas well drilled or operated under a
working interest if at any time during the tax year the partner held
the working interest directly or through an entity that didn't limit
the partner's liability (for example, an interest as a general
partner). This exception applies regardless of whether the
partner materially participated for the tax year.
4. The rental of a dwelling unit used by a partner 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. An activity of trading personal property for the account of
owners of interests in the activity. For purposes of this rule,
personal property means property that is actively traded, such as
stocks, bonds, and other securities. See Temporary Regulations
section 1.469-1T(e)(6).

Trade or Business Activities

A trade or business activity is an activity (other than a rental
activity or an activity treated as incidental to an activity of holding
property for investment) that:
• Involves the conduct of a trade or business (within the
meaning of section 162),
• Is conducted in anticipation of starting a trade or business, or
15

• Involves research or experimental expenditures deductible
under section 174 (or that would be if you chose to deduct rather
than capitalize them).
If the partner doesn't materially participate in the activity, a
trade or business activity conducted through a partnership is
generally a passive activity of the partner.
Each partner must determine if the partner materially
participated in an activity. As a result, while the partnership's
ordinary business income (loss) is reported on page 1 of Form
1065, the specific income and deductions from each separate
trade or business activity must be reported on attached
statements to Form 1065. Similarly, while each partner's
distributive share of the partnership's ordinary business income
(loss) is reported in box 1 of Schedule K-1, each partner's
distributive share of the income and deductions from each trade
or business activity must be reported on attached statements to
each Schedule K-1. See Passive Activity Reporting
Requirements, later, for more information.

• The type and amount of labor required to perform the
services, and
• The value of the services in relation to the amount charged for
use of the property.
The following services aren't considered in determining
whether personal services are significant.
• Services necessary to permit the lawful use of the rental
property.
• Services performed in connection with improvements or
repairs to the rental property that extend the useful life of the
property substantially beyond the average rental period.
• Services provided in connection with the use of any improved
real property that are similar to those commonly provided in
connection with long-term rentals of high-grade commercial or
residential property. Examples include cleaning and
maintenance of common areas, routine repairs, trash collection,
elevator service, and security at entrances.

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Rental Activities

Generally, except as noted below, if the gross income from an
activity consists of amounts paid principally for the use of real or
personal tangible property held by the partnership, the activity is
a rental activity.

There are several exceptions to this general rule. Under these
exceptions, an activity involving the use of real or personal
tangible property isn't a rental activity if any of the following
apply.
• The average period of customer use (defined below) for such
property is 7 days or less.
• The average period of customer use for such property is 30
days or less and significant personal services (defined below)
are provided by or on behalf of the partnership.
• Extraordinary personal services (defined below) are provided
by or on behalf of the partnership.
• The rental of such property is treated as incidental to a
nonrental activity of the partnership under Temporary
Regulations section 1.469-1T(e)(3)(vi) and Regulations section
1.469-1(e)(3)(vi)(D).
• The partnership customarily makes the property available
during defined business hours for nonexclusive use by various
customers.
• The partnership provides property for use in a nonrental
activity of a partnership or joint venture in its capacity as an
owner of an interest in such partnership or joint venture. Whether
the partnership provides property used in an activity of another
partnership or of a joint venture in the partnership's capacity as
an owner of an interest in the partnership or joint venture is
determined on the basis of all the facts and circumstances.
In addition, a guaranteed payment described in section
707(c) is never income from a rental activity.
Average period of customer use. Figure the average period
of customer use for a class of property by dividing the total
number of days in all rental periods by the number of rentals
during the tax year. If the activity involves renting more than one
class of property, multiply the average period of customer use of
each class by the ratio of the gross rental income from that class
to the activity's total gross rental income. The activity's average
period of customer use equals the sum of these class-by-class
average periods weighted by gross income. See Regulations
section 1.469-1(e)(3)(iii).
Significant personal services. Personal services include only
services performed by individuals. To determine if personal
services are significant personal services, consider all the
relevant facts and circumstances. Relevant facts and
circumstances include:
• How often the services are provided,
16

Extraordinary personal services. Services provided in
connection with making rental property available for customer
use are extraordinary personal services only if the services are
performed by individuals and the customers' use of the rental
property is incidental to their receipt of the services.
For example, a patient's use of a hospital room is generally
incidental to the care received from the hospital's medical staff.
Similarly, a student's use of a dormitory room in a boarding
school is incidental to the personal services provided by the
school's teaching staff.

Rental activity incidental to a nonrental activity. An activity
isn't a rental activity if the rental of the property is incidental to a
nonrental activity, such as the activity of holding property for
investment, a trade or business activity, or the activity of dealing
in property.
Rental of property is incidental to an activity of holding
property for investment if both of the following apply.
• The main purpose for holding the property is to realize a gain
from the appreciation of the property.
• The gross rental income from such property for the tax year is
less than 2% of the smaller of the property's unadjusted basis or
its FMV.
Rental of property is incidental to a trade or business activity
if all of the following apply.
• The partnership owns an interest in the trade or business at all
times during the year.
• The rental property was mainly used in the trade or business
activity during the tax year or during at least 2 of the 5 preceding
tax years.
• The gross rental income from the property for the tax year is
less than 2% of the smaller of the property's unadjusted basis or
its FMV.
The sale or exchange of property that is also rented during
the tax year (in which the gain or loss is recognized) is treated as
incidental to the activity of dealing in property if, at the time of the
sale or exchange, the property was held primarily for sale to
customers in the ordinary course of the partnership's trade or
business.
See Temporary Regulations section 1.469-1T(e)(3) and
Regulations section 1.469-1(e)(3) for more information on the
definition of rental activities for purposes of the passive activity
limitations.
Reporting of rental activities. In reporting the partnership's
income or losses and credits from rental activities, the
partnership must separately report rental real estate activities
and rental activities other than rental real estate activities.
Partners who actively participate in a rental real estate activity
may be able to deduct part or all of their rental real estate losses
(and the deduction equivalent of rental real estate credits)

Instructions for Form 1065 (2024)

against income (or tax) from nonpassive activities. The
combined amount of rental real estate losses and the deduction
equivalent of rental real estate credits from all sources (including
rental real estate activities not held through the partnership) that
may be claimed is limited to $25,000. This $25,000 amount is
generally reduced for high-income partners.
Report rental real estate activity income (loss) on Form 8825
and Schedule K, line 2, and in box 2 of Schedule K-1, rather than
on page 1 of Form 1065. Report credits related to rental real
estate activities on Schedule K, lines 15c and 15d (box 15,
codes E and F, of Schedule K-1), and low-income housing
credits on Schedule K, lines 15a and 15b (box 15, codes C and
D, of Schedule K-1).
See Line 3. Other Net Rental Income (Loss), later, for
reporting other net rental income (loss) other than rental real
estate.

each owner in the borrowing entity has the same proportional
ownership interest in the lending entity.
The self-charged interest rules don't apply to a partner's
interest in a partnership if the partnership makes an election
under Regulations section 1.469-7(g) to avoid the application of
these rules. To make the election, the partnership must attach to
its original or amended partnership return a statement that
includes the name, address, and EIN of the partnership and a
declaration that the election is being made under Regulations
section 1.469-7(g). The election will apply to the tax year in
which it was made and all subsequent tax years. Once made,
the election may only be revoked with the consent of the IRS.

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Portfolio Income

Generally, portfolio income includes all gross income, other than
income derived in the ordinary course of a trade or business,
that is attributable to interest; dividends; royalties; income from a
real estate investment trust (REIT), a regulated investment
company (RIC), a REMIC, a common trust fund, a CFC, a QEF,
or a cooperative; income from the disposition of property that
produces income of a type defined as portfolio income; and
income from the disposition of property held for investment. See
Self-Charged Interest, later, for an exception.
Solely for purposes of the preceding paragraph, gross
income derived in the ordinary course of a trade or business
includes (and portfolio income, therefore, doesn't include) the
following types of income.
• Interest income on loans and investments made in the
ordinary course of a trade or business of lending money.
• Interest on accounts receivable arising from the performance
of services or the sale of property in the ordinary course of a
trade or business of performing such services or selling such
property, but only if credit is customarily offered to customers of
the business.
• Income from investments made in the ordinary course of a
trade or business of furnishing insurance or annuity contracts or
reinsuring risks underwritten by insurance companies.
• Income or gain derived in the ordinary course of an activity of
trading or dealing in any property if such activity constitutes a
trade or business (unless the dealer held the property for
investment at any time before such income or gain is
recognized).
• Royalties derived by the taxpayer in the ordinary course of a
trade or business of licensing intangible property.
• Amounts included in the gross income of a patron of a
cooperative by reason of any payment or allocation to the patron
based on patronage as a result of a trade or business of the
patron.
• Other income identified by the IRS as income derived by the
taxpayer in the ordinary course of a trade or business.
See Temporary Regulations section 1.469-2T(c)(3) for more
information on portfolio income.
Report portfolio income and related deductions on
Schedule K rather than on page 1 of Form 1065.

Self-Charged Interest
Certain self-charged interest income and deductions may be
treated as passive activity gross income and passive activity
deductions if the loan proceeds are used in a passive activity.
Generally, self-charged interest income and deductions result
from loans between the partnership and its partners and also
include loans between the partnership and another partnership if
Instructions for Form 1065 (2024)

For more details on the self-charged interest rules, see
Regulations section 1.469-7.

Grouping Activities

Generally, one or more trade or business or rental activities may
be treated as a single activity if the activities make up an
appropriate economic unit for measurement of gain or loss under
the passive activity rules. Whether activities make up an
appropriate economic unit depends on all the relevant facts and
circumstances. The factors given the greatest weight in
determining whether activities make up an appropriate economic
unit are:
• Similarities and differences in types of trades or businesses,
• The extent of common control,
• The extent of common ownership,
• Geographical location, and
• Reliance between or among the activities.
Example. The partnership has a significant ownership
interest in a bakery and a movie theater in Baltimore and a
bakery and a movie theater in Philadelphia. Depending on the
relevant facts and circumstances, there may be more than one
reasonable method for grouping the partnership's activities. For
instance, the following groupings may or may not be permissible.
• A single activity.
• A movie theater activity and a bakery activity.
• A Baltimore activity and a Philadelphia activity.
• Four separate activities.
Once the partnership chooses a grouping under these rules,
it must continue using that grouping in later tax years unless a
material change in the facts and circumstances makes it clearly
inappropriate.
The IRS may regroup the partnership's activities if the
partnership's grouping fails to reflect one or more appropriate
economic units and one of the primary purposes of the grouping
is to avoid the passive activity limitations.
Limitation on grouping certain activities. The following
activities may not be grouped together.
1. A rental activity with a trade or business activity unless
the activities being grouped together make up an appropriate
economic unit and:
a. The rental activity is insubstantial relative to the trade or
business activity or vice versa, or
b. Each owner of the trade or business activity has the same
proportionate ownership interest in the rental activity. If so, the
portion of the rental activity involving the rental of property to be
used in the trade or business activity can be grouped with the
trade or business activity.
2. An activity involving the rental of real property with an
activity involving the rental of personal property (except personal
property provided in connection with the real property or vice
versa).
3. Any activity with another activity in a different type of
business and in which the partnership holds an interest as a

limited partner or as a limited entrepreneur (as defined in section
461(k)(4)) if that other activity engages in holding, producing, or
distributing motion picture films or videotapes; farming; leasing
section 1245 property; or exploring for or exploiting oil and gas
resources or geothermal deposits.
Activities conducted through other partnerships. Once a
partnership determines its activities under these rules, the
partnership as a partner can use these rules to group those
activities with:
• Each other,
• Activities conducted directly by the partnership, or
• Activities conducted through other partnerships.
A partner can't treat as separate activities those activities
grouped together by a partnership.
If you group your activities under these rules for section 469
purposes, check the appropriate box in item K below the name
and address block on page 1 of Form 1065.

• The partnership recognizes gain from the sale, exchange, or
other disposition of the rental property during the tax year.
• The use of the item of property in the rental activity started
less than 12 months before the date of disposition. The use of an
item of rental property begins on the first day that (a) the
partnership owns an interest in the property, (b) substantially all
of the property is either rented or held out for rent and ready to
be rented, and (c) no significant value-enhancing services
remain to be performed.
• The partner materially or significantly participated for any tax
year in an activity that involved performing services to enhance
the value of the property (or any other item of property if the
basis of the property disposed of is determined in whole or in
part by reference to the basis of that item of property).
Because the partnership can't determine a partner's level of
participation, the partnership must identify net income from
property described earlier under Rental Activities (without regard
to the partner's level of participation) as income that may be
subject to recharacterization.

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Recharacterization of Passive Income

Under Temporary Regulations section 1.469-2T(f) and
Regulations section 1.469-2(f), net passive income from certain
passive activities must be treated as nonpassive income. Net
passive income is the excess of an activity's passive activity
gross income over its passive activity deductions (current year
deductions and prior year unallowed losses).

Any net passive income recharacterized as nonpassive
income is treated as investment income for purposes of figuring
investment interest expense limitations if it's from (a) an activity
of renting substantially nondepreciable property from an
equity-financed lending activity, or (b) an activity related to an
interest in a pass-through entity that licenses intangible property.

The amount of income from the activities in the first three
paragraphs, below, that any partner will be required to
recharacterize as nonpassive income may be limited under
Temporary Regulations section 1.469-2T(f)(8). Because the
partnership won't have information regarding all of a partner's
activities, it must identify all partnership activities meeting the
definitions under Certain nondepreciable rental property
activities and Passive equity-financed lending activities below as
activities that may be subject to recharacterization.
Income from the following six sources is subject to
recharacterization.
Significant participation passive activities. A significant
participation passive activity is any trade or business activity in
which the partner participated for more than 100 hours during
the tax year but didn't materially participate. Because each
partner must determine the partner's level of participation, the
partnership won't be able to identify significant participation
passive activities.

Certain nondepreciable rental property activities. Net
passive income from a rental activity is nonpassive income if less
than 30% of the unadjusted basis of the property used or held for
use by customers in the activity is subject to depreciation under
section 167.
Passive equity-financed lending activities. If the partnership
has net income from a passive equity-financed lending activity,
the smaller of the net passive income or the equity-financed
interest income from the activity is nonpassive income.
Rental of property incidental to a development activity. Net
rental activity income is the excess of passive activity gross
income from renting or disposing of property over passive
activity deductions (current year deductions and prior year
unallowed losses) that are reasonably allocable to the rented
property. Net rental activity income is nonpassive income for a
partner if all of the following apply.
18

Rental of property to a nonpassive activity. If a taxpayer
rents property to a trade or business activity in which the
taxpayer materially participates, the taxpayer's net rental activity
income from the property is nonpassive income.

Acquisition of an interest in a pass-through entity that licenses intangible property. Generally, net royalty income
from intangible property is nonpassive income if the taxpayer
acquired an interest in the pass-through entity after the
pass-through entity created the intangible property or performed
substantial services or incurred substantial costs in developing
or marketing the intangible property. Net royalty income is the
excess of passive activity gross income from licensing or
transferring any right in intangible property over passive activity
deductions (current year deductions and prior year unallowed
losses) that are reasonably allocable to the intangible property.
See Temporary Regulations section 1.469-2T(f)(7)(iii) for
exceptions to this rule.

Passive Activity Reporting Requirements

To allow partners to correctly apply the passive activity loss and
credit limitation rules, the partnership must do the following.
1. If the partnership carries on more than one activity,
provide an attached statement for each activity conducted
through the partnership that identifies the type of activity
conducted (trade or business, rental real estate, or rental activity
other than rental real estate). See Grouping Activities, earlier.
2. On the attached statement for each activity, provide a
statement, using the same box numbers as shown on
Schedule K-1, detailing the net income (loss), credits, and all
items required to be separately stated under section 702(a) from
each trade or business activity, from each rental real estate
activity, from each rental activity other than a rental real estate
activity, and from investments. If the partnership grouped
separate activities, the attachments must identify each group.
The attached group activity description must be sufficient for a
partner to determine if its other activities qualify to be grouped
with any groups provided by the partnership.
3. Identify the net income (loss) and credits from each oil or
gas well drilled or operated under a working interest that any
partner (other than a partner whose only interest in the
partnership during the year is as a limited partner) holds through
the partnership. Further, if any partner had an interest as a
general partner in the partnership during less than the entire
year, the partnership must identify both the disqualified
deductions from each well that the partner must treat as passive
activity deductions, and the ratable portion of the gross income
from each well that the partner must treat as passive activity
gross income.
Instructions for Form 1065 (2024)

4. Identify the net income (loss) and the partner's share of
partnership interest expense from each activity of renting a
dwelling unit that any partner uses for personal purposes during
the year for more than the greater of 14 days or 10% of the
number of days that the residence is rented at fair rental value.
5. Identify the net income (loss) and the partner's share of
partnership interest expense from each activity of trading
personal property conducted through the partnership.
6. For any gain (loss) from the disposition of an interest in an
activity or of an interest in property used in an activity (including
dispositions before 1987 from which gain is being recognized
after 1986):
a. Identify the activity in which the property was used at the
time of disposition;
b. If the property was used in more than one activity during
the 12 months preceding the disposition, identify the activities in
which the property was used and the adjusted basis allocated to
each activity; and
c. For gains only, if the property was substantially
appreciated at the time of the disposition and the applicable
holding period specified in Regulations section 1.469-2(c)(2)(iii)
(A) wasn't satisfied, identify the amount of the nonpassive gain
and indicate whether the gain is investment income under
Regulations section 1.469-2(c)(2)(iii)(F).
7. Specify the amount of gross portfolio income, the interest
expense properly allocable to portfolio income, and expenses
other than interest expense that are clearly and directly allocable
to portfolio income.
8. Identify separately any of the following types of payments
to partners.
a. Payments to a partner for services other than in the
partner's capacity as a partner under section 707(a).
b. Guaranteed payments to a partner for services under
section 707(c).
c. Guaranteed payments for use of capital.
d. If section 736(a)(2) payments are made for unrealized
receivables or for goodwill, the amount of the payments and the
activities to which the payments are attributable.
e. If section 736(b) payments are made, the amount of the
payments and the activities to which the payments are
attributable.
9. Identify the ratable portion of any section 481 adjustment
(whether a net positive or a net negative adjustment) allocable to
each partnership activity.
10. Identify the amount of gross income from each oil or gas
property of the partnership.
11. Identify any gross income from sources specifically
excluded from passive activity gross income, including:
a. Income from intangible property if the partner is an
individual whose personal efforts significantly contributed to the
creation of the property;
b. Income from state, local, or foreign income tax refunds;
and
c. Income from a covenant not to compete if the partner is
an individual who contributed the covenant to the partnership.
12. Identify any deductions that aren't passive activity
deductions.
13. If the partnership makes a full or partial disposition of its
interest in another entity, identify the gain (loss) allocable to each
activity conducted through the entity, and the gain allocable to a
passive activity that would have been recharacterized as
nonpassive gain had the partnership disposed of its interest in
property used in the activity (because the property was
substantially appreciated at the time of the disposition, and the

gain represented more than 10% of the partner's total gain from
the disposition).
14. Identify the following items from activities that may be
subject to the recharacterization rules. See Recharacterization of
Passive Income, earlier.
a. Net income from an activity of renting substantially
nondepreciable property.
b. The smaller of equity-financed interest income or net
passive income from an equity-financed lending activity.
c. Net rental activity income from property developed (by the
partner or the partnership), rented, and sold within 12 months
after the rental of the property commenced.
d. Net rental activity income from the rental of property by
the partnership to a trade or business activity in which the
partner had an interest (either directly or indirectly).
e. Net royalty income from intangible property if the partner
acquired the partner's interest in the partnership after the
partnership created the intangible property or performed
substantial services, or incurred substantial costs in developing
or marketing the intangible property.
15. Identify separately the credits from each activity
conducted by or through the partnership.
16. Identify the partner's distributive share of the partnership's
self-charged interest income or expense (see Self-Charged
Interest, earlier).
a. Loans between a partner and the partnership. Identify the
lending or borrowing partner's share of the self-charged interest
income or expense. If the partner made the loan to the
partnership, also identify the activity in which the loan proceeds
were used. If the proceeds were used in more than one activity,
allocate the interest to each activity based on the amount of the
proceeds used in each activity.
b. Loans between the partnership and another partnership
or S corporation. If the partnership's partners have the same
proportional ownership interest in the partnership and the other
partnership or S corporation, identify each partner's share of the
interest income or expense from the loan. If the partnership was
the borrower, also identify the activity in which the loan proceeds
were used. If the loan proceeds were used in more than one
activity, allocate the interest to each activity based on the
amount of the proceeds used in each activity.

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Instructions for Form 1065 (2024)

Net Investment Income Tax Reporting
Requirements

The information described in this section should be given directly
to the partner and shouldn't be reported by the partnership to the
IRS.

To allow partners to correctly figure the net investment
income tax (NIIT) where a partner disposes of an interest in the
partnership during the tax year, the partnership may be required
to provide the partner with certain information. The NIIT is a tax
imposed on an individual’s, trust’s, or estate’s net investment
income. Net investment income includes the net gains or losses
from the sale of an interest in the partnership. A partner who is
actively involved in one or more of the partnership’s or lower-tier
pass-through entities’ trades or businesses (other than trading in
financial instruments or commodities) can reduce the amount of
the gain or loss from the sale of the partnership or lower-tier
pass-through entity interest included in its net investment
income. However, to figure its net investment income, the active
partner needs certain information from the partnership.
Generally, the partnership must provide certain information to
the partner if the partnership knows, or has reason to know, the
following.
• The partner disposed of an interest in the partnership.
19

• The partner materially participates (within the meaning of the
passive activity loss rules (section 469)) in one or more of the
trades or businesses (within the meaning of section 162) of the
partnership or a lower-tier pass-through entity (other than trading
in financial instruments or commodities).
• The partner doesn't qualify for the optional simplified reporting
method for figuring its net investment income associated with the
disposition of the interest. For more information, see the
instructions for Form 8960, line 5c.

following order: city, province or state, and the foreign country.
Follow the foreign country's practice in placing the postal code in
the address. Don't abbreviate the country name.
If the partnership has changed its address since it last filed a
return (including a change to an “in care of” address), check box
G(4) for “Address change.”
If the partnership changes its mailing address or the

TIP responsible party after filing its return, it can notify the

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Information to be provided to partner. Generally, the
partnership must provide the partner with its distributive share of
the net gain and loss from the deemed sale for FMV of the
partnership’s property, other than property that relates to the
trades or businesses in which the partner materially participates,
as determined under the passive activity loss rules applicable to
the transfer of an interest in a pass-through entity. For more
information, see the instructions for Form 8960, line 5c.
If a partner who qualifies for the optional simplified reporting
method prefers to determine net gain or loss under the general
calculation, the partnership may, but isn't obligated to, provide
the information to the partner at that partner’s request.

Specific Instructions

These instructions follow the line numbers on the first page of
Form 1065. The accompanying schedules are discussed
separately. Specific instructions for most of the lines are
provided. Lines that aren't discussed are self-explanatory.
Fill in all applicable lines and schedules.

Enter any items specially allocated to the partners in the
appropriate box of the applicable partner's Schedule K-1. Enter
the total amount on the appropriate line of Schedule K. Don't
enter separately stated amounts on the numbered lines on Form
1065; Form 1125-A, page 1; or Schedule D (Form 1065).
File all six pages of Form 1065. However, if the answer to
Schedule B, question 4, is “Yes,” Schedules L, M-1, and M-2 on
page 6 are optional. Also attach a Schedule K-1 to Form 1065
for each partner.
File only one Form 1065 for each partnership. Mark
“Duplicate Copy” on any copy you give to a partner.
If a syndicate, pool, joint venture, or similar group files Form
1065, it must attach a copy of the agreement and all
amendments to the return, unless a copy has previously been
filed.
A foreign partnership required to file a return must
TIP generally report all of its foreign and U.S. partnership
items. For rules regarding whether a foreign partnership
must file Form 1065, see Who Must File, earlier.

Name and Address

IRS by filing Form 8822-B, Change of Address or
Responsible Party—Business.

Partnerships With Adjustments in the Current
Year That Didn’t Result in an IU

If a partnership has an adjustment from a BBA audit which
doesn't result in an IU, the partnership shouldn't take the
adjustment into account until the adjustment year (see
Definitions, earlier). With its Form 1065 for the adjustment year,
the partnership should provide a statement describing the
adjustments, including the line numbers to which the
adjustments relate, and incorporate those adjustments into its
adjustment year return. If there's a reallocation adjustment being
reported on the adjustment year return, ensure the statement
identifies the partner receiving the reallocation adjustment. If
there's an adjustment to a separately stated item or to a credit,
the partnership must adjust that item or that credit in the
adjustment year. See Examples 1 and 2 in Regulations section
301.6225-3.

Items A and C

Enter the applicable activity name and the code number from the
list, Codes for Principal Business Activity and Principal Product
or Service, near the end of these instructions.

For example, if, as its principal business activity, the
partnership (a) purchases raw materials, (b) subcontracts out for
labor to make a finished product from the raw materials, and (c)
retains title to the goods, the partnership is considered to be a
manufacturer and must enter “Manufacturer” in item A and enter
in item C one of the codes (311110 through 339900) listed under
“Manufacturing” on the list, Codes for Principal Business Activity
and Principal Product or Service, near the end of these
instructions. For nonstore retailers, select the Principal Business
Activity (PBA) code by the primary product that your
establishment sells. For example, establishments primarily
selling prescription and non-prescription drugs, select PBA code
456110 Pharmacies & Drug Retailers.

Item D. Employer Identification Number (EIN)

Show the correct EIN in item D. If the partnership doesn't have
an EIN, it must apply for one in one of the following ways.
• Online—Go to IRS.gov/EIN. The EIN is issued immediately
once the application information is validated.
• By mailing or faxing Form SS-4, Application for Employer
Identification Number.

Enter the legal name of the partnership, address, and EIN on the
appropriate lines. If the partnership has changed its name, check
box G(3). Include the suite, room, or other unit number after the
street address. If the post office doesn't deliver mail to the street
address and the partnership has a P.O. box, show the box
number instead.

An LLC must determine which type of federal tax entity it will
be (partnership, corporation, or disregarded entity (DE)) before
applying for an EIN (see Form 8832 for details). If the partnership
hasn't received its EIN by the time the return is due, enter
“Applied for” and the application date in the space for the EIN.
For more details, see the Instructions for Form SS-4.

If the partnership receives its mail in care of a third party
(such as an accountant or an attorney), enter “C/O” on the street
address line, followed by the third party’s name and street
address or P.O. box.

Note. The online application process isn't yet available for
partnerships with addresses in foreign countries. If you're
located outside the United States, call 267-941-1099.

If the partnership's address is outside the United States or
U.S. territories, enter the information on the line for “City or town,
state or province, country, and ZIP or foreign postal code” in the
20

Item F. Total Assets

You aren't required to complete item F if the answer to
Schedule B, question 4, is “Yes.”
Instructions for Form 1065 (2024)

If you're required to complete this item, enter the partnership's
total assets at the end of the tax year, as determined by the
accounting method regularly used in keeping the partnership's
books and records. If there were no assets at the end of the tax
year, enter zero.

Item J. Schedule C and Schedule M-3

A partnership must file Schedule M-3, Net Income (Loss)
Reconciliation for Certain Partnerships, instead of Schedule M-1,
if any of the following apply.
• The amount of total assets at the end of the tax year reported
on Schedule L, line 14, column (d), is $10 million or more.
• The amount of adjusted total assets for the tax year is $10
million or more. Adjusted total assets is defined in the
Instructions for Schedule M-3.
• The amount of total receipts (as defined later in the
instructions for Schedule B, question 4) for the tax year is $35
million or more.
• An entity that is a reportable entity partner of the partnership
owns or is deemed to own, directly or indirectly, an interest of
50% or more in the partnership's capital, profit, or loss on any
day during the tax year of the partnership. Reportable entity
partner is defined in the Instructions for Schedule M-3.

through 7. If a cost offset method under section 451(b) or (c) is
used, the resulting gross income is reported on line 1a.
Special rules apply to certain income, as discussed below.
For example, don't include gross receipts from farming on
line 1a. Instead, show the net profit (loss) from farming on line 5.
Also, don't include on line 1a rental activity income or portfolio
income.

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A partnership filing Form 1065 that isn't required to file
Schedule M-3 may voluntarily file Schedule M-3 instead of
Schedule M-1.

Any partnership that files Schedule M-3 must also complete
and file Schedule C (Form 1065), Additional Information for
Schedule M-3 Filers. See Eased requirements next.
Eased requirements. Partnerships that (a) are required to
file Schedule M-3 and have less than $50 million in total assets
at tax-year-end, or (b) aren't required to file Schedule M-3 and
voluntarily file Schedule M-3, must either (i) complete
Schedule M-3 entirely, or (ii) complete Schedule M-3 through
Part I and complete Schedule M-1 instead of completing Parts II
and III of Schedule M-3.
In addition, partnerships that meet the requirements of (a)
and (b) above aren't required to file Schedule C (Form 1065) or
Form 8916-A.
See the instructions for Schedule C and Schedule M-3 for
more information.

Income
Report only trade or business activity income on lines 1a
through 8. Don't report rental activity income or portfolio
CAUTION income on these lines. See Passive Activity Limitations,
earlier, for definitions of rental activity income and portfolio
income. Rental activity income and portfolio income are reported
on Schedules K and K-1. Rental real estate activities are also
reported on Form 8825.

Tax-exempt income. Don’t include any tax-exempt income on
lines 1a through 8. A partnership that receives any tax-exempt
income other than interest, or holds any property or engages in
any activity that produces tax-exempt income, reports this
income on Schedule K, line 18b, and in box 18 of Schedule K-1
using code B.
Report tax-exempt interest income, including exempt-interest
dividends received as a shareholder in a mutual fund or other
RIC, on Schedule K, line 18a, and in box 18 of Schedule K-1
using code A.
See Deductions, later, for information on how to report
expenses related to tax-exempt income.

Line 1a. Gross Receipts or Sales

Enter on line 1a gross receipts or sales from all trade or business
operations, except for amounts that must be reported on lines 4
Instructions for Form 1065 (2024)

In general, advance payments are reported in the year of
receipt. For exceptions to this general rule for partnerships that
use the accrual method of accounting, see the following.
• To report income from long-term contracts, see section 460.
• For permissible methods that allow a limited deferral of
advance payments beyond the current tax year, see section
451(c) and Regulations section 1.451-8.
• For information on adopting or changing to a permissible
method for reporting advance payment for goods and services
by an accrual method partnership, see the Instructions for Form
3115.

Installment sales. Generally, the installment method can't be
used for dealer dispositions of property. A dealer disposition is
any disposition of:
• Personal property by a person who regularly sells or otherwise
disposes of personal property of the same type on the
installment plan, or
• Real property held for sale to customers in the ordinary
course of the taxpayer's trade or business.
Exception. These restrictions on using the installment
method don't apply to dispositions of property used or produced
in a farming business or sales of timeshares and residential lots.
However, if the partnership elects to report dealer dispositions of
timeshares and residential lots on the installment method, each
partner's tax liability must be increased by the partner's
distributive share of the interest payable under section 453(l)(3).
Include on line 1a the gross profit on collections from
installment sales for any of the following.
• Dealer dispositions of property before March 1, 1986.
• Dispositions of property used or produced in the trade or
business of farming.
• Certain dispositions of timeshares and residential lots
reported under the installment method.
Attach a statement showing the following information for the
current year and the 3 preceding years.
• Gross sales.
• Cost of goods sold.
• Gross profits.
• Percentage of gross profits to gross sales.
• Amount collected.
• Gross profit on the amount collected.
Nonaccrual-experience method. Partnerships that qualify to
use the nonaccrual-experience method (described earlier)
should attach a statement showing total gross receipts, the
amount not accrued as a result of the application of section
448(d)(5), and the net amount accrued. Include the net amount
on line 1a.

Line 2. Cost of Goods Sold

If the partnership has a cost of goods sold deduction, complete
and attach Form 1125-A. Enter on Form 1065, page 1, line 2, the
amount from Form 1125-A, line 8. See Form 1125-A and its
instructions.

Line 4. Ordinary Income (Loss) From Other
Partnerships, Estates, and Trusts

Enter the ordinary income (loss) shown on Schedule K-1 (Form
1065) or Schedule K-1 (Form 1041), or other ordinary income
(loss) from a foreign partnership, estate, or trust. Show the
21

partnership's, estate's, or trust's name, address, and EIN on a
separate statement attached to this return. If the amount entered
is from more than one source, identify the amount from each
source.
Don't include portfolio income or rental activity income (loss)
from other partnerships, estates, or trusts on this line. Instead,
report these amounts on Schedules K and K-1, or on Form 8825,
line 20a, if the amount is from a rental real estate activity.

Line 7. Other Income (Loss)

Enter any other trade or business income (loss) not included on
lines 1a through 6. List the type and amount of income on an
attached statement. Examples of other income include the
following.
• Interest income derived in the ordinary course of the
partnership's trade or business, such as interest charged on
receivable balances.
• Recoveries of bad debts deducted in prior years under the
specific charge-off method.
• Taxable income from insurance proceeds.
• Any amount included in income from Form 6478, Biofuel
Producer Credit, line 2, if applicable.
• Any amount included in income from Form 8864, line 9, if
applicable.
• The recapture amount under section 280F if the business use
of listed property drops to 50% or less. To figure the recapture
amount, complete Form 4797, Part IV.
• All section 481 income adjustments resulting from changes in
accounting methods. Show the computation of the section 481
adjustments on an attached statement.
• Part or all of the proceeds received from certain
employer-owned life insurance contracts issued after August 17,
2006. Partnerships that own one or more employer-owned life
insurance contracts issued after that date must file Form 8925,
Report of Employer-Owned Life Insurance Contracts. See
section 101(j) for details.

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Ordinary income (loss) from another partnership that is a PTP
isn't reported on this line. Instead, report the amount separately
on Schedule K, line 11, and in box 11 of Schedule K-1 using
code ZZ.
Treat shares of other items separately reported on
Schedule K-1 issued by the other entity as if the items were
realized or incurred by this partnership.

If there's a loss from another partnership, the amount of the
loss that may be claimed is subject to the basis limitations as
appropriate.

If the tax year of your partnership doesn't coincide with the tax
year of the other partnership, estate, or trust, include the ordinary
income (loss) from the other entity in the tax year in which the
other entity's tax year ends.

Line 5. Net Farm Profit (Loss)

Enter the partnership's net farm profit (loss) from Schedule F
(Form 1040). Attach Schedule F (Form 1040) to Form 1065.
Don't include on this line any farm profit (loss) from other
partnerships. Report those amounts on line 4. In figuring the
partnership's net farm profit (loss), don't include any section 179
expense deduction; this amount must be separately stated.
Also report the partnership's fishing income on this line.

For a special rule concerning the method of accounting for a
farming partnership with a corporate partner and for other tax
information on farms, see Pub. 225, Farmer's Tax Guide.
Because the partner, and not the partnership, makes the
TIP election to deduct the expenses of raising any plant with
a preproductive period of more than 2 years, farm
partnerships that aren't required to use an accrual method
shouldn't capitalize such expenses. Instead, state them
separately on an attached statement to Schedule K, line 13d,
and in box 13 of Schedule K-1 using code P. See section
263A(d) for more information.

Line 6. Net Gain (Loss) From Form 4797
Include only ordinary gains or losses from the sale,
exchange, or involuntary conversion of assets used in a
CAUTION trade or business activity. Ordinary gains or losses from
the sale, exchange, or involuntary conversion of rental activity
assets are reported separately on Form 8825, line 19, or
Schedule K, line 3c, and in box 3 of Schedule K-1, generally as a
part of the net income (loss) from the rental activity.

A partnership that is a partner in another partnership must
include on Form 4797 its share of ordinary gains (losses) from
sales, exchanges, or involuntary conversions (other than
casualties or thefts) of the other partnership's trade or business
assets.
Partnerships shouldn't use Form 4797 to report the sale or
other disposition of property if a section 179 expense deduction
was previously passed through to any of its partners for that
property. Instead, report it in box 20 of Schedule K-1 using code
L. See Dispositions of property with section 179 deductions
(code L), later, for details.
22

Don't include items requiring separate computations that
must be reported on Schedules K and K-1. See the instructions
for Schedules K and K-1, later.
Don't report portfolio or rental activity income (loss) on this
line.

Deductions

Report only trade or business activity deductions on
lines 9 through 21.

CAUTION

Don't report the following expenses on lines 9 through 21.

• Rental activity expenses. Report these expenses on Form

8825 or Schedule K, line 3b.
• Deductions allocable to portfolio income. Report these
deductions on Schedule K, line 13e, and in box 13 of
Schedule K-1 using code I or L.
• Nondeductible expenses (for example, expenses connected
with the production of tax-exempt income). Report
nondeductible expenses on Schedule K, line 18c, and in box 18
of Schedule K-1 using code C.
• Qualified expenditures to which an election under section
59(e) may apply. The instructions for Schedule K, line 13d, and
for box 13, code J, of Schedule K-1 explain how to report these
amounts.
• Items the partnership must state separately that require
separate computations by the partners. Examples include
expenses incurred for the production of income instead of in a
trade or business, charitable contributions, foreign taxes paid or
accrued, intangible drilling and development costs, soil and
water conservation expenditures, amortizable basis of
reforestation expenditures, and exploration expenditures. The
distributive shares of these expenses are reported separately to
each partner on Schedule K-1.

Limitations on Deductions
Section 263A uniform capitalization rules. The uniform
capitalization rules of section 263A generally require
partnerships to capitalize certain costs incurred in connection
with the following.
Instructions for Form 1065 (2024)

• The production of real property and tangible personal property
held in inventory or held for sale in the ordinary course of
business.
• Real property or personal property (tangible and intangible)
acquired for resale.
• The production of real property and tangible personal property
by a partnership for use in its trade or business or in an activity
engaged in for profit.
Tangible personal property produced by a partnership
includes a film, sound recording, videotape, book, or similar
property.
The costs required to be capitalized under section 263A
aren't deductible until the property to which the costs relate is
sold, used, or otherwise disposed of by the partnership.
Exceptions. For tax years beginning after 2017, a small
business taxpayer, defined earlier, can adopt or change its
method of accounting to not capitalize costs under section 263A.
See section 263A(i) and Accounting Methods, earlier.
Section 263A doesn't apply to the following.
• Timber.
• Most property produced under a long-term contract.
• Certain property produced in a farming business. See the
note at the end of the instructions for line 5, earlier.
• Geological and geophysical costs amortized under section
167(h).
• Certain plants bearing fruits and nuts under section 168(k)(5).

Business startup and organizational costs. Generally, a
partnership can elect to deduct a limited amount of startup or
organizational costs paid or incurred. Any costs not deducted
must be amortized as explained below. See sections 195(b) and
709(b).
Time for making an election. The partnership generally
elects to deduct startup or organizational costs by claiming the
deduction on its return filed by the due date (including
extensions) for the tax year in which the active trade or business
begins.
If the partnership timely filed its return for the year without
making an election, it can still make an election by filing an
amended return within 6 months of the due date of the return
(excluding extensions). Clearly indicate the election on the
amended return and enter “Filed pursuant to section
301.9100-2” at the top of the amended return. File the amended
return at the same address the partnership filed its original
return. The election applies when figuring income for the current
tax year and all subsequent years.
The partnership can choose to forgo the above elections by
clearly electing to capitalize its startup or organizational costs on
its return filed by the due date (including extensions) for the tax
year in which the active trade or business begins.
The election to either amortize or capitalize startup or
organizational costs is irrevocable and applies to all startup and
organizational costs that are related to the trade or business.
Amortization. Any costs not deducted under the above rules
must be amortized ratably over a 180-month period, beginning
with the month the partnership begins business. See the
Instructions for Form 4562 for details.
Report the deductible amount of these costs and any
amortization on line 21. For amortization that began during the
tax year, complete and attach Form 4562, Depreciation and
Amortization.

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The partnership must report the following costs separately to
the partners for purposes of determinations under section 59(e).
• R&E costs under section 174.
• Intangible drilling costs for oil, gas, and geothermal property.
• Mining exploration and development costs.
Indirect costs. Partnerships subject to the uniform
capitalization rules are required to capitalize not only direct costs
but an allocable part of most indirect costs (including taxes) that
benefit the assets produced or acquired for resale, or are
incurred because of the performance of production or resale
activities.
For inventory, indirect costs that must be capitalized include
the following.
• Administration expenses.
• Taxes.
• Depreciation.
• Insurance.
• Compensation paid to officers attributable to services.
• Rework labor.
• Contributions to pension, stock bonus, and certain
profit-sharing, annuity, or deferred compensation plans.
Regulations section 1.263A-1(e)(3) specifies other indirect
costs that relate to production or resale activities that must be
capitalized and those that may be currently deductible.
Interest expense paid or incurred during the production
period of designated property must be capitalized and is
governed by special rules. For more details, see Regulations
sections 1.263A-8 through -15.
For more details on the uniform capitalization rules, see
Regulations sections 1.263A-1 through -3.

Transactions between related taxpayers. Generally, an
accrual basis partnership can deduct business expenses and
interest owed to a related party (including any partner) only in the
tax year of the partnership that includes the day on which the
payment is includible in the income of the related party. See
section 267 for details.
Business interest. Business interest expense (BIE) is limited
for tax years beginning after 2017. See section 163(j) for
limitations on deductions for business interest, and section
163(j)(4) for rules specific to partnerships.
Instructions for Form 1065 (2024)

Syndication costs. Costs for issuing and marketing interests in
the partnership, such as commissions, professional fees, and
printing costs, must be capitalized. They can't be depreciated or
amortized. See the instructions for line 10, later, for the treatment
of syndication fees paid to a partner.
Reducing certain expenses for which credits are allowable.
The partnership may need to reduce the otherwise allowable
deductions for expenses used to figure certain credits. The
following are examples of such credits. (Don't reduce the amount
of the allowable deduction for any portion of the credit that was
passed through to the partnership from another pass-through
entity.)
• Work opportunity credit.
• Credit for increasing research activities.
• Disabled access credit.
• Empowerment zone employment credit, if applicable.
• Credit for employer social security and Medicare taxes paid
on certain employee tips.
• Orphan drug credit.
• Credit for small employer pension plan startup costs
(including employer contributions).
• Credit for employer-provided childcare facilities and services.
• Low sulfur diesel fuel production credit.
• Credit for employer differential wage payments.
• Credit for small employer health insurance premiums.
• Employer credit for paid family and medical leave (Form
8994).
Note. Wages taken into account in determining the credit for
qualified sick and family leave on Form 941 can't be taken into
account in determining the employer credit for paid family and
medical leave on Form 8994. See the Instructions for Form 8994.

Partnerships can't take a bad debt deduction unless the
amount was previously included in income.

If the partnership has any of the credits listed above, figure
each current year credit before figuring the deductions for
expenses on which the credit is based.

CAUTION

Line 9. Salaries and Wages

Line 13. Rent

Enter the salaries and wages paid or incurred for the tax year,
reduced by the amount of the following credit(s).
• Work Opportunity Credit (Form 5884).
• Empowerment Zone Employment Credit (Form 8844), if
applicable.
• Credit for Employer Differential Wage Payments (Form 8932).

Enter rent paid on business property used in a trade or business
activity. Don't deduct rent for a dwelling unit occupied by any
partner for personal use.

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Don't reduce the amount of the allowable deduction for any
portion of the credit that was passed through to the partnership
from another pass-through entity. See the instructions for the
credit form for more information.

Don't include salaries and wages reported elsewhere on the
return, such as amounts included in cost of goods sold, elective
contributions to a section 401(k) cash or deferred arrangement,
or amounts contributed under a salary reduction SEP agreement
or a SIMPLE IRA plan.

Line 10. Guaranteed Payments to Partners

Deduct payments or credits to a partner for services or for the
use of capital if the payments or credits are determined without
regard to partnership income and are allocable to a trade or
business activity. Also include on line 10 amounts paid during
the tax year for insurance that constitutes medical care for a
partner, a partner's spouse, a partner's dependents, or a
partner's children under age 27 who aren't dependents.

For information on how to treat the partnership's contribution
to a partner's health savings account (HSA), see Notice 2005-8,
2005-4 I.R.B. 368.

Don't include any payments and credits that should be
capitalized. For example, although payments or credits to a
partner for services rendered in syndicating a partnership may
be guaranteed payments, they aren't deductible on line 10. They
are capital expenditures. However, they should be reported as
guaranteed payments on the applicable line of Schedule K,
line 4b, and in box 4b of Schedule K-1.
Don't include distributive shares of partnership profits.
Report the guaranteed payments to the appropriate partners
using the applicable box 4 of Schedule K-1.

Line 11. Repairs and Maintenance

Enter the cost of repairs and maintenance not claimed
elsewhere on the return, such as labor and supplies, that aren't
payments for improvements to the partnership’s property.
Amounts are paid for improvements if they’re for betterments to
the property or for restorations of the property (such as the
replacements of major components or substantial structural
parts), or if they adapt the property to a new or different use.
Improvements must be capitalized. See Regulations section
1.263(a)-3.
The partnership can deduct repair and maintenance
expenses only to the extent they relate to a trade or business
activity. See Regulations section 1.162-4. The partnership may
elect to capitalize certain repair and maintenance costs
consistent with its books and records. See Regulations section
1.263(a)-3(n) for information on how to make the election.

Line 12. Bad Debts

Enter the total debts that became worthless in whole or in part
during the year, but only to the extent such debts relate to a trade
or business activity. Report deductible nonbusiness bad debts
as a short-term capital loss on Form 8949.

If the partnership rented or leased a vehicle, enter the total
annual rent or lease expense paid or incurred in the trade or
business activities of the partnership. Also complete Form 4562,
Part V. If the partnership leased a vehicle for a term of 30 days or
more, the deduction for vehicle lease expense may have to be
reduced by an amount called the inclusion amount. The
partnership may have an inclusion amount if:
The lease term began:

And the vehicle's FMV on the first day of
the lease exceeded:

Automobiles other than trucks and vans
During calendar year 2024

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

$62,000

During calendar year 2023

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

$60,000

During calendar year 2022

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

$56,000

During calendar year 2021

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

$51,000

After 12/31/2017 but before 1/1/2021

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

$50,000

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

$19,000

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

$18,500

During calendar year 2024

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

$62,000

During calendar year 2023

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

$60,000

During calendar year 2022

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

$56,000

During calendar year 2021

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

$51,000

After 12/31/12 and before 1/1/18
After 12/31/09 but before 1/1/13
Trucks and vans

After 12/31/2017 but before 1/1/2021

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

$50,000

After 12/31/13 and before 1/1/18

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

$19,500

After 12/31/09 and before 1/1/14

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

$19,000

The inclusion amount for lease terms beginning in 2025 will be published in the
Internal Revenue Bulletin in early 2025.

See Pub. 463, Travel, Gift, and Car Expenses, for instructions
on figuring the inclusion amount.

Line 14. Taxes and Licenses

Enter taxes and licenses paid or incurred in the trade or business
activities of the partnership if not reflected elsewhere on the
return. Federal import duties and federal excise and stamp taxes
are deductible only if paid or incurred in carrying on the trade or
business of the partnership. Foreign taxes are included on
line 14 only if they are taxes not creditable but deductible under
sections 901 and 903. See Schedule K-2, Part II, Section 2,
line 45, column (g).
Don't deduct the following taxes on line 14.

• Taxes not imposed on the partnership.
• Federal income taxes or taxes reported elsewhere on the

return.
• Creditable foreign taxes under sections 901 and 903. Report
these taxes separately on Schedule K, line 21, and in box 21 of
Schedule K-1.
• Taxes allocable to a rental activity. Report taxes allocable to
rental real estate activity on Form 8825. Report taxes allocable
to a rental activity other than a rental real estate activity on
Schedule K, line 3b.
• Taxes paid or incurred for the production or collection of
income, or for the management, conservation, or maintenance of
property held to produce income. Report these taxes separately
Instructions for Form 1065 (2024)

on Schedule K, line 13e, and in box 13 of Schedule K-1 using
code ZZ.
See section 263A(a) for rules on capitalization of allocable
costs (including taxes) for any property.

• Taxes, including state or local sales taxes, that are paid or
incurred in connection with an acquisition or disposition of
property (these taxes must be treated as a part of the cost of the
acquired property or, in the case of a disposition, as a reduction
in the amount realized on the disposition).
• Taxes assessed against local benefits that increase the value
of the property assessed (such as for paving, etc.).

• Interest paid by a partnership to a partner for the use of
capital, which should be entered on line 10 as guaranteed
payments.
• Prepaid interest, which can generally only be deducted over
the term of the debt. See section 461(g) and Regulations
sections 1.163-7, 1.446-2, and 1.1273-2(g) for details.
• Interest that is allocable to unborrowed policy cash values of
life insurance, endowment, or annuity contracts issued after
June 8, 1997, when the partnership is a policyholder or
beneficiary. See section 264(f). Attach a statement showing the
computation of the deduction.

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See section 164(d) for information on apportionment of taxes
on real property between seller and purchaser.

Line 15. Interest

Include only interest incurred in the trade or business activities of
the partnership that isn't claimed elsewhere on the return.
Don't include interest expense on the following.

• Debt used to purchase rental property or debt used in a rental

activity. Interest allocable to a rental real estate activity is
reported on Form 8825 and is used in arriving at net income
(loss) from rental real estate activities on Schedule K, line 2, and
in box 2 of Schedule K-1. Interest allocable to a rental activity
other than a rental real estate activity is included on Schedule K,
line 3b, and is used in arriving at net income (loss) from a rental
activity (other than a rental real estate activity). This net amount
is reported on Schedule K, line 3c, and in box 3 of Schedule K-1.
• Debt used to buy property held for investment. Interest that is
clearly and directly allocable to interest, dividend, royalty, or
annuity income not derived in the ordinary course of a trade or
business is reported on Schedule K, line 13c, and in box 13 of
Schedule K-1 using code H. See the instructions for Schedule K,
line 13c; box 13, code H, of Schedule K-1; and Form 4952,
Investment Interest Expense Deduction, for more information on
investment property.
• Debt proceeds allocated to distributions made to partners
during the tax year. Instead, report such interest on Schedule K,
line 13e, and in box 13 of Schedule K-1 using code AC.
• Debt required to be allocated to the production of designated
property. Designated property includes real property, personal
property that has a class life of 20 years or more, and other
tangible property requiring more than 2 years (1 year in the case
of property with a cost of more than $1 million) to produce or
construct. Interest allocable to designated property produced by
a partnership for its own use or for sale must be capitalized. In
addition, a partnership must also capitalize to the basis of the
designated property any interest on debt allocable to an asset
used to produce designated property. A partner may have to
capitalize interest that the partner incurs during the tax year for
the partnership's production expenditures. Similarly, interest
incurred by a partnership may have to be capitalized by a partner
for the partner's own production expenditures. The information
required by the partner to properly capitalize interest for this
purpose must be provided by the partnership on an attached
statement for box 20 of Schedule K-1 using code R. See section
263A(f) and Regulations sections 1.263A-8 through -15.
Special rules apply to the following.

• Allocating interest expense among activities so that the

limitations on passive activity losses, investment interest, and
personal interest can be properly figured. Generally, interest
expense is allocated in the same manner as debt is allocated.
Debt is allocated by tracing disbursements of the debt proceeds
to specific expenditures. Temporary Regulations section
1.163-8T gives rules for tracing debt proceeds to expenditures.
Also see Proposed Regulations 1.163-14 for a special rule for
allocating interest expense with respect to pass-through entities.
Instructions for Form 1065 (2024)

Limitation on deduction. Business interest expense deduction
is generally limited to the sum of business interest income, 30%
of the adjusted taxable income (ATI), and floor plan financing
interest. This limitation generally applies at the partnership level.
See section 163(j)(4) for additional information about the
application of the business interest expense limitation to
partnerships. See Form 8990, Limitation on Business Interest
Expense Under Section 163(j), and its instructions for more
information. BIE includes any interest expense properly allocable
to a trade or business. A small business taxpayer that isn't a tax
shelter (as defined in section 448(d)(3)) and that meets the
gross receipts test isn't required to limit BIE under section 163(j).
A taxpayer meets the gross receipts test if the taxpayer has
average annual gross receipts of $30 million or less for the 3
prior tax years under the gross receipts test of section 448(c).
Gross receipts include the aggregate gross receipts from all
persons treated as a single employer such as a controlled group
of corporations, commonly controlled partnerships or
proprietorships, and affiliated service groups. If the partnership
fails to meet the gross receipts test, Form 8990 is generally
required. Also see Schedule B, questions 23 and 24.

Line 16. Depreciation

On line 16a, enter only the depreciation claimed on assets used
in a trade or business activity. Enter on line 16b the depreciation
included elsewhere on the return (for example, on page 1, line 2)
that is attributable to assets used in trade or business activities.
See the Instructions for Form 4562, or Pub. 946, How To
Depreciate Property, to figure the amount of depreciation to
enter on this line.
Complete and attach Form 4562 only if the partnership
placed property in service during the tax year or claims
depreciation on any car or other listed property.

Don't include any section 179 expense deduction on this line.
This amount isn't deducted by the partnership. Instead, it's
passed through to the partners in box 12 of Schedule K-1.
Generally, the basis of a partnership's section 179 property must
be reduced to reflect the amount of section 179 expense elected
by the partnership. This reduction must be made in the basis of
partnership property even if the limitations of section 179(b) and
Regulations section 1.179-2 prevent a partner from deducting all
or a portion of the amount of the section 179 expense allocated
by the partnership.

Line 17. Depletion

If the partnership claims a deduction for timber depletion,
complete and attach Form T (Timber), Forest Activities
Schedule.
Don't deduct depletion for oil and gas properties. Each
partner figures depletion on oil and gas properties. See
CAUTION the instructions for Schedule K-1, box 20, Depletion
information oil and gas (code T), for the information on oil and
gas depletion that must be supplied to the partners by the
partnership.

Line 18. Retirement Plans, etc.

Don't deduct payments for partners to retirement or deferred
compensation plans including IRAs, qualified plans, and
simplified employee pension (SEP) and SIMPLE IRA plans on
this line. These amounts are reported in box 13 of Schedule K-1
using code R and are deducted by the partners on their own
returns.

• Amortization. See the Instructions for Form 4562 for more
information. Complete and attach Form 4562 if the partnership is
claiming amortization of costs that began during the tax year.
• Insurance premiums.
• Legal and professional fees.
• Supplies used and consumed in the business.
• Utilities.
• Certain business startup and organizational costs. See
Limitations on Deductions, earlier, for more details.
• Any net negative section 481(a) adjustment.

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Enter the deductible contributions not claimed elsewhere on
the return made by the partnership for its common-law
employees under a qualified pension, profit-sharing, annuity, or
SEP or SIMPLE IRA plan, and under any other deferred
compensation plan.

If the partnership contributes to an IRA for employees, include
the contribution in salaries and wages on page 1, line 9, or Form
1125-A, line 3, and not on line 18.

Employers who maintain a pension, profit-sharing, or other
funded deferred compensation plan (other than a SEP or
SIMPLE IRA), whether or not the plan is qualified under the
Code and whether or not a deduction is claimed for the current
year, must generally file the applicable form listed below.
• Form 5500, Annual Return/Report of Employee Benefit Plan.
• Form 5500-SF, Short Form Annual Return/Report of Small
Employee Benefit Plan (generally filed instead of Form 5500 if
there are under 100 participants at the beginning of the plan
year).
Form 5500 and Form 5500-SF must be filed

TIP electronically under the computerized ERISA Filing

Acceptance System (EFAST2). For more information,
see the EFAST2 website at EFAST.dol.gov.

• Form 5500-EZ, Annual Return of A One-Participant (Owners/
Partners and Their Spouses) Retirement Plan or A Foreign Plan.
File this form for a plan that only covers one or more partners (or
partners and their spouses) or a foreign plan that is required to
file an annual return and doesn't file the annual return
electronically on Form 5500-SF.

Line 19. Employee Benefit Programs

Enter the partnership's contributions to employee benefit
programs not claimed elsewhere on the return (for example,
insurance, health, and welfare programs) that aren't part of a
pension, profit-sharing, etc., plan included on line 18.
Don't include amounts paid during the tax year for insurance
that constitutes medical care for a partner, a partner's spouse, a
partner's dependents, or a partner's children under age 27 who
aren't dependents. Instead, include these amounts on line 10 as
guaranteed payments on the applicable line of Schedule K,
line 4, and the applicable line of box 4 of Schedule K-1, of each
partner on whose behalf the amounts were paid. Also report
these amounts on Schedule K, line 13e, and in box 13 of
Schedule K-1, using code M, of each partner on whose behalf
the amounts were paid.

Line 20. Energy Efficient Commercial Building
Deduction

Deduction for certain energy efficient commercial building
property. See the Instructions for Form 7205 and section 179D
for more information. Complete and attach Form 7205 if claiming
this deduction.

Line 21. Other Deductions

Enter the total allowable trade or business deductions that aren't
deductible elsewhere on page 1 of Form 1065. Attach a
statement listing by type and amount each deduction included
on this line. Examples of other deductions include the following.

Also see Special Rules, later.

Don't deduct the following on line 21.

• Items that must be reported separately on Schedules K and

K-1.
• Fines or similar penalties. Generally, no deduction is allowed
for fines or similar penalties paid or incurred to or at the direction
of a government or governmental entity for violating any law
except amounts that constitute restitution (including remediation
of property), amounts paid or incurred to come into compliance
with the law, amounts paid or incurred as the result of orders or
agreements in which no government or governmental entity is a
party, and amounts paid or incurred for taxes due to the extent
the amount would have been allowed as a deduction if timely
paid. No deduction is allowed unless the amounts are
specifically identified in the order or agreement and the taxpayer
establishes that the amounts were paid for that purpose. Also,
any amount paid or incurred as reimbursement to the
government for the costs of any investigation or litigation aren't
eligible for the exceptions and are nondeductible. See section
162(f). Report nondeductible amounts on Schedule K, line 18c.
• Expenses allocable to tax-exempt income. Report these
expenses on Schedule K, line 18c.
• Net operating losses. Only individuals and corporations may
claim a net operating loss deduction.
• Amounts paid or incurred to participate or intervene in any
political campaign on behalf of a candidate for public office, or to
influence the general public regarding legislative matters,
elections, or referendums. Report these expenses on
Schedule K, line 18c.
• Lobbying expenses. Generally, lobbying expenses aren't
deductible. These expenses include amounts paid or incurred in
connection with influencing federal, state, or local legislation; or
amounts paid or incurred in connection with any communication
with certain federal executive branch officials in an attempt to
influence the official actions or positions of the officials. See
Regulations section 1.162-29 for the definition of “influencing
legislation.” Dues and other similar amounts paid to certain
tax-exempt organizations may not be deductible. If certain
in-house lobbying expenditures don't exceed $2,000, the general
rule denying deductions for lobbying expenses doesn’t apply to
these amounts. See section 162(e)(4)(B).
• Amounts paid or incurred for any settlement or payout related
to sexual harassment or sexual abuse that is subject to a
nondisclosure agreement, as well as any attorney’s fees related
to the settlement or payout. See section 162(q).

Special Rules
Travel, meals, and entertainment. Subject to limitations and
restrictions discussed below, a partnership can deduct ordinary
and necessary travel and non-entertainment-related meal
expenses paid or incurred in its trade or business. Generally,
entertainment expenses, membership dues, and facilities used
in connection with these activities can't be deducted. Also,
special rules apply to deductions for gifts, luxury water travel,
and convention expenses. See section 274 and Pub. 463 for
details.
Travel. The partnership can't deduct travel expenses of any
individual accompanying a partner or partnership employee,
Instructions for Form 1065 (2024)

including a spouse or dependent of the partner or employee,
unless:
• That individual is an employee of the partnership, and
• The travel is for a bona fide business purpose and would
otherwise be deductible by that individual.
Meals. Generally, the partnership can deduct only 50% of the
amount otherwise allowable for non-entertainment meal
expenses paid or incurred in its trade or business.
Entertainment-related meals are generally disallowed. In
addition (subject to exceptions under section 274(k)(2)):
• Meals must not be lavish or extravagant, and
• A partner or employee of the partnership must be present at
the meal.
See section 274(n)(3) for a special rule that applies to
expenses for meals consumed by individuals subject to the
hours of service limits of the Department of Transportation.
Membership dues. The partnership may deduct amounts
paid or incurred for membership dues in civic or public service
organizations, professional organizations (such as bar and
medical associations), business leagues, trade associations,
chambers of commerce, boards of trade, and real estate boards.
However, no deduction is allowed if a principal purpose of the
organization is to entertain, or provide entertainment facilities for,
members or their guests. In addition, the partnership may not
deduct membership dues in any club organized for business,
pleasure, recreation, or other social purpose. This includes
country clubs, golf and athletic clubs, airline and hotel clubs, and
clubs operated to provide meals under conditions favorable to
business discussion.
Entertainment facilities. The partnership can't deduct an
expense paid or incurred for a facility (such as a yacht or hunting
lodge) used for an activity usually considered entertainment,
amusement, or recreation.
Amounts treated as compensation. Generally, the
partnership may be able to deduct otherwise nondeductible
entertainment, amusement, or recreation expenses if the
amounts are treated as compensation to the recipient and
reported on Form W-2 for an employee or on Form 1099-NEC for
an independent contractor.

to “United States Treasury” and mailed to Ogden Service Center,
Ogden, UT 84201-0011. Payments can be made by check or
electronically. If making an electronic payment, choose the
payment description “BBA AAR Imputed Underpayment” from
the list of payment types.
Line 27. Other taxes. In a few instances, payments other than
those listed above may have to be made with Form 1065. Enter
the amount on this line and attach a statement identifying the
purpose of the payment.

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Reforestation expenditures. If the partnership made an
election to deduct a portion of its reforestation expenditures on
Schedule K, line 13e, it must amortize over an 84-month period
the portion of these expenditures in excess of the amount
deducted on Schedule K (see section 194). Deduct on line 21
only the amortization of these excess reforestation expenditures.
See Reforestation expense deduction (code S), later.

Tax and Payment
Line 24. Interest due under the look-back method for completed long-term contracts. For partnerships that aren't
closely held, attach Form 8697 and a check or money order for
the full amount made payable to “United States Treasury.” Enter
the partnership's EIN, daytime phone number, and “Form 8697
Interest” on the check or money order.
Line 25. Interest due under the look-back method for property depreciated under the income forecast method. For
partnerships that aren’t closely held, attach Form 8866 and a
check or money order for the full amount, made payable to
“United States Treasury.” Enter the partnership’s EIN, daytime
phone number, and “Form 8866 Interest” on the check or money
order.
Line 26. BBA AAR imputed underpayment. Use this line if
the partnership is filing an AAR electronically and chooses to
pay the IU. For instructions on how to figure the IU, see the
Instructions for Form 8082. Enter the name of the partnership,
TIN, tax year, “Form 1065,” and “BBA AAR Imputed
Underpayment” on the payment. Checks must be made payable
Instructions for Form 1065 (2024)

Line 29. Elective payment election amount from Form 3800.
Report the gross elective payment election amount from Form
3800, Part III, line 6, column (h).
Line 30. Payment. Enter any prepayments related to lines 24
through 27 above.

Schedule B. Other Information

Question 1

Check box 1f for any other type of entity and state the type.

Maximum Percentage Owned for Purposes of
Questions 2 and 3

To determine the maximum percentage owned in the
partnership's profit, loss, or capital for the purposes of questions
2a, 2b, and 3b, determine separately the partner's percentage of
interest in profit, loss, and capital at the end of the partnership's
tax year. This determination must be based on the partnership
agreement and it must be made using the constructive
ownership rules described below. The maximum percentage is
the highest of these three percentages (determined at the end of
the tax year).
See Item J. Partner's Profit, Loss, and Capital, later, for more
information on ownership percentages.

Questions 2 and 3
Constructive ownership of the partnership. For purposes of
question 2, except for foreign governments within the meaning of
section 892, in determining an ownership interest in the profit,
loss, or capital of the partnership, the constructive ownership
rules of section 267(c) (excluding section 267(c)(3)) apply to
ownership of interests in the partnership as well as corporate
stock. An interest in the partnership that is owned directly or
indirectly by or for another entity (corporation, partnership,
estate, trust, or tax-exempt organization) is considered to be
owned proportionately by the owners (shareholders, partners, or
beneficiaries) of the owning entity.
Also, under section 267(c), an individual is considered to own
an interest owned directly or indirectly by or for the individual’s
family. The family of an individual includes only that individual's
spouse, brothers, sisters, ancestors, and lineal descendants. An
interest will be attributed from an individual under the family
attribution rules only if the person to whom the interest is
attributed owns a direct interest in the partnership or an indirect
interest under section 267(c)(1) or (5). For purposes of these
instructions, an individual won't be considered to own, under
section 267(c)(2), an interest in the partnership owned, directly
or indirectly, by a family member of the individual unless the
individual also owns an interest in the partnership either directly
or indirectly through a corporation, partnership, or trust.
For purposes of question 2, the term “foreign government”
has the same meaning as it does under section 892. In
determining a foreign government's ownership interest in the
profit, loss, or capital of the partnership, the constructive
ownership rules of Temporary Regulations section 1.892-5T(c)
(1)(i) apply to ownership of interests in the partnership as well as
27

corporate stock. An interest in the partnership that is owned
directly or indirectly by an integral part or controlled entity of a
foreign sovereign (within the meaning of Temporary Regulations
section 1.892-2T(a)) is considered to be owned proportionately
by such foreign sovereign.
Constructive ownership examples for questions 2 and 3 are
included below. For the purposes of questions 2 and 3, add an
owner's direct percentage ownership and indirect percentage
ownership in an entity to determine if the owner owns, directly or
indirectly, 50% or more of the entity.
Example for question 2a. Corporation A owns, directly, an
interest of 50% in the profit, loss, or capital of Partnership B.
Corporation A also owns, directly, an interest of 15% in the profit,
loss, or capital of Partnership C. Partnership B owns, directly, an
interest of 70% in the profit, loss, or capital of Partnership C.
Therefore, Corporation A owns, directly or indirectly, an interest
of 50% in the profit, loss, or capital of Partnership C (15%
directly and 35% indirectly through Partnership B). On
Partnership C's Form 1065, it must answer “Yes” to question 2a
of Schedule B. See Example 1 in the instructions for
Schedule B-1 (Form 1065) for guidance on providing the rest of
the information required of entities answering “Yes” to this
question.
Example for question 2b. A owns, directly, 50% of the profit,
loss, or capital of Partnership X. B, the daughter of A, doesn't
own, directly, any interest in Partnership X and doesn't own,
indirectly, any interest in Partnership X through any entity
(corporation, partnership, trust, or estate). Because family
attribution rules apply only when an individual (in this example,
B) owns a direct interest in the partnership or an indirect interest
through another entity, A's interest in Partnership X isn't
attributable to B. On Partnership X's Form 1065, it must answer
“Yes” to question 2b of Schedule B. See Example 2 in the
instructions for Schedule B-1 (Form 1065) for guidance on
providing the rest of the information required of entities
answering “Yes” to this question.

interests owned, directly or indirectly, in the profit, loss, or capital
of the partnership at the end of the partnership's tax year. If the
entity is a trust, enter in column (v) the percentage of the
partnership's beneficial interest in the trust owned, directly or
indirectly, at the end of the tax year. List a partnership or trust
owned through a DE rather than the DE.

Question 4

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Constructive ownership of other entities by the partnership. For purposes of determining the partnership's constructive
ownership of other entities, the constructive ownership rules of
section 267(c) (excluding section 267(c)(3)) apply to ownership
of interests in partnerships and trusts as well as corporate stock.
Generally, if an entity (a corporation, partnership, or trust) is
owned, directly or indirectly, by or for another entity (corporation,
partnership, estate, or trust), the owned entity is considered to
be owned proportionally by or for the owners (shareholders,
partners, or beneficiaries) of the owning entity.
Question 3a. List each corporation in which the partnership,
at the end of the tax year, owns, directly, 20% or more, or owns,
directly or indirectly, 50% or more, of the total voting power of all
classes of stock entitled to vote. Indicate the name, EIN, country
of incorporation, and percentage interest owned, directly or
indirectly, in the total voting power. List the parent corporation of
an affiliated group filing a consolidated tax return rather than the
subsidiary members except for subsidiary members in which an
interest is owned, directly or indirectly, independent of the
interest owned, directly or indirectly, in the parent corporation. If
a corporation is owned through a DE, list the information for the
corporation rather than the DE.
Question 3b. List each partnership in which the partnership,
at the end of the tax year, owns, directly, an interest of 20% or
more, or owns, directly or indirectly, an interest of 50% or more in
the profit, loss, or capital of the partnership. List each trust in
which the partnership, at the end of the tax year, owns, directly,
an interest of 20% or more, or owns, directly or indirectly, an
interest of 50% or more, in the trust beneficial interest. For each
partnership or trust listed, indicate the name, EIN, type of entity
(partnership or trust), and country of origin. If the listed entity is a
partnership, enter in column (v) the maximum of percentage
28

Answer “Yes” if the partnership meets all four of the requirements
shown on the form. “Total receipts” is defined as the sum of
gross receipts or sales (page 1, line 1a); all other income
(page 1, lines 4 through 7); income reported on Schedule K,
lines 3a, 5, 6a, and 7; income or net gain reported on
Schedule K, lines 8, 9a, 10, and 11; and income or net gain
reported on Form 8825, lines 2, 19, and 20a. “Total assets” is
defined as the amount that would be reported in item F on
page 1 of Form 1065.

Question 5

Answer “Yes” if interests in the partnership are traded on an
established securities market or are readily tradable on a
secondary market (or its substantial equivalent).

Question 6

Generally, the partnership will have income if debt is canceled or
forgiven. Amounts related to forgiven Paycheck Protection
Program (PPP) loans are disregarded for purposes of this
question. The determination of the existence and amount of
cancellation of debt income is determined at the partnership
level. Partnership cancellation of indebtedness income is
separately stated on Schedule K and Schedule K-1. The extent
to which such income is taxable is usually determined by each
individual partner under rules found in section 108. For more
information, see Pub. 334, Tax Guide for Small Business.

Question 7

Answer “Yes” if the partnership filed, or is required to file, a return
under section 6111 to provide information on any reportable
transaction by a material advisor. Use Form 8918, Material
Advisor Disclosure Statement, to provide the information. For
details, see the Instructions for Form 8918.

Question 8

Answer “Yes” if either (1) or (2) below applies to the partnership.
Otherwise, answer “No.”
1. At any time during calendar year 2024, the partnership
had an interest in or signature or other authority over a bank
account, securities account, or other financial account in a
foreign country (see FinCEN Form 114, Report of Foreign Bank
and Financial Accounts (FBAR)); and
a. The combined value of the accounts was more than
$10,000 at any time during the calendar year; and
b. The accounts were not with a U.S. military banking facility
operated by a U.S. financial institution.
2. The partnership owns more than 50% of the stock in any
corporation that would answer “Yes” based on item (1) above.
If “Yes,” do the following.

• Enter the name of the foreign country or countries. Attach a

separate sheet if more space is needed.
• File FinCEN Form 114 electronically at the FinCEN website,
bsaefiling.fincen.treas.gov/main.html.

Question 9

The partnership may be required to file Form 3520, Annual
Return To Report Transactions With Foreign Trusts and Receipt
of Certain Foreign Gifts, if any of the following apply.
Instructions for Form 1065 (2024)

• It directly or indirectly transferred property or money to a
foreign trust. For this purpose, any U.S. person who created a
foreign trust is considered a transferor.
• It's treated as the owner of any part of the assets of a foreign
trust under the grantor trust rules.
• It received a distribution, a loan of cash or other marketable
securities, or uncompensated use of trust property from a foreign
trust, or a foreign trust holds an outstanding qualified obligation
of the partnership.

negative amount from all section 734(b) adjustments” means the
decrease in basis of partnership property from all section 734(b)
adjustments.
Section 734(b) basis adjustment. For a section 734(b)
basis adjustment, attach a statement that includes:
• The computation of the adjustment,
• The class of property distributed (ordinary income property or
capital gain property), and
• The partnership properties to which the adjustment has been
allocated.

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For more information, see the Instructions for Form 3520.

An owner of a foreign trust must ensure that the trust files an
annual information return on Form 3520-A, Annual Information
Return of Foreign Trust With a U.S. Owner.

Questions 10a, 10b, 10c, and 10d

You must answer “Yes” or “No” for each question.

TIP

Question 10a. Answer “Yes” if the partnership is making, or has
made (and hasn't revoked), a section 754 election. For
information about the election, see item 4 under Elections Made
by the Partnership, earlier.

Question 10b. Answer “Yes” if either of the following has
occurred.
• The partnership made an optional basis adjustment under
section 743(b) or 734(b) for the tax year.
• The partnership has made a section 754 election (and it
hasn't been revoked) and a basis adjustment under section
743(b) is made on a sale or exchange of a partnership interest or
a transfer of a partnership interest on the death of a partner. See
question 10c if the partnership has a substantial built-in loss
immediately after such a transfer.
For partnerships other than PTPs, enter the total aggregate
positive amount (in the appropriate space provided) resulting
from all section 743(b) adjustments. “Aggregate positive amount
from all section 743(b) adjustments” means the increase in the
partners' shares of basis in partnership property from all section
743(b) adjustments allocated to all the partners. Enter the total
aggregate negative amount (in the appropriate space provided)
resulting from all section 743(b) adjustments. “Aggregate
negative amount from all section 743(b) adjustments” means the
decrease in the partners' shares of basis in partnership property
from all section 743(b) adjustments allocated to all the partners.
Section 743(b) basis adjustment. The basis adjustment
affects only the transferee's basis in partnership property. The
partnership must attach a statement to the return for the tax year
in which the transfer occurred. The statement must include:
• The name of the transferee partner,
• The EIN or SSN of the transferee partner,
• The computation of the adjustment, and
• The identity of the partnership properties to which the
adjustment has been allocated.
For details, see section 743 and Regulations section 1.743-1.
For details on allocating the basis adjustment to partnership
properties, see section 755 and Regulations section 1.755-1.

Question 10c. Answer “Yes” if the partnership made an optional
basis adjustment under section 734(b) for the tax year. If the
partnership has made a section 754 election (and it hasn't been
revoked), the partnership must make a basis adjustment under
section 734(b). Enter the total aggregate positive amount and
the total aggregate negative amount in the appropriate space
provided. “Aggregate positive amount from all section 734(b)
adjustments” means the increase in the basis of partnership
property from all section 734(b) adjustments. Enter the total
aggregate negative amount (in the appropriate space provided)
resulting from all section 734(b) adjustments. “Aggregate
Instructions for Form 1065 (2024)

Question 10d. Answer “Yes” if the partnership had to make a
basis reduction under section 743(b) because of a substantial
built-in loss (as defined in section 743(d)) or under section
734(b) because of a substantial basis reduction (as defined in
section 734(d)).
Enter the total aggregate amount of such section 743(b)
adjustments and/or section 734(b) adjustments for all partners
and/or partnership property made in the tax year in the space
provided as a positive number.
Section 743(d)(1) provides that, for purposes of section 743,
a partnership has a substantial built-in loss resulting from a
transfer of a partnership interest if the partnership's adjusted
basis in the partnership's property exceeds by more than
$250,000 the FMV of the property or the transferee partner
would be allocated a loss of more than $250,000 if the
partnership assets were sold for cash equal to their FMV
immediately after such transfer. Under section 734(d), there's a
substantial basis reduction resulting from a distribution if the sum
of the following amounts exceeds $250,000.
• The amount of loss recognized by the distributee partner on a
distribution in liquidation of the partner's interest in the
partnership (see section 731(a)(2)).
• The excess of the basis of the distributed property to the
distributee partner (determined under section 732) over the
adjusted basis of the distributed property to the partnership
immediately before the distribution (as adjusted by section
732(d)).
Section 734(b) basis adjustment. For a section 734(b)
basis adjustment, for partnerships other than PTPs, attach a
statement that includes:
• The computation of the adjustment,
• The class of property distributed (ordinary income property or
capital gain property), and
• The partnership properties to which the adjustment has been
allocated.

Question 11

Check the box if the partnership engaged in a like-kind exchange
during the current or immediately preceding tax year and
received replacement property that it distributed during the
current tax year. For purposes of this question, the partnership is
considered to have distributed replacement property if the
partnership contributed such property to any entity other than a
DE. The distribution of its ownership interest in a DE is
considered a distribution of the underlying property.

Question 12

If a partnership distributed property to its partners to be jointly
owned, whether such distribution is direct or through the
formation of an intermediate entity, the question must be
answered “Yes.” For purposes of question 12, an “undivided
interest in partnership property” means property that was owned
by the partnership either directly or through a DE and which was
distributed to partners as fractional ownership interests. A
tenancy-in-common interest is a type of undivided ownership
interest in property which provides each owner the right to
transfer property to a third party without destroying the tenancy
in common. Partners may agree to partition property held as
29

tenants in common or may seek a court order to partition the
property (usually dividing the property into fractional interests in
accordance with each partner's ownership interest in the
partnership).
Example. Partnership P is a partnership that files Form
1065. Partnership P holds title to land held for investment.
Partnership P converts its title to the land to fractional interests in
the name of the partners and distributes such interests to its
partners. Partnership P must answer “Yes” to question 12.

businesses/partnerships/FAQs-for-Form-1065-Schedule-BOther-Information-Question-22.

Question 23

The limitation on BIE applies to every taxpayer with a trade or
business, unless the taxpayer meets certain specified
exceptions. A partnership may elect out of the limitation for
certain businesses otherwise subject to the BIE limitation.

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Question 13

Enter the number of Forms 8858, Information Return of U.S.
Persons With Respect To Foreign Disregarded Entities (FDEs)
and Foreign Branches (FBs), that are attached to the return.
Form 8858 and its schedules are used by certain U.S. persons
(including domestic partnerships) that own an FDE or FB directly
(or, in certain cases, indirectly or constructively) to satisfy the
reporting requirements of sections 6011, 6012, 6031, and 6038,
and the related regulations. See Form 8858 (and its separate
instructions) for information on completing the form and the
information that the partnership may need to provide to certain
partners for them to complete their Forms 8858 relating to that
FDE or FB.

Question 14

Answer “Yes” if the partnership had any foreign partners (for
purposes of section 1446(a)) at any time during the tax year.
Otherwise, answer “No.”

If the partnership had gross income effectively connected
with a trade or business in the United States and foreign
partners, it may be required to withhold tax under section
1446(a) on income allocable to foreign partners (without regard
to distributions) and file Forms 8804, 8805, and 8813. See
Regulations sections 1.1446-1 through -7 for more information.

Questions 16a and 16b

If the partnership made any payment in 2024 that would require
the partnership to file any Form(s) 1099, answer “Yes” for
question 16a and answer question 16b. Otherwise, answer “No”
for question 16a and skip question 16b. See Am I Required to
File a Form 1099 or Other Information Return for more
information.

Question 20

For tax years beginning after 2015, domestic partnerships that
are formed or availed of to hold specified foreign financial assets
(specified domestic entities) must file Form 8938, Statement of
Specified Foreign Financial Assets, with its Form 1065 for the tax
year. Form 8938 must be filed each year the value of the
partnership’s specified foreign financial assets meets or exceeds
the reporting threshold. For more information on domestic
partnerships that are specified domestic entities and the types of
foreign financial assets that must be reported, see the
Instructions for Form 8938.
A domestic partnership required to file Form 8938 with its
Form 1065 for the tax year should answer “Yes” to this question.

Question 22

Section 267A disallows a deduction for certain interest or royalty
paid or accrued pursuant to a hybrid arrangement, to the extent
that, under the foreign tax law, there isn't a corresponding
income inclusion (including long-term deferral). On the entry line
for question 22, report the total amount of interest and royalty
paid or accrued by the partnership for which the partnership
knows, or has reason to know, that one or more partners'
distributive shares of deductions is disallowed under section
267A. For additional information, see FAQs at IRS.gov/
30

Certain real property trades or businesses and farming
businesses qualify to make an election not to limit BIE. This is an
irrevocable election. If you make this election, you're required to
use the alternative depreciation system to depreciate certain
property. Also, you aren’t entitled to the special depreciation
allowance for that property. For a partnership with more than one
qualifying business, the election is made with respect to each
business. Answer “Yes” if the partnership has an election in
effect to exclude a real property trade or business or a farming
business from section 163(j). For more information, see section
163(j) and the Instructions for Form 8990.

Question 24

Generally, a taxpayer with a trade or business must file Form
8990 to claim a deduction for business interest. BIE is interest
that is properly allocable to a non-excepted trade or business or
that is floor plan financing interest. In addition, Form 8990 must
be filed by any taxpayer that owns an interest in a partnership
with current year, or prior year carryover, excess business
interest expense (EBIE) allocated from the partnership. A
pass-through entity allocating excess taxable income or excess
business interest income to its owners (that is, a pass-through
entity that isn't a small business taxpayer) must file Form 8990,
regardless of whether it has any interest expense.

Exclusions from filing. A taxpayer isn't required to file Form
8990 if the taxpayer is a small business taxpayer and doesn't
have EBIE from a partnership. A taxpayer is also not required to
file Form 8990 if the taxpayer only has BIE from the following
excepted trades or businesses.
• The trade or business of providing services as an employee.
• An electing real property trade or business.
• An electing farming business.
• Certain utility businesses.

Small business taxpayer. A small business taxpayer isn't
subject to the BIE limitation and isn't required to file Form 8990.
A small business taxpayer is a taxpayer that (a) isn't a tax shelter
(as defined in section 448(d)(3)); and (b) meets the gross
receipts test of section 448(c), discussed next.
Gross receipts test. A taxpayer meets the gross receipts
test if the taxpayer has average annual gross receipts of $30
million or less for the 3 prior tax years. A taxpayer's average
annual gross receipts for the 3 prior tax years is determined by
adding the gross receipts for the 3 prior tax years and dividing
the total by 3. Gross receipts include the aggregate gross
receipts from all persons treated as a single employer, such as a
controlled group of corporations, commonly controlled
partnerships, or proprietorships, and affiliated service groups.
See section 448(c) and the Instructions for Form 8990 for
additional information.

Question 25

To be certified as a QOF, the partnership must file Form 1065
and attach Form 8996, even if the partnership had no income or
expenses to report. If the partnership is attaching Form 8996,
answer “Yes” to question 25. On the line following the dollar sign,
enter the amount from Form 8996, Part III, line 15.

Instructions for Form 1065 (2024)

Question 26

Provide the number of foreign partners subject to section 864(c)
(8) as a result of transferring all or a portion of an interest in the
partnership if the partnership is engaged in a U.S. trade or
business. Section 864(c)(8) provides that gain or loss of a
foreign transferor from the transfer of a partnership interest is
treated as effectively connected with the conduct of a trade or
business within the United States to the extent that the transferor
would have had effectively connected gain or loss if the
partnership sold all of its assets at FMV on the date of transfer.
For purposes of section 864(c)(8), a “transfer of a partnership
interest” means a sale, an exchange, or other disposition, and
includes a distribution from a partnership to a partner to the
extent that gain or loss is recognized on the distribution, as well
as a transfer treated as a sale or an exchange under section
707(a)(2)(B). Section 864(c)(8) applies to foreign partners that
directly or indirectly transfer an interest in a partnership that is
engaged in a U.S. trade or business. The partnership should
include in its response any transfer for which it has received
notification or otherwise knows about. If the partnership is a PTP
as defined in section 469(k)(2) and has properly answered “Yes”
to question 5 on Form 1065, Schedule B, then it's not required to
answer the question.

The information must be reported even if you conclude that
section 7874 doesn't apply.
Section 7874 generally applies when the following three
requirements are met.
• Pursuant to a plan or series of related transactions, a foreign
corporation must acquire directly or indirectly substantially all of
the properties constituting a trade or business of a domestic
partnership.
• After the acquisition, the ownership percentage (by vote or
value) must be at least 60%.
• After the acquisition, the expanded affiliate that includes the
foreign acquiring corporation must not have substantial business
activities in the foreign country in which the foreign acquiring
corporation is created or organized.

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If a partnership had any foreign partners subject to section
864(c)(8), the partnership must complete Schedule K-3 (Form
1065), Part XIII, for each foreign partner subject to section 864(c)
(8) on a transfer or distribution. The partnership may also be
required to withhold under section 1446(f)(4) on future
distributions that it makes to the transferee partner if that partner
failed to withhold on the transfer under section 1446(f)(1). See
Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign
Entities, for more information.

Question 27

Answer “Yes” if at any time during the tax year there were
transfers between the partnership and its partners subject to the
disclosure requirements of Regulations section 1.707-8. For
certain transfers that are presumed to be sales, the partnership
or the partners must comply with the disclosure requirements in
Regulations section 1.707-8. Generally, disclosure is required
when:
1. Certain transfers to a partner are made within 2 years of a
transfer of property by the partner to the partnership;
2. Certain debt is incurred by a partner within 2 years of the
earlier of (a) a written agreement to transfer, or (b) a transfer of
the property that secures the debt, if the debt is treated as a
qualified liability; or
3. Transfers from a partnership to a partner occur which are
the equivalent to those listed in (1) or (2) above.
The disclosure must be made on the transferor partner's
return using Form 8275, Disclosure Statement, or on an attached
statement providing the same information. When more than one
partner transfers property to a partnership under a plan, the
disclosure may be made by the partnership rather than by each
partner.

Question 28

Section 7874 applies in certain cases in which a foreign
corporation directly or indirectly acquires substantially all of the
properties constituting a trade or business of a domestic
partnership. Answer “Yes” if, since December 22, 2017, a foreign
corporation directly or indirectly acquired substantially all of the
properties constituting a trade or business of your partnership
(and you're a domestic partnership), and the ownership with
respect to the acquisition was greater than 50% (by vote or
value). If “Yes,” list the ownership percentage by both vote and
value.
Instructions for Form 1065 (2024)

When section 7874 applies, the tax treatment of the
acquisition depends on the ownership percentage. If the
ownership percentage is at least 80%, the foreign acquiring
corporation is treated as a domestic corporation for all purposes
of the Code. See section 7874(b). If the ownership percentage is
at least 60% but less than 80%, the foreign acquiring corporation
is considered a foreign corporation but the domestic partnership
and certain other persons are subject to special rules that
reduce the tax benefits of the acquisition. See section 7874(a)
(1).
The Tax Cuts and Jobs Act of 2017 provides additional
special rules for certain cases in which section 7874 applies.
See sections 59A(d)(4) and 965(l).

Ownership percentage. The ownership percentage is the
percentage described in section 7874(a)(2)(B)(ii). See the
regulations under section 7874 for rules regarding the
computation of the ownership percentage.
In general, the ownership percentage measures the
percentage of stock of the foreign acquiring corporation that is
held by partners of the domestic partnership by reason of
holding a capital or profits interest in the domestic partnership,
with certain adjustments (for example, disregarding certain stock
of the foreign acquiring corporation attributable to passive assets
or assets of other domestic entities that were recently acquired
by the foreign acquiring corporation). The ownership percentage
is measured separately by vote and value.
Multiple reportable acquisitions. If there are multiple
acquisitions that must be reported, list on the lines for question
28 the ownership percentage by vote and value for the most
recent acquisition. Attach a statement reporting the ownership
percentage by vote and value for the other acquisitions.

Question 29

Under section 4501, the partnership may be required to file Form
7208, Excise Tax on Repurchase of Corporate Stock, and pay
the stock repurchase excise tax if, during the partnership's tax
year, (a) the partnership is a specified affiliate of an applicable
foreign corporation, or (b) the partnership is an expatriated entity
with respect to a covered surrogate foreign corporation. See the
Instructions for Form 7208. For additional information, see
section 4501.

Question 30

Digital assets are any digital representations of value that are
recorded on a cryptographically secured distributed ledger or
any similar technology. For example, digital assets include
non-fungible tokens (NFTs) and virtual currencies, such as
cryptocurrencies and stablecoins. If a particular asset has the
characteristics of a digital asset, it will be treated as a digital
asset for federal income tax purposes.
Answer “Yes” if at any time during 2024, the partnership (a)
received (as a reward, award, or payment for property or
31

services); or (b) sold, exchanged, or otherwise disposed of a
digital asset (or any financial interest in any digital asset).
For example, answer “Yes” if at any time during 2024 the
partnership:
• Received digital assets as payment for property or services
provided;
• Received digital assets as a result of a reward or award;
• Received new digital assets as a result of mining, staking, and
similar activities;
• Received digital assets as a result of a hard fork;
• Disposed of digital assets in exchange for property or
services;
• Disposed of a digital asset in exchange or trade for another
digital asset;
• Sold a digital asset; or
• Otherwise disposed of any other financial interest in a digital
asset.
The partnership has a financial interest in a digital asset if it’s the
owner of record of a digital asset, or has an ownership stake in
an account that holds one or more digital assets, including the
rights and obligations to acquire a financial interest, or it owns a
wallet that holds digital assets.

partners in that year. Eligible partners are individuals, C
corporations, S corporations, foreign entities that would be C
corporations if they were domestic entities, and estates of
deceased partners. The determination as to whether the
partnership has 100 or fewer partners is made by adding the
number of Schedules K-1 required to be issued by the
partnership for the tax year to the number of Schedules K-1
required to be issued by any partner that is an S corporation to
its shareholders for the tax year of the S corporation ending with
or within the partnership tax year. A partnership isn't eligible to
elect out of the centralized partnership audit regime if it's
required to issue a Schedule K-1 to any of the following partners.
• A partnership.
• A trust.
• A foreign entity that would not be treated as a C corporation if
it were a domestic entity.
• A DE described in Regulations section 301.7701-2(c)(2)(i).
• An estate of an individual other than a deceased partner.
• Any person that holds an interest in the partnership on behalf
of another person.

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The following actions or transactions in 2024, alone, generally
don’t require the partnership to answer “Yes.”
• Holding a digital asset in a wallet or account.
• Transferring a digital asset from one wallet or account it owns
or controls to another wallet or account that it owns or controls.
• Purchasing digital assets using U.S. or other real currency,
including through the use of electronic platforms such as PayPal
and Venmo.
Don’t leave the question unanswered. You must answer “Yes”
or “No” by checking the appropriate box. For more information,
go to IRS.gov/VirtualCurrencyFAQs.

Question 32

A qualifying syndicate, pool, joint venture, or similar organization
may elect under section 761(a) not to be treated as a partnership
for federal income tax purposes and won't be required to file
Form 1065 except for the year of election. If an election out of
subchapter K is being made for the tax year, answer “Yes” and
attach a statement that contains:
• The names, addresses, and identification numbers of all the
members of the organization,
• A statement that the organization qualifies under Regulations
section 1.761-2(a), paragraph (1), and either paragraph (2) or
(3),
• A statement that all members of the organization elect to
exclude the organization from all of subchapter K, and
• A statement indicating the availability of the agreement under
which the organization operates (or for an oral agreement, from
whom the provisions of the agreement may be obtained).
For calendar-year organizations, Form 1065 must be filed by
March 15 following the close of the first calendar year for which
the section 761(a) election is being made. The filing date for
fiscal-year organizations is the 15th day of the 3rd month
following the close of the 1st fiscal year. These dates are subject
to filing extensions. See Regulations section 1.761-2 for more
information concerning making the election out of subchapter K.

Question 33

Answer “Yes” if an eligible partnership chooses to elect out of the
centralized partnership audit regime for the tax year and enter
the total from Schedule B-2, Part III, line 3. If making the election,
attach a completed Schedule B-2 to Form 1065. An election out
of the centralized partnership audit regime can only be made on
a timely filed return (including extensions). A partnership is an
eligible partnership for the tax year if it has 100 or fewer eligible
32

Designated Partnership Representative (PR)

Section 6223 provides that unless the partnership has made a
valid election out of the centralized partnership audit regime,
each partnership must designate, in the manner prescribed by
the Secretary, a partner or other person with a substantial
presence in the United States as the PR who shall have the sole
authority to act on behalf of the partnership. On Form 1065,
provide the name, address, and phone number of the PR. If an
entity is designated as the PR, the partnership must also appoint
an individual to act on the entity's behalf (a DI). To be a DI, the
appointed person must also have a substantial presence in the
United States.

How to designate. A designation of a PR must be made for
each respective year on the partnership’s Form 1065. The
partnership can revoke a designation of a PR or DI, and the PR
or DI can resign, by submitting Form 8979, Partnership
Representative Revocation, Designation, and Resignation Form.

CAUTION

See the Instructions for Form 8979 for information
concerning how and when Form 8979 can be submitted
to the IRS.

PR authority. Under section 6223, the partnership and all its
partners (and any other person whose tax liability is determined
in whole or in part by taking into account directly or indirectly
adjustments determined under the centralized partnership audit
regime) are bound by the actions of the PR in dealings with the
IRS. A designation for a partnership tax year remains in effect
until the designation is terminated by (a) a valid resignation of
the PR or DI, (b) a valid revocation of the PR (with designation of
successor PR), or (c) a determination by the IRS that the
designation isn't in effect.
Substantial presence. In order for either a PR or a DI to have
substantial presence, they must make themselves available to
meet in person with the IRS in the United States at a reasonable
time and place as determined by the IRS, and must have a street
address in the United States, a U.S. TIN, and a telephone
number with a U.S. area code.

Schedules K and K-1. Partners'
Distributive Share Items
Purpose of Schedules

Although the partnership isn't subject to income tax, the partners
are liable for tax on their shares of the partnership income,
Instructions for Form 1065 (2024)

whether or not distributed, and must include their shares on their
tax returns.
Schedule K. Schedule K is a summary schedule of all the
partners' shares of the partnership's income, credits, deductions,
etc. All partnerships must complete Schedule K. Rental activity
income (loss) and portfolio income aren't reported on page 1 of
Form 1065. These amounts aren't combined with the trade or
business activity income (loss) reported on page 1. Schedule K
is used to report the totals of these and other amounts reported
on page 1.

If a partner's interest changed during the year (such as the
entrance of a new partner, the exit of a partner, an increase to a
partner's interest through an additional capital contribution, or a
decrease in a partner's interest through a distribution), see
section 706(d) and Regulations section 1.706-4 before
determining each partner's distributive share of any item of
income, gain, loss, and deduction, and other items. Partnership
items are allocated to a partner only for the part of the year in
which that person is a member of the partnership. Generally, for
each change in a partner’s interest, the partnership will either
allocate its items using a proration method or a
closing-of-the-books method. Special rules apply to certain
partnerships, certain variations, and certain items. See
Regulations section 1.706-4 for additional rules and procedures
for making elections. In addition, special rules in section 706(d)
(2) apply to certain items of partnerships that report their income
on the cash basis, and special rules in section 706(d)(3) apply to
tiered partnerships.

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Schedule K-1. Schedule K-1 shows each partner's separate
share. Attach a copy of each Schedule K-1 to the Form 1065
filed with the IRS. Keep a copy with a copy of the partnership
return as a part of the partnership's records and furnish a copy to
each partner. If the partner is a DE, furnish the Schedule K-1 to
the DE partner. If a partnership interest is held by a nominee on
behalf of another person, the partnership may be required to
furnish Schedule K-1 to the nominee. See Temporary
Regulations sections 1.6031(b)-1T and 1.6031(c)-1T for more
information.
Give each partner a copy of either the Partner's Instructions
for Schedule K-1 (Form 1065) or specific instructions for each
item reported on the partner's Schedule K-1.

Substitute Forms

The partnership doesn't need IRS approval to use a substitute
Schedule K-1 if it's an exact copy of the IRS schedule. The
boxes must use the same numbers and titles and must be in the
same order and format as on the comparable IRS Schedule K-1.
The substitute schedule must include the OMB number. The
partnership must provide each partner with the Partner's
Instructions for Schedule K-1 (Form 1065) or other prepared
specific instructions for each item reported on the partner's
Schedule K-1.
The partnership must request IRS approval to use other
substitute Schedules K-1. To request approval, write to:
Internal Revenue Service
Attention: Substitute Forms Program
C:DC:TS:CAR:MP:P:TP:TP
ATSC
4800 Buford Highway
Mail Stop 061-N
Chamblee, GA 30341
[email protected]
Each partner's information must be on a separate sheet of
paper. Therefore, separate all continuously printed substitutes
before you file them with the IRS.

The partnership may be subject to a penalty if it files
Schedules K-1 that don't conform to the specifications discussed
in Pub. 1167, General Rules and Specifications for Substitute
Forms and Schedules.

How Income Is Shared Among Partners

Allocate shares of income, gain, loss, deduction, or credit among
the partners according to the partnership agreement for sharing
income or loss generally. Partners may agree to allocate specific
items in a ratio different from the ratio for sharing income or loss.
For instance, if the net income exclusive of specially allocated
items is divided evenly among three partners but some special
items are allocated 50% to one, 30% to another, and 20% to the
third partner, report the specially allocated items on the
appropriate line of the applicable partner's Schedule K-1 and the
total on the appropriate line of Schedule K, instead of on the
numbered lines on page 1 of Form 1065, Form 1125-A, or
Schedule D.
Instructions for Form 1065 (2024)

Special rules on the allocation of income, gain, loss, and
deductions generally apply if a partner contributes property to
the partnership and the FMV of that property at the time of
contribution differs from the contributing partner's adjusted tax
basis. Under these rules, the partnership must use a reasonable
method of making allocations of income, gain, loss, and
deductions from the property so that the contributing partner
receives the tax burdens and benefits of any built-in gain or loss
(that is, precontribution appreciation or diminution of value of the
contributed property). See Regulations section 1.704-3 for
details on how to make these allocations, including a description
of specific allocation methods that are generally reasonable.
See Dispositions of Contributed Property, earlier, for special
rules on the allocation of income, gain, loss, and deductions on
the disposition of property contributed to the partnership by a
partner.

If the partnership agreement doesn't provide for the partner's
share of income, gain, loss, deduction, or credit, or if the
allocation under the agreement doesn't have substantial
economic effect, the partner's share is determined according to
the partner's interest in the partnership. See Regulations section
1.704-1 for more information.

Specific Instructions (Schedule K-1
Only)
General Information

Generally, the partnership is required to prepare and give a
Schedule K-1 to each person who was a partner in the
partnership at any time during the year. Schedule K-1 must be
provided to each partner on or before the day on which the
partnership return is required to be filed.
However, a foreign partnership that has one or more U.S.
partners must file Form 1065. But if it meets each of the following
four requirements, it isn't required to file or provide Schedules
K-1 for foreign partners (unless the foreign partner is a
pass-through entity through which a U.S. person holds an
interest in the foreign partnership).
• The partnership had no gross income effectively connected
with the conduct of a trade or business within the United States
during its tax year.
• The partnership isn't a withholding foreign partnership as
defined in Regulations section 1.1441-5(c)(2)(i).
• All required Forms 1042 and 1042-S were filed by the
partnership or another withholding agent as required by
Regulations sections 1.1461-1(b) and (c).
33

• The tax liability for each foreign partner for amounts
reportable under Regulations sections 1.1461-1(b) and (c) has
been fully satisfied by the withholding of tax at the source.
Generally, any person who holds an interest in a partnership
as a nominee for another person must furnish to the partnership
the name, address, etc., of the other person.

Part I. Information About the
Partnership

On each Schedule K-1, enter the name, address, and identifying
number of the partnership.

If a married couple each had an interest in the partnership,
prepare a separate Schedule K-1 for each of them.

Item C. If the partnership is filing its return electronically, enter
“e-file.” Otherwise, enter the name of the IRS Service Center
where the partnership will file its return. See Where To File,
earlier.

How To Complete Schedule K-1

Part II. Information About the Partner

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In order to enable accurate scanning and processing of
Schedule(s) K-1, use a 10-point Helvetica Light
CAUTION Standard font for all entries on Schedules K-1 if the
entries are typed or made using a computer.

If the return is for a fiscal year or a short tax year, fill in the tax
year space at the top of each Schedule K-1. On each
Schedule K-1, enter the information about the partnership and
the partner in Parts I and II (items A through N). In Part III, enter
the partner's distributive share of each item of income,
deduction, and credit and any other information the partner
needs to file the partner's tax return, including information
needed to prepare state and local tax returns.

Codes. In box 11 and boxes 13 through 15, and 17 through 20,
identify each item by entering a code in the column to the left of
the entry space for the dollar amount. These codes are identified
in these instructions and on the List of Codes in the Partner’s
Instructions for Schedule K-1 (Form 1065).

Attached statements. When attaching statements to
Schedule K-1 to report additional information to the partner,
indicate there's a statement for the following.
• If an amount can be input on Schedule K-1 but additional
information is required, enter an asterisk (*) after the code in the
column to the left of the entry space.
• For items that can't be reported as a single dollar amount,
enter the code and an asterisk (*) in the column to the left and
enter “STMT” in the right column to indicate that the information
is provided on an attached statement.
• If the partnership has more coded items than the number of
entry boxes (for example, box 11, boxes 13 through 15, or boxes
17 through 20), don't enter a code or dollar amount in the last
entry box. Instead, enter an asterisk (*) in the left column and
enter “STMT” in the entry space to the right.
More than one attached statement can be placed on the
same sheet of paper. The information included in the statement
should be identified in alphanumeric order by box number
followed by the letter code (if any), description, and dollar
amount for each item. For example: “Box 13, code J—Section
59(e)(2) expenditures—$1,000.” This can be followed with any
additional information the partner needs to determine the proper
tax treatment of the item.

Section 721(c) partnerships. When the gain deferral method,
as described in Regulations section 1.721(c)-3, is being applied,
a partnership that is a section 721(c) partnership will attach to
the Schedule K-1 provided to a U.S. transferor the information
required under Regulations sections 1.721(c)-6(b)(2) and (3). A
partnership that is a section 721(c) partnership will also attach to
its Form 1065 a Schedule K-1 for each partner that is a related
foreign person with respect to the U.S. transferor. For an indirect
partner that is a related foreign person with respect to the U.S.
transferor, the Schedule K-1 will only include relevant information
with respect to section 721(c) property. See Regulations section
1.721(c)-1 for definitions.

Complete a Schedule K-1 for each partner. On each
Schedule K-1, enter the partner's name, address, identifying
number, and distributive share items. See special rules below for
partners that are DEs.

Items E and F

For an individual partner, enter the partner's SSN or individual
taxpayer identification number (ITIN) rather than the TIN of the
DE partner. For all other partners, enter the partner's EIN.

However, if a partner is an IRA, enter the identifying number
of the custodian of the IRA. Don't enter the identification number
of the person for whom the IRA is maintained. If the partnership
reports unrelated business taxable income (UBTI) to such IRA
partner, include the IRA partner's unique EIN in box 20, code
AR, along with the amount of such income.

Note. For tax year 2024, PTPs aren't required to include the IRA
partner’s unique EIN in box 20, code AR.

Don’t include dashes when entering the EIN in box 20.

CAUTION

Foreign partners without a U.S. identifying number should be
notified by the partnership of the necessity of obtaining a U.S.
identifying number. Certain aliens who aren't eligible to obtain
SSNs can apply for an ITIN on Form W-7, Application for IRS
Individual Taxpayer Identification Number.

If the partner in the partnership is an entity, such as a
single-member LLC, that is a DE for federal income tax
purposes, enter the TIN of the beneficial owner of the DE partner
in item E rather than the TIN of the DE partner. The beneficial
owner is the taxpayer who owns the DE partner. In item F, enter
the name and address of the beneficial owner of the DE partner.
See the instructions for item H2 below.
Note. If the partner is an LLC or a trust, the partnership should
inquire as to whether the LLC is a DE for federal income tax
purposes. If the LLC or trust is a DE, the partnership must verify
that the partner's TIN is the TIN used by the partner's beneficial
owner in filing its federal income tax return.
Truncating recipient’s TIN on Schedule K-1. The partnership
can truncate a partner's identifying number on the Schedule K-1
the partnership sends to the partner. Truncation isn't allowed on
the Schedule K-1 the partnership files with the IRS. Also, the
partnership can't truncate its own identification number on any
form.
To truncate, where allowed, replace the first five digits of the
nine-digit number with asterisks (*) or Xs (for example, an SSN
xxx-xx-xxxx would appear as ***-**-xxxx or XXX-XX-xxxx). For
more information, see Regulations section 301.6109-4.
Foreign address. If the partner has a foreign address, enter the
information in the following order: city or town, state or province,
country, and ZIP or foreign postal code. Follow the country's
practice for entering the postal code. Don't abbreviate the
country name.
Instructions for Form 1065 (2024)

Item G

Complete item G on all Schedules K-1. If a partner holds
interests as both a general and limited partner, check both boxes
and attach a statement for each activity that shows the amounts
allocable to the partner's interest as a limited partner.

Item H1. Domestic/Foreign Partner

Check the Foreign partner box if the partner is a nonresident
alien individual, foreign partnership, foreign corporation, foreign
estate, foreign trust, or foreign government. Otherwise, check the
Domestic partner box.

percentages, the partnership may use a reasonable method in
arriving at each percentage for purposes of completing the items
required by item J, as long as such method is consistent with the
partnership agreement and is applied consistently from year to
year. Maintain records to support the share of profits, share of
losses, and share of capital reported for each partner.
If there is a decrease in the partner's share of profits, losses,
or capital, indicate whether it was due to a sale or an exchange.
Sale box. Check the Sale box in this item if there was a
taxable sale of all or part of a partnership interest to a new or
pre-existing partner during the year, regardless of whether the
partner recognized gain or loss on the transaction(s). “Sale,” for
the purposes of this checkbox, means a taxable transaction
involving the transfer of a partnership interest. This will exclude
transfers subject to gain recognition under section 721(b). This
will also exclude transactions where a new partnership interest is
issued to a partner in exchange for property contributed to the
partnership, even if some gain is recognized by the contributing
partner.
Exchange box. Check the Exchange box in this item if there
was a nontaxable exchange of all or part of a partnership interest
to a new or pre-existing partner during the year. “Exchange,” for
purposes of this checkbox, means a nontaxable transaction
involving the transfer of a partnership interest excluding a
transfer on the death of a partner. Exchange also includes a
transaction under section 721(a) regardless of whether gain
recognition took place.

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Item H2. Disregarded Entity (DE)

If the partner is a DE, check the box and provide the name and
TIN of the DE partner. The partnership should make reasonable
attempts to obtain the DE’s TIN. If after making reasonable
attempts to obtain the DE’s TIN such TIN is unavailable or
unknown to the partnership, the partnership may report the DE’s
TIN as unknown. If the DE doesn't have a TIN, enter “None” in
the space for the DE’s TIN. For more information about DE
reporting, go to IRS.gov/forms-pubs/clarifications-fordisregarded-entity-reporting-and-section-743b-reporting.

Item I1. What Type of Entity Is This Partner?

State whether the partner is an individual, a corporation, an
estate, a trust, a partnership, a DE, an exempt organization, a
foreign government, or a nominee (custodian). If the partner is
an LLC and has elected to be treated as other than a DE under
Regulations section 301.7701-3 for federal income tax purposes,
the partnership must enter the LLC's classification for federal
income tax purposes (that is, a corporation or partnership). If any
legal owner of the partnership is a DE for federal income tax
purposes, report the beneficial owner’s entity type in item I1. If
the partner is a nominee, use one of the following codes after the
word “nominee” to indicate the type of entity the nominee
represents: I—Individual; C—Corporation; F—Estate or Trust;
P—Partnership; DE—Disregarded Entity; E—Exempt
Organization; IRA—Individual Retirement Arrangement; or
FGOV—Foreign Government. If the partner is a nominee that
acts on behalf of more than one person, use code M—Multiple.

Item J. Partner’s Profit, Loss, and Capital

On each line, enter the partner's percentage share of the
partnership's profit, loss, and capital as of the beginning and end
of the partnership's tax year, as determined under the
partnership agreement. If a partner's interest commences after
the beginning of the partnership's tax year, enter in the
Beginning column the percentages that existed for the partner
immediately after admission. If a partner's interest terminates
before the end of the partnership's tax year, enter in the Ending
column the percentages that existed immediately before
termination.
On the line for Capital, enter the percentage share of the
capital that the partner would receive if the partnership was
liquidated by the distribution of undivided interests in partnership
assets and liabilities. If the partner's capital account is negative
or zero, express the percentage ownership of capital as zero.
The partner's percentage share of each category must be
expressed as a percentage. The percentage must not be
negative. The total percentage interest in each category must
total 100% for all partners. To determine whether the total
beginning and ending percentages are 100%, don't include the
beginning percentage for a partner that wasn't a partner at the
beginning of the partnership's tax year or the ending percentage
for a partner that left the partnership before the end of the
partnership's tax year. If the partnership agreement doesn't
express the partner's share of profit, loss, and capital as fixed
Instructions for Form 1065 (2024)

Item K1. Partner's Share of Liabilities

Enter each partner's share of nonrecourse liabilities,
partnership-level qualified nonrecourse financing, and other
recourse liabilities at the end of the year.

Nonrecourse liabilities are those liabilities of the partnership
for which no partner (or related person) bears the economic risk
of loss. The extent to which a partner bears the economic risk of
loss is determined under the rules of Regulations section
1.752-2. Don't include partnership-level qualified nonrecourse
financing (defined below) on the line for nonrecourse liabilities.
If the partner terminated their interest in the partnership
during the year, enter the share that existed immediately before
the total disposition. In all other cases, enter it as of the end of
the year.

If the partnership is engaged in two or more different types of
at-risk activities, or a combination of at-risk activities and any
other activity, attach a statement showing the partner's share of
nonrecourse liabilities, partnership-level qualified nonrecourse
financing, and other recourse liabilities for each activity. See
Pub. 925 to determine if the partnership is engaged in more than
one at-risk activity.
The at-risk rules of section 465 generally apply to any activity
carried on by the partnership as a trade or business or for the
production of income. These rules generally limit the amount of
loss and other deductions a partner can claim from any
partnership activity to the amount for which that partner is
considered at risk. However, for partners who acquired their
partnership interests before 1987, the at-risk rules don't apply to
losses from an activity of holding real property the partnership
placed in service before 1987. The activity of holding mineral
property doesn't qualify for this exception. Identify on an
attached statement to Schedule K-1 the amount of any losses
that aren't subject to the at-risk rules.
If a partnership is engaged in an activity subject to the
limitations of section 465(c)(1) (such as films or videotapes,
leasing section 1245 property, farming, or oil and gas property),
give each partner their share of the total pre-1976 losses from
that activity for which there existed a corresponding amount of
35

nonrecourse liability at the end of each year in which the losses
occurred. See Form 6198, At-Risk Limitations, and related
instructions for more information.
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 that is
borrowed from a qualified person. Qualified persons include any
person actively and regularly engaged in the business of lending
money, such as a bank or savings and loan association.
Qualified persons generally don't include related parties (unless
the nonrecourse financing is commercially reasonable and on
substantially the same terms as loans involving unrelated
persons), the seller of the property, or a person who receives a
fee for the partnership's investment in the real property. See
section 465(b)(6) for more information on qualified nonrecourse
financing.

in its partnership interest (without regard to partnership
liabilities), taking into account the rules and principles of sections
705, 722, 733, and 742 and by reporting the amount on the line
for other increase (decrease). The partner's ending capital
account as reported using the tax-basis method in item L might
not equal the partner's adjusted tax basis in its partnership
interest. Generally, this is because a partner's adjusted tax basis
in its partnership interest includes the partner's share of
partnership liabilities, as well as partner-specific adjustments.
Each partner is responsible for maintaining a record of the
adjusted tax basis in its partnership interest.
Beginning capital account. Enter the partner's ending
capital account as determined for last year on the line for
beginning capital account. If a partner joined the partnership
through a contribution to the partnership this year, enter zero as
the partner's beginning capital account.
Capital contributed during the year. On the line for capital
contributed during the year, enter the amount of cash plus the
adjusted tax basis of all property contributed by the partner to
the partnership during the year. The amount you enter on this
line should be reduced by any liabilities assumed by the
partnership in connection with, or liabilities to which the property
is subject immediately before, the contribution. This amount
might be negative.
Current year net income (loss). On the line for current year
net income (loss), enter the partner's distributive share of
partnership income and gain (including tax-exempt income) as
figured for tax purposes for the year, minus the partner's
distributive share of partnership loss and deductions (including
nondeductible, noncapital expenditures) as figured for tax
purposes for the year.
Other increase (decrease). On the line for other increase
(decrease), enter the sum of all other increases or decreases
that affected the partner's capital account for tax purposes
during the year and attach a statement explaining each
adjustment. For example, if a new partner acquired its interest in
the partnership from another partner in a purchase, exchange,
gift, or inheritance, enter an amount for the transferee under
other increase that is equal to the transferor partner's ending
capital account with respect to the interest transferred
immediately before the transfer figured using the tax-basis
method. Other examples of increases include the following.
• The partner's distributive share of the excess of the tax
deductions for depletion (other than oil and gas depletion) over
the adjusted tax basis of the property subject to depletion.
• The partner's share of any increase to the adjusted tax basis
of partnership property under section 734(b).
If a transferor partner disposed of its interest in the
partnership by sale, exchange, or gift, or as the result of death,
enter the transferor partner's ending capital account with respect
to the interest transferred immediately before the transfer figured
using the tax-basis method. Other examples of decreases
include the following.
• The partner's distributive share of tax deductions for depletion
of any partnership oil and gas property, but not exceeding the
partner's share of the adjusted tax basis of that property.
• The partner's share of any decrease to the adjusted tax basis
of partnership property under section 734(b).

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The partner as well as the partnership must meet the qualified
nonrecourse rules. Therefore, the partnership must enter on an
attached statement any other information the partner needs to
determine if the qualified nonrecourse rules are also met at the
partner level.

Item K2

If a partnership (upper-tier) owns a direct interest in other
partnerships (lower-tier), then Regulations section 1.752-4(a)
requires that the upper-tier partnership allocate to its partners its
share of the lower-tier partnership's liabilities (except for any
liability of the lower-tier partnership that is owed to the upper-tier
partnership). Allocate those lower-tier partnership liabilities to
each partner based on whether that liability is a recourse or
nonrecourse liability to the partner under the regulations under
section 752. The characterization of a liability may change as it
moves from a lower-tier partnership to an upper-tier partnership.
If Schedule K-1 (Form 1065) includes lower-tier partnership
liabilities, check the box in item K2. If the total liabilities on all
Schedules K-1 (Form 1065) don't equal the total liabilities on
Schedule L, attach a reconciliation.

Item K3. Payment Obligations Including
Guarantees and Deficit Restoration Obligations
(DROs)

Check the box in item K3 if the partner or a related person has
certain payment obligations, including guarantees or DROs, with
respect to any liability in item K1. See the instructions for
line 20c, code X, for additional information. For purposes of item
K3, a payment obligation is defined as an obligation under
Regulations section 1.752-2(b)(1) that is recognized under
Regulations sections 1.752-2(b)(3)(i)(A) and (B) (such as a
recognized guarantee or an obligation to restore a deficit capital
account upon liquidation), and a related person is defined as a
related person as defined in Regulations section 1.752-4(b).

Item L. Partner's Capital Account Analysis

You aren’t required to complete item L if the answer to question 4
of Schedule B is “Yes.” If you're required to complete this item,
also see the instructions for Schedule M-2, later.

Tax-basis method. Figure each partner's capital account for
the partnership's tax year using the transactional approach,
discussed below, for the tax-basis method.
How to report partnership events or transactions. If
you're uncertain how to report a partnership event or transaction,
you should account for the event or transaction in a manner
generally consistent with figuring the partner's adjusted tax basis
36

Note. Section 743(b) basis adjustments aren't taken into
account in calculating a partner's capital account under the
tax-basis method.
Withdrawals and distributions. On the line for withdrawals
and distributions, enter the amount of cash plus the adjusted tax
basis of all property distributed by the partnership to the partner
during the year. The amount you enter on this line should be
reduced by any liabilities assumed by the partner in connection
with, or liabilities to which the property is subject immediately
before, the distribution. This amount might be negative.
Instructions for Form 1065 (2024)

Ending capital account. The sum of the amounts shown on
the lines in item L above the line for ending capital account must
equal the amount reported on the line for ending capital account.
A partner's ending capital account determined under the
tax-basis method may be negative if the sum of a partner's
losses and distributions exceeds the sum of the partner's
contributions and share of income.
Publicly traded partnerships (PTPs). In the case of a sale or
exchange of an interest in a PTP, you may determine a transferee
partner's beginning capital account by adjusting the partner's
beginning capital account to reflect the transferee partner's
purchase price of the interest rather than entering the transferor
partner's ending capital account. In making the adjustments, you
may use information required to be reported to you under
Temporary Regulations section 1.6031(c)-1T, and publicly
available trading price information.

all unrecognized section 704(c) gain or loss in partnership
property, including section 704(c) gain or loss arising from
revaluations of partnership property. See Notice 2019-66 for
more information.

Specific Instructions (Schedules K
and K-1, Part III, Except as Noted)

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Item M. Did the Partner Contribute Property
With a Built-in Gain or Loss?

Check the appropriate box to indicate whether the partner
contributed property with a built-in gain or loss during the tax
year. If “Yes,” attach a statement that contains the following
information.
• A description of each property the partner contributed.
• The date the property was contributed.
• The amount of the property's built-in gain or loss.
Exception. If a partner contributes more than 10 properties
with either a built-in gain or built-in loss on any date during the
tax year, the partnership isn't required to provide the required
information separately for each property contributed for that
date. Instead, the partnership can report the (a) number of
properties contributed on that date, (b) total amount of built-in
gain, and (c) total amount of built-in loss. Don't net the built-in
gains and built-in losses; instead, show the total built-in gain and
total built-in loss for all properties contributed on that date.

A property's built-in gain is the amount by which the FMV of
the property exceeds its adjusted tax basis at the time the
property is contributed to the partnership. A property's built-in
loss is the amount by which the FMV of the property is less than
its adjusted tax basis at the time the property is contributed to
the partnership. Partnerships are required to keep track of this
information; see Regulations section 1.704-3. This information is
also needed for purposes of allocating partnership items to
partners because income, gain, loss, and deductions related to
property contributed to the partnership by a partner must be
shared among the partners so as to take account of the variation
between the basis of the property to the partnership and its FMV
at the time of contribution. If the partnership distributes any
property (other than built-in gain property) to a partner that has
contributed built-in gain property to the partnership within the
last 7 years, it will need this information for the attached
statement required in the instructions for Schedule K, line 19b,
for distributions subject to section 737 (code B). If the
partnership distributes contributed property with a built-in gain or
loss to any partner other than the partner that contributed the
property and the date of the distribution is within 7 years of the
date the property was contributed to the partnership, it will need
this information for the attached statement required by the
instructions for line 20c of Schedule K for the precontribution
gain (loss) (code W).

Item N. Partner's Share of Net Unrecognized
Section 704(c) Gain or (Loss)

For item N, the partnership should report the partner's share of
net unrecognized section 704(c) gains or losses, both at the
beginning and at the end of the partnership's tax year. Solely for
purposes of completing item N, the section 704(c) gain or loss is
the partner's share of the net (net means aggregate or sum) of

Instructions for Form 1065 (2024)

These instructions refer to the lines on Schedule K and the
boxes on Schedule K-1.

Special Allocations

An item is specially allocated if it's allocated to a partner in a ratio
different from the ratio for sharing income or loss generally.
Report specially allocated ordinary gain (loss) on Schedule K,
line 11, and in box 11 of Schedule K-1. Report other specially
allocated items in the applicable boxes of the partner's
Schedule K-1, with the total amount on the applicable line of
Schedule K. See How Income Is Shared Among Partners,
earlier.
Example. A partnership has a long-term capital gain that is
specially allocated to a partner and a net long-term capital gain
reported on Schedule D (Form 1065), line 15, that must be
reported on Schedule K, line 9a. Because specially allocated
gains or losses aren't reported on Schedule D, the partnership
must report both the net long-term capital gain from Schedule D
and the specially allocated gain on Schedule K, line 9a. Box 9a
of Schedule K-1 for the partner must include both the specially
allocated gain and the partner's distributive share of the net
long-term capital gain from Schedule D.

Income (Loss)
Line 1. Ordinary Business Income (Loss)

Enter the amount from page 1, line 23. Enter the income (loss)
without reference to (a) the bases of the partners' interests in the
partnership, (b) the partners' at-risk limitations, or (c) the passive
activity limitations. These limitations, if applicable, are
determined at the partner level.
Line 1 shouldn't include rental activity income (loss) or
portfolio income (loss).
Schedule K-1. Enter each partner's distributive share of
ordinary business income (loss) in box 1 of Schedule K-1.
Identify on statements attached to Schedule K-1 any additional
information the partner needs to correctly apply the passive
activity limitations. For example, if the partnership has more than
one trade or business activity, identify on an attached statement
to Schedule K-1 the amount from each separate activity. See
Passive Activity Reporting Requirements, earlier.

Line 2. Net Rental Real Estate Income (Loss)
Enter the net income (loss) from rental real estate activities of the
partnership from Form 8825. Attach this form to Form 1065.
Schedule K-1. Enter each partner's distributive share of net
rental real estate income (loss) in box 2 of Schedule K-1. Identify
on statements attached to Schedule K-1 any additional
information the partner needs to correctly apply the passive
activity limitations. For example, if the partnership has more than
one rental real estate activity, identify the amount attributable to
each activity. Also, for example, identify certain items from any
rental real estate activities that may be subject to the
recharacterization rules. See Passive Activity Reporting
Requirements, earlier.
37

Line 3. Other Net Rental Income (Loss)
Enter on line 3a gross income from rental activities other than
those reported on Form 8825. Include on line 3a gain (loss) from
Form 4797, line 17, that is attributable to the sale, exchange, or
involuntary conversion of an asset used in a rental activity other
than a rental real estate activity.

Interest expense allocable to portfolio income is generally
investment interest expense reported on Schedule K, line 13c.
Report each partner's distributive share of interest expense
allocable to portfolio income in box 13 of Schedule K-1 using
code H.

Line 5. Interest Income

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Enter on line 3b the deductible expenses of the activity.
Attach a statement of these expenses to Form 1065.
Enter on line 3c the net income (loss).

See Rental Activities, earlier, and Pub. 925 for more
information on rental activities.

Schedule K-1. Enter each partner's distributive share of net
income (loss) from rental activities other than rental real estate
activities in box 3 of Schedule K-1. Identify on statements
attached to Schedule K-1 any additional information the partner
needs to correctly apply the passive activity limitations. For
example, if the partnership has more than one rental activity
reported in box 3, identify on an attached statement to
Schedule K-1 the amount from each activity. See Passive
Activity Reporting Requirements, earlier.

Line 4. Guaranteed Payments to Partners

Guaranteed payments are payments made by a partnership to a
partner that are determined without regard to the partnership's
income. Some examples of guaranteed payments to partners
include:
• Payments for salaries, health insurance, and interest
deducted by the partnership and reported on Form 1065,
page 1, line 10; Form 8825; or Schedule K, line 3b;
• Compensation deferred under a section 409A nonqualified
deferred compensation plan that doesn't meet the requirements
of section 409A reported on Schedule K, line 20c, code AI; and
• Payments the partnership must capitalize. See the
instructions for Form 1065, line 10.

Generally, amounts reported on line 4a as guaranteed
payment for services and line 4b as guaranteed payment for the
use of capital aren't considered to be related to a passive
activity. For example, guaranteed payments for personal
services paid to a partner would not be passive activity income.
Likewise, guaranteed payments for capital are treated as interest
for purposes of section 469 and are generally not passive activity
income.
A partnership must treat and report a transfer of

TIP partnership property to a partner in satisfaction of a

guaranteed payment as a sale or exchange, and not a
distribution. See Rev. Rul. 2007-40, 2007-25 I.R.B. 1426, for
more details.
Schedule K-1. Enter each partner's guaranteed payments for
services in box 4a and guaranteed payments for use of capital in
box 4b of Schedule K-1. Report each partner's total guaranteed
payments in box 4c of Schedule K-1.

Portfolio Income
See Portfolio Income, earlier, for a definition of portfolio income.
Don't reduce portfolio income by deductions allocated to it.
Report such deductions (other than interest expense) on
Schedule K, line 13e. Report each partner's distributive share of
deductions (other than interest) allocable to portfolio income in
box 13 of Schedule K-1 using code I or L.
38

Enter only taxable portfolio interest on this line. Taxable interest
is interest from all sources except interest exempt from tax and
interest on tax-free covenant bonds. Include interest income
from the credit to holders of tax credit bonds. See the
instructions for codes AP through AU under Line 15f. Other
Credits, later, and the Instructions for Form 8912, Credit to
Holders of Tax Credit Bonds, for details.

Schedule K-1. Enter each partner's distributive share of interest
income in box 5 of Schedule K-1. If the partnership is reporting
interest income from clean renewable energy bonds, attach a
statement to Schedule K-1 that shows each partner's distributive
share of interest income from this credit. Partners need this
information to properly adjust the bases of their interests in the
partnership.

Line 6a. Ordinary Dividends

Enter only taxable ordinary dividends on line 6a, including any
qualified dividends reported on line 6b. Don't include any
dividend equivalents reported on line 6c, or, to the extent
attributable to previously taxed earnings and profits (PTEP) in
annual PTEP accounts of the partnership, any distributions
received by the partnership from foreign corporations.

Note. The amount determined by the partnership based on its
annual PTEP accounts in determining the amount on line 6a
doesn't include the amount by which distributions are attributable
to PTEP in annual PTEP accounts of a direct or indirect partner.
Schedule K-1. Enter each partner's distributive share of
ordinary dividends in box 6a of Schedule K-1.

Line 6b. Qualified Dividends
Enter qualified dividends on line 6b. Except as provided below,
qualified dividends are dividends received from domestic
corporations and qualified foreign corporations. Don't include
any distributions received by the partnership from foreign
corporations to the extent that they are attributable to PTEP in
annual PTEP accounts of the partnership.
Note. The amount determined by the partnership based on its
annual PTEP accounts in determining the amount on line 6b
doesn't include the amount by which distributions are attributable
to PTEP in annual PTEP accounts of a direct or indirect partner.
Exceptions. The following dividends aren't qualified dividends.
• Dividends the partnership received on any share of stock held
for less than 61 days during the 121-day period that began 60
days before the ex-dividend date. When determining the number
of days the partnership held the stock, don't count certain days
during which the partnership's risk of loss was diminished. The
ex-dividend date is the first date following the declaration of a
dividend on which the purchaser of a stock isn't entitled to
receive the next dividend payment. When counting the number
of days the partnership held the stock, include the day the
partnership disposed of the stock but not the day the partnership
acquired it.
• Dividends attributable to periods totaling more than 366 days
that the partnership received on any share of preferred stock
held for less than 91 days during the 181-day period that began
Instructions for Form 1065 (2024)

90 days before the ex-dividend date. When determining the
number of days the partnership held the stock, don't count
certain days during which the partnership's risk of loss was
diminished. Preferred dividends attributable to periods totaling
less than 367 days are subject to the 61-day holding period rule
above.
• Dividends that relate to payments that the partnership is
obligated to make because of short sales or positions in
substantially similar or related property.
• Dividends paid by a RIC that aren't treated as qualified
dividend income under section 854.
• Dividends paid by a REIT that aren't treated as qualified
dividend income under section 857(c).
• Dividends from a corporation which first became a surrogate
foreign corporation (as defined in section 7874(a)(2)(B) after
December 22, 2017) other than a foreign corporation that is
treated as a domestic corporation under section 7874(b). See
section 1(h)(11)(C)(iii)(II).
See Pub. 550 for more details.

Schedule K-1. Enter each partner's distributive share of
royalties in box 7 of Schedule K-1.

Line 8. Net Short-Term Capital Gain (Loss)
Enter the gain (loss) that is portfolio income (loss) from
Schedule D (Form 1065), line 7.
Schedule K-1. Enter each partner's distributive share of net
short-term capital gain (loss) in box 8 of Schedule K-1.

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Qualified foreign corporation. A foreign corporation is a
qualified foreign corporation if it's:
1. Incorporated in a territory of the United States, or
2. Eligible for benefits of a comprehensive income tax treaty
with the United States that the Secretary determines is
satisfactory for this purpose and that includes an exchange of
information program. See Notice 2011-64, 2011-37 I.R.B. 231,
for details.
If the foreign corporation doesn't meet either (1) or (2) above,
then it may be treated as a qualified foreign corporation for any
dividend paid by the corporation if the stock associated with the
dividend paid is readily tradable on an established securities
market in the United States.
However, qualified dividends don't include dividends paid by
an entity that was a PFIC (defined in section 1297) in either the
tax year of the distribution or the preceding tax year.
See Notice 2004-71, 2004-45 I.R.B. 793, for more details.

Schedule K-1. Enter each partner's distributive share of
qualified dividends in box 6b of Schedule K-1.
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); section 245; or section 245A; or are hybrid dividends as
defined in section 245A(e)(4).

CAUTION

If any amounts from line 6b are from foreign sources, see
the Partnership Instructions for Schedules K-2 and K-3
for additional information.

Line 6c. Dividend Equivalents
Information on dividend equivalents, as described in section
871(m), is provided for persons that aren't 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. Enter the amount of dividend equivalents
as defined in section 871(m). See Regulations section 1.871-15
for additional information. For purposes of line 6c, include all
amounts that would be included as a dividend equivalent if the
amount were paid to a person subject to tax under section 871
or 881, even if the partner is a U.S. person.

Line 7. Royalties
Enter the royalties received by the partnership.

Instructions for Form 1065 (2024)

Line 9a. Net Long-Term Capital Gain (Loss)

Enter the gain or loss that is portfolio income (loss) from
Schedule D (Form 1065), line 15.

Schedule K-1. Enter each partner's distributive share of net
long-term capital gain (loss) in box 9a of Schedule K-1.

If any gain or loss from Schedule D, line 7 or 15, is from
the disposition of nondepreciable personal property
CAUTION used in a trade or business, it may not be treated as
portfolio income. Instead, report it on Schedule K, line 11, and
report each partner's distributive share in box 11 of
Schedule K-1 using code ZZ.

Line 9b. Collectibles (28%) Gain (Loss)

Figure the amount attributable to collectibles from the amount
reported on Schedule D (Form 1065), line 15. A collectibles gain
(loss) is any long-term gain or deductible long-term loss from the
sale or exchange of a collectible that is a capital asset.
Collectibles include works of art, rugs, antiques, metal (such
as gold, silver, or platinum bullion), gems, stamps, coins,
alcoholic beverages, and certain other tangible property.

Also, include gain (but not loss) from the sale or exchange of
an interest in a partnership or trust held for more than 1 year and
attributable to unrealized appreciation of collectibles. For details,
see Regulations section 1.1(h)-1. Also attach the statement
required under Regulations section 1.1(h)-1(e).
Schedule K-1. Report each partner's distributive share of the
collectibles (28%) gain (loss) in box 9b of Schedule K-1.

Line 9c. Unrecaptured Section 1250 Gain
The three types of unrecaptured section 1250 gain must be
reported separately on an attached statement to Form 1065.
From the sale or exchange of the partnership's business
assets. Figure this amount in Form 4797, Part III, for each
section 1250 property (except property for which gain is reported
using the installment method on Form 6252) for which you had
an entry in Form 4797, Part I. Subtract Form 4797, Part III,
line 26g, from the smaller of Form 4797, line 22 or line 24. Figure
the total of these amounts for all section 1250 properties.
Generally, the result is the partnership's unrecaptured section
1250 gain. However, if the partnership is reporting gain on the
installment method for a section 1250 property held more than 1
year, see the next paragraph.
The total unrecaptured section 1250 gain for an installment
sale of section 1250 property held more than 1 year is figured in
a manner similar to that used in the preceding paragraph.
However, the total unrecaptured section 1250 gain must be
allocated to the installment payments received from the sale. To
do so, the partnership must generally treat the gain allocable to
each installment payment as unrecaptured section 1250 gain
until all such gain has been used in full. Figure the unrecaptured
39

section 1250 gain for installment payments received during the
tax year as the smaller of (a) the amount from Form 6252, Part II,
line 26, or Part III, line 37 (whichever applies); or (b) the total
unrecaptured section 1250 gain for the sale reduced by all gain
reported in prior years (excluding section 1250 ordinary income
recapture).
If the partnership chose not to treat all of the gain from
payments received after May 6, 1997, and before August
CAUTION 24, 1999, as unrecaptured section 1250 gain, use only
the amount the partnership chose to treat as unrecaptured
section 1250 gain for those payments to reduce the total
unrecaptured section 1250 gain remaining to be reported for the
sale. See Regulations section 1.453-12.

Line 11. Other Income (Loss)
Enter any other item of income or loss not included on lines 1
through 10. Determine other income (loss) without regard to any
amount reported on line 6c. On the line to the left of the entry
space for line 11, identify the type of income. If there's more than
one type of income, attach a statement to Form 1065 that
separately identifies each type and amount of income for each of
the following categories. The codes needed for Schedule K-1
reporting are provided in the heading for each category below.

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From the sale or exchange of an interest in a partnership.
Also report as a separate amount any gain from the sale or
exchange of an interest in a partnership attributable to
unrecaptured section 1250 gain. See Regulations section
1.1(h)-1 and attach the statement required under Regulations
section 1.1(h)-1(e).

From an estate, trust, REIT, or RIC. If the partnership received
a Schedule K-1 or Form 1099-DIV from an estate, a trust, a REIT,
or a RIC reporting unrecaptured section 1250 gain, don't add it
to the partnership's own unrecaptured section 1250 gain.
Instead, report it as a separate amount. For example, if the
partnership received a Form 1099-DIV from a REIT with
unrecaptured section 1250 gain, report it as “Unrecaptured
section 1250 gain from a REIT.”
Schedule K-1. Report each partner's distributive share of
unrecaptured section 1250 gain from the sale or exchange of the
business assets in box 9c of Schedule K-1. If the partnership is
reporting unrecaptured section 1250 gain from an estate, a trust,
a REIT, or a RIC, or from the partnership's sale or exchange of
an interest in another partnership (as explained above), enter
“STMT” in box 9c and an asterisk (*) in the left column of the box,
and attach a statement that separately identifies the amount of
unrecaptured section 1250 gain from the following.
• The sale or exchange of the partnership's business assets.
• The sale or exchange of an interest in another partnership.
• An estate, a trust, a REIT, or a RIC.

CAUTION

If any amounts from line 9c are from foreign sources, see
the Partnership Instructions for Schedules K-2 and K-3
for additional information.

Line 10. Net Section 1231 Gain (Loss)
Enter the net section 1231 gain (loss) from Form 4797, Part I,
line 7.
Don't include net gain or loss from involuntary conversions
due to casualty or theft. Report net gain or loss from involuntary
conversions due to casualty or theft on Schedule K, line 11
(box 11, code B, of Schedule K-1). See the instructions for
line 11 on how to report net gain (loss) due to a casualty or theft.
Schedule K-1. Report each partner's distributive share of net
section 1231 gain (loss) in box 10 of Schedule K-1. If the
partnership has more than one rental, trade, or business activity,
identify on an attached statement to Schedule K-1 the amount of
section 1231 gain (loss) from each separate activity. See
Passive Activity Reporting Requirements, earlier.

CAUTION

If any amounts from line 10 are from foreign sources, see
the Partnership Instructions for Schedules K-2 and K-3
for additional information.

Other portfolio income (loss) (code A). Portfolio income not
reported on lines 5 through 10.
Report and identify other portfolio income or loss on an
attached statement for line 11.
For example, income reported to the partnership from a
REMIC, in which the partnership is a residual interest holder,
would be reported on an attached statement for line 11. If the
partnership holds a residual interest in a REMIC, report on the
attached statement for box 11 of Schedule K-1 the partner's
share of the following.
• Taxable income (net loss) from the REMIC (Schedules Q
(Form 1066), line 1b).
• Excess inclusion (Schedules Q (Form 1066), line 2c).
• Section 212 expenses (Schedules Q (Form 1066), line 3b).
Don't report these section 212 expense deductions related to
portfolio income on Schedules K and K-1.
Because Schedule Q (Form 1066) is a quarterly statement,
the partnership must follow the Schedule Q instructions to figure
the amounts to report to partners for the partnership's tax year.

Involuntary conversions (code B). Net gain (loss) from
involuntary conversions due to casualty or theft. The amount for
this line is shown on Form 4684, Casualties and Thefts,
Section B, Part II, line 38a, 38b, or 39.
Each partner's share must be entered on Schedule K-1. Give
each partner a schedule that shows the amounts to be reported
on the partner's Form 4684, Section B, Part II, 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, notify the partner. The partnership shouldn't complete
Form 4684 for this type of casualty or theft. Instead, each partner
will complete their own Form 4684.
Section 1256 contracts and straddles (code C). Report any
net gain or loss from section 1256 contracts from Form 6781,
Gains and Losses From Section 1256 Contracts and Straddles.

Mining exploration costs recapture (code D). Provide the
information partners need to recapture certain mining exploration
expenditures. See Regulations section 1.617-3.
Cancellation of debt (code E). If cancellation of debt is
reported to the partnership on Form 1099-C, report each
partner's distributive share in box 11 using code E. Amounts
related to forgiven PPP loans are disregarded for purposes of
this question.
Include the amount of income the partnership must

TIP recognize for a transfer of a partnership interest in

satisfaction of a partnership debt when the debt relieved
exceeds the FMV of the partnership interest. See section 108(e)
(8) for more information.
Section 743(b) positive income adjustments (code F). For
partnerships other than PTPs, report the partner's share of net
positive income resulting from all section 743(b) adjustments.
For purposes of code F, “net positive income from all section
743(b) adjustments” means the excess of all section 743(b)
adjustments allocated to the partner that increase the partner's
Instructions for Form 1065 (2024)

taxable income over all section 743(b) adjustments that
decrease the partner's taxable income. Attach a statement to
line 20, code U, showing each section 743(b) basis adjustment
making up the total and identify the assets to which it relates.
The partnership may group these section 743(b) basis
adjustments by asset category or description in cases where
multiple assets are affected. See the instructions for line 20,
code U.

the sale or exchange of qualified small business (QSB) stock (as
defined in the Instructions for Schedule D) that was deferred by
the partnership under section 1045 and reported on Form 8949
and/or Schedule D. See the Instructions for Schedule D, and the
Instructions for Form 8949 for more details. The partnership
makes the election for the section 1045 rollover on a timely filed
(including extensions) return for the year in which the sale
occurred. Corporate partners aren't eligible for the section 1045
rollover. Additional limitations apply at the partner level. Each
partner will determine if they qualify for the rollover. Report on an
attached statement to Schedule K-1 for each sale or exchange
(a) the name of the corporation that issued the QSB stock, (b)
the partner's 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) the partner's distributive share of gain from the sale
of the QSB stock, and (e) the partner's distributive share of the
gain that was deferred by the partnership under section 1045.
Only report these amounts on Schedule K-1; don’t include them
on Schedule K, line 11.

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Code G. Reserved for future use.

Section 951(a) income inclusions (code H). If the
partnership is a domestic partnership, enter any section 951(a)
income inclusions of the domestic partnership. A domestic
partnership may only have section 951(a) income inclusions with
respect to a foreign corporation and a tax year of the foreign
corporation that begins before January 25, 2022, if the domestic
partnership (a) doesn't apply Regulations sections 1.958-1(d)(1)
through (3) to such tax year to be treated as not owning stock of
the foreign corporation within the meaning of section 958(a) for
purposes of section 951, and (b) is a U.S. shareholder of the
foreign corporation during such tax year. A domestic partnership
doesn't have section 951(a) income inclusions with respect to a
foreign corporation for tax years of the foreign corporation that
begin on or after January 25, 2022, under Regulations section
1.958-1(d)(1). Additionally, if the partnership, domestic or
foreign, has a distributive share of section 951(a) income
inclusions of a lower-tier partnership, enter the partnership's
distributive share of the section 951(a) income inclusions. If the
partnership doesn't have a section 951(a) income inclusion with
respect to a foreign corporation stock of which it owns within the
meaning of section 958(a) and without regard to Regulations
section 1.958-1(d), see Schedule K-2, Part VI, for reporting of
information with respect to section 951(a) income inclusions of
certain partners with respect to the foreign corporation. Attach a
statement to the Schedule K-1 identifying the section 951(a)
income inclusions attributable to the sale or exchange by a CFC
of stock in another foreign corporation described in section
964(e)(4) or attributable to hybrid dividends of tiered
corporations under section 245A(e)(2).

Gain (loss) from disposition of oil, gas, geothermal, or other mineral properties (section 59(e)) (code I). Disposition of
an interest in oil, gas, geothermal, or other mineral properties.
Report the following information on an attached statement to
Schedule K-1.
• Description of the property.
• The partner's share of the amount realized on the sale,
exchange, or involuntary conversion of each property (FMV of
the property for any other disposition, such as a distribution).
• The partner's share of the partnership's adjusted basis in the
property (except for oil or gas properties).
• Total intangible drilling costs, development costs, and mining
exploration costs (section 59(e) expenditures) passed through to
the partner for the property.
See Regulations section 1.1254-5 for more information.
Recoveries of tax benefit items (code J). See section 111.
Gambling gains and losses (code K). Gambling gains and
losses subject to the limitations in section 165(d). Indicate on an
attached statement whether or not the partnership is in the trade
or business of gambling.
Any income, gain, or loss to the partnership from a distribution under section 751(b) (code L). When a partnership
makes a distribution and the partnership holds section 751
property, if any partner has any gain or loss under section
751(b), the partnership must report the net of all such gains or
losses.
Gain eligible for section 1045 rollover (replacement stock
purchased by partnership) (code M). Include only gain from
Instructions for Form 1065 (2024)

Gain eligible for section 1045 rollover (replacement stock
not purchased by the partnership) (code N). Include only
gain from the sale or exchange of QSB stock (as defined in the
Instructions for Schedule D) the partnership held for more than 6
months but that wasn't deferred by the partnership under section
1045. See the Instructions for Schedule D for more details. A
partner (other than a corporation) may be eligible to defer their
distributive share of this gain under section 1045 if the partner
purchases other QSB stock during the 60-day period that began
on the date the QSB stock was sold by the partnership.
Additional limitations apply at the partner level. Report on an
attached statement to Schedule K-1 for each sale or exchange
(a) the name of the corporation that issued the QSB stock, (b)
the partner's 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) the partner's distributive share of gain from the
sale of the QSB stock.

Gain from sale or exchange of QSB stock with section 1202
exclusion (code O). The section 1202 exclusion applies only to
QSB stock held by the partnership for more than 5 years.
Corporate partners aren't eligible for the section 1202 exclusion.
Additional limitations apply at the partner level. Report each
partner's share of section 1202 gain on Schedule K-1. Each
partner will determine if they qualify for the section 1202
exclusion. Report on an attached statement to Schedule K-1 for
each sale or exchange (a) the name of the corporation that
issued the QSB stock, (b) the partner's 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.
Gain or loss on disposition of farm recapture property and
other items to which section 1252 applies (code P). Gains
from the disposition of farm recapture property (see Form 4797)
and other items to which section 1252 applies.
Gain or loss on Fannie Mae or Freddie Mac qualified preferred stock (code Q). The partner's distributive share of the
partnership's 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). On an attached statement, show (a)
the gain or loss attributable to the sale or exchange of the
qualified preferred stock, (b) the date the stock was acquired by
the partnership, and (c) the date the stock was sold or
exchanged by the partnership. See Rev. Proc. 2008-64, 2008-47
I.R.B. 1195, for more information.
Specially allocated ordinary gain (loss) (code R).
Non-portfolio capital gain (loss) (code S). Any gain or loss
from Schedule D (Form 1065), line 7 or 15, that isn't portfolio
41

income (for example, gain or loss from the disposition of
nondepreciable personal property used in a trade or business).
Codes T through X. Reserved for future use.
Other (code ZZ). Any other information the partners need to
prepare their tax returns.
Schedule K-1. Enter each partner's distributive share of the
other income categories listed earlier in box 11 of Schedule K-1.
Enter the applicable code provided.
If the partnership has more than one trade or business or
rental activity, identify on an attached statement to Schedule K-1
the amount from each separate activity. See Passive Activity
Reporting Requirements, earlier.

partnership files its return. Don't attach the acknowledgment to
the partnership return, but keep it with the partnership's records.
Cash contributions of any amount must be supported by a
dated bank record or a written communication from the donee
showing the name of the donee organization, the date of the
contribution, and the amount of the contribution, for example, a
receipt.

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Deductions
Line 12. Section 179 Deduction

A partnership can elect to expense part or all of the cost of
certain property the partnership purchased during the tax year
for use in its trade or business (including certain rental activities,
if the renting of the property is the partnership’s trade or
business). See Pub. 946 for a definition of what kind of property
qualifies for the section 179 expense deduction and the
Instructions for Form 4562 for limitations on the amount of the
section 179 expense deduction.

Complete Part I of Form 4562 to figure the partnership's
section 179 expense deduction. The partnership doesn't take
the deduction itself but instead passes it through to the partners.
Attach Form 4562 to Form 1065 and show the total section 179
expense deduction on Schedule K, line 12.

Enter charitable cash contributions made during the tax year.
Attach a statement to Form 1065 that separately identifies the
partnership's contributions for each applicable code below. See
Limits on Deductions in Pub. 526, Charitable Contributions, for
information on adjusted gross income (AGI) limitations on
deductions for charitable contributions.

Cash contributions (60%) (code A). Enter cash contributions
subject to the 60% AGI limitation. Don’t include in the amount
reported using code A the cash contributions reported using
code G.
Cash contributions (30%) (code B). Enter cash contributions
subject to the 30% AGI limitation.
Schedule K-1. Report each partner's distributive share of cash
charitable contributions in box 13 of Schedule K-1 using code A
or B, as applicable.

Line 13b. Noncash Contributions

The partnership must reduce the basis of the asset by the
amount of the section 179 expense elected by the partnership,
even if a portion of that amount can't be passed through to its
partners that year and must be carried forward because of
limitations at the partnership level. Don't reduce the partnership's
basis in section 179 property to reflect any portion of the section
179 expense that is allocable to a partner that is a trust or estate.

No deduction is allowed for any contribution of $250 or more
unless the partnership obtains a written acknowledgment from
the charitable organization that describes the property
contributed and gives an estimate of the value of any goods or
services provided in return for the contribution. The
acknowledgment must be obtained by the due date (including
extensions) of the partnership return or, if earlier, the date the
partnership files its return. Don't attach the acknowledgment to
the partnership return but keep it with the partnership's records.
These rules apply in addition to the filing requirements for Form
8283, Noncash Charitable Contributions, described below.

Identify on an attached statement to Schedules K and K-1 the
cost of section 179 property placed in service during the year
that is a qualified enterprise zone property. See the Instructions
for Form 4562 for more details.

Attach a statement to Form 1065 that separately identifies the
partnership's contributions for each of applicable codes C
through F. See Limits on Deductions in Pub. 526 for information
on AGI limitations on deductions for charitable contributions.

See the instructions for Schedule K, line 20c, for sales or
other dispositions of property for which a section 179 deduction
has passed through to partners and for the recapture rules if the
business use of the property dropped to 50% or less.

Noncash contributions (50%) (code C). Enter noncash
contributions subject to the 50% AGI limitation.
Qualified conservation contributions. The AGI limit for
qualified conservation contributions under section 170(h) is
50%. The carryover period is 15 years. See section 170(b) and
Notice 2007-50, 2007-25 I.R.B. 1430, for details. Report
qualified conservation contributions with a 50% AGI limitation in
box 13 of Schedule K-1 using code C. Don't include in the
amount reported using code C the conservation contributions of
property used in agriculture or livestock production reported on
Schedule K-1 using code G. See Qualified Conservation
Contribution in Pub. 526 and Disallowance of deduction for
certain qualified conservation contributions by pass-through
entities in the Instructions for Form 8283.
Charitable contributions of food inventory. Attach a
statement to Schedule K-1 that shows the following.
• The partner's distributive share of the amount of the charitable
contributions made under section 170(e)(3) for qualified
inventory that was donated to charitable organizations for the
care of the ill, needy, and infants. The food must meet all the
quality and labeling standards imposed by federal, state, and
local laws and regulations. The amount of the charitable
contribution for donated food inventory is the lesser of (a) the
basis of the donated food plus one-half of the appreciation (gain

Schedule K-1. Report each partner's distributive share of the
section 179 expense deduction in box 12 of Schedule K-1. If the
partnership has more than one trade or business activity, identify
on an attached statement to Schedule K-1 the amount of section
179 deduction from each separate activity. See Passive Activity
Reporting Requirements, earlier.
Don't complete box 12 of Schedule K-1 for any partner that is
an estate or a trust; estates and trusts aren't eligible for the
section 179 expense deduction.

Line 13a. Cash Contributions
No deduction is allowed for any contribution of $250 or more
unless the partnership obtains a written acknowledgment from
the charitable organization that shows the amount of cash
contributed and gives an estimate of the value of any goods or
services provided in return for the contribution. The
acknowledgment must be obtained by the due date (including
extensions) of the partnership return or, if earlier, the date the
42

Instructions for Form 1065 (2024)

if the donated food was sold at FMV on the date of the gift), or
(b) twice the amount of basis of the donated food. A partnership
that doesn't account for inventories and isn't required to
capitalize indirect costs under section 263A may elect to treat
the basis of the donated food as equal to 25% of the FMV of the
food. See section 170(e)(3)(C) for more details.
• The partner's distributive share of the net income for the tax
year from the partnership's trades or businesses that made the
contribution of food inventory.

qualified conservation contribution is equal to or less than 2.5
times the sum of each ultimate member's relevant basis, then
any upper-tier partnership must still determine whether the
disallowance rule applies to its allocated portion of the qualified
conservation contribution. Subject to the three exceptions, if an
upper-tier partnership's allocated portion exceeds 2.5 times the
sum of each ultimate member's relevant basis, the contribution
isn’t treated as a qualified conservation contribution with respect
to the upper-tier partnership, any subsequent upper-tier
partnership or upper-tier S corporation, or any ultimate member.
No one may claim a deduction for the allocated portion
attributable to that upper-tier partnership.
If an upper-tier partnership's allocated portion is equal to or
less than 2.5 times the sum of each ultimate member's relevant
basis, then any subsequent upper-tier partnership or upper-tier S
corporation must still determine whether the disallowance rule
applies to its allocated portion.
In an attachment to each Schedule K-1 issued to a partner
that is an ultimate member, report the partner’s relevant basis. If
the Schedule K-1 is being issued to a partner that’s an upper-tier
partnership or upper-tier S corporation, the attachment should
include a list of the relevant basis of each ultimate member of the
upper-tier partnership or upper-tier S corporation. The
partnership should coordinate with each partner in calculating
relevant basis. See Qualified Conservation Contribution in Pub.
526 and Disallowance of deduction for certain qualified
conservation contributions by partnerships and S corporations in
the Instructions for Form 8283.

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Don’t include the amount of food inventory contributions
in the amount reported in box 13 of Schedule K-1 using
CAUTION code C. These contributions must be reported
separately on an attached statement because partners must
separately determine the limitations on the deduction.

Noncash contributions (30%) (code D). Enter noncash
contributions subject to the 30% AGI limitation.

Capital gain property to a 50% limit organization (30%)
(code E). Enter capital gain property contributions subject to
the 30% AGI limitation.
Capital gain property (20%) (code F). Enter capital gain
property contributions subject to the 20% AGI limitation.

Contributions of property. See Contributions of Property in
Pub. 526, and Pub. 561, Determining the Value of Donated
Property, for information on noncash contributions and
contributions of capital gain property. If the deduction claimed for
noncash contributions exceeds $500, complete Form 8283 and
attach it to Form 1065.
If the partnership made a qualified conservation contribution
under section 170(h), also include the FMV of the underlying
property before and after the donation, as well as the type of
legal interest contributed, and describe the conservation
purpose furthered by the donation. Give a copy of this
information to each partner.
If the partnership made a qualified conservation contribution
for the preservation of a historic structure, there are additional
requirements that may apply to obtain a charitable contribution
deduction. This deduction may be reduced if rehabilitation
credits were claimed for the historic structure. This deduction
may be denied if the partnership doesn't comply with section
170(f)(19). A $500 filing fee may apply to certain deductions over
$10,000. See the Instructions for Form 8283 and Pub. 526 for
details.
Subject to three exceptions, a charitable contribution by a
partnership (whether made directly or reported as an allocated
portion of a contribution of another partnership) isn't treated as a
qualified conservation contribution if the amount of such
contribution exceeds 2.5 times the sum of each ultimate
member's relevant basis (disallowance rule). See the
Instructions for Form 8283, Pub. 526, and Regulations sections
1.170A-14(j) through (n) for more details and information on the
three exceptions.
An “ultimate member” means, with respect to any partnership,
any partner (that is not itself a partnership or S corporation) or S
corporation shareholder that receives a distributive share or pro
rata share, directly or indirectly, of a qualified conservation
contribution. Thus, a partnership's ultimate members will be
partners holding a direct interest in the partnership, partners
holding an interest in an upper-tier partnership, or shareholders
in an upper-tier S corporation. An upper-tier partnership or
upper-tier S corporation is a partnership or S corporation that
doesn’t itself make the contribution, but instead receives an
allocated portion of a qualified conservation contribution from
another partnership.
If the disallowance rule doesn’t apply to the contributing
partnership because the amount of the contributing partnership's
Instructions for Form 1065 (2024)

Nondeductible contributions. Certain contributions made to
an organization conducting lobbying activities aren't deductible.
See section 170(f)(9) for more details. Also, see Contributions
You Can’t Deduct in Pub. 526 for more examples of
nondeductible contributions.

Contributions (100%) (code G). Use code G to report the
contributions below and, on an attached statement, provide the
following information.
Qualified conservation contributions of property used in
agriculture or livestock production. Enter qualified
conservation contributions of property used in agriculture or
livestock production. The contribution must be subject to a
restriction that the property remain available for such production.
See section 170(b)(1)(E)(iv) for details.
If the partnership is a qualified farmer or rancher (as defined
in section 170(b)(1)(E)(v)), show each partner's distributive
share of qualified conservation contributions of property used in
agriculture or livestock production. Partners will have to
separately determine whether they qualify for the 50% or 100%
AGI limitation for these contributions. Don't include the amounts
reported on the attached statement using code G in the amount
reported on Schedule K-1 for qualified conservation
contributions using code C.

Schedule K-1. Report each partner's distributive share of
noncash charitable contributions in box 13 of Schedule K-1
using codes C through F for each of the contribution categories
shown above. For code G items, report them by entering code G
with an asterisk (G*) and entering “STMT” in the dollar amount
entry space for box 13 and attach a statement that shows “Box
13, Code G” and the dollar amount of each type of deduction.
The partnership must attach a copy of its Form 8283 to the
Schedule K-1 of each partner receiving a distributive share of the
contribution deduction shown in its Form 8283, Section A or
Section B.

Line 13c. Investment Interest Expense (Code H)
Include on this line the interest properly allocable to debt on
property held for investment purposes. Property held for
43

investment includes property that produces income from
interest, dividends, annuities, or royalties not derived in the
ordinary course of a trade or business. Property held for
investment also includes property that produces gains not
derived in the ordinary course of a trade or business from the
disposition of property that produces those types of income or is
held for investment.
Investment interest expense doesn't include interest expense
allocable to a passive activity.

or incurred for oil and gas properties) for each type of
expenditure separately for each property.

Line 13e. Other Deductions
Enter deductions not included on lines 12, 13a, 13b, 13c, 13d(2),
and 21. On the line to the left of the entry space for this line,
identify the type of deduction. If there's more than one type of
deduction, attach a statement to Form 1065 that separately
identifies the type and amount of each deduction for the
following categories. The codes needed for Schedule K-1
reporting are provided for each category.

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Investment income and investment expenses other than
interest are reported on lines 20a and 20b, respectively. This
information is needed by partners to determine the investment
interest expense limitation (see Form 4952 for details).

Schedule K-1. Report each partner's distributive share of
investment interest expense in box 13 of Schedule K-1 using
code H.

Lines 13d(1) and 13d(2). Section 59(e)(2)
Expenditures (Code J)

Generally, section 59(e) allows each partner to make an election
to deduct their distributive share of the partnership's otherwise
deductible qualified expenditures ratably over 10 years (3 years
for circulation expenditures). The deduction is taken beginning
with the tax year in which the expenditures were made (or for
intangible drilling and development costs, over the 60-month
period beginning with the month in which such costs were paid
or incurred).
The term “qualified expenditures” includes only the following
types of expenditures paid or incurred during the tax year.
• Circulation expenditures.
• R&E expenditures.
• Intangible drilling and development costs.
• Mining exploration and development costs.

If a partner makes the election, these items aren't treated as
alternative minimum tax (AMT) tax preference items. Because
the partners are generally allowed to make this election, the
partnership can't deduct these amounts or include them as AMT
items on Schedule K-1. Instead, the partnership passes through
the information the partners need to figure their separate
deductions. On line 13d(1), enter the type of expenditures
claimed on line 13d(2). Enter on line 13d(2) the qualified
expenditures paid or incurred during the tax year for which an
election under section 59(e) may apply. Enter this amount for all
partners whether or not any partner makes an election under
section 59(e).
On an attached statement, identify the property for which the
expenditures were paid or incurred. If the expenditures were for
intangible drilling costs or development costs for oil and gas
properties, identify the month(s) in which the expenditures were
paid or incurred. If there's more than one type of expenditure or
more than one property, provide the amounts (and the months
paid or incurred if required) for each type of expenditure
separately for each property.
Schedule K-1. Report each partner's distributive share of
section 59(e) expenditures in box 13 of Schedule K-1 using code
J. Identify the following on an attached statement: (a) the type of
expenditure; (b) the property for which the expenditures are paid
or incurred; and (c) for oil and gas properties only, the month in
which intangible drilling costs and development costs were paid
or incurred. If there's more than one type of expenditure or the
expenditures are for more than one property, provide each
partner's distributive share of the amounts (and the months paid
44

Deductions—royalty income (code I). Enter deductions
related to royalty income.
Schedule K-1. Report each partner’s distributive share of
deductions related to royalty income.

Excess business interest expense (EBIE) (code K). If the
partnership is required to file Form 8990, it may determine it has
EBIE. If so, enter the amount from Form 8990, Part II, line 32, for
EBIE.
Schedule K-1. Provide the information each partner needs to
figure EBIE. In box 13, report the partner’s distributive share of
EBIE. If the partnership reports EBIE, the partner is required to
file Form 8990. The partner will enter the amount in Form 8990,
Schedule A, line 43, column (c). See the Instructions for Form
8990 for additional information.
Deductions—portfolio income (other) (code L). Enter any
other deductions related to portfolio income.
No deduction is allowed under section 212 for expenses
allocable to a convention, seminar, or similar meeting. Because
these expenses aren't deductible by partners, the partnership
doesn't report these expenses on Schedule K, line 13e. The
expenses are nondeductible and are reported as such on
Schedule K, line 18c, and in box 18 of Schedule K-1 using code
C.
Schedule K-1. In box 13, report the partner's distributive
share of deductions related to portfolio income that are reported
on Schedule K, line 13e, using code I (for deductions related to
royalty income) or L (for other deductions related to portfolio
income).

Amounts paid for medical insurance (code M). Enter
amounts paid during the tax year for insurance that constitutes
medical care for the partner (including the partner's spouse,
dependents, and children under age 27 who aren't dependents).
Educational assistance benefits (code N). Enter amounts
paid during the tax year for educational assistance benefits paid
to a partner.
Dependent care benefits (code O). Enter amounts paid
during the tax year for dependent care benefits paid on behalf of
each partner.
Preproductive period expenses (code P). If the partnership
is required to use an accrual method of accounting under section
447 or is prohibited from using the cash method under section
448(a)(3), it must capitalize these expenses. If the partnership is
permitted to use the cash method, enter the amount of
preproductive period expenses that qualify under section
263A(d). An election not to capitalize these expenses must be
made at the partner level. See Uniform Capitalization Rules in
Pub. 225.
Code Q. Reserved for future use.
Pensions and IRAs (code R). Enter the payments for a partner
to an IRA, a qualified plan, or a SEP or SIMPLE IRA plan. If a
qualified plan is a defined benefit plan, a partner's distributive
share of payments is determined in the same manner as the
Instructions for Form 1065 (2024)

partner’s distributive share of partnership taxable income. For a
defined benefit plan, attach to the Schedule K-1 for each partner
a statement showing the amount of benefit accrued for the tax
year.
Reforestation expense deduction (code S). The partnership
can elect to deduct a limited amount of its reforestation
expenditures paid or incurred during the tax year. The amount
the partnership can elect to deduct is limited to $10,000 for each
qualified timber property. See section 194(c) for a definition of
reforestation expenditures and qualified timber property. The
partnership must amortize over 84 months any amount not
deducted. See the instructions for Form 1065, page 1, line 21,
earlier. See Notice 2006-47, 2006-20 I.R.B. 892, for details on
making the election.
Schedule K-1. Enter the partner's distributive share of the
allowable reforestation expenses in box 13 of Schedule K-1
using code S, and attach a statement that provides a description
of the qualified timber property. If the partnership is electing to
deduct amounts from more than one qualified timber property,
provide a description and the amount for each property.

Contributions to a capital construction fund (CCF) (code
AA). Enter the amount of contributions made to a CCF. See
Pub. 595.
Penalty on early withdrawal of savings (code AB). Enter
any penalty on early withdrawal of savings not reported on
Schedule K, line 13c, because the partnership withdrew its time
savings deposit before its maturity.

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Codes T through U. Reserved for future use.

Section 743(b) negative income adjustments (code V). For
partnerships other than PTPs, report the partner’s share of net
negative income resulting from all section 743(b) adjustments.
For purposes of code V, “net negative income from all section
743(b) adjustments” means the excess of all section 743(b)
adjustments allocated to the partner that decrease partner
taxable income over all section 743(b) adjustments that increase
partner taxable income. Attach a statement for line 20, code U,
showing each section 743(b) basis adjustment making up the
total and identify the assets to which it relates. The partnership
may group these section 743(b) basis adjustments by asset
category or description in cases where multiple assets are
affected. See the instructions for line 20, code U.

Soil and water conservation (code W). Enter amounts for soil
and water conservation expenditures, and endangered species
recovery expenditures. See section 175.
Film, television, and theatrical production expenses (code
X). The partnership can elect to deduct certain costs of a
qualified film, television, or live theatrical production
commencing before January 1, 2026 (after December 31, 2015,
and before January 1, 2026, for a live theatrical production),
limited to $15 million of the aggregate production cost of the
production. There's a higher dollar limitation for productions in
certain areas. Provide a description of the film, television, or live
theatrical production on an attached statement. If the partnership
makes the election for more than one film, television, or live
theatrical production, attach a statement to Schedule K-1 that
shows each partner's distributive share of the qualified
expenditures separately for each production. The deduction is
subject to recapture under section 1245 if the election is
voluntarily revoked or the production fails to meet the
requirements for the deduction. See section 181 and the related
regulations for details.
Expenditures for removal of barriers (code Y). Enter
expenditures paid or incurred for the removal of architectural and
transportation barriers to the elderly and disabled that the
partnership has elected to treat as a current expense. See
section 190.
Itemized deductions (code Z). Enter amounts paid by the
partnership that would be allowed as itemized deductions on any
of the partners' income tax returns if they were paid directly by a
partner for the same purpose. Don't enter expenses related to
portfolio income or investment interest expense reported on
Schedule K, line 13b, on this line.

Instructions for Form 1065 (2024)

Interest expense allocated to debt-financed distributions
(code AC). See 2022 Pub. 535, Business Expenses, for more
information.

Interest expense on working interest in oil or gas (code
AD). Enter interest paid or accrued on debt properly allocable to
each general partner's share of a working interest in any oil or
gas property (if the partner's liability isn't limited). General
partners that didn't materially participate in the oil or gas activity
treat this interest as investment interest; for other general
partners, it's trade or business interest.
Deductions—portfolio income (code AE). Enter the amount
of deductions related to portfolio income which were formerly
deductible by individuals under section 67 subject to the 2% AGI
floor. For partners other than individuals, amounts that are
clearly and directly allocable to portfolio income (other than
investment interest expense and section 212 expenses from a
REMIC) can be deducted on those partners’ income tax returns.
Codes AF through AJ. Reserved for future use.

Other (code ZZ). Any other information the partners need to
prepare their tax returns.

Schedule K-1. Enter each partner's distributive share of the
deduction categories listed earlier in box 13 of Schedule K-1 or
provide the information required on an attached statement for
the deduction.
If the partnership has more than one trade or business
activity, identify on an attached statement to Schedule K-1 the
amount for each separate activity. See Passive Activity Reporting
Requirements, earlier.

Self-Employment
If the partnership is an options dealer or a commodities

TIP dealer, see section 1402(i) before completing lines 14a,

14b, and 14c, to determine the amount of any
adjustment that may have to be made to the amounts shown on
the Worksheet for Figuring Net Earnings (Loss) From
Self-Employment, later. If the partnership is engaged solely in
the operation of a group investment program, earnings from the
operation generally aren't self-employment earnings for either
general or limited partners.

General partners. General partners' net earnings (loss) from
self-employment don't include the following.
• Dividends on any shares of stock and interest on any bonds,
debentures, notes, etc., unless the dividends or interest are
received in the course of a trade or business, such as a dealer in
stocks or securities or interest on notes or accounts receivable.
• Rentals from real estate, except rentals of real estate held for
sale to customers in the course of a trade or business as a real
estate dealer or payments for rooms or space when significant
services are provided.
• Royalty income, except royalty income received in the course
of a trade or business.
See the Instructions for Schedule SE (Form 1040) for more
information.
Limited partners. Generally, a limited partner's share of
partnership income (loss) isn't included in net earnings (loss)
from self-employment. Limited partners treat as self-employment
45

Worksheet for Figuring Net Earnings (Loss) From Self-Employment
1a Ordinary business income (loss) (Schedule K, line 1)

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

b Net income (loss) from certain rental real estate activities (see instructions)
c Other net rental income (loss) (Schedule K, line 3c)

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

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

d Net loss from Form 4797, Part II, line 17, included on line 1a, above. Enter as a positive amount

. . . .

1a
1b
1c
1d

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e Combine lines 1a through 1d

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

Net gain from Form 4797, Part II, line 17, included on line 1a, above

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

3a Subtract line 2 from line 1e. If line 1e is a loss, increase the loss on line 1e by the amount on line 2
b Part of line 3a allocated to limited partners, estates, trusts, corporations, exempt organizations,
and IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. .

1e
2

. . . .

c Subtract line 3b from line 3a. If line 3a is a loss, reduce the loss on line 3a by the amount on line 3b. Include each general partner's
share of line 3c in box 14 of Schedule K-1 using code A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4a Guaranteed payments to partners (Schedule K, line 4c) derived from a trade or business as defined in
section 1402(c) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b Part of line 4a allocated to limited partners for other than services and to estates, trusts, corporations,
exempt organizations, and IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c Subtract line 4b from line 4a. Include each general partner's share and each limited partner's share of line 4c in box 14 of
Schedule K-1 using code A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

earnings only guaranteed payments for services they actually
rendered to, or on behalf of, the partnership to the extent that
those payments are payment for those services.
However, whether a partner qualifies as a limited partner for
purposes of self-employment tax depends on whether the
partner is considered a limited partner under section 1402(a)
(13).

Line 14a. Net Earnings (Loss) From
Self-Employment (Code A)

Use the Worksheet for Figuring Net Earnings (Loss) From
Self-Employment in these instructions.
Schedule K. Enter on line 14a the amount from line 5 of the
worksheet.
Schedule K-1. Don't complete this line for any partner that is an
estate, a trust, a corporation, an exempt organization, or an IRA.
Enter in box 14 of Schedule K-1 each individual general
partner's share of the combined amounts shown on the
worksheet, lines 3c and 4c; and each individual limited partner’s
share of the amount shown on the worksheet, line 4c, using code
A.

Line 14b. Gross Farming or Fishing Income (Code
B)
Enter on line 14b the partnership's gross farming or fishing
income from self-employment. Individual partners need this
amount to figure net earnings from self-employment under the
farm optional method on Schedule SE (Form 1040), Part II. Enter
each individual partner's distributive share in box 14 of
Schedule K-1 using code B.

. . . .

. . . . . . . . . . .

4c
5

individual partner's share in box 14 of Schedule K-1 using code
C.

Worksheet Instructions

Line 1b. Include on line 1b any part of the net income (loss)
from rental real estate activities from Schedule K, line 2, that is
from:
• Rentals of real estate held for sale to customers in the course
of a trade or business as a real estate dealer, or
• Rentals for which services were rendered to the occupants
(other than services usually or customarily rendered for the
rental of space for occupancy only). The supplying of maid
service is such a service, but the furnishing of heat and light; the
cleaning of public entrances, exits, stairways, and lobbies; and
trash collection, etc., aren't considered services rendered to the
occupants.
Line 3c. The distributive share of limited partners isn't earnings
from self-employment and isn't reported on this line.
Lines 3b and 4b. Allocate the amounts on these lines in the
same way Form 1065, page 1, line 23, is allocated to these
particular partners.

Line 4a. Include in the amount on line 4a any guaranteed
payments to partners reported on Schedule K, line 4c, and in
box 4c of Schedule K-1, and derived from a trade or business as
defined in section 1402(c). Also include other ordinary business
income and expense items (other than expense items subject to
separate limitations at the partner level, such as the section 179
expense deduction) reported on Schedules K and K-1 that are
used to figure self-employment earnings under section 1402.
Line 4c. Guaranteed payments to general partners and limited
partners for services provided to the partnership are net
earnings from self-employment and are reported on this line.

Line 14c. Gross Nonfarm Income (Code C)
Enter on line 14c the partnership's gross nonfarm income from
self-employment. Individual partners need this amount to figure
net earnings from self-employment under the nonfarm optional
method on Schedule SE (Form 1040), Part II. Enter each
46

Instructions for Form 1065 (2024)

Credits
Zero-Emission Nuclear Power Production Credit
(Code A)

Line 15b. Low-Income Housing Credit (Other)
(Code D)
Enter on line 15b any low-income housing credit not reported on
line 15a. This includes any credit reported to the partnership in
box 15 of Schedule K-1 using code D.

The Inflation Reduction Act of 2022 created section 45U, the
zero-emission nuclear power production credit, for electricity
produced at a qualified nuclear power facility and sold by the
taxpayer to an unrelated person in tax years beginning after
December 31, 2023, and before January 1, 2033. For more
information about the zero-emission nuclear power production
credit, see Form 7213, Part II, and the Instructions for Form
7213.

Schedule K-1. Report in box 15 of Schedule K-1 each partner's
distributive share of the low-income housing credit reported on
Schedule K, line 15b. Use code D to report credits attributable to
buildings placed in service after 2007. If the partnership has
credits from more than one rental activity, identify on an attached
statement to Schedule K-1 the amount for each separate activity.
See Passive Activity Reporting Requirements, earlier.

Schedule K-1. Report in box 15 of Schedule K-1 each partner's
distributive share of the zero-emission nuclear power production
credit reported on Schedule K, line 15f, using code A.

Line 15c. Qualified Rehabilitation Expenditures
(Rental Real Estate) (Code E)

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Credit for Production From Advanced Nuclear
Power Facilities (Code B)

Section 45J was enacted by section 1306 of the Energy Policy
Act of 2005, P.L. 109-58, title XIII, section 1306. The credit is
allowed only for qualifying electricity that the taxpayer produces
and sells to an unrelated person. For more information about the
credit for electricity produced from advanced nuclear power
facilities, see Form 7213, Part I, and the Instructions for Form
7213.

Schedule K-1 Report in box 15 of Schedule K-1 each partner's
distributive share of the credit for electricity produced from
advanced nuclear power facilities reported on Schedule K,
line 15f, using code B.

Low-Income Housing Credit

Section 42 provides a credit that can be claimed by owners of
low-income residential rental buildings. To qualify for this credit,
the partnership must file Form 8609, Low-Income Housing Credit
Allocation and Certification, separately with the IRS. Don't attach
Form 8609 to Form 1065. Complete and attach Form 8609-A,
Annual Statement for Low-Income Housing Credit; and Form
8586, Low-Income Housing Credit, to Form 1065.

Line 15a. Low-Income Housing Credit (Section
42(j)(5)) (Code C)
Enter on line 15a the total low-income housing credit for property
which a partnership is to be treated under section 42(j)(5) as the
taxpayer to which the low-income housing credit was allowed.
If the partnership invested in another partnership to which the
provisions of section 42(j)(5) apply, report on line 15a the credit
reported to the partnership in box 15 of Schedule K-1 (Form
1065), code C.
Schedule K-1. Report in box 15 of Schedule K-1 each partner's
distributive share of the low-income housing credit reported on
line 15a of Schedule K. Use code C to report credits attributable
to buildings placed in service after 2007. If the partnership has
credits from more than one rental activity, identify on an attached
statement to Schedule K-1 the amount for each separate activity.
See Passive Activity Reporting Requirements, earlier.

Enter on line 15c the total qualified rehabilitation expenditures
related to rental real estate activities of the partnership. See the
Instructions for Form 3468 for details on qualified rehabilitation
expenditures.

Schedule K-1. Report each partner's distributive share of
qualified rehabilitation expenditures related to rental real estate
activities in box 15 of Schedule K-1 using code E. Attach a
statement to Schedule K-1 that provides the information and the
partner's distributive share of the amounts the partner will need
to complete Form 3468, Part VII, lines 1d through 1k. See the
Instructions for Form 3468 for details. If the partnership has
expenditures from more than one rental real estate activity,
identify on an attached statement to Schedule K-1 the amount
for each separate activity. See Passive Activity Reporting
Requirements, earlier.

CAUTION

Qualified rehabilitation expenditures for property not
related to rental real estate activities must be reported in
box 20 using code D.

Line 15d. Other Rental Real Estate Credits (Code
F)
Enter on line 15d any other credit (other than credits reported on
lines 15a through 15c) related to rental real estate activities. On
the dotted line to the left of the entry space for line 15d, identify
the type of credit. If there's more than one type of credit, attach a
statement to Form 1065 that identifies the type and amount for
each credit. These credits may include any type of credit listed in
the instructions for line 15f.
Schedule K-1. Report in box 15 of Schedule K-1 each partner's
distributive share of other rental real estate credits using code F.
If you're reporting each partner's distributive share of only one
type of rental real estate credit under code F, enter the code with
an asterisk (F*) and the dollar amount in the entry space in
box 15 and attach a statement that shows “Box 15, Code F” and
the type of credit. If you're reporting multiple types of rental real
estate credits under code F, enter the code with an asterisk (F*)
and enter “STMT” in the entry space in box 15 and attach a
statement that shows “Box 15, Code F” and the types and dollar
amounts of the credits. If the partnership has credits from more
than one rental real estate activity, identify on the attached
statement the amount of each type of credit for each separate
activity. See Passive Activity Reporting Requirements, earlier.

Line 15e. Other Rental Credits (Code G)
Enter on line 15e any other credit (other than credits reported on
lines 15a through 15d) related to rental activities. On the dotted
Instructions for Form 1065 (2024)

line to the left of the entry space for line 15e, identify the type of
credit. If there's more than one type of credit, attach a statement
to Form 1065 that identifies the type and amount for each credit.
These credits may include any type of credit listed in the
instructions for line 15f.
Schedule K-1. Report in box 15 of Schedule K-1 each partner's
distributive share of other rental credits using code G. If you're
reporting each partner's distributive share of only one type of
rental credit under code G, enter the code with an asterisk (G*)
and the dollar amount in the entry space in box 15 and attach a
statement that shows “Box 15, Code G” and the type of credit. If
you're reporting multiple types of rental credits under code G,
enter the code with an asterisk (G*) and enter “STMT” in the
entry space in box 15 and attach a statement that shows “Box
15, Code G” and the types and dollar amounts of the credits. If
the partnership has credits from more than one rental activity,
identify on the attached statement the amount of each type of
credit for each separate activity. See Passive Activity Reporting
Requirements, earlier.

Unused investment credit from the qualifying advanced
coal project credit or qualifying gasification project credit
allocated from cooperatives (code P). See Form 3468.
Unused investment credit from the qualifying advanced energy project credit allocated from cooperatives (code Q).
See Form 3468.
Unused investment credit from the advanced manufacturing investment credit allocated from cooperatives (code
R). See Form 3468.

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Line 15f. Other Credits

Enter on line 15f any other credit, except credits or expenditures
shown or listed for lines 15a through 15e. If any of these credits
are attributable to rental activities, enter the amount on line 15d
or 15e. On the dotted line to the left of the entry space for
line 15f, identify the type of credit. If there's more than one type
of credit or if there are any credits subject to recapture, attach a
statement to Form 1065 that separately identifies each type and
amount of credit and credit recapture information for the
following categories. The codes needed for box 15 of
Schedule K-1 are provided in the headings of the following
categories.

Undistributed capital gains credit (code H). This credit
represents taxes paid on undistributed capital gains by a RIC or
a REIT. As a shareholder of a RIC or a REIT, the partnership will
receive notice of the amount of tax paid on undistributed capital
gains on Form 2439, Notice to Shareholder of Undistributed
Long-Term Capital Gains.

Unused investment credit from the clean electricity investment credit allocated from cooperatives (code S). See
Form 3468.
Unused investment credit from the energy credit allocated
from cooperatives (code T). See Form 3468.
Unused investment credit from the rehabilitation credit allocated from cooperatives (code U). See Form 3468.
Advanced manufacturing production credit (code V). See
Form 7207.
Clean electricity production credit (code W). See Form
7211.
Clean fuel production credit (code X). See Form 7218.

Clean hydrogen production credit (code Y). See Form 7210.
Orphan drug credit (code Z). Complete Form 8820 to figure
the credit, and attach it to Form 1065.
Enhanced oil recovery credit (code AA). See Form 8830.

Renewable electricity production credit (code AB). See
Rev. Proc. 2007-65, as modified by Announcement 2009-69 and
Announcement 2007-112, for a safe harbor method for allocating
the credit for wind energy production. Complete Form 8835 to
figure the credit. Attach a statement to Form 1065 and
Schedule K-1 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. Attach
Form 8835 to Form 1065.

Disabled access credit (code K). Complete Form 8826 to
figure the credit. Attach it to Form 1065.

Biodiesel, renewable diesel, or sustainable aviation fuels
credit (code AC). Complete Form 8864, if applicable, to figure
the credit, and attach it to Form 1065. If this credit includes the
small agri-biodiesel producer credit, identify on a statement
attached to Schedule K-1 (a) each partner's distributive share of
the small agri-biodiesel producer credit included in the total
credit allocated to the partner, (b) the number of gallons for
which the partnership claimed the small agri-biodiesel producer
credit, and (c) the partnership's productive capacity for
agri-biodiesel.

Empowerment zone employment credit (code L). Complete
Form 8844 to figure the credit. Attach it to Form 1065.

New markets credit (code AD). Complete Form 8874 to figure
the credit. Attach it to Form 1065.

Credit for increasing research activities (code M).
Complete Form 6765 to figure the credit. Attach it to Form 1065.

Credit for small employer pension plan startup costs (code
AE). Complete Form 8881, Part I, to figure the credit, and attach
it to Form 1065.

Biofuel producer credit (code I). Complete Form 6478, if
applicable, to figure the credit. Attach it to Form 1065. Include
any amount shown on Form 6478, line 2, in the partnership's
income on line 7. See section 40(f) for an election the
partnership can make to not have the credit apply.
Work opportunity credit (code J). Complete Form 5884 to
figure the credit. Attach it to Form 1065.

Note. The partnership should provide the information necessary
for the partner to determine whether the partnership is an eligible
small business under section 38(c)(5)(A). If the partner and the
partnership meet the requirements of section 38(c)(5)(A), the
research credit may be treated as a specified credit.
Credit for employer social security and Medicare taxes
paid on certain employee tips (code N). Complete Form
8846 to figure the credit. Attach it to Form 1065.
Backup withholding (code O). This credit is for backup
withholding on dividends, interest, and other types of income of
the partnership.
48

Credit for small employer auto-enrollment (code AF).
Complete Form 8881, Part II, to figure the credit, and attach it to
Form 1065.
Credit for small employer military spouse retirement plan
eligibility (code AG). Complete Form 8881, Part III, to figure
the credit, and attach it to Form 1065.
Credit for employer-provided childcare facilities and services (code AH). Complete Form 8882 to figure the credit, and
attach it to Form 1065.

Instructions for Form 1065 (2024)

Low sulfur diesel fuel production credit (code AI).
Complete Form 8896 to figure the credit, and attach it to Form
1065.
Qualified railroad track maintenance credit (code AJ).
Complete Form 8900 to figure the credit, and attach it to Form
1065.
Credit for oil and gas production from marginal wells (code
AK). See Form 8904.

Eligible credits from transferor(s) under section 6418
(code BC). Enter the total amount of eligible credits received
from transferor(s) included in column (f) of the partnership's
Form 3800, Part III, line 6. Also, enter the total of the
partnership's distributive share of all eligible credits received
from transferor(s) that were received from another pass-through
entity. See required statement below.
Partnership and S corporation pass-through entities that
transferred eligible credits from an unrelated person for
CAUTION cash under section 6418 must use Form 3800, Part III
and Part V (if applicable) to report such credits. See the
Instructions for Form 3800 for reporting and other requirements.

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Distilled spirits credit (code AL). See Form 8906.

Energy efficient home credit (code AM). See Form 8908.
Code AN. Reserved for future use.

Alternative fuel vehicle refueling property credit (code AO).
See Form 8911.
Clean renewable energy bond credit (code AP). See Form
8912. The amount of this credit (excluding any credits from other
partnerships, estates, and trusts) must also be reported as
interest income on Schedule K, line 5.

New clean renewable energy bond credit (code AQ). See
Form 8912. The amount of this credit (excluding any credits from
other partnerships, estates, and trusts) must also be reported as
interest income on Schedule K, line 5. In addition, the amount of
this credit must also be reported as a cash distribution on
Schedule K, line 19a.
Qualified energy conservation bond credit (code AR). See
Form 8912. The amount of this credit (excluding any credits from
other partnerships, estates, and trusts) must also be reported as
interest income on Schedule K, line 5. In addition, the amount of
this credit must also be reported as a cash distribution on
Schedule K, line 19a.
Qualified zone academy bond credit (code AS). See Form
8912. The amount of this credit (excluding any credits from other
partnerships, estates, and trusts) must also be reported as
interest income on Schedule K, line 5. In addition, the amount of
this credit must also be reported as a cash distribution on
Schedule K, line 19a.

Qualified school construction bond credit (code AT). See
Form 8912. The amount of this credit (excluding any credits from
other partnerships, estates, and trusts) must also be reported as
interest income on Schedule K, line 5. In addition, the amount of
this credit must also be reported as a cash distribution on
Schedule K, line 19a.
Build America bond credit (code AU). See Form 8912. The
amount of this credit (excluding any credits from other
partnerships, estates, and trusts) must also be reported as
interest income on Schedule K, line 5. In addition, the amount of
this credit must also be reported as a cash distribution on
Schedule K, line 19a.
Credit for employer differential wage payments (code AV).
See Form 8932.
Carbon oxide sequestration credit (code AW). See Form
8933, Part III, line 5.
Carbon oxide sequestration credit recapture (code AX).
See Form 8933, Part III, line 7. Enter as a negative number.
New clean vehicle credit (code AY). See Form 8936, Part II.
Qualified commercial clean vehicle credit (code AZ). See
Form 8936, Part V.
Credit for small employer health insurance premiums
(code BA). See Form 8941.
Employer credit for paid family and medical leave (code
BB). See Form 8994.
Instructions for Form 1065 (2024)

Schedule K-1. Report each partner's distributive share of all
eligible credits transferred from one or more unrelated
transferors pursuant to a transfer election under section 6418 in
box 15 of Schedule K-1 using code BC. This amount must
include the partner’s distributive share of all eligible credits from
transferors that were received from another pass-through entity.
Enter code BC with an asterisk (BC*) and enter “STMT” in the
dollar amount entry space for box 15. Attach a statement that
contains the following information.
• The partner’s distributive share amount of the eligible credits
received from transferor(s) reported in column (f) of the
partnership's Form 3800, Part III or Part V (if applicable).
• The name of the credit form of the applicable line of Part III or
Part V (if applicable).
• Source information for each eligible credit shown on Form
3800, Part III or Part V (if applicable), including:
1. The IRS-issued registration number for transfers in
column (b) of Part III or Part V, and
2. The transferor’s EIN in column (c) of Part III or Part V.
• If a partner’s distributive share includes an allocation of
eligible credits purchased by a lower-tier pass-through entity and
reported on Schedule K-1, you must provide the EIN of such
transferee partnership or S corporation and the source
information that was provided to you by such entity.
See the Instructions for Form 3800 for additional details.
Codes BD through BG. Reserved for future use.
Other (code ZZ). Any other information the partners need to
prepare their tax returns.
Section 6418 transfers of credits under section 48. If the
partnership has made an election under section 6418 to transfer
a portion of a general business credit determined under section
48 to an unrelated transferee, use code ZZ to report to the
partners their shares of the retained section 48 credit.
Section 6418 transfers of credits under section 48C. If
the partnership has made an election under section 6418 to
transfer a portion of a general business credit determined under
section 48C to an unrelated transferee, use code ZZ to report to
the partners their shares of the retained section 48C credit.
Section 6418 transfers of credits under section 48E. If
the partnership has made an election under section 6418 to
transfer a portion of a general business credit determined under
section 48E to an unrelated transferee, use code ZZ to report to
the partners their shares of the retained section 48E credit.
If a portion of a section 48, 48C, or 48E credit had been
transferred under section 6418, don’t use box 20, code
CAUTION E, to report the basis information for the partners’ shares
of the remaining credit(s).

Schedule K-1. Enter in box 15 of Schedule K-1 each partner's
distributive share of the credits listed above. See additional
Schedule K-1 reporting information provided in the instructions
above.
If the partnership has credits from more than one activity,
identify on an attached statement to Schedule K-1 the amount of
49

each type of credit for each separate activity. See Passive
Activity Reporting Requirements, earlier.

International Transactions
Line 16. International Transactions
If the partnership had items of international tax relevance, see
the instructions for Schedule K-2 (Form 1065) to determine if you
need to attach Schedules K-2 and K-3. If you satisfy the
domestic filing exception to filing Schedule K-3, you must
provide notification to the partner either through an attachment to
the Schedule K-1, or separately prior to filing Form 1065. If you
satisfy an exception to filing Schedule K-2, you may also attach a
statement to Form 1065 that states “Qualified for exception to
filing Schedule K-2.”

• For any other tangible property, use the 150% declining
balance method, switching to the straight line method the first tax
year it gives a larger deduction, over the property's AMT class
life. Use 12 years if the property has no class life.
See Pub. 946 for a table of class lives.

TIP

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Alternative Minimum Tax (AMT) Items

Lines 17a through 17f must be completed for all partners.

Enter items of income and deductions that are adjustments or
tax preference items for the AMT. See Form 6251, Alternative
Minimum Tax—Individuals; or Schedule I (Form 1041),
Alternative Minimum Tax—Estates and Trusts, to determine the
amounts to enter and for other information.

Don't include as a tax preference item any qualified
expenditures to which an election under section 59(e) may apply.
Instead, report these expenditures on Schedule K, line 13d(2).
Because these expenditures are subject to an election by each
partner, the partnership can't figure the amount of any tax
preference related to them. Instead, the partnership must pass
through to each partner in box 13, code J, of Schedule K-1 the
information needed to figure the deduction.
Schedule K-1. Report each partner's distributive share of
amounts reported on lines 17a through 17f (concerning AMT) in
box 17 of Schedule K-1 using codes A through F, respectively. If
the partnership is reporting items of income or deduction for oil,
gas, and geothermal properties, you may be required to identify
these items on a statement attached to Schedule K-1 (see Oil,
Gas, and Geothermal Properties Gross Income and Deductions,
later, for details). Also see the requirement for an attached
statement in the instructions for line 17f.

Line 17a. Post-1986 Depreciation Adjustment
(Code A)
Figure the adjustment for line 17a based only on tangible
property placed in service after 1986 (and tangible property
placed in service after July 31, 1986, and before 1987 for which
the partnership elected to use the General Depreciation
System). Don't make an adjustment for motion picture films,
videotapes, sound recordings, certain public utility property (as
defined in section 168(f)(2)), property depreciated under the
unit-of-production method (or any other method not expressed in
a term of years), qualified Indian reservation property, property
eligible for a special depreciation allowance, qualified
revitalization expenditures, or the section 179 expense
deduction.
For property placed in service before 1999, refigure
depreciation for the AMT as follows (using the same convention
used for the regular tax).
• For section 1250 property (generally, residential rental and
nonresidential real property), use the straight line method over
40 years.
• For tangible property (other than section 1250 property)
depreciated using the straight line method for the regular tax,
use the straight line method over the property's class life. Use 12
years if the property has no class life.
50

For property (except section 1250 property) placed in service
after 1998, refigure depreciation for the AMT only for property
depreciated for the regular tax using the 200% declining balance
method. For the AMT, use the 150% declining balance method,
switching to the straight line method the first tax year it gives a
larger deduction, and the same convention and recovery period
used for the regular tax. For section 1250 property, refigure
depreciation for the AMT using the straight line method, and the
same convention and recovery period used for regular tax.
Figure the adjustment by subtracting the AMT deduction for
depreciation from the regular tax deduction and enter the result
on line 17a. If the AMT deduction is more than the regular tax
deduction, enter the difference as a negative amount.
Depreciation capitalized to inventory must also be refigured
using the AMT rules. Include on this line the current year
adjustment to income, if any, resulting from the difference.

Line 17b. Adjusted Gain or Loss (Code B)

If the partnership disposed of any tangible property placed in
service after 1986 (or after July 31, 1986, if an election was
made to use the General Depreciation System), or if it disposed
of a certified pollution control facility placed in service after 1986,
refigure the gain or loss from the disposition using the adjusted
basis for the AMT. The property's adjusted basis for the AMT is
its cost or other basis minus all depreciation or amortization
deductions allowed or allowable for the AMT during the current
tax year and previous tax years. Enter on this line the difference
between the regular tax gain (loss) and the AMT gain (loss). If
the AMT gain is less than the regular tax gain, or the AMT loss is
more than the regular tax loss, or there's an AMT loss and a
regular tax gain, enter the difference as a negative amount.
If any part of the adjustment is allocable to net short-term
capital gain (loss), net long-term capital gain (loss), or net
section 1231 gain (loss), attach a statement that identifies the
amount of the adjustment allocable to each type of gain or loss.
For a net long-term capital gain (loss), also identify the
amount of the adjustment that is collectibles (28%) gain (loss).
For a net section 1231 gain (loss), also identify the amount of
adjustment that is unrecaptured section 1250 gain.

Line 17c. Depletion (Other Than Oil and Gas)
(Code C)
Don't include any depletion on oil and gas wells. The partners
must figure their oil and gas depletion deductions and
preference items separately under section 613A.
Refigure the depletion deduction under section 611 for mines,
wells (other than oil and gas wells), and other natural deposits
for the AMT. Percentage depletion is limited to 50% of the
taxable income from the property as figured under section
613(a), using only income and deductions for the AMT. Also, the
deduction is limited to the property's adjusted basis at the end of
the year as figured for the AMT. Figure this limit separately for
each property. When refiguring the property's adjusted basis,
take into account any AMT adjustments made this year or in
Instructions for Form 1065 (2024)

previous years that affect basis (other than the current year's
depletion).
Enter the difference between the regular tax and AMT
deduction. If the AMT deduction is greater, enter the difference
as a negative amount.

Oil, Gas, and Geothermal Properties—Gross
Income and Deductions

Schedule K-1. If you're reporting each partner's distributive
share of only one type of AMT item under code F, enter the code
with an asterisk (F*) and the dollar amount in the entry space in
box 17 and attach a statement that shows the type of AMT item.
If you're reporting multiple types of AMT items under code F,
enter the code with an asterisk (F*) and enter “STMT” in the
entry space in box 17 and attach a statement that shows the
dollar amount of each type of AMT item.

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Generally, the amounts to be entered on lines 17d and 17e are
only the income and deductions for oil, gas, and geothermal
properties that are used to figure the partnership's ordinary
income (loss) (Form 1065, line 23).

If there are any items of income or deductions for oil, gas, and
geothermal properties included in the amounts that are required
to be passed through separately to the partners on Schedule K-1
(items not reported in box 1 of Schedule K-1), give each partner
a statement that shows, for the box in which the income or
deduction is included, the amount of income or deductions
included in the total amount for that box. Don't include any of
these direct pass-through amounts on line 17d or 17e.
Figure the amounts for lines 17d and 17e separately for oil
and gas properties that aren't geothermal deposits and for all
properties that are geothermal deposits.
Give each partner a statement that shows the separate
amounts included in the computation of the amounts on lines
17d and 17e of Schedule K.

Line 17d. Oil, Gas, and Geothermal
Properties—Gross Income (Code D)

Enter the total amount of gross income (within the meaning of
section 613(a)) from all oil, gas, and geothermal properties
received or accrued during the tax year and included on page 1
of Form 1065.

Line 17e. Oil, Gas, and Geothermal
Properties—Deductions (Code E)
Enter any deductions allowed for the AMT that are allocable to
oil, gas, and geothermal properties.

Line 17f. Other AMT Items (Code F)
Attach a statement to Form 1065 and Schedule K-1 that shows
other items not shown on lines 17a through 17e that are
adjustments or tax preference items or that the partner needs to
complete Form 6251 or Schedule I (Form 1041). See these
forms and their instructions to determine the amount to enter.
Other AMT items include the following.

• Accelerated depreciation of real property under pre-1987

rules.
• Accelerated depreciation of leased personal property under
pre-1987 rules.
• Long-term contracts entered into after February 28, 1986.
Except for certain home construction contracts, the taxable
income from these contracts must be figured using the
percentage of completion method of accounting for the AMT.
• Losses from tax shelter farm activities. No loss from any tax
shelter farm activity is allowed for the AMT.
• Any information needed by certain corporate partners to figure
corporate AMT for tax years beginning after 2022, under section
55.
Instructions for Form 1065 (2024)

Other Information

Line 18a. Tax-Exempt Interest Income

Enter on line 18a tax-exempt interest income, including any
exempt-interest dividends received from a mutual fund or other
RIC.

Line 18b. Other Tax-Exempt Income

Enter on line 18b all income of the partnership exempt from tax
other than tax-exempt interest.
Tax-exempt income from transfer election. Enter the total
consideration received by the transferor partnership as a result
of a transfer election under section 6418. If the partnership is
allocated tax-exempt income from a pass-through entity (or
lower-tier pass-through entity) making a transfer election to
transfer its credits, include those amounts in code B as well.

Tax-exempt income from elective payment election. Enter
the amount from Form 1065, page 1, line 29. This is the total
amount of credits determined by the partnership for which an
elective payment election is being made.

PPP loan forgiveness reporting. Report tax-exempt income
resulting from the forgiveness of a PPP loan on this line. Attach a
statement to Form 1065 for each tax year in which the
partnership is applying the provisions of Rev. Proc. 2021-48,
section 3.01(1), (2), or (3). The statement should include the
following information for each PPP loan.
• The partnership’s name, address, and EIN.
• Which section(s) of Rev. Proc. 2021-48 the partnership is
applying: 3.01(1), (2), and/or (3).
• The amount of tax-exempt income from forgiveness of the
PPP loan that the partnership is treating as received or accrued
during the year.
• Whether forgiveness of the PPP loan has been granted as of
the date the return is filed.
A partnership that didn’t report tax-exempt income from a
PPP loan on its 2020 return may file an amended return or AAR
to apply the applicable provisions of Rev. Proc. 2021-48. A
partnership that reported tax-exempt income from a PPP loan on
its 2020 return, the timing of which corresponds to section
3.01(1), (2), or (3) of Rev. Proc. 2021-48, doesn't need to file an
amended return or AAR solely to attach the statement that is
described in the preceding paragraph.
As explained in section 3.03 of Rev. Proc. 2021-48, if a
partnership treats tax-exempt income resulting from a PPP loan
as received or accrued prior to when forgiveness of the PPP loan
is granted, and the amount of forgiveness granted is less than
the amount of tax-exempt income that was previously treated as
received or accrued, the partnership must make appropriate
required adjustments on an amended return or AAR, as
applicable, for the tax year in which the partnership treated the
tax-exempt income as received or accrued. The partnership
should attach a statement to that amended return or AAR that
includes the following information.
• The partnership’s name, address, and EIN.
• A statement that the partnership is making adjustments in
accordance with section 3.03 of Rev. Proc. 2021-48.

• The tax year in which tax-exempt income was originally
reported, the amount of tax-exempt income that was originally
reported in that tax year, and the amount of tax-exempt income
being adjusted on the amended return or AAR, as applicable.
Schedule K-1.
Tax-exempt income from transfer election. Include the
partner's distributive share of tax-exempt income allocated by
the transferor partnership related to proceeds received by the
partnership as a result of the partnership making a transfer
election to transfer its credits under section 6418. Also include
the partner's distributive share of allocations made to the
transferor partnership from a pass-through entity for which it was
a partner related to the pass-through entity (or lower-tier
pass-through entity) making a transfer election to transfer its
credits.
Tax-exempt income from elective payment election.
Include the partner's distributive share of tax-exempt income as
a result of the partnership making an elective payment election
under section 6417. Also include the partner's distributive share
of allocations to the partnership from a pass-through entity (or
lower-tier pass-through entity) that made an elective payment
election.

property, attach a statement to the distributee partner's
Schedule K-1 that provides 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. This is the net gain
(if any) that would have been recognized by the distributee
partner under section 704(c)(1)(B) if all the following property
had been distributed by the partnership to another partner. This
property includes all property contributed by the distributee
partner during the 7 years prior to the distribution and that is still
held by the partnership at the time of the distribution (see section
737).
For more information, see Recognition of Precontribution
Gain on Certain Partnership Distributions, earlier.

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Line 18c. Nondeductible Expenses

Enter on line 18c nondeductible expenses paid or incurred by
the partnership.
Payments made by transferee partnerships to eligible
taxpayers for the purchase of eligible credits as a result of a
transfer election under section 6418 are treated as
nondeductible expenses and are reported on this line. Don't
include separately stated deductions shown elsewhere on
Schedules K and K-1, capital expenditures, or items the
deduction for which is deferred to a later tax year.

Schedule K-1. Report in box 18 of Schedule K-1 each partner's
distributive share of amounts reported on lines 18a, 18b, and
18c of Schedule K (concerning items affecting partners' bases)
using codes A through C, respectively. Attach a statement to
Schedule K-1 for the amounts included on line 18b that are
exempt by reason of section 892, and describe the nature of the
income.

Line 19a. Distributions of Cash and Marketable
Securities (Code A)
If the amount on line 19a includes marketable securities treated
as money, state separately on an attached statement to
Schedules K and K-1 (a) the partnership's adjusted basis of
those securities immediately before the distribution, and (b) the
FMV of those securities on the date of distribution (excluding the
distributee partner's share of the gain on the securities
distributed to that partner).

Line 19b. Distributions of Other Property
Enter on line 19b the total distributions to each partner of
property not included on line 19a. In box 19 of Schedule K-1,
distributions of section 737 property will be reported separately
from other property. The codes used when reporting amounts
from line 19b in box 19 of Schedule K-1 are provided in the
headings for the following categories.
Distributions subject to section 737 (code B). 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
52

Other property (code C). Include all distributions of property
(other than money) not included on line 19a that aren't section
737 property. In figuring the amount of the distribution, use the
adjusted basis of the property to the partnership immediately
before the distribution, taking into account any adjustments
under sections 732(d), 734(b), or 743(b), as applicable. In
addition, attach a statement showing the adjusted basis and
FMV of each property distributed.

Schedule K-1. Report in box 19 each partner's distributive
share of the amount of money or marketable securities each
partner received or was deemed to receive on line 19a using
code A. If a statement is attached, enter an asterisk after the
code (A*) and “STMT” in the entry space, and attach the
required statement. For line 19b, report distributions subject to
section 737 in box 19 using code B with an asterisk (B*) and
“STMT” in the entry space, and attach the required statement.
For distributions of other property (other than money), report
each partner's distributive share of the amount in box 19 using
code C with an asterisk (C*) and “STMT” in the entry space, and
attach the required statement. Use the partnership's basis in the
distributed property (other than money) immediately before the
distribution, taking into account any adjustments under sections
732(d), 734(b), or 743(b), as applicable.

Lines 20a and 20b. Investment Income and
Expenses (Codes A and B)
Enter on line 20a the investment income included on
Schedule K, lines 5, 6a, 7, and 11. Don't include other portfolio
gains or losses on this line.
Investment income includes gross income from property held
for investment, the excess of net gain attributable to the
disposition of property held for investment over net capital gain
from the disposition of property held for investment, any net
capital gain from the disposition of property held for investment
that each partner elects to include in investment income under
section 163(d)(4)(B)(iii), and any qualified dividend income that
the partner elects to include in investment income. Generally,
investment income and investment expenses don't include any
income or expenses from a passive activity. See Regulations
section 1.469-2(f)(10) for exceptions.
Property subject to a net lease isn't treated as investment
property because it's subject to the passive loss rules. Don't
reduce investment income by losses from passive activities.
Enter investment expenses on line 20b. Investment expenses
are deductible expenses (other than interest) directly connected
with the production of investment income. See the instructions
for Form 4952 for more information.
Schedule K-1. Report each partner's distributive share of
amounts reported on lines 20a and 20b (investment income and
Instructions for Form 1065 (2024)

expenses) in box 20 of Schedule K-1 using codes A and B,
respectively.
If there are other items of investment income or expense
included in the amounts that are required to be passed through
separately to the partners on Schedule K-1, such as net
short-term capital gain or loss, net long-term capital gain or loss,
and other portfolio gains or losses, give each partner a
statement identifying these amounts.

If a partner's ownership interest in a building decreased

TIP because of a transaction at the partner level, the

partnership must provide the necessary information to
the partner to enable the partner to figure the recapture.
The disposal of a building or an interest therein will
generate a credit recapture unless it's reasonably
CAUTION expected that the building will continue to be operated
as a qualified low-income building for the remainder of the
building's compliance period.

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Line 20c. Other Items and Amounts

Report the following information on a statement attached to Form
1065. On Schedule K-1, enter the appropriate code in box 20 for
each information item followed by an asterisk in the left-hand
column of the entry space (for example, “C*”). In the right-hand
column, enter “STMT.” The codes are provided in the headings
of the following information categories.

Fuel tax credit information (code C). 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 fuel,
type of use, and the applicable credit per gallon. See Form 4136,
Credit for Federal Tax Paid on Fuels, for details.
Qualified rehabilitation expenditures (other than rental real
estate) (code D). Enter total qualified rehabilitation
expenditures from activities other than rental real estate
activities. See the Instructions for Form 3468 for details on
qualified rehabilitation expenditures.
Note. Report qualified rehabilitation expenditures related to
rental real estate activities on Schedule K, line 15c.
Schedule K-1. Report each partner's distributive share of
qualified rehabilitation expenditures related to activities other
than rental real estate activities in box 20 of Schedule K-1 using
code D. Attach a statement to Schedule K-1 that provides the
information and the partner's distributive share of the amounts
the partner will need to complete Form 3468, Part VII, lines 1d
through 1j. See the Instructions for Form 3468 for details. If the
partnership has expenditures from more than one activity,
identify on a statement attached to Schedule K-1 the amount for
each separate activity. See Passive Activity Reporting
Requirements, earlier.

Basis of energy property (code E). See the Instructions for
Form 3468 for details on basis of energy property. In box 20 of
Schedule K-1, enter code E followed by an asterisk (E*) and
enter “STMT” in the entry space for the dollar amount. Attach a
statement to Schedule K-1 that provides the information and the
partner's distributive share of the amounts the partner will need
to figure the amounts to report on Form 3468, Part VI, lines 1a,
3a, 3e, 5a, 5c, 5f, 5o, 7a, 7j, 9a, 9b, 11d, 11h, 13a, 15a, 17a,
17e, 19a, 21a, 23a, 23e, 25a, 25d, 25g, 25j, and 28a. See the
Instructions for Form 3468 for details.
This code and the partners’ distributive shares should
not include any investment credits for which a transfer
CAUTION election was made by the partnership under section
6418. See Other (code ZZ) under Line 15f. Other Credits, earlier.

Recapture of low-income housing credit (codes F and G).
If recapture of part or all of the low-income housing credit is
required because (a) the prior year qualified basis of a building
decreased, or (b) the partnership disposed of a building or part
of its interest in a building, see Form 8611, Recapture of
Low-Income Housing Credit. Complete Form 8611, lines 1
through 7, to determine the amount of credit to recapture. Use
code F on Schedule K-1 to report recapture of the low-income
housing credit from a section 42(j)(5) partnership. Use code G to
report recapture of any other low-income housing credit. See the
instructions for lines 15a and 15b, earlier, for more information.
Instructions for Form 1065 (2024)

See Form 8586, Form 8611, and section 42 for more
information.

Recapture of investment credit (code H). Complete and
attach Form 4255, Certain Credit Recapture, Excessive
Payments, and Penalties, when investment credit property is
disposed of, or it no longer qualifies for the credit, before the end
of the recapture period or the useful life applicable to the
property. State the type of property at the top of Form 4255, and
complete Part II, lines 2, 3, 4, 10, and 11, whether or not any
partner is subject to recapture of the credit.
Attach to each Schedule K-1 a separate statement providing
the information the partnership is required to show on Form
4255, but list only the partner's distributive share of the cost of
the property subject to recapture. Also indicate the lines of Form
4255 on which the partners should report these amounts.

Recapture of other credits (code I). On an attached
statement to Schedule K-1, provide any information partners will
need to report recapture of credits (other than recapture of
low-income housing and investment credits reported on
Schedule K-1 using codes F, G, and H). Examples of credits
reported using code I when subject to recapture include the
following.
• The new markets credit. See Form 8874 and Form 8874-B,
Notice of Recapture Event for New Markets Credit, for details.
• The credit for employer-provided childcare facilities and
services. See section 45F(d).
• The alternative motor vehicle credit. See section 30B(h)(8).
• The alternative fuel vehicle refueling property credit. See
section 30C(e)(5).
• The clean vehicle credit. See section 30D(f)(5).

Look-back interest—completed long-term contracts (code
J). If the partnership is closely held (defined in section 460(b)(4)
(C)) and it entered into any long-term contracts after February
28, 1986, that are accounted for under either the percentage of
completion-capitalized cost method or the percentage of
completion method, it must attach a statement to Form 1065
showing the information required in items (a) and (b) of Form
8697, Part II, lines 1 and 3. It must also report the amounts for
Part II, lines 1 and 3, to its partners. See the Instructions for Form
8697 for more information.
Look-back interest—income forecast method (code K). If
the partnership is closely held (defined in section 460(b)(4)(C))
and it depreciated certain property placed in service after
September 13, 1995, under the income forecast method, it must
attach to Form 1065 the information specified in the instructions
for Form 8866, line 2, for the 3rd and 10th tax years beginning
after the tax year the property was placed in service. It must also
report the line 2 amounts to its partners. See the Instructions for
Form 8866 for more details.
Dispositions of property with section 179 deductions
(code L). This represents gain or loss on the sale, exchange, or
other disposition of property for which a section 179 deduction
has been passed through to partners. The partnership must
provide all the following information related to such dispositions
(see the instructions for page 1, line 6, earlier).
• Description of the property.
53

• Date the property was acquired and placed in service.
• Date of the sale or other disposition of the property.
• The partner's share of the gross sales price or amount

realized.
• The partner's share of the cost or other basis plus expense of
sale (reduced as explained in the instructions for Form 4797,
line 21).
• The partner's share of the depreciation allowed or allowable,
determined as described in the instructions for Form 4797,
line 22, but excluding the section 179 deduction.
• The partner's share of the section 179 deduction (if any)
passed through for the property and the partnership's tax year(s)
in which the amount was passed through.
• If the disposition is due to a casualty or theft, a statement
indicating so, and any additional information needed by the
partner.
• For an installment sale, any information the partner needs to
complete Form 6252. The partnership must also separately
report the partner's share of all payments received for the
property in future tax years. (Installment payments received for
sales made in prior tax years should be reported in the same
manner used in prior tax years.) See the instructions for Form
6252 for details.

•
•
•
•

Description of property.
Date acquired.
Date property sold.
Selling price, including mortgages and other debts, not
including interest, whether stated or unstated.
• Mortgages, debts, and other liabilities the buyer assumed or
took the property subject to.
• Gross profit.
• Contract price.
• Gross profit percentage.
• Current year payments and deemed payments received
during the year, not including interest whether stated or unstated.
• Origination year payments and deemed payments received
during the year, not including interest whether stated or unstated.
• Prior year payments, not including interest whether stated or
unstated.
• Installment sale income.
• Character of the income—capital or ordinary.
See section 453A(c) for information on how to compute the
interest charge on the deferred tax liability. The section 453A
interest charge is reported on the Other taxes line of your tax
returns. See Interest on Deferred Tax in Pub. 537 for additional
details on how to compute the section 453A(c) interest.

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Recapture of section 179 deduction (code M). This amount
represents recapture of the section 179 deduction if business
use of the property dropped to 50% or less before the end of the
recapture period. If the business use of any property (placed in
service after 1986) for which a section 179 deduction was
passed through to partners dropped to 50% or less (for a reason
other than disposition), the partnership must provide all the
following information.
• The partner's distributive share of the original basis and
depreciation allowed or allowable (not including the section 179
deduction).
• The partner's distributive share of the section 179 deduction
(if any) passed through for the property and the partnership's tax
year(s) in which the amount was passed through.
See Regulations section 1.179-1(e) for details.

Business interest expense (BIE) (code N). The partnership
must determine the amount of deductible BIE included on other
lines of the Schedule K. Attach a statement to Schedule K
providing the allocation of the deductible BIE included on other
lines of Schedule K. EBIE isn't deductible BIE; therefore, don't
include it in this reported amount for tax years beginning after
November 12, 2020.
Schedule K-1. For tax years beginning after November 12,
2020, enter the partner's amount of deductible BIE for inclusion
in the separate loss class for computing any basis limitation
(defined in section 704(d) and Regulations section
1.163(j)-6(h)). Also attach a statement to Schedule K-1 providing
the allocation of the BIE already deducted by the partnership on
other lines of Schedule K-1 by line number. Don't include EBIE
reported in box 13, code K.
Section 453(l)(3) information (code O). Supply any
information needed by a partner to figure the interest due under
section 453(l)(3). If the partnership elected to report the
dispositions of certain timeshares and residential lots on the
installment method, each partner's tax liability must be increased
by the partner's distributive share of the interest on tax
attributable to the installment payments received during the tax
year.
Section 453A(c) information (code P). Supply any
information needed by a partner to figure the interest due under
section 453A(c); see Pub. 537, Installment Sales, for additional
information. This information must include the following from
each Form 6252 where the partner’s share of the selling price,
including mortgages and other debts, is greater than $150,000.
54

Section 1260(b) information (code Q). Supply any
information needed by a partner to figure the interest due under
section 1260(b). If the partnership had gain from certain
constructive ownership transactions, each partner's tax liability
must be increased by the partner's distributive share of interest
due on any deferral of gain recognition. See section 1260(b) for
details, including how to figure the interest.
Interest allocable to production expenditures (code R).
Supply any information needed by a partner to properly
capitalize interest as required by section 263A(f). See Section
263A uniform capitalization rules, earlier, for more information.

CCF nonqualified withdrawal (code S). Report nonqualified
withdrawals by the partnership from a CCF to partners. See Pub.
595.
Depletion information—oil and gas (code T). Report gross
income and other information relating to oil and gas well
properties to partners to allow them to figure the depletion
deduction for oil and gas well properties. Allocate to each
partner a proportionate share of the adjusted basis of each
partnership oil or gas property. See section 613A(c)(7)(D) for
details.
The partnership can't deduct depletion on oil and gas wells.
Each partner must determine the allowable amount to report on
their return. See 2022 Pub. 535 for more information.
Section 743(b) basis adjustment (code U). Report the total
section 743(b) adjustment net of any cost recovery as a single
amount for all asset categories for each partner. In addition,
attach a statement to the Schedule K-1 for this code showing the
amount of each remaining section 743(b) basis, net of cost
recovery by asset category. A reasonable grouping by asset
category may be used, but such grouping shouldn't be less
detailed than the asset categories listed on the Form 1065,
Schedule L, balance sheet. See IRS.gov/forms-pubs/
clarifications-for-disregarded-entity-reporting-and-section-743breporting for more information.
Unrelated business taxable income (UBTI) (code V). Report
any information a partner that is a tax-exempt organization may
need to figure its share of UBTI under section 512(a)(1) (but
excluding any modifications required by paragraphs (8) through
(15) of section 512(b)). Partners are required to notify the
partnership of their tax-exempt status. See Form 990-T, Exempt
Organization Business Income Tax Return; and Pub. 598, Tax on

Instructions for Form 1065 (2024)

Unrelated Business Income of Exempt Organizations, for more
information.
If the partner is an IRA, include the IRA partner's unique EIN
on line 20, code AR.
Note. For tax year 2024, PTPs aren’t required to include the IRA
partner’s unique EIN on line 20, code AR.
Precontribution gain (loss) (code W). If the partnership
distributed any section 704(c) property to any partner other than
the contributing partner, and the date of the distribution was
within 7 years of the date the section 704(c) property was
contributed to the partnership, the distribution must be treated as
if it were a sale by the contributing partner taking place on the
date of the distribution. Section 704(c) property is property that
had an FMV that was either greater or less than the contributing
partner's adjusted basis at the time the property was contributed
to the partnership. See Dispositions of Contributed Property,
earlier, for more information. If the partnership made such a
distribution during its tax year, attach a statement to the
contributing partner's Schedule K-1 that provides the following
information.
• The amount of the gain or loss that would have been allocated
to the contributing partner if the partnership had sold the section
704(c) property at its FMV at the time of the distribution. See
section 704(c)(1)(B) for details.
• The character of the gain or loss that would have resulted if
the partnership had sold the section 704(c) property to the
distributee partner.
Enter code W in box 20 of Schedule K-1 with an asterisk (W*)
and enter “STMT,” and attach the required statement.

share of recourse liabilities in item K1 of the Schedule K-1 for tax
Year 1. For tax Year 1, the partnership would enter $1,520 in
box 20 under code X as the aggregate ending balance of the
partner's or related person's payment obligations. On the
attached statement, the partnership would separately identify
each of the partner's or related person's payment obligations (for
example, $500 with respect to the partner's guarantee of PS
Liability 1, $1,000 with respect to the related person's guarantee
of PS Liability 2, and $20 with respect to the partner's DRO).

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Payment obligations including guarantees and deficit restoration obligations (DROs) (code X). If the box in item K3
is checked, in box 20 of Schedule K-1, enter code X followed by
an asterisk (X*) and enter “STMT” in the entry for dollar amount.
On the attached statement, provide the aggregate ending
balance of the partner's or related person's payment obligations
and identify the ending balance of each payment obligation that
is included in the aggregate amount. For purposes of box 20,
code X, a payment obligation is defined as an obligation under
Regulations section 1.752-2(b)(1) that is recognized under
Regulations sections 1.752-2(b)(3)(i)(A) and (B) (such as a
recognized guarantee or an obligation to restore a deficit capital
account upon liquidation), and a related person is defined as a
related person as defined in Regulations section 1.752-4(b).
The following examples assume that the described
partnership liabilities are properly allocable to the partner in the
examples under the rules of section 752.

Example 1. In Year 1, a partnership borrows $1,000 (PS
Liability 1) from Bank 1 and $1,000 (PS Liability 2) from Bank 2.
A partner guarantees payment of up to $500 of PS Liability 1 if
any amount of the full $1,000 isn't recovered by Bank 1 and
lends $200 to the partnership, and a person related to the
partner guarantees payment of the entire amount of PS Liability
2 of $1,000. The partnership enters $1,700 as the ending
balance of the partner's share of recourse liabilities in item K1 of
the Schedule K-1 for tax Year 1. For tax Year 1, the partnership
would enter $1,500 in box 20 under code X as the aggregate
ending balance of the partner's or related person's payment
obligations. On the attached statement, the partnership would
separately identify each of the partner's or related person's
payment obligations (for example, $500 with respect to the
partner's guarantee of PS Liability 1 and $1,000 with respect to
the related person's guarantee of PS Liability 2).
Example 2. Assume the same facts as in Example 1, except
that, instead of loaning $200 to the partnership, the partner has a
$100 DRO and a $20 negative tax capital account and the
partnership enters $1,520 as the ending balance of the partner's
Instructions for Form 1065 (2024)

Net investment income (code Y). Use code Y to report any
information that may be relevant for partners to figure their NIIT
when the information isn't otherwise identifiable elsewhere on
Schedule K-1. Attach a statement that shows a description and
dollar amount of each relevant item.
Examples of items reported using code Y may include the
following.
• Net rental real estate income reported on Form 1065,
Schedule K, line 2, and other net rental income reported on
Form 1065, Schedule K, line 3c, derived from a section 212
for-profit activity (and not from a section 162 trade or business).
• Gains and losses from dispositions of assets attributable to a
section 212 for-profit activity (and not from a section 162 trade or
business).
• Gain reported on the installment sale basis (or attributable to
a private annuity) that is attributable to the disposition of property
held in a trade or business.
• Gain or loss from the disposition of a partnership interest, but
only if such partnership was engaged, directly or indirectly, in
one or more trades or businesses, and at least one of those
trades or businesses wasn't trading in financial instruments or
commodities.
• The partner’s distributive share of interest income, or interest
expense, which is attributable to a loan between the partnership
and the partner (self-charged interest).
• If the partnership received a Schedule K-1 (Form 1065), the
detail and amounts reported to the partnership in box 20 using
code Y.
• If the partnership received a Schedule K-1 (Form 1041), the
amount of the adjustment reported.
• Guaranteed payments (reported on Form 1065, Schedule K,
line 4b) unrelated to services, such as for the use of capital or
attributable to section 736(a)(2) payments for unrealized
receivables or goodwill.
• In the case of a common trust fund, any items of income or
loss that may be taken into account in figuring the participant’s
net investment income (other than qualified dividends, and
short-term and long-term capital gains).
• Gain from a trade or business of trading in securities or
commodities for which the partnership has elected under section
475(f) to mark to market the securities, the commodities, or both.
In addition, Regulations section 1.1411-10 provides special
rules for stock of CFCs and PFICs owned by the partnership. If
the partnership directly or indirectly owns stock of a CFC or
PFIC, then additional reporting may be required under code Y.
CFCs and QEFs. In the case of stock of CFCs and QEFs
directly or indirectly owned by the partnership, the partnership
must provide the name and EIN (if one has been issued) for
each CFC and QEF the stock of which is owned by the
partnership for which an election under Regulations section
1.1411-10(g) isn’t in effect and for which the partnership isn't
engaged in a trade or business described in section 1411(c)(2).
For each of these entities, the partnership must provide the
following information on an entity-by-entity basis (to the extent
such information isn't otherwise identifiable elsewhere on
Schedule K-3).
• Section 951(a) inclusions.
• Section 1293(a)(1)(A) inclusions.
• Section 1293(a)(1)(B) inclusions.

• Section 959(d) distributions subject to section 1411.
• Section 1293(c) distributions subject to section 1411.
• Amount of gain or loss derived from dispositions of the stock

of CFCs and QEFs that is taken into account for section 1411
purposes.
• Amounts that are derived from the disposition of the stock of
CFCs and QEFs and included in income as dividends under
section 1248 for section 1411 purposes.
In the case of stock of CFCs and QEFs directly or indirectly
owned by the partnership for which an election under
Regulations section 1.1411-10(g) is in effect, the partnership
must provide the following information (to the extent such
information isn't otherwise identifiable elsewhere on
Schedule K-3) on either an aggregate basis or an entity-by-entity
basis.
• Section 951(a) inclusions.
• Section 1293(a)(1)(A) inclusions.
• Section 1293(a)(1)(B) inclusions.
In the case of stock of CFCs and QEFs directly or indirectly
owned by the partnership with respect to which the partnership
is engaged in a trade or business described in section 1411(c)
(2), the partnership must provide the following information (to the
extent such information isn't otherwise identifiable elsewhere on
Schedule K-3) on either an aggregate or an entity-by-entity
basis, or the partnership may aggregate this information with
other income derived by the partnership that is net investment
income under section 1411(c)(1)(A)(ii).
• Section 951(a) inclusions.
• Section 1293(a)(1)(A) inclusions.
• Section 1293(a)(1)(B) inclusions.
Section 1296 mark-to-market PFICs. In the case of stock of
PFICs directly or indirectly owned by the partnership for which an
election under section 1296 is in effect, the partnership must
provide the following information (to the extent such information
isn't otherwise identifiable elsewhere on Schedule K-3) on either
an aggregate basis or an entity-by-entity basis (except as
provided below).
• Amounts included in income under section 1296(a)(1).
• Amounts deducted from income under section 1296(a)(2).
In the case of PFIC stock owned directly or indirectly by the
partnership for which an election under section 1296 is in effect
and with respect to which the partnership is engaged in a trade
or business described in section 1411(c)(2), the partnership may
aggregate this information with other income derived by the
partnership that is net investment income under section 1411(c)
(1)(A)(ii).
Section 1291 funds. In the case of stock of PFICs directly or
indirectly owned by the partnership with respect to which direct
or indirect partners are subject to section 1291, the partnership
must provide the following information (to the extent such
information isn't otherwise identifiable elsewhere on
Schedule K-3) on an entity-by-entity basis.
• Excess distributions made by a PFIC for which a partner is
subject to section 1291.
• Gains derived from the disposition of stock of a PFIC for which
a partner is subject to section 1291.

• Unadjusted basis immediately after acquisition (UBIA) of
qualified property;
• Qualified PTP items; and
• Qualified REIT dividends.
The partnership must make an initial determination of which
items are qualified items of income, gain, deduction, and loss at
its level and report to each partner its distributive share of all
items that may be qualified items at the partner level. These
items must be separately stated where necessary for the partner
to figure the deduction. See Determining the partnership’s QBI or
qualified PTP items, later. The partner must then determine
whether each item is includible in QBI.
In addition, the partnership must also report whether any of its
trades or businesses are specified service trades or businesses
(SSTBs) and identify on the statement any trades or businesses
that are aggregated. The partnership must also report all QBI
information reported to it by any entity in which the partnership
has an ownership interest.

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Section 199A information (code Z). The qualified business
income (QBI) deduction may be taken by eligible taxpayers,
including individuals and some trusts and estates. The
deduction is determined at the partner level. Partnerships are
required to report information necessary for their partners to
figure the deduction. Use code Z with an asterisk (Z*) on each
partner’s Schedule K-1 and enter “STMT” in the entry space to
indicate that the information is provided on an attached
statement that separately identifies the partner’s distributive
share of:
• Qualified items of income, gain, deduction, and loss;
• W-2 wages;
56

Note. The partnership must report each partner’s share of
qualified items of income, gain, deduction, and loss from a PTP
so that partners can determine their qualified PTP income.
However, the W-2 wages and UBIA of qualified property from the
PTP shouldn't be reported because partners can't use that
information in figuring their QBI deduction.
Partnerships should use Statement A—QBI Pass-Through
Entity Reporting, later, or a substantially similar statement, to
report information for each partner’s distributive share from each
trade or business, including QBI items, W-2 wages, UBIA of
qualified property, qualified PTP items, and qualified REIT
dividends by attaching the completed statement(s) to each
partner’s Schedule K-1. The partnership should also use
Statement A to report each partner’s distributive share of QBI
items, W-2 wages, UBIA of qualified property, qualified PTP
items, and qualified REIT dividends reported to the partnership
by another entity.
Partnerships should use Statement B—QBI Pass-Through
Entity Aggregation Election(s), later, or a substantially similar
statement, to report aggregated trades or businesses and
provide supporting information to partners on each
Schedule K-1.
Partnerships should use Statement C—QBI Pass-Through
Entity Reporting—Patrons of Specified Agricultural and
Horticultural Cooperatives, later, or a substantially similar
statement, to report the distributive share of QBI and W-2 wages
allocable to qualified payments from a specified agricultural or
horticultural cooperative for each trade or business. This
statement should also be used to report each partner’s share of
section 199A(g) deduction reported to the partnership by the
specified cooperative.
Determining the partnership’s qualified trades or
businesses. The partnership’s qualified trades or businesses
include its section 162 trades or businesses, except for SSTBs,
or the trade or business of providing services as an employee. A
section 162 trade or business generally includes any activity if
the partnership’s primary purpose for engaging in the activity is
for income or profit and the partnership is involved in the activity
with continuity and regularity. For more information on what
qualifies as a trade or business for purposes of section 199A,
see the Instructions for Form 8995, Qualified Business Income
Deduction Simplified Computation; or the Instructions for Form
8995-A, Qualified Business Income Deduction.
Rental real estate. Rental real estate may constitute a trade
or business for purposes of the QBI deduction if the rental real
estate:
• Rises to the level of a trade or business under section 162,
• Satisfies the requirements for the rental real estate safe
harbor in Rev. Proc. 2019-38, or

Instructions for Form 1065 (2024)

• Meets the self-rental exception (that is, the rental or licensing
of property to a commonly controlled trade or business
conducted by an individual or relevant pass-through entity)
described in Regulations section 1.199A-1(b)(14).
The determination of whether rental real estate constitutes a
trade or business for purposes of the QBI deduction is made by
the partnership. The partnership must first make this
determination and then only include the distributive share of
rental real estate items of income, gain, loss, and deduction from
a trade or business on the statement provided to partners.
Rental real estate that doesn't meet any of the three conditions
noted above doesn't constitute a trade or business for purposes
of the QBI deduction and must not be included in the QBI
information provided to partners.
SSTBs excluded from qualified trades or businesses.
SSTBs are generally excluded from the definition of a qualified
trade or business. An SSTB is any trade or business providing
services in the field of health, law, accounting, actuarial science,
performing arts, consulting, athletics, financial services,
brokerage services, investing and investment management,
trading or dealing in securities, partnership interests, or
commodities, or any other trade or business where the principal
asset is the reputation or skill of one or more of its employees or
owners. The term “any trade or business where the principal
asset is the reputation or skill of one or more of its employees or
owners” means any trade or business that consists of (a) a trade
or business in which a person receives fees, compensation, or
other income from endorsing products or services; (b) a trade or
business in which a person licenses or receives fees,
compensation, or other income for the use of an individual’s
image, likeness, name, signature, voice, or trademark, or any
other symbols associated with the individual’s identity; or (c)
receiving fees, compensation, or other income for appearing at
an event or on radio, television, or another media format.
Partnerships must separately report QBI information for all
trades or businesses engaged in by the partnership, including
SSTBs, but must identify which trades or businesses are SSTBs.
Aggregation of trades or businesses. A partnership
engaged in more than one trade or business may choose to
aggregate multiple trades or businesses into a single trade or
business for purposes of section 199A if it meets the following
requirements.
1. The same person, or group of persons, either directly or
through attribution, owns 50% or more of each trade or business
for a majority of the tax year, including the last day of the tax
year, and all trades or businesses use the same tax year-end.
2. None of the trades or businesses are SSTBs.
3. The trades or businesses to be aggregated meet at least
two of the following three factors.
a. They provide products, property, or services that are the
same or that are customarily offered together.
b. They share facilities or share significant centralized
business elements, such as personnel, accounting, legal,
manufacturing, purchasing, human resources, or information
technology resources.
c. They’re operated in coordination with, or reliance on, one
or more of the businesses in the aggregated group.

aggregation in accordance with Regulations section 1.199A-4.
The aggregation statement must be completed each year to
show the partnership's trade or business aggregations. Failure to
disclose the aggregations may cause them to be disaggregated.
The partnership's aggregations must be reported consistently
for all subsequent years, unless there's a change in facts and
circumstances that changes or disqualifies the aggregation. The
partnership must provide a written explanation for any changes
to prior year aggregations that describes the change in facts and
circumstances.
If the partnership directly or indirectly owns an interest in
another relevant pass-through entity (RPE) that aggregates
multiple trades or businesses, it must attach a copy of the RPE’s
aggregation to each Schedule K-1. The partnership can't break
apart the aggregation of another RPE, but it may add trades or
businesses to the aggregation, assuming the requirements
above are satisfied.
Determining the partnership’s QBI or qualified PTP
items. The partnership’s items of QBI include qualified items of
income, gain, deduction, and loss from the partnership’s trades
or businesses that are effectively connected with the conduct of
a trade or business within the United States. This may include,
but isn't limited to, items such as ordinary business income or
losses, section 1231 gains or (losses), section 179 deductions,
and interest from debt-financed distributions.
QBI may also include rental income/losses or royalty income,
if the activity rises to the level of a trade or business; and
gambling gains or losses, but only if the partnership is engaged
in the trade or business of gambling. Whether an activity rises to
the level of a trade or business must be determined at the entity
level and, once made, is binding on partners.
Qualified PTP items include the partnership’s share of
qualified items of income, gain, deduction, and loss from an
interest in a PTP and may also include gain or loss recognized
on the disposition of the partner’s partnership interest that isn't
treated as a capital gain or loss. If the reporting partnership is
itself a PTP, the PTP should report all qualified items of income,
gain, deduction, and loss separately for each trade or business
engaged in by the PTP.
QBI and qualified PTP items don’t include the following.
• Items that aren’t properly includible in income.
• Items that are treated as capital gain or loss under any
provision of the Code.
• Dividends or dividend equivalents, including qualified REIT
dividends.
• Interest income (unless received in connection with the trade
or business).
• Wage income.
• Income that isn't effectively connected with the conduct of
business within the United States (go to IRS.gov/ECI for more
information).
• Commodities transactions, or foreign currency gains or losses
described in section 954(c)(1)(C) or (D).
• Income, loss, or deductions from notional principal contracts
under section 954(c)(1)(F).
• Annuities (unless received in connection with the trade or
business).
• Guaranteed payments described in section 707(c) received
by the entity for services rendered to a partnership.
• Payments described in section 707(a) received by the entity
for services rendered to a partnership.
QBI flowchart. Partnerships may use this flowchart to
determine if an item of income, gain, deduction, or loss is
includible in QBI reportable to partners.

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If the partnership chooses to aggregate multiple trades or
businesses, it must report the aggregation on Statement B, or a
substantially similar statement, and attach it to each
Schedule K-1. The statement must provide the information
necessary to identify each separate trade or business included
in each aggregation, a description of the aggregated trades or
businesses, and an explanation of the factors met that allow the

Instructions for Form 1065 (2024)

Flowchart To Help Determine if Items Are Qualified Business Income
Questions

Yes

1. Is the item effectively connected with the conduct of a trade or business within the United States?

Continue to next question.

Stop. This item isn't QBI.

2. Is the item attributable to a trade or business (this may include section 1231 gain/(loss), section 179
deductions, interest from debt-financed distributions, etc.)? Examples of an item not considered
attributable to the trade or business at the entity level include gambling income/(loss) where the entity
isn't engaged in the trade or business of gambling, income/(loss) from vacation properties when the
entity isn't in that trade or business, activities not engaged in for profit, etc.

Continue to next question.

Stop. This item isn't QBI.

3. Is the item treated as a capital gain or loss under any provision of the Code or is it a dividend or
dividend equivalent?

Stop. This item isn't QBI.

Continue to next question.

4. Is the item interest income other than interest income properly allocable to a trade or business?
Stop. This item isn't QBI.
(Note that interest income attributable to an investment of working capital, reserves, or similar accounts
isn't properly allocable to a trade or business.)

Continue to next question.

5. Is the item an annuity, other than an annuity received in connection with the trade or business?

Stop. This item isn't QBI.

Continue to next question.

6. Is the item gain or loss from a commodities transaction or foreign currency gain or loss described in
section 954(c)(1)(C) or (D)?

Stop. This item isn't QBI.

Continue to next question.

7. Is the item gain or loss from a notional principal contract under section 954(c)(1)(F)?

Stop. This item isn't QBI.

Continue to next question.

8. Is the item of income or loss from a qualified PTP?

This item is a qualified PTP
item. Report this item as
qualified PTP income or
loss, subject to
partner-specific
determinations, and
check the PTP box.

This item is QBI. Report this
item as QBI subject to
partner-specific
determinations.

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Specific instructions for Statement A—QBI Pass-Through
Entity Reporting.
QBI or qualified PTP items. The partnership (including
PTPs) must first determine if it's engaged in one or more trades
or businesses. It must then determine if any of its trades or
businesses are SSTBs. It must also determine whether it has
qualified PTP items from an interest in a PTP. It must indicate the
status in the appropriate checkboxes for each trade or business
(or aggregated trade or business) reported.

Note. SSTBs and PTPs can't be aggregated with any other
trade or business. So, if the Aggregation box is checked, the
SSTB and PTP boxes for that specific aggregated trade or
business shouldn't be checked.
Next, the partnership must report to each partner their
distributive share of all items that are QBI or qualified PTP items
for each trade or business the partnership owns directly or
indirectly. Use the QBI flowchart above to determine if an item is
reportable as a QBI item or qualified PTP item subject to
partner-specific determinations.
The descriptions on the statement generally match the
descriptions reported on Schedule K-1. So, the amounts should
reflect each trade’s or business’s portion of the qualified items of
income, gain, deduction, or loss reported in the applicable box of
the partner’s Schedule K-1. For example, the amount reported
on the “Ordinary business income (loss)” line of this statement
should reflect the attributable portion of qualified items of
income, gain, deduction, and loss for each trade or business
included in the “Ordinary business income (loss)” reported in
box 1 of the partner’s Schedule K-1. Each item included under
“Other income (loss)” and “Other deductions” must be stated
separately, identifying the nature and amount of each item.
W-2 wages and UBIA of qualified property. The
partnership must determine the W-2 wages and UBIA of
qualified property properly allocable to QBI for each qualified
trade or business and report the distributive share to each
partner on Statement A, or a substantially similar statement,
attached to Schedule K-1. This includes the pro rata share of
W-2 wages and UBIA of qualified property reported to the
partnership from any qualified trades or businesses of an RPE
the partnership owns directly or indirectly. However, partnerships
58

that own a direct or indirect interest in a PTP may not include any
amounts for W-2 wages or UBIA of qualified property from the
PTP, as the W-2 wages and UBIA of qualified property from a
PTP aren't allowed in figuring the W-2 wage and UBIA
limitations.
The W-2 wages are amounts paid to employees described in
sections 6051(a)(3) and (8). If the partnership conducts more
than one trade or business, it must allocate the W-2 wages
among its trades or businesses. See Rev. Proc. 2019-11,
2019-09 I.R.B. 742, for more information.
The unadjusted basis of qualified property is figured by
adding the unadjusted basis of all qualified assets immediately
after acquisition. Qualified property includes all tangible property
subject to depreciation under section 167, for which the
depreciable period hasn’t ended, that is held and used by the
trade or business during the tax year and held on the last day of
the tax year. The depreciable period ends on the later of 10
years after the property is placed in service or the last day of the
full year for the applicable recovery period under section 168.
Qualified REIT dividends. The partnership must report the
distributive share of any qualified REIT dividends to each partner
on Statement A, or a substantially similar statement, attached to
Schedule K-1. Qualified REIT dividends don’t have to be
separately reported by trades or businesses and can be
reported as a single amount to partners. Qualified REIT
dividends include any dividend the partnership receives on REIT
stock held for more than 45 days (taking into account the
principles of sections 246(c)(3) and (4)) during the 91-day period
beginning on the date that is 45 days before the date on which
such stock becomes ex-dividend with respect to such dividend,
for which the payment isn't obligated to someone else, isn't a
capital gain dividend under section 857(b)(3), and isn't a
qualified dividend under section 1(h)(11), plus any section 199A
dividends received from a RIC that are permitted to be treated as
qualified REIT dividends under Regulations section 1.199A-3(d).
Fiscal year partnerships. For purposes of determining the
QBI or qualified PTP items, UBIA of qualified property, and the
aggregate amount of qualified REIT dividends, fiscal year-end
partnerships include all items from the tax (fiscal) year.
For purposes of determining W-2 wages, fiscal year-end
partnerships include amounts paid to employees under sections

Instructions for Form 1065 (2024)

6051(a)(3) and (8) for the calendar year ended with or within the
partnership’s tax year. If the partnership conducts more than one

trade or business, it must allocate W-2 wages among its trades
or businesses. See Rev. Proc. 2019-11 for more information.

Statement A—QBI Pass-Through Entity Reporting
Partnership’s name:

Partnership’s EIN:

Partner’s name:

Partner’s identifying number:

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Trade or Business 1

Partner’s share of:

Trade or Business 2

Trade or Business 3

PTP

Aggregated

SSTB

QBI or qualified PTP items subject to partner-specific determinations:
Ordinary business income (loss)
Rental income (loss)

Royalty income (loss)

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

Section 1231 gain (loss)
Other income (loss)

Section 179 deduction
Other deductions

W-2 wages .

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

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

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

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

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

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

UBIA of qualified property
Qualified REIT dividends

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

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

Specific instructions for Statement B—QBI Pass-Through
Entity Aggregation Election(s). If the partnership elects to
aggregate more than one trade or business that meets all the
requirements to aggregate, the partnership must report the
aggregation to partners on Statement B, or a substantially similar
statement, and attach it to each Schedule K-1. The partnership
must indicate trades or businesses that were aggregated by
checking the appropriate box on Statement A for each
aggregated trade or business. The partnership must also provide
a description of the aggregated trade or business and an
explanation of the factors met that allow the aggregation.
The aggregation statement must be completed each year to
show the partnership’s trade or business aggregations. Failure to
disclose the aggregations may cause them to be disaggregated.

Instructions for Form 1065 (2024)

The partnership’s aggregations must be reported consistently for
all subsequent years, unless there's a change in facts and
circumstances that changes or disqualifies the aggregation. The
partnership must provide a written explanation for any changes
to prior year aggregations that describes the change in facts and
circumstances.
If the partnership holds a direct or indirect interest in an RPE
that aggregates multiple trades or businesses, the partnership
must also include a copy of the RPE’s aggregations with each
partner’s Schedule K-1. The partnership can't break apart the
aggregation of another RPE, but it may add trades or businesses
to the aggregation, assuming the aggregation requirements are
satisfied.

Statement B—QBI Pass-Through Entity Aggregation Election(s)
Partnership’s name:

Partnership’s EIN:

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

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

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

Specific instructions for Statement C—QBI Pass-Through
Entity Reporting—Patrons of Specified Agricultural and
Horticultural Cooperatives.
QBI items and W-2 wages allocable to qualified
payments. If the partnership is a patron of a specified
agricultural or horticultural cooperative, the partnership must
provide the share of QBI items and W-2 wages allocable to
qualified payments from each trade or business to each of its
partners on Statement C, or a substantially similar statement,
and attach it to each Schedule K-1 so each partner can figure
their patron reduction under section 199A(b)(7).

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

Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural
Cooperatives
Partnership’s name:

Partnership’s EIN:

Partner’s name:

Partner’s identifying number:
Trade or Business

Partner’s share of:

Trade or Business

PTP

Aggregated

SSTB

QBI items allocable to qualified payments subject to partner-specific determinations:
Ordinary business income (loss)
Rental income (loss)

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

Royalty income (loss)

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

Section 1231 gain (loss)
Other income (loss)
Section 179 deduction
Other deductions

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

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

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

W-2 wages allocable to qualified payments .
Section 199A(g) deduction .

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

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

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

Section 704(c) information (code AA). For partnerships other
than PTPs, if a partner’s taxable income or loss on any line item
on Schedule K-1 (Form 1065) includes an allocation of any
income or deduction item determined by applying section
704(c), include the sum of such income and deduction items
here.
60

Example 1—single section 704(c) allocation. Partnership
P has two partners, A and B. A and B share all items of income,
loss, and deduction equally, except for items required to be
allocated under section 704(c). A contributes property X with an
FMV of $100 and a tax basis of $60. X is depreciable over 10
years. B contributes $100. The traditional method is used to
Instructions for Form 1065 (2024)

allocate section 704(c) items pertaining to X. In the first year, the
partnership has $10 of section 704(b) book depreciation, which
is allocated equally to A and B for book purposes ($5 each).
However, P only has $6 of tax depreciation. The partnership has
no other income or deductions during the tax year. Under the
traditional method, P allocates $1 to A and $5 to B for tax
purposes. Assuming this is the only item where taxable income
is affected by section 704(c) allocations during the current year,
the partnership would report deductions of $1 for A and $5 for B
in box 20, code AA, of Schedule K-1.

partnership is treated as one person under the aggregation rules
of section 448(c)). Partnerships with current year gross receipts
(defined in Temporary Regulations section 1.448-1T(f)(2)(iv))
greater than $5 million are required to report to partners their
distributive shares of their current year gross receipts, as well as
their distributive shares 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 current
year total 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-rules-undersection-448c2-that-apply-to-the-section-163j-small-businessexemption. Partnerships whose current year gross receipts are
less than or equal to $5 million may also use this code to report
gross receipts.

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Example 2—multiple section 704(c) allocations. The
facts are the same as in Example 1, except in addition to the
facts in that example, A also contributes property Y with an FMV
of $100 and a remaining tax basis of $0. If Y were newly placed
in service, its depreciable life would be 10 years straight line.
The partnership adopts the remedial method with respect to
property Y. In the first year, P has $10 of section 704(b) book
depreciation, which is allocated equally to A and B for book
purposes ($5 each). However, P has $0 of tax depreciation with
respect to property Y. Under the remedial method, for tax
purposes, P allocates $5 of remedial income to A and $5 of a
remedial depreciation deduction to B with respect to property Y.
In this case, the partnership would report in box 20, code AA, of
Schedule K-1 that A has $4 of taxable income, determined by
applying section 704(c) ($1 of depreciation deductions from
property X and $5 of remedial income from property Y) and that
B has $10 of deductions for tax purposes, determined by
applying section 704(c) (consisting of $5 depreciation from
property X and $5 remedial depreciation from property Y).

Required reporting for the sale or exchange of an interest
in a partnership (codes AB, AC, and AD). When a sale or
exchange of a partnership interest occurs and the partnership
holds section 751 property such as unrealized receivables
defined in section 751(c), property subject to unrecaptured
section 1250 gain, inventory items defined in section 751(d), or
collectibles, the partnership must report to the transferor partner
their share of the gain or loss figured for the following categories
of assets. If there was an exchange described in section 751(a),
this information must also be reported on Form 8308.
Section 751 gain (loss) (code AB). Section 751 “hot
assets” (unrealized receivables and inventory items).
Section 1(h)(5) collectibles gain (code AC). Section 1(h)
(5) collectible assets.
Section 1(h)(6) unrecaptured section 1250 gain (code
AD). Section 1(h)(6) unrecaptured section 1250 gain assets
(depreciable real property) are section 751 property per
Regulations section 1.751-1(c)(4)(v).
Excess taxable income (code AE). If the partnership is
required to file Form 8990, it may determine it has excess
taxable income. If so, enter the amount from Form 8990, Part II,
line 36, for excess taxable income.
Schedule K-1. Enter the partner’s amount of excess taxable
income. The partner will enter the amount in Form 8990,
Schedule A, line 43, column (f), if the partner is required to file
Form 8990.
Excess business interest income (code AF). If the
partnership is required to file Form 8990, it may determine it has
excess business interest income. If so, enter the amount from
Form 8990, Part II, line 37, for excess business interest income.
Schedule K-1. Enter the partner’s amount of excess
business interest income. The partner will enter the amount in
Form 8990, Schedule A, line 43, column (g), if the partner is
required to file Form 8990.

Gross receipts for section 448(c) (code AG). 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
Instructions for Form 1065 (2024)

Noncash charitable contributions (code AH). If the
partnership made a noncash charitable contribution, report the
partner’s share of the partnership’s adjusted basis of the
property for basis limitation purposes.

Interest and tax on deferred compensation to partners
(code AI). Interest and additional tax on deferred compensation
under a section 409A nonqualified deferred compensation plan
that doesn't meet the requirements of section 409A. Include in
this amount any earnings on these deferrals. This amount must
also be included on Schedule K, line 4. For details, see the
regulations under section 409A. These regulations don't provide
guidance on the application of section 409A to arrangements
between partnerships and partners. For interim guidance on
such arrangements, see Q&A-7 in Notice 2005-1, 2005-2 I.R.B.
274, and the information provided in T.D. 9321. Also see Notice
2006-79, 2006-43 I.R.B. 763; Notice 2007-86, 2007-46 I.R.B.
990; and Notice 2008-113, 2008-51 I.R.B. 1305, for additional
information on transitional and relief rules.
Excess business loss limitation (code AJ). To enable
partners to figure their excess business loss limitation under
section 461(l), attach a statement to each partner's
Schedule K-1 showing the partner's distributive share of the
aggregate business activity gross income or gain, and the
aggregate business activity deductions, from all of the
partnership's trades or businesses.

Gain from mark-to-market election (code AK). 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 should
report ordinary gain or loss from the securities or commodities
(or both securities and commodities) trading activities separately
from any other ordinary gain or loss. Gain from the
mark-to-market election is relevant for partners to figure the NIIT.
See the instructions regarding net investment income (code Y),
earlier.
Section 721(c) partnership (code AL). If the partnership is a
section 721(c) partnership, line 20c must include the amounts
relating to any remedial items made under the remedial
allocation method (described in Regulations sections 1.704-3(d)
and 1.704-3(d)(5)(iii)) with respect to section 721(c) property.
Enter a separate code AL in box 20 of Schedule K-1 for each
amount for items allocated to the partner. For the U.S. transferor,
enter a separate code AL, if any, for the total remedial income
allocated to the U.S. transferor, total gain recognized due to an
acceleration event, and/or total gain recognized due to a section
367 transfer reflected in Schedule G (Form 8865), Part II,
columns (c), (d), and (e), respectively. For all other partners of
the section 721(c) partnership, enter a separate code AL for the
total amount of remedial items allocated to such partner relating

to section 721(c) property. See Regulations sections 1.721(c)-3
and -6.
Section 1061 information (code AM). The partnership will
furnish to the partners any information needed to figure their
capital gains with respect to an applicable partnership interest.
Go to Section 1061 Reporting Guidance FAQs.
Farming and fishing business (code AN). If the partnership
is involved in a farming or fishing business, report the gross
income and gains as well as the losses and deductions
attributable to such business activities. See section 1301.

Corporate alternative minimum tax (CAMT) (code AX). If
requested by a partner, the partnership will furnish to the partner
any information needed to figure the partner’s distributive share
of the partnership’s adjusted financial statement income.
Foreign partners, Form 8990, Schedule A (code AY). Form
8990, Schedule A, requires certain foreign partners to report
their allocable share of EBIE, excess taxable income, and
excess business interest income, if any, that is attributable to
income effectively connected with a U.S. trade or business.
Provide on Schedule K-1 the information needed to complete
Form 8990, Schedule A, for a partner that is a foreign
corporation or nonresident alien or is a partnership (domestic or
foreign) in which you know, or have reason to know, that one or
more of the partners is a foreign corporation or nonresident alien.

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PTP information (code AO). Any information a partner that is a
PTP may need to determine if it meets the 90% qualifying
income test of section 7704(c)(2). A partner is required to notify
the partnership of their status as a PTP.
Inversion gain (code AP). Any income or gain reported on
Schedule K, lines 1 through 11, that qualifies as inversion gain, if
the partnership is an expatriated entity or is a partner in an
expatriated entity. For details, see section 7874. Attach a
statement to Form 1065 that shows the amount of each type of
income or gain included in the inversion gain. The partnership
must report each partner's distributive share of the inversion gain
in box 20 of Schedule K-1 using code AP. Attach a statement to
Schedule K-1 that shows the partner's distributive share of the
amount of each type of income or gain included in the inversion
gain.
Conservation reserve program payments (code AQ). The
partner's distributive share of any conservation reserve program
payments made to the partnership.
IRA disclosure (code AR). For IRA partners with an amount
reported in box 20, code V, include code AR with the IRA
partner's unique EIN (not the custodian's EIN).

Enter the EIN without any dashes.

CAUTION

Qualifying advanced coal project property and qualifying
gasification project property (code AS). Attach a statement
to Schedule K-1 showing the partner's distributive share of the
amounts that the partner will use to figure the amounts to report
on their Form 3468, Part II. See the Instructions for Form 3468
for details.
Qualifying advanced energy project property (code AT).
Attach a statement to Schedule K-1 showing the partner's
distributive share of the amounts that the partner will use to
figure the amounts to report on their Form 3468, Part III. See the
Instructions for Form 3468 for details.
Advanced manufacturing investment property (code AU).
Attach a statement to Schedule K-1 showing the partner's
distributive share of the amounts that the partner will use to
figure the amount to report on their Form 3468, Part IV. See the
Instructions for Form 3468 for details.
Clean electricity investment property (code AV). Attach a
statement to Schedule K-1 showing the partner's distributive
share of the amounts that the partner will use to figure the
amount to report on their Form 3468, Part V. See the Instructions
for Form 3468 for details.
Reportable transactions (code AW). If the partnership
participates in a transaction that must be disclosed on Form
8886, both the partnership and its partners may be required to
file Form 8886. The partnership must determine if any of its
partners are required to disclose the transaction and provide
those partners with information they will need to file Form 8886.
This determination is based on the category(ies) under which a
transaction qualified for disclosures. See Form 8886 and its
instructions for details.
62

Codes AZ through BD. Reserved for future use.

Other (code ZZ). Any other information the partners need to
prepare their tax returns, including information needed to
prepare state and local tax returns.

Line 21. Total Foreign Taxes Paid or Accrued

Enter in U.S. dollars the total creditable foreign taxes (described
in section 901 or 903) that were paid or accrued by the
partnership (according to its method of accounting for such
taxes). Enter the amount paid or accrued on line 21. Translate
these amounts into U.S. dollars by using the applicable
exchange rate (see Pub. 514, Foreign Tax Credit for Individuals).

The information on line 21 is solely for purposes of computing
basis. A partnership must complete Schedules K-2 and K-3 to
provide the information necessary for the partner to claim a
foreign tax credit.

Line 22. More Than One At-Risk Activity
If the partnership conducted more than one at-risk activity, the
partnership is required to provide certain information separately
for each at-risk activity to its partners. This information is
reported on an attached statement to Schedule K-1. Check the
box to indicate there's more than one at-risk activity for which a
statement is attached. See At-risk activity reporting
requirements, earlier, for details. Also see Notice 2019-66 for
certain at-risk reporting.

Line 23. More Than One Passive Activity
If the partnership conducted more than one activity (determined
for purposes of the passive activity loss and credit limitations),
the partnership is required to provide information separately for
each activity to its partners. This information is reported on an
attached statement to Schedule K-1. Check the box to indicate
there's more than one passive activity for which a statement is
attached. See Passive Activity Reporting Requirements, earlier,
for details.

Analysis of Net Income (Loss) per
Return

For each type of partner shown on line 2, enter the portion of the
amount shown on line 1 that was allocated to that type of
partner. Foreign government partners are treated as corporate
partners pursuant to section 892(a)(3). Report all amounts for
LLC members on the line for limited partners. The sum of the
amounts shown on line 2 must equal the amount shown on
line 1. In addition, the amount on Analysis of Net Income (Loss)
per Return, line 1, must equal the amount on Schedule M-1,
Instructions for Form 1065 (2024)

line 9 (if the partnership is required to complete Schedule M-1). If
the partnership files Schedule M-3, the amount on Analysis of
Net Income (Loss) per Return, line 1, must equal the amount in
column (d) of Schedule M-3, Part II, line 26.
In classifying partners who are individuals as active or
passive, the partnership should apply the rules below. In
applying these rules, a partnership should classify each partner
to the best of its knowledge and belief. It's assumed that in most
cases the level of a particular partner's participation in an activity
will be apparent.
• If the partnership's principal activity is a trade or business,
classify a general partner as active if the partner materially
participated in all partnership trade or business activities;
otherwise, classify a general partner as passive.
• If the partnership's principal activity consists of a working
interest in an oil or gas well, classify a general partner as active.
• If the partnership's principal activity is a rental real estate
activity, classify a general partner as active if the partner actively
participated in all of the partnership's rental real estate activities;
otherwise, classify a general partner as passive.
• Classify as passive all partners in a partnership whose
principal activity is a rental activity other than a rental real estate
activity.
• If the partnership's principal activity is a portfolio activity,
classify all partners as active.
• Classify as passive all limited partners in a partnership whose
principal activity is a trade or business or rental activity.

Schedule L must report non-tax-basis financial statement
amounts. If the partnership doesn't prepare non-tax-basis
financial statements, Schedule L must be based on the
partnership's books and records and may show tax-basis
balance sheet amounts if the partnership's books and records
reflect only tax-basis amounts.

Line 5. Tax-Exempt Securities

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Schedule L. Balance Sheets per
Books

Schedules L, M-1, and M-2 aren't required to be

TIP completed if the partnership answered “Yes” to question
4 of Schedule B.

The balance sheets should agree with the partnership's
books and records. Attach a statement explaining any
differences. There are additional requirements for completing
Schedule L for partnerships that are required to file
Schedule M-3 (see the Instructions for Schedule M-3 (Form
1065) for details).
Partnerships reporting to the Interstate Commerce
Commission (ICC) or to any national, state, municipal, or other
public officer may send copies of their balance sheets
prescribed by the ICC or national, state, or municipal authorities,
as of the beginning and end of the tax year, instead of
completing Schedule L. However, statements filed under this
procedure must contain sufficient information to enable the IRS
to reconstruct a balance sheet similar to that contained on Form
1065 without contacting the partnership during processing.
All amounts on the balance sheet should be reported in U.S.
dollars. If the partnership's books and records are kept in a
foreign currency, the balance sheet should be translated in
accordance with U.S. generally accepted accounting principles
(GAAP).
Exception. If the partnership or any qualified business unit of
the partnership uses the U.S. dollar approximate separate
transactions method, Schedule L should reflect the tax balance
sheet prepared and translated into U.S. dollars according to
Regulations section 1.985-3(d), and not a U.S. GAAP balance
sheet.

Partnerships Required To File Schedule M-3

For partnerships required to file Schedule M-3, the amounts
reported on Schedule L must be amounts from financial
statements used to complete Schedule M-3. If the partnership
prepares non-tax-basis financial statements, Schedule M-3 and
Instructions for Form 1065 (2024)

Include on this line:
• State and local government obligations, the interest on which
is excludable from gross income under section 103(a); and
• Stock in a mutual fund or other RIC that distributed
exempt-interest dividends during the tax year of the partnership.

Line 7a. Loans to Partners (or Persons Related
to Partners)

Include on this line loans to partners or persons related to
partners. Persons are related if they have a relationship specified
in section 267(b) or 707(b). Amounts included here shouldn't be
included elsewhere on lines 1 through 13.

Line 14. Total Assets

Generally, total assets at the beginning of the year (Schedule L,
line 14, column (b)) must equal total assets at the close of the
prior tax year (Schedule L, line 14, column (d)). If total assets at
the beginning of the year don't equal total assets at the close of
the prior year, attach a statement explaining the difference.

For purposes of measuring total assets at the end of the year,
the partnership's assets may not be netted against or reduced by
partnership liabilities. In addition, asset amounts may not be
reported as a negative number. If the partnership has an interest
in another partnership and uses a tax-basis method for
Schedule L, it must show as an asset the adjusted basis of its
interest in the other partnership and separately show as a liability
its share of the other partnership's liabilities (which are included
in the computation of its adjusted basis). See the Partner's
Instructions for Schedule K-1 for details on how to figure the
adjusted basis of a partnership interest. If Schedule L is
non-tax-basis, investment in a partnership may be shown as
appropriate under the non-tax-basis accounting method of the
partnership including, if required by the non-tax-basis
accounting method of the partnership, the equity method of
accounting for investments, but must be shown as a
non-negative amount.
Example. Partnership A prepares a tax-basis Schedule L
and is a general partner in Partnership B, a general partnership.
Partnership A's adjusted basis in Partnership B at the end of the
year is $16 million. Partnership A's share of Partnership B's
liabilities is $20 million, which is included in the $16 million
adjusted basis amount. On its Schedule L, Partnership A must
report $16 million on line 8 as the amount of its investment asset
in Partnership B and report on line 20 its $20 million share of
Partnership B's liabilities. These amounts can't be netted on
Schedule L.

Line 18. All Nonrecourse Loans

Nonrecourse loans are those liabilities of the partnership for
which no partner bears the economic risk of loss. If the
partnership's nonrecourse liabilities include its share of the
liabilities of another partnership, the partnership's share of those
liabilities must be reflected on line 18.

Line 19a. Loans From Partners (or Persons
Related to Partners)

Include on this line loans from partners or persons related to
partners. Persons are related if they have a relationship specified
63

in section 267(b) or 707(b). Amounts included here shouldn't be
included elsewhere on lines 15 through 21.

Line 20. Other Liabilities

A partnership that is a partner in a tiered partnership must
include as a liability on line 20 the partner's share of the tiered
partnership's liabilities to the extent they are recourse liabilities to
the partner.

Schedule M-2. Analysis of Partners'
Capital Accounts

Show what caused changes during the tax year in the partners'
tax-basis capital accounts.

Line 1. Balance at Beginning of Year

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Schedule M-1. Reconciliation of
Income (Loss) per Books With
Analysis of Net Income (Loss) per
Return

Schedule M-3 may be required instead of Schedule M-1.

TIP See Item J. Schedule C and Schedule M-3, earlier. See
the Instructions for Schedule M-3 for more information.

Line 2

Report on this line income included on Schedule K, lines 1, 2,
3c, 5, 6a, 7, 8, 9a, 10, and 11, not recorded on the partnership's
books this year. Describe each such item of income. Attach a
statement if necessary.

Line 3. Guaranteed Payments

Include on this line guaranteed payments shown on Schedule K,
lines 4a and 4b (other than amounts paid for insurance that
constitutes medical care for a partner, a partner's spouse, a
partner's dependents, and a partner's children under age 27 who
aren't dependents).

Line 4b. Travel and Entertainment

Include the following on this line.
• Entertainment expenses, including entertainment-related
meals and facilities, not deductible under section 274(a).
• Non-entertainment-related meal expenses not deductible
under section 274(n).
• The part of business gifts over $25. See section 274(b).
• Expenses of an individual allocable to conventions on cruise
ships over $2,000. See section 274(h)(2).
• Employee achievement awards of nontangible property or
tangible property over $400 ($1,600 if part of a qualified plan).
See section 274(j).
• The part of the cost of luxury water travel expenses not
deductible under section 274(m). See section 274(m)(1)(A).
• Expenses for travel as a form of education. See section
274(m)(2).
• Nondeductible club dues. See section 274(a)(3).
• Qualified transportation fringes under section 274(a)(4).
• Transportation and commuting expenses under section 274(l).
• Other nondeductible travel and entertainment expenses.

Line 6

Include tax-exempt income from forgiven PPP loans on line 6 if it
was included on line 1 of Schedule M-1.

Line 7

Report on this line deductions included on Schedule K, lines 1
through 13e, and 21, not charged against the partnership's book
income this year. Describe each such item of deduction. Attach a
statement if necessary.

Line 9

This line 9 should reconcile to the Analysis of Net Income (Loss)
per Return, line 1.

The balance at the beginning of the year should equal the total of
the amounts reported as the partners’ beginning tax-basis
capital accounts in item L of all the partners’ Schedules K-1. If
not, the partnership should attach an explanation of the
difference. Generally, the balance at the beginning of the year
should equal the adjusted tax basis of the partnership’s assets at
the beginning of the year reduced by the partnership’s liabilities
at the beginning of the year. If the partnership’s balance sheet
(Schedule L) is reported on the tax basis and if the aggregate of
the partners’ beginning and ending capital accounts differs from
the amounts reported on Schedule L, attach a statement
reconciling any differences. No such reconciliation is required if
Schedule L isn't reported on the tax basis.

Line 2. Capital Contributed During Year

Include on line 2a the amount of money contributed by each
partner to the partnership, as reflected on the partnership's
books and records. Include on line 2b the adjusted tax basis of
property net of liabilities contributed by each partner to the
partnership, as reflected on the partnership’s books and records.

Line 3. Net Income (Loss)

Enter on Schedule M-2, line 3, the amount from the Analysis of
Net Income (Loss) per Return, line 1. Generally, this is the same
as the amount entered on Schedule M-1, line 9 (if the
partnership is required to complete Schedule M-1), or, if the
partnership files Schedule M-3, the amount in column (d) of
Schedule M-3, Part II, line 26. Because section 743(b) basis
adjustments and income from guaranteed payments aren't
included in the partners' tax-basis capital accounts, certain
adjustments may be necessary. If adjustments to income under
section 743(b) are taken into account in calculating net income
(loss), remove the effects of those adjustments (for example, by
adding or subtracting the income, gain, loss, or deduction
resulting from those adjustments on line 4 or line 7 in
accordance with the instructions for those lines). If net income
includes income from guaranteed payments made to partners,
remove such income on line 7.

Line 4. Other Increases (Itemize)

Enter on line 4 the sum of all other increases to the partners'
tax-basis capital accounts during the year not reflected on lines 2
and 3. Also, if the aggregate net negative income from all section
743(b) adjustments reported on Schedule K, line 13e, was
included as a decrease to income in arriving at net income (loss)
on line 3, report those amounts as an increase on line 4. For
these purposes, “net negative income from all section 743(b)
adjustments” means the excess of all section 743(b)
adjustments to income allocated to the partner that decrease
partner taxable income over all section 743(b) adjustments to
income that increase partner taxable income.

Line 6. Distributions
Line 6a. Cash. Enter the amount of money distributed to each
partner by the partnership. For purposes of line 6a, money
includes marketable securities, as described in section 731(c).
Line 6b. Property. Enter the sum of the adjusted tax bases of
property net of liabilities distributed to each partner by the
partnership as reflected on the partnership's books and records.
Instructions for Form 1065 (2024)

Include withdrawals from inventory for the personal use of a
partner.

Line 7. Other Decreases (Itemize)

Enter on line 7 the sum of all other decreases to the partners'
tax-basis capital accounts during the year not reflected on line 6.
Also, if the aggregate net positive income from all section 743(b)
adjustments reported on Schedule K, line 11, was included as
an increase to income in arriving at net income (loss) on line 3,
report that amount as a decrease on line 7. For these purposes,
“net positive income from all section 743(b) adjustments” means

the excess of all section 743(b) adjustments to income allocated
to the partner that increase the partner's taxable income over all
section 743(b) adjustments to income that decrease the
partner's taxable income. Likewise, if line 3 includes income from
guaranteed payments reported on Schedule K, line 4c, include
that amount as a decrease on line 7.

Line 9. Balance at End of Year

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Instructions for Form 1065 (2024)

The balance at the end of the year should equal the total of the
amounts reported as the partners’ ending capital accounts in
item L of all the partners’ Schedules K-1.

Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United
States. You're required to give us the information. We need it to ensure that you're complying with these laws and to allow us to figure
and collect the right amount of tax.
You aren’t required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.

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Estimates of taxpayer burden. The following tables show burden estimates based on current statutory requirements as of
December 2023, for taxpayers filing 2023 Forms 1065, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC,
1120-L, 1120-PC, 1066, 1120-REIT, 1120-RIC, 1120-POL, and related attachments. Time spent and out-of-pocket costs are
presented separately. Time burden is broken out by taxpayer activity, with reporting representing the largest component. Out-of-pocket
costs include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and
submission fees, postage and photocopying costs, and tax preparation software costs. While these estimates don't include burden
associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic
errors, implying lower post-filing burden.
Reported time and cost burdens are national averages and don't necessarily reflect a “typical” case. Most taxpayers experience
lower-than-average burden, with taxpayer burden varying considerably by taxpayer type.

The average burden for partnerships filing Forms 1065 and related attachments is about 60 hours and $5,000; the average burden
for corporations filing Forms 1120 and associated forms is about 105 hours and $6,700; and the average burden for Forms 1120-REIT,
1120-RIC, and 1120-S, and all related attachments is 65 hours and $4,400. Within each of these estimates, there's significant variation
in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the taxpayer,
the type of software or professional preparer used, and the geographic location. Third-party burden hours aren't included in these
estimates.

Table 1—Taxpayer Burden for Partnerships
Forms 1065, 1066, and all attachments
Primary Form Filed or Type of
Taxpayer
All Partnerships

Total Number of Returns
(millions)

Average Time (hours)

Average Cost

Average Monetized
Burden
$8,700

5.3

$5,000

Small

4.9

$3,200

$5,200

Large*

0.4

200

$27,800

$50,800

* A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn't meet the definition of a large business.

Table 2—Taxpayer Burden for Taxable Corporations
Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, and 1120-POL, and all attachments
Primary Form Filed or Type of
Taxpayer
All Taxable Corporations

Total Number of Returns
(millions)

Average Time (hours)

Average Cost

Average Monetized
Burden
$14,900

2.1

105

$6,700

Small

2.0

$3,600

$6,200

Large*

0.1

830

$53,800

$149,000

Table 3—Taxpayer Burden for Pass-Through Corporations
Forms 1120-REIT, 1120-RIC, and 1120-S, and all attachments
Primary Form Filed or Type of
Taxpayer
All Pass-Through Corporations

Total Number of Returns
(millions)

Average Time (hours)

Average Cost

Average Monetized
Burden
$7,500

5.8

$4,400

Small

5.7

$3,800

$6,400

Large*

0.1

295

$37,700

$71,800

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

Instructions for Form 1065 (2024)

Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments
as we revise our tax forms, instructions, and publications. Don’t send the tax form to this address. Instead, see Where To File, earlier,
near the beginning of these instructions.

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Instructions for Form 1065 (2024)

Codes for Principal Business Activity
and Principal Product or Service
This list of Principal Business Activities and their
associated codes is designed to classify an enterprise
by the type of activity in which it's engaged to facilitate
the administration of the Internal Revenue Code. These
Principal Business Activity Codes are based on the
North American Industry Classification System.

Agriculture, Forestry, Fishing
and Hunting

238290

Using the list of activities and codes below,
determine from which activity the business derives the
largest percentage of its “total receipts.” Total receipts is
defined as the sum of gross receipts or sales (page 1,
line 1a); all other income (page 1, lines 4 through 7);
income reported on Schedule K, lines 3a, 5, 6a, and 7;
income or net gain reported on Schedule K, lines 8, 9a,
10, and 11; and income or net gain reported on Form
8825, lines 2, 19, and 20a. If the business purchases
raw materials and supplies them to a subcontractor to
Other Building Equipment
Contractors
Building Finishing Contractors
(including drywall, insulation,
painting, wallcovering, flooring,
tile, & finish carpentry)
Other Specialty Trade
Contractors (including site
preparation)

produce the finished product, but retains title to the
product, the business is considered a manufacturer and
must use one of the manufacturing codes (311110–
339900).
Once the Principal Business Activity is determined,
enter the six-digit code from the list below on page 1,
item C. Also enter the business activity in item A and a
brief description of the principal product or service of the
business in item B.

Plastics and Rubber Products
Manufacturing
326100 Plastics Product Mfg
326200 Rubber Product Mfg
Nonmetallic Mineral Product
Manufacturing
327100 Clay Product & Refractory Mfg
327210 Glass & Glass Product Mfg
327300 Cement & Concrete Product Mfg
327400 Lime & Gypsum Product Mfg
327900 Other Nonmetallic Mineral
Product Mfg
Primary Metal Manufacturing
331110 Iron & Steel Mills & Ferroalloy
Mfg
331200 Steel Product Mfg from
Purchased Steel
331310 Alumina & Aluminum Production
& Processing
331400 Nonferrous Metal (except
Aluminum) Production &
Processing
331500 Foundries
Fabricated Metal Product
Manufacturing
332110 Forging & Stamping
332210 Cutlery & Handtool Mfg
332300 Architectural & Structural Metals
Mfg
332400 Boiler, Tank, & Shipping
Container Mfg
332510 Hardware Mfg
332610 Spring & Wire Product Mfg
332700 Machine Shops; Turned Product;
& Screw, Nut, & Bolt Mfg
332810 Coating, Engraving, Heat
Treating, & Allied Activities
332900 Other Fabricated Metal Product
Mfg
Machinery Manufacturing
333100 Agriculture, Construction, &
Mining Machinery Mfg
333200 Industrial Machinery Mfg
333310 Commercial & Service Industry
Machinery Mfg
333410 Ventilation, Heating,
Air-Conditioning, & Commercial
Refrigeration Equipment Mfg
333510 Metalworking Machinery Mfg
333610 Engine, Turbine & Power
Transmission Equipment Mfg
333900 Other General Purpose
Machinery Mfg
Computer and Electronic Product
Manufacturing
334110 Computer & Peripheral
Equipment Mfg
334200 Communications Equipment Mfg
334310 Audio & Video Equipment Mfg
334410 Semiconductor & Other
Electronic Component Mfg
334500 Navigational, Measuring,
Electromedical, & Control
Instruments Mfg
334610 Manufacturing & Reproducing
Magnetic & Optical Media
Electrical Equipment, Appliance, and
Component Manufacturing
335100 Electric Lighting Equipment Mfg
335200 Household Appliance Mfg
335310 Electrical Equipment Mfg
335900 Other Electrical Equipment &
Component Mfg
Transportation Equipment
Manufacturing
336100 Motor Vehicle Mfg
336210 Motor Vehicle Body & Trailer Mfg
336300 Motor Vehicle Parts Mfg
336410 Aerospace Product & Parts Mfg
336510 Railroad Rolling Stock Mfg
336610 Ship & Boat Building
336990 Other Transportation Equipment
Mfg

Furniture and Related Product
Manufacturing
337000 Furniture & Related Product
Manufacturing
Miscellaneous Manufacturing
339110 Medical Equipment & Supplies
Mfg
339900 Other Miscellaneous
Manufacturing

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Crop Production
111100 Oilseed & Grain Farming
111210 Vegetable & Melon Farming
(including potatoes & yams)
111300 Fruit & Tree Nut Farming
111400 Greenhouse, Nursery, &
Floriculture Production
111900 Other Crop Farming (including
tobacco, cotton, sugarcane, hay,
peanut, sugar beet & all other
crop farming)
Animal Production
112111 Beef Cattle Ranching & Farming
112112 Cattle Feedlots
112120 Dairy Cattle & Milk Production
112210 Hog & Pig Farming
112300 Poultry & Egg Production
112400 Sheep & Goat Farming
112510 Aquaculture (including shellfish &
finfish farms & hatcheries)
112900 Other Animal Production
Forestry and Logging
113110 Timber Tract Operations
113210 Forest Nurseries & Gathering of
Forest Products
113310 Logging
Fishing, Hunting and Trapping
114110 Fishing
114210 Hunting & Trapping
Support Activities for Agriculture and
Forestry
115110 Support Activities for Crop
Production (including cotton
ginning, soil preparation,
planting, & cultivating)
115210 Support Activities for Animal
Production (including farriers)
115310 Support Activities For Forestry

Mining
211120
211130
212110
212200
212310
212320
212390
213110

Crude Petroleum Extraction
Natural Gas Extraction
Coal Mining
Metal Ore Mining
Stone Mining & Quarrying
Sand, Gravel, Clay, & Ceramic &
Refractory Minerals Mining &
Quarrying
Other Nonmetallic Mineral
Mining & Quarrying
Support Activities for Mining

Utilities
221100
221210
221300
221500

Electric Power Generation,
Transmission, & Distribution
Natural Gas Distribution
Water, Sewage & Other Systems
Combination Gas & Electric

Construction
Construction of Buildings
236110 Residential Building Construction
236200 Nonresidential Building
Construction
Heavy and Civil Engineering
Construction
237100 Utility System Construction
237210 Land Subdivision
237310 Highway, Street, & Bridge
Construction
237990 Other Heavy & Civil Engineering
Construction
Specialty Trade Contractors
238100 Foundation, Structure, & Building
Exterior Contractors (including
framing carpentry, masonry,
glass, roofing, & siding)
238210 Electrical Contractors
238220 Plumbing, Heating, &
Air-Conditioning Contractors

238300

238900

Manufacturing

Food Manufacturing
311110 Animal Food Mfg
311200 Grain & Oilseed Milling
311300 Sugar & Confectionery Product
Mfg
311400 Fruit & Vegetable Preserving &
Specialty Food Mfg
311500 Dairy Product Mfg
311610 Animal Slaughtering &
Processing
311710 Seafood Product Preparation &
Packaging
311800 Bakeries, Tortilla & Dry Pasta Mfg
311900 Other Food Mfg (including
coffee, tea, flavorings &
seasonings)
Beverage and Tobacco Product
Manufacturing
312110 Soft Drink & Ice Mfg
312120 Breweries
312130 Wineries
312140 Distilleries
312200 Tobacco Manufacturing
Textile Mills and Textile Product Mills
313000 Textile Mills
314000 Textile Product Mills
Apparel Manufacturing
315100 Apparel Knitting Mills
315210 Cut & Sew Apparel Contractors
315250 Cut & Sew Apparel Mfg (except
Contractors)
315990 Apparel Accessories & Other
Apparel Mfg
Leather and Allied Product
Manufacturing
316110 Leather & Hide Tanning &
Finishing
316210 Footwear Mfg (including rubber &
plastics)
316990 Other Leather & Allied Product
Mfg
Wood Product Manufacturing
321110 Sawmills & Wood Preservation
321210 Veneer, Plywood, & Engineered
Wood Product Mfg
321900 Other Wood Product Mfg
Paper Manufacturing
322100 Pulp, Paper, & Paperboard Mills
322200 Converted Paper Product Mfg
Printing and Related Support Activities
323100 Printing & Related Support
Activities
Petroleum and Coal Products
Manufacturing
324110 Petroleum Refineries (including
integrated)
324120 Asphalt Paving, Roofing, &
Saturated Materials Mfg
324190 Other Petroleum & Coal Products
Mfg
Chemical Manufacturing
325100 Basic Chemical Mfg
325200 Resin, Synthetic Rubber, &
Artificial & Synthetic Fibers &
Filaments Mfg
325300 Pesticide, Fertilizer, & Other
Agricultural Chemical Mfg
325410 Pharmaceutical & Medicine Mfg
325500 Paint, Coating, & Adhesive Mfg
325600 Soap, Cleaning Compound, &
Toilet Preparation Mfg
325900 Other Chemical Product &
Preparation Mfg

Wholesale Trade

Merchant Wholesalers, Durable Goods
423100 Motor Vehicle & Motor Vehicle
Parts & Supplies
423200 Furniture & Home Furnishings
423300 Lumber & Other Construction
Materials
423400 Professional & Commercial
Equipment & Supplies
423500 Metal & Mineral (except
Petroleum)
423600 Household Appliances &
Electrical & Electronic Goods
423700 Hardware, & Plumbing & Heating
Equipment & Supplies
423800 Machinery, Equipment, &
Supplies
423910 Sporting & Recreational Goods &
Supplies
423920 Toy & Hobby Goods & Supplies
423930 Recyclable Materials
423940 Jewelry, Watch, Precious Stone,
& Precious Metals
423990 Other Miscellaneous Durable
Goods
Merchant Wholesalers, Nondurable
Goods
424100 Paper & Paper Products
424210 Drugs & Druggists' Sundries
424300 Apparel, Piece Goods, & Notions
424400 Grocery & Related Products
424500 Farm Product Raw Materials
424600 Chemical & Allied Products
424700 Petroleum & Petroleum Products
424800 Beer, Wine, & Distilled Alcoholic
Beverages
424910 Farm Supplies
424920 Book, Periodical, & Newspapers
424930 Flower, Nursery Stock, & Florists'
Supplies
424940 Tobacco Products & Electronic
Cigarettes
424950 Paint, Varnish, & Supplies
424990 Other Miscellaneous Nondurable
Goods
Wholesale Trade Agents & Brokers
425120 Wholesale Trade Agents &
Brokers

Retail Trade
Motor Vehicle and Parts Dealers
441110 New Car Dealers
441120 Used Car Dealers
441210 Recreational Vehicle Dealers
441222 Boat Dealers
441227 Motorcycle, ATV, & All Other
Motor Vehicle Dealers
441300 Automotive Parts, Accessories, &
Tire Retailers
Building Material and Garden
Equipment and Supplies Dealers
444110 Home Centers
444120 Paint & Wallpaper Retailers
444140 Hardware Retailers
444180 Other Building Material Dealers
444200 Lawn & Garden Equipment &
Supplies Retailers
Food and Beverage Retailers
445110 Supermarkets & Other Grocery
Retailers (except Convenience)
445131 Convenience Retailers
445132 Vending Machine Operators
445230 Fruit & Vegetable Retailers

Codes for Principal Business Activity and Principal Product or Service (Continued)
445240
445250
445291
445292
445298

Meat Retailers
Fish & Seafood Retailers
Baked Goods Retailers
Confectionery & Nut Retailers
All Other Specialty Food
Retailers
445320 Beer, Wine, & Liquor Retailers
Furniture and Home Furnishings
Retailers
449110 Furniture Retailers
449121 Floor Covering Retailers
449122 Window Treatment Retailers
449129 All Other Home Furnishings
Retailers
Electronics and Appliance Retailers
449210 Electronics & Appliance Retailers
(including computers)
General Merchandise Retailers
455110 Department Stores
455210 Warehouse Clubs, Supercenters,
& Other General Merch. Retailers
Health and Personal Care Retailers
456110 Pharmacies & Drug Retailers
456120 Cosmetics, Beauty Supplies, &
Perfume Retailers
456130 Optical Goods Retailers
456190 Other Health & Personal Care
Retailers
Gasoline Stations & Fuel Dealers
457100 Gasoline Stations (including
convenience stores with gas)
457210 Fuel Dealers (including Heating
oil & Liquefied Petroleum)
Clothing and Accessories Retailers
458110 Clothing & Clothing Accessories
Retailers
458210 Shoe Retailers
458310 Jewelry Retailers
458320 Luggage & Leather Goods
Retailers
Sporting, Hobby, Book, Musical
Instruments, & Miscellaneous Retailers
459110 Sporting Goods Retailers
459120 Hobby, Toy, & Game Retailers
459130 Sewing, Needlework, & Piece
Goods Retailers
459140 Musical Instrument & Supplies
Retailers
459210 Book Retailers & News Dealers
(including newsstands)
459310 Florists
459410 Office Supplies & Stationery
Retailers
459420 Gift, Novelty, & Souvenir
Retailers
459510 Used Merchandise Retailers
459910 Pet & Pet Supplies Retailers
459920 Art Dealers
459930 Manufactured (Mobile) Home
Dealers
459990 All Other Miscellaneous Retailers
(including tobacco, candle, &
trophy retailers)
Nonstore Retailers
Nonstore retailers sell all types of
merchandise using such
methods as Internet, mail-order
catalogs, interactive television, or
direct sales. These types of
Retailers should select the PBA
associated with their primary line
of products sold. For example,
establishments primarily selling
prescription and non-prescription
drugs, select PBA code 456110
Pharmacies & Drug Retailers.

485320
485410

Limousine Service
School & Employee Bus
Transportation
485510 Charter Bus Industry
485990 Other Transit & Ground
Passenger Transportation
Pipeline Transportation
486000 Pipeline Transportation
Scenic & Sightseeing Transportation
487000 Scenic & Sightseeing
Transportation
Support Activities for Transportation
488100 Support Activities for Air
Transportation
488210 Support Activities for Rail
Transportation
488300 Support Activities for Water
Transportation
488410 Motor Vehicle Towing
488490 Other Support Activities for Road
Transportation
488510 Freight Transportation
Arrangement
488990 Other Support Activities for
Transportation
Couriers and Messengers
492110 Couriers & Express Delivery
Services
492210 Local Messengers & Local
Delivery
Warehousing and Storage
493100 Warehousing & Storage (except
lessors of miniwarehouses &
self-storage units)

523160

Commodity Contracts
Intermediation
Securities & Commodity
Exchanges
523900 Other Financial Investment
Activities (including portfolio
management & investment
advice)
Insurance Carriers and Related
Activities
524110 Direct Life, Health, & Medical
Insurance Carriers
524120 Direct Insurance (except Life,
Health, & Medical) Carriers
524210 Insurance Agencies &
Brokerages
524290 Other Insurance Related
Activities (including third-party
administration of insurance &
pension funds)
Funds, Trusts, and Other Financial
Vehicles
525100 Insurance & Employee Benefit
Funds
525910 Open-End Investment Funds
(Form 1120-RIC)
525920 Trusts, Estates, & Agency
Accounts
525990 Other Financial Vehicles
(including mortgage REITs &
closed-end investment funds)
523210

541370

Surveying & Mapping (except
Geophysical) Services
541380 Testing Laboratories & Services
Specialized Design Services
541400 Specialized Design Services
(including interior, industrial,
graphic, & fashion design)
Computer Systems Design and Related
Services
541511 Custom Computer Programming
Services
541512 Computer Systems Design
Services
541513 Computer Facilities Management
Services
541519 Other Computer Related
Services
Other Professional, Scientific, and
Technical Services
541600 Management, Scientific, &
Technical Consulting Services
541700 Scientific Research &
Development Services
541800 Advertising, Public Relations, &
Related Services
541910 Marketing Research & Public
Opinion Polling
541920 Photographic Services
541930 Translation & Interpretation
Services
541940 Veterinary Services
541990 All Other Professional, Scientific,
& Technical Services

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Transportation and
Warehousing
Air, Rail, and Water Transportation
481000 Air Transportation
482110 Rail Transportation
483000 Water Transportation
Truck Transportation
484110 General Freight Trucking, Local
484120 General Freight Trucking,
Long-distance
484200 Specialized Freight Trucking
Transit and Ground Passenger
Transportation
485110 Urban Transit Systems
485210 Interurban & Rural Bus
Transportation
485310 Taxi and Ridesharing Services

Information

Motion Picture and Sound Recording
Industries
512100 Motion Picture & Video Industries
(except video rental)
512200 Sound Recording Industries
Publishing Industries
513110 Newspaper Publishers
513120 Periodical Publishers
513130 Book Publishers
513140 Directory & Mailing List
Publishers
513190 Other Publishers
513210 Software Publishers
Broadcasting & Content Providers &
Telecommunications
516100 Radio & Television Broadcasting
Stations
516210 Media Streaming, Social
Networks, & Other Content
Providers
517000 Telecommunications (including
Wired, Wireless, Satellite, Cable
& Other Program Distribution,
Resellers, Agents, Other
Telecommunications, & Internet
Service Providers)
Data Processing, Web Search Portals, &
Other Information Services
518210 Computing Infrastructure
Providers, Data Processing, Web
Hosting, & Related Services
519200 Web Search Portals, Libraries,
Archives, & Other Info. Services

Finance and Insurance
Depository Credit Intermediation
522110 Commercial Banking
522130 Credit Unions
522180 Savings Institutions & Other
Depository Credit Intermediation
Nondepository Credit Intermediation
522210 Credit Card Issuing
522220 Sales Financing
522291 Consumer Lending
522292 Real Estate Credit (including
mortgage bankers & originators)
522299 Intl, Secondary Market, & Other
Nondepos. Credit Intermediation
Activities Related to Credit
Intermediation
522300 Activities Related to Credit
Intermediation (including loan
brokers, check clearing, & money
transmitting)
Securities, Commodity Contracts, and
Other Financial Investments and
Related Activities
523150 Investment Banking & Securities
Intermediation

Real Estate and Rental and
Leasing

Real Estate
531110 Lessors of Residential Buildings
& Dwellings (including equity
REITs)
531120 Lessors of Nonresidential
Buildings (except
Miniwarehouses) (including
equity REITs)
531130 Lessors of Miniwarehouses &
Self-Storage Units (including
equity REITs)
531190 Lessors of Other Real Estate
Property (including equity REITs)
531210 Offices of Real Estate Agents &
Brokers
531310 Real Estate Property Managers
531320 Offices of Real Estate Appraisers
531390 Other Activities Related to Real
Estate
Rental and Leasing Services
532100 Automotive Equipment Rental &
Leasing
532210 Consumer Electronics &
Appliances Rental
532281 Formal Wear & Costume Rental
532282 Video Tape & Disc Rental
532283 Home Health Equipment Rental
532284 Recreational Goods Rental
532289 All Other Consumer Goods
Rental
532310 General Rental Centers
532400 Commercial & Industrial
Machinery & Equipment Rental &
Leasing
Lessors of Nonfinancial Intangible
Assets (except copyrighted works)
533110 Lessors of Nonfinancial
Intangible Assets (except
copyrighted works)

Professional, Scientific, and
Technical Services
Legal Services
541110 Offices of Lawyers
541190 Other Legal Services
Accounting, Tax Preparation,
Bookkeeping, and Payroll Services
541211 Offices of Certified Public
Accountants
541213 Tax Preparation Services
541214 Payroll Services
541219 Other Accounting Services
Architectural, Engineering, and Related
Services
541310 Architectural Services
541320 Landscape Architecture Services
541330 Engineering Services
541340 Drafting Services
541350 Building Inspection Services
541360 Geophysical Surveying &
Mapping Services

Management of Companies
(Holding Companies)
551111
551112

Offices of Bank Holding
Companies
Offices of Other Holding
Companies

Administrative and Support and
Waste Management and
Remediation Services

Administrative and Support Services
561110 Office Administrative Services
561210 Facilities Support Services
561300 Employment Services
561410 Document Preparation Services
561420 Telephone Call Centers
561430 Business Service Centers
(including private mail centers &
copy shops)
561440 Collection Agencies
561450 Credit Bureaus
561490 Other Business Support
Services (including repossession
services, court reporting, &
stenotype services)
561500 Travel Arrangement &
Reservation Services
561600 Investigation & Security Services
561710 Exterminating & Pest Control
Services
561720 Janitorial Services
561730 Landscaping Services
561740 Carpet & Upholstery Cleaning
Services
561790 Other Services to Buildings &
Dwellings
561900 Other Support Services
(including packaging & labeling
services, & convention & trade
show organizers)
Waste Management and Remediation
Services
562000 Waste Management &
Remediation Services

Educational Services
611000

Educational Services (including
schools, colleges, & universities)

Health Care and Social
Assistance
Offices of Physicians and Dentists
621111 Offices of Physicians (except
mental health specialists)
621112 Offices of Physicians, Mental
Health Specialists
621210 Offices of Dentists
Offices of Other Health Practitioners
621310 Offices of Chiropractors
621320 Offices of Optometrists

Codes for Principal Business Activity and Principal Product or Service (Continued)
621330

624310

621340

624410

Offices of Mental Health
Practitioners (except Physicians)
Offices of Physical, Occupational
& Speech Therapists, &
Audiologists
621391 Offices of Podiatrists
621399 Offices of All Other
Miscellaneous Health
Practitioners
Outpatient Care Centers
621410 Family Planning Centers
621420 Outpatient Mental Health &
Substance Abuse Centers
621491 HMO Medical Centers
621492 Kidney Dialysis Centers
621493 Freestanding Ambulatory
Surgical & Emergency Centers
621498 All Other Outpatient Care
Centers
Medical and Diagnostic Laboratories
621510 Medical & Diagnostic
Laboratories
Home Health Care Services
621610 Home Health Care Services
Other Ambulatory Health Care Services
621900 Other Ambulatory Health Care
Services (including ambulance
services & blood & organ banks)
Hospitals
622000 Hospitals
Nursing and Residential Care Facilities
623000 Nursing & Residential Care
Facilities
Social Assistance
624100 Individual & Family Services
624200 Community Food & Housing, &
Emergency & Other Relief
Services

Vocational Rehabilitation
Services
Childcare Services

Arts, Entertainment, and
Recreation
Performing Arts, Spectator Sports, and
Related Industries
711100 Performing Arts Companies
711210 Spectator Sports (including
sports clubs & racetracks)
711300 Promoters of Performing Arts,
Sports, & Similar Events
711410 Agents & Managers for Artists,
Athletes, Entertainers, & Other
Public Figures
711510 Independent Artists, Writers, &
Performers
Museums, Historical Sites, and Similar
Institutions
712100 Museums, Historical Sites, &
Similar Institutions
Amusement, Gambling, and Recreation
Industries
713100 Amusement Parks & Arcades
713200 Gambling Industries
713900 Other Amusement & Recreation
Industries (including golf
courses, skiing facilities,
marinas, fitness centers, &
bowling centers)

721191
721199

Bed & Breakfast Inns
All Other Traveler
Accommodation
721210 RV (Recreational Vehicle) Parks
& Recreational Camps
721310 Rooming & Boarding Houses,
Dormitories, & Workers’ Camps
Food Services and Drinking Places
722300 Special Food Services (including
food service contractors &
caterers)
722410 Drinking Places (Alcoholic
Beverages)
722511 Full-Service Restaurants
722513 Limited Service Restaurants
722514 Cafeterias, Grill Buffets, & Buffets
722515 Snack & Non-alcoholic Beverage
Bars

811430

Footwear & Leather Goods
Repair
Other Personal & Household
Goods Repair & Maintenance
Personal and Laundry Services
812111 Barber Shops
812112 Beauty Salons
812113 Nail Salons
812190 Other Personal Care Services
(including diet & weight reducing
centers)
812210 Funeral Homes & Funeral
Services
812220 Cemeteries & Crematories
812310 Coin-Operated Laundries &
Drycleaners
812320 Drycleaning & Laundry Services
(except Coin-Operated)
812330 Linen & Uniform Supply
812910 Pet Care (except Veterinary)
Services
812920 Photofinishing
812930 Parking Lots & Garages
812990 All Other Personal Services
Religious, Grantmaking, Civic,
Professional, and Similar Organizations
813000 Religious, Grantmaking, Civic,
Professional, & Similar
Organizations (including
condominium & homeowners
associations)
811490

TREASURY/IRS
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November 21, 2024

Accommodation and Food
Services

Accommodation
721110 Hotels (except Casino Hotels) &
Motels
721120 Casino Hotels

Other Services

Repair and Maintenance
811110 Automotive Mechanical &
Electrical Repair & Maintenance
811120 Automotive Body, Paint, Interior,
& Glass Repair
811190 Other Automotive Repair &
Maintenance (including oil
change & lubrication shops & car
washes)
811210 Electronic & Precision Equipment
Repair & Maintenance
811310 Commercial & Industrial
Machinery & Equipment (except
Automotive & Electronic) Repair
& Maintenance
811410 Home & Garden Equipment &
Appliance Repair & Maintenance
811420 Reupholstery & Furniture Repair

Other

999000

Unclassified Establishments
(unable to classify)

Index
A
Accounting methods 7
Change in accounting method 8
Mark-to-market accounting method 8
Nonaccrual-experience method 8, 21
Percentage of completion method 8
Accounting periods 8
Adjusting deductions for certain
credits 23
Administrative adjustment request 9
Allocation of partnership items:
Contributed property 33
Liabilities 35
Nonrecourse liabilities 35
Partnership agreement 33
Special allocations 37
Alternative minimum tax 50
Adjusted gain (loss) 50
Depletion (other than oil and gas) 50
Depreciation adjustment on property
placed in service after 1986 50
Oil, gas, and geothermal properties 51
Amended return 9
Analysis of net income (loss) per
Return 62
Analysis of partner's capital account 36
Analysis of partners' capital accounts 64
Assembling the return 12
At-risk activities 35
Attached statements 34

Reforestation expenditures 27
Rent 24
Repairs and maintenance 24
Retirement plans 26
Salaries and wages 24, 38
Taxes and licenses 24
Transactions between related
taxpayers 23
Travel 26
Wages 24
Definitions 2
Depreciation 25
Dispositions of contributed property 14
Distributions:
Recognition of precontribution gain 14
Dividends 38

O
Ordinary business income (loss) 37

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B

Balance sheets per books 63
Bipartisan Budget Act of 2015 (BBA) 2
Business start-up expenses 23

C
Capital gain:
Net long-term 39
Net short-term 39
Change of address 20
Charitable contribution 42
Codes:
Partner 35
Principal business activity 68
Schedule K-1 reporting 34
Collectibles (28%) gain (loss) 39
Consolidated audit procedures 2
Contributions to the partnership 14
Cost of goods sold 21
Credits 47
Low-income housing 47
Rehabilitation 47
Rental activities 47

D
Deductions:
Bad debts 24
Depletion 25
Depreciation 25
Employee benefit programs 26
Entertainment facilities 27
Guaranteed payments 24
How to report 22
Interest 25
Limitations 22
Meals and entertainment 26
Membership dues 27

Elections:
By each partner 13
By the partnership 13
Electronic filing 5
Entity classification election 12
Extensions 6

Foreign accounts 28
Foreign partners, withholding 30
Foreign partnership 3
Foreign trusts, transactions 28
Forms:
How to get 2
That may be required 10
Future Developments 1

G
General partner 3
General partnership 3
Guaranteed payments 38, 64

I
Inclusion amount 24
Income:
Gross receipts or sales 21
Tax-exempt income 21
Trade or business 21
Installment sales 21
Interest income 38
Interest on production expenditures 25
Investment:
Income and expenses 52
Interest expense 43

L
Limited liability company 3
Limited liability partnership 3
Limited partner 3
Limited partnership 3

N
Net section 1231 gain (loss) 40
Nondeductible expenses 52
Nonrecourse liabilities 35
Nonrecourse loans 4, 35
(See also Nonrecourse liabilities)
Notice of inconsistent treatment 9

Paid preparer authorization 7
Partner contributing property with a
built-in gain or loss 37
Passive activity limitations:
Grouping activities 17
Passive activities defined 15
Recharacterization of passive income 18
Rental activities 16
Reporting requirements 18
Trade or business activities 15
Penalties 7
Failure to furnish information timely 7
Late filing 7
Trust fund recovery 7
Period covered 6
Portfolio income 17, 38
Private delivery services 5
Publicly traded partnerships 4, 15, 22

Qualified Business Income Deduction 56

Recapture:
Investment credit 53
Low-income housing credit 53
Mining exploration costs 40
Section 179 deduction 54
Reconciliation of income (loss) per books
with income (loss) per return 64
Recordkeeping 9
Reforestation costs 45
Rental activities 16
Rounding off to whole dollars 9
Royalties 39

S
Sale of partnership interests 14
Sale of small business stock:
Exclusion 41
Rollover 41
Schedule:
B 27
K 32, 37
K-1 32, 37
L 63
M-1 64
M-2 64
M-3 64
Section 179 expense deduction 42
Recapture 54
Section 481(a) adjustment 8
Section 59(e) expenditures 13, 22, 23, 44
Self-charged interest 17
Self-employment 45
Signatures:
General partner or LLC member
manager 6
Paid preparer 6
Special allocations 37
Substitute forms 33
Syndication costs 23

Tax shelter:
Registration 28
Tax-exempt income 51
Termination of partnership 5
Travel and entertainment 26, 64

Uniform capitalization rules 22
Unrealized receivables and inventory:
Sale of partnership interests 14
Unrecaptured section 1250 gain 39
Unrelated business taxable income 54

When to file 5
Where to file 6
Who must file 4

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File Type	application/pdf
File Title	2024 Instructions for Form 1065
Subject	Instructions for Form 1065 , U.S. Return of Partnership Income
Author	W:CAR:MP:FP
File Modified	2024-11-21
File Created	2024-11-20