2017

Partner's Instructions for 

Schedule K-1 (Form 1065-B)

Partner's Share of Income (Loss) From an Electing Large Partnership

(For Partner's Use Only)

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue 

Code unless otherwise noted.

Future Developments

For the latest information about 

developments related to Schedule K-1 

(Form1065-B) and its instructions, such as 

legislation enacted after they were 

published, go to IRS.gov/Form1065B.

What’s New

Schedule K-1 (1065-B) and its instructions. Public Law 114-74, Title XI, sec. 

1101(b) repealed the electing large 

partnership rules for partnership tax years 

beginning after 2017. As a result, 

Schedule K-1 (Form 1065-B) and its 

instructions will be obsoleted after 2017.

General Instructions

Purpose of Schedule K-1

The partnership uses Schedule K-1 to 

report your share of the partnership's 

income, deductions, credits, etc. Keep it 

for your records. Don’t file it with your tax 

return. The partnership has filed a copy 

with the IRS.

You are liable for tax on your share of 

the partnership income, whether or not 

distributed. Include your share on your tax 

return if a return is required. Use these 

instructions to help you report the items 

shown on Schedule K-1 on your tax return.

The amount of loss and deduction that 

you can claim on your tax return may be 

less than the amount reported on 

Schedule K-1. It is the partner's 

responsibility to consider and apply any 

applicable limitations. See Limitations on 

Losses, Deductions, and Credits, later, for 

more information.

Electing Large 

Partnerships (ELPs)

This partnership has elected simplified 

reporting requirements intended to make it 

simpler for you to report your share of 

partnership income, credits, deductions, 

etc. In most cases, income, capital gains, 

credits, and deductions are combined at 

the partnership level so that the number of 

partnership items separately reported to 

partners is reduced. Most limitations and 

elections affecting partnership income are 

made by the electing large partnership.

For limited partners, income and other 

items from the partnership's trade or 

business and rental activities are treated 

as being from a trade or business that is a 

single passive activity. These items are 

reported in boxes 1, 4a, and 5, with most 

credits being reported in boxes 7 and 8.

General partners must make their own 

determinations as to whether the activities 

are passive for them. Therefore, 

partnership items from trade or business, 

rental real estate, and other rental 

activities are separately reported for each 

activity in box 9.

Income, etc., from other activities 

(investment and portfolio income and 

deductions) are reported in boxes 2, 3, 4b, 

and 6 for both limited and general 

partners.

Errors

You must report partnership items shown 

on your Schedule K-1 (and any attached 

statements) the same way that the 

partnership treated the items on its return. 

If you believe the partnership has made an 

error on your Schedule K-1, notify the 

partnership. Don’t change any items on 

your copy of Schedule K-1. Generally, an 

adjustment to correct an error will take 

effect for the tax year in which the 

partnership actually makes the 

adjustment. However, if the error involves 

a change to your share of a partnership 

item, the partnership should file an 

amended partnership return and send you 

a corrected Schedule K-1.

If the treatment on your original or 

amended return is inconsistent with the 

partnership's treatment, you may be 

subject to the accuracy-related penalty. 

This penalty is in addition to any tax that 

results from making your amount or 

treatment of the item consistent with that 

shown on the partnership's return. Any 

deficiency that results from making the 

amounts consistent may be assessed 

immediately.

Sale or Exchange of 

Partnership Interest

Generally, a partner who sells or 

exchanges a partnership interest in a 

section 751(a) exchange must notify the 

partnership, in writing, within 30 days of 

the exchange (or, if earlier, by January 15 

of the calendar year following the calendar 

year in which the exchange occurred). A 

“section 751(a) exchange” is any sale or 

exchange of a partnership interest in 

which any money or other property 

received by the partner in exchange for 

that partner's interest is attributable to 

unrealized receivables (as defined in 

section 751(c)) or inventory items (as 

defined in section 751(d)).

The written notice to the partnership 

must include the names and addresses of 

both parties to the exchange, the 

identifying numbers of the transferor and 

(if known) of the transferee, and the 

exchange date.

An exception to this rule is made for 

sales or exchanges of publicly traded 

partnership interests for which a broker is 

required to file Form 1099-B, Proceeds 

From Broker and Barter Exchange 

Transactions.

If a partner is required to notify the 

partnership of a section 751(a) exchange 

but fails to do so, the partner will be 

subject to a penalty for each such failure. 

However, no penalty will be imposed if the 

partner can show that the failure was due 

to reasonable cause and not willful 

neglect.

Gain or loss from the disposition 

of your partnership interest may 

be net investment income under 

section 1411 and could be subject to the 

net investment income tax. See Form 

8960, Net Investment Income 

Tax—Individuals, Estates, and Trusts, and 

its instructions for information about how 

to figure and report the tax due.

Nominee Reporting

Any person who holds, directly or 

indirectly, an interest in a partnership as a 

nominee for another person must furnish a 

written statement to the partnership by the 

last day of the month following the end of 

the partnership's tax year. This statement 

must include the name, address, and 

identifying number of the nominee and 

such other person, description of the 

partnership interest held as nominee for 

TIP

Sep 22, 2017 Cat. No. 26141W
that person, and other information 

required by Temporary Regulations 

section 1.6031(c)-1T. A nominee who fails 

to furnish this statement must furnish to 

the person for whom the nominee holds 

the partnership interest a copy of 

Schedule K-1 and related information 

within 30 days of receiving it from the 

partnership.

A nominee who fails to furnish when 

due all the information required by 

Temporary Regulations section 

1.6031(c)-1T, or who furnishes incorrect 

information, is subject to a $260 penalty 

for each failure. The maximum penalty is 

$3,218,500 for all such failures during a 

calendar year. If the nominee intentionally 

disregards the requirement to report 

correct information, each $260 penalty 

increases to $530 or, if greater, 10% of the 

aggregate amount of items required to be 

reported, and there is no limit to the 

amount of the penalty.

International Boycotts

Every partnership that had operations in, 

or related to, a boycotting country, 

company, or a national of a boycotting 

country must file Form 5713, International 

Boycott Report.

If the partnership cooperated with an 

international boycott, it must provide you 

with a copy of its Form 5713. As a general 

or limited partner, you must file your own 

Form 5713 to report the partnership's 

activities and any other boycott operations 

that you may have. You may lose certain 

tax benefits if the partnership participated 

in, or cooperated with, an international 

boycott. See Form 5713 and its 

instructions for more information.

Definitions

General Partner

A general partner is a partner who is 

personally liable for partnership debts.

Limited Partner

A limited partner is a partner in a 

partnership formed under a state limited 

partnership law, whose personal liability 

for partnership debts is limited to the 

amount of money or other property that 

the partner contributed or is required to 

contribute to the partnership. Some 

members of other entities, such as 

domestic or foreign business trusts or 

limited liability companies that are 

classified as partnerships, may be treated 

as limited partners for certain purposes.

Disqualified Person

If you are a partner in a partnership 

holding oil and gas properties, you are a 

disqualified person if:

You are an oil or natural gas retailer 

described in section 613A(d)(2) or crude 

oil refiner described in section 613A(d)(4), 

or

Your average daily production of 

domestic crude oil and natural gas 

exceeds 500 barrels for your tax year in 

which the partnership's tax year ends. See 

section 776(b) for more details.

Note. Disqualified persons must report 

items of income, gain, loss, deduction, 

and credit attributable to partnership oil 

and gas properties as if the special rules 

for ELPs did not apply.

Nonrecourse Loans

Nonrecourse loans are those liabilities of 

the partnership for which no partner or 

related person bears the economic risk of 

loss.

Elections

Generally, the partnership decides how to 

figure taxable income from its operations. 

However, two elections are made by you 

separately on your income tax return and 

not by the partnership. These elections 

are made under the following Code 

sections.

Section 108(b)(5) (election related to 

reduction of tax attributes due to exclusion 

from gross income of discharge of 

indebtedness).

Section 901 (foreign tax credit).

Additional Information

For more information on the treatment of 

partnership income, deductions, credits, 

etc., see the following.

Pub. 541, Partnerships.

Pub. 535, Business Expenses.

Pub. 925, Passive Activity and At-Risk 

Rules.

To get forms and publications, see the 

instructions for your tax return or visit the 

IRS website at IRS.gov.

Limitations on Losses, 

Deductions, and Credits

There are three separate potential 

limitations on the amount of partnership 

losses that you can deduct on your return. 

These limitations and the order in which 

you must apply them are as follows: the 

basis limitations, the at-risk limitations, 

and the passive activity limitations. Each 

of these limitations is discussed 

separately below.

Basis Limitations

Generally, you can’t claim your share of a 

partnership loss (including a capital loss) 

to the extent that it is greater than the 

adjusted basis of your partnership interest 

at the end of the partnership's tax year. 

Any losses and deductions not allowed 

this year because of the basis limit can be 

carried forward indefinitely and deducted 

in a later year subject to the basis limit for 

that year.

The partnership isn’t responsible for 

keeping the information needed to figure 

the basis of your partnership interest. You 

can figure the adjusted basis of your 

partnership interest by adding items that 

increase your basis and then subtracting 

items that decrease your basis.

Use the Worksheet for Adjusting the 

Basis of a Partner's Interest in the 

Partnership, later, to figure the basis of 

your interest in the partnership.

Additional basis adjustments may 

apply to partners claiming 

deductions for depletion. See 

Pub. 535 for details.

At-Risk Limitations

Generally, if you have (a) a loss or other 

deduction from any activity carried on as a 

trade or business or for the production of 

income by the partnership, and (b) 

amounts in the activity for which you are 

not at risk, you will have to complete Form 

6198, At-Risk Limitations, to figure your 

allowable loss for the activity.

The at-risk rules generally limit the 

amount of loss and other deductions that 

you can claim to the amount you could 

actually lose in the activity. However, if 

you acquired your partnership interest 

before 1987, the at-risk rules don’t apply 

to losses from an activity of holding real 

property placed in service before 1987 by 

the partnership. The activity of holding 

mineral property doesn’t qualify for this 

exception. The partnership should identify 

on an attached statement to Schedule K-1 

the amount of any losses that aren’t 

subject to the at-risk limitations.

Generally, you aren’t at risk for 

amounts such as the following.

Nonrecourse loans used to finance the 

activity, to acquire property used in the 

activity, or to acquire your interest in the 

activity, that aren’t secured by your own 

property (other than the property used in 

the activity). See the instructions for 

Partner's Share of Liabilities, later, for the 

exception for qualified nonrecourse 

financing secured by real property.

Cash, property, or borrowed amounts 

used in the activity (or contributed to the 

activity, or used to acquire your interest in 

the activity) that are protected against loss 

by a guarantee, stop-loss agreement, or 

other similar arrangement (excluding 

casualty insurance and insurance against 

tort liability).

Amounts borrowed for use in the 

activity from a person who has an interest 

in the activity, other than as a creditor, or 

who is related, under section 465(b)(3), to 

a person (other than you) having such an 

interest.

CAUTION

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-2- Instructions for Schedule K-1 (1065-B)
You should get a separate statement of 

income, expenses, etc., for each activity 

from the partnership.

Passive Activity Limitations

Section 469 provides rules that limit the 

deduction of certain losses and credits. 

These rules apply to partners who:

Are individuals, estates, trusts, closely 

held C corporations (other than S 

corporations), or personal service 

corporations; and

Have a passive activity loss or credit for 

the tax year.

Individuals, estates, and trusts. If you 

have a passive activity loss or credit, use 

Form 8582, Passive Activity Loss 

Limitations, to figure your allowable 

passive losses and Form 8582-CR, 

Passive Activity Credit Limitations, to 

figure your allowable passive credits.

If the publicly traded partnership 

(PTP) box on Schedule K-1 is 

checked, do not report passive 

income (loss) from the partnership on 

Form 8582. See the special rules for 

PTPs, later.

Corporations. Use Form 8810, 

Corporate Passive Activity Loss and 

Credit Limitations. See the instructions for 

more information.

For limited partners of an ELP, all 

income, loss, deductions, and credits from 

trade or business and rental activities 

generally are reported as being from a 

trade or business that is a single passive 

activity.

CAUTION

!

However, the determination of whether 

an activity is a passive activity must be 

made by any partner who is either a:

General partner; or

Limited partner who is a disqualified 

person (as defined earlier) with respect to 

items of income, gain, loss, deduction, 

and credit attributable to partnership oil 

and gas properties.

In addition, the partnership is required 

to provide each general partner and 

disqualified person the information 

necessary to comply with the passive 

activity rules of section 469. Items of 

income, gain, loss, credit, etc., must be 

separately reported to general partners for 

each trade or business, rental real estate, 

and other rental activity.

Except for the PTP discussion, 

later, the following information on 

passive activity limitations applies 

only to general partners.

Generally, passive activities include:

1. Trade or business activities in 

which you didn’t materially participate, and

2. Activities that meet the definition of 

rental activities under Temporary 

Regulations section 1.469-1T(e)(3) and 

Regulations section 1.469-1(e)(3).

Passive activities don’t include the 

following.

1. Trade or business activities in 

which you materially participated.

2. Rental real estate activities in which 

you materially participated if you were a 

real estate professional for the tax year. 

You were a real estate professional only if 

you met both of the following conditions.

a. More than half of the personal 

services you performed in trades or 

businesses were performed in real 

property trades or businesses in which 

you materially participated.

b. You performed more than 750 

hours of services in real property trades or 

businesses in which you materially 

participated.

If you are married filing jointly, either 

you or your spouse must separately meet 

both of the above conditions, without 

taking into account services performed by 

the other spouse.

For 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 were from real 

property trades or businesses in which the 

corporation materially participated.

For purposes of this rule, each interest 

in rental real estate is a separate activity, 

unless you elect to treat all interests in 

rental real estate as one activity. For 

CAUTION

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CAUTION

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Worksheet for Adjusting the Basis of a 

Partner's Interest in the Partnership Keep for Your Records

1. Your adjusted basis at the end of the prior year. Do not enter less than zero. 

Enter -0- if this is your first tax year ........................... 1.

Increases:

2. Money and your adjusted basis in property contributed to the partnership 

less the associated liabilities (but not less than zero) ............... 2.

3. Your increased share of or assumption of partnership liabilities. (Subtract 

your share of liabilities shown on your 2016 Schedule K-1 from your share 

of liabilities shown on your 2017 Schedule K-1 and add the amount of any 

partnership liabilities you assumed during the tax year. Do not enter less 

than zero.) .......................................... 3.

4. Your share of the partnership's income or gain (including tax-exempt 

income) reduced by any amount included in interest income with respect to 

the credit to holders of clean renewable energy bonds .............. 4.

5. Any gain recognized this year on contributions of property. Do not include 

gain from transfer of liabilities .............................. 5.

Decreases:

6. Withdrawals and distributions of money and the adjusted basis of property 

distributed to you from the partnership. Do not include the amount of 

property distributions included in the partner's income (taxable 

income) ............................................ 6.

Caution. A distribution may be taxable if the amount exceeds your adjusted 

basis of your partnership interest immediately before the distribution.

7. Your decreased share of partnership liabilities and any decrease in your 

individual liabilities because they were assumed by the partnership. 

(Subtract your share of liabilities shown on your 2017 Schedule K-1 from 

your share of liabilities shown on your 2016 Schedule K-1 and add the 

amount of your individual liabilities that the partnership assumed during the 

tax year. Do not enter less than zero.) ......................... 7.

8. Your share of the partnership's nondeductible expenses that are not capital 

expenditures ......................................... 8.

9. Your share of the partnership's losses and deductions (including capital 

losses) ............................................ 9.

10. Your adjusted basis in the partnership at the end of this tax year. (Add lines 

1 through 5 and subtract lines 6 through 9 from the total. If zero or less, 

enter -0-.) ........................................... 10.

Caution. The deduction for your share of the partnership's losses and 

deductions is limited to your adjusted basis in your partnership interest. If 

you entered zero on line 10 and the amount figured for line 10 was less than 

zero, a portion of your share of the partnership losses and deductions may 

not be deductible (see Basis Limitations, earlier, for more information).

Instructions for Schedule K-1 (1065-B) -3-
details on making this election, see the 

Instructions for Schedule E (Form 1040).

A real property trade or business is any 

real property development, 

redevelopment, construction, 

reconstruction, acquisition, conversion, 

rental, operation, management, leasing, or 

brokerage trade or business. Services you 

performed as an employee are not treated 

as performed in a real property trade or 

business unless you owned more than 5% 

of the stock (or more than 5% of the 

capital or profits interest) in the employer.

3. Working interests in oil or gas wells.

4. The rental of a dwelling unit any 

partner used for personal purposes during 

the year for more than the greater of 14 

days or 10% of the number of days that 

the residence was rented at fair rental 

value.

5. Activities of trading personal 

property for the account of owners of 

interests in the activities.

Material participation. You must 

determine if you (a) materially participated 

in each trade or business activity held 

through the partnership, and (b) were a 

real estate professional (defined earlier), 

in each rental real estate activity held 

through the partnership. All determinations 

of material participation are made based 

on your participation during the 

partnership's tax year.

Material participation standards for 

partners who are individuals are listed 

below. Special rules apply to certain 

retired or disabled farmers and to the 

surviving spouses of farmers. See the 

Instructions for Form 8582 for details.

Corporations should refer to the 

Instructions for Form 8810 for the material 

participation standards that apply to them.

Individuals (other than limited 

partners). If you are an individual (either 

a general partner or a limited partner who 

owned a general partnership interest at all 

times during the tax year), you materially 

participated in an activity only if one or 

more of the following apply.

1. You participated in the activity for 

more than 500 hours during the tax year.

2. Your participation in the activity for 

the tax year constituted substantially all 

the participation in the activity of all 

individuals (including individuals who are 

not owners of interests in the activity for 

the tax year).

3. You participated in the activity for 

more than 100 hours during the tax year, 

and your participation in the activity for the 

tax year was not less than the participation 

in the activity of any other individual 

(including individuals who were not 

owners of interests in the activity) for the 

tax year.

4. The activity was a significant 

participation activity for the tax year, and 

you participated in all significant 

participation activities (including activities 

outside the partnership) during the year for 

more than 500 hours. A significant 

participation activity is any trade or 

business activity in which you participated 

for more than 100 hours during the tax 

year and in which you didn’t materially 

participate under any of the material 

participation tests (other than this test 4).

5. You materially participated in the 

activity for any 5 tax years (whether or not 

consecutive) during the 10 tax years that 

immediately precede the tax year.

6. The activity was a personal service 

activity, and you materially participated in 

the activity for any 3 tax years (whether or 

not consecutive) preceding the tax year. A 

personal service activity involves the 

performance of personal services in the 

fields of health, law, engineering, 

architecture, accounting, actuarial 

science, performing arts, consulting, or 

any other trade or business in which 

capital isn’t a material income-producing 

factor.

7. Based on all the facts and 

circumstances, you participated in the 

activity on a regular, continuous, and 

substantial basis during the tax year.

Work counted toward material 

participation. Generally, any work that 

you or your spouse does in connection 

with an activity held through a partnership 

(where you own your partnership interest 

at the time the work is done) is counted 

toward material participation. However, 

work in connection with the activity is not 

counted toward material participation if 

either of the following applies.

1. The work isn’t the sort of work that 

owners of the activity would usually do 

and one of the principal purposes of the 

work that you or your spouse does is to 

avoid the passive loss or credit limitations.

2. You do the work in your capacity as 

an investor and you aren’t directly involved 

in the day-to-day operations of the activity. 

Examples of work done as an investor that 

would not count toward material 

participation include the following.

a. Studying and reviewing financial 

statements or reports on operations of the 

activity.

b. Preparing or compiling summaries 

or analyses of the finances or operations 

of the activity for your own use.

c. Monitoring the finances or 

operations of the activity in a 

nonmanagerial capacity.

Effect of determination. Income 

(loss), deductions, and credits from an 

activity are nonpassive if you determine 

that:

You materially participated in a trade or 

business activity of the partnership, or

You were a real estate professional in a 

rental real estate activity of the 

partnership.

If you determine that you didn’t 

materially participate in a trade or 

business activity of the partnership or if 

you have income (loss), deductions, or 

credits from a rental activity of the 

partnership (other than a rental real estate 

activity in which you materially participated 

as a real estate professional), the amounts 

from that activity are passive. Report 

passive income (losses), deductions, and 

credits as follows.

1. If you have an overall gain (the 

excess of income over deductions and 

losses, including any prior year unallowed 

loss) from a passive activity, report the 

income, deductions, and losses from the 

activity as indicated in the instructions for 

the boxes in which those items were 

reported.

2. If you have an overall loss (the 

excess of deductions and losses, 

including any prior year unallowed loss, 

over income) or credits from a passive 

activity, report the income, deductions, 

losses, and credits from all passive 

activities using the Instructions for Form 

8582 or Form 8582-CR (or Form 8810), to 

see if your deductions, losses, and credits 

are limited under the passive activity rules.

Special allowance for rental real estate 

activities. If you actively participated in a 

rental real estate activity, you may be able 

to deduct up to $25,000 of the loss from 

the activity from nonpassive income. This 

“special allowance” is an exception to the 

general rule disallowing losses in excess 

of income from passive activities. The 

special allowance isn’t available if you 

were married, filed a separate return for 

the year, and did not live apart from your 

spouse at all times during the year.

Only individuals, qualifying estates, and 

qualifying revocable trusts that made a 

section 645 election can actively 

participate in a rental real estate activity. 

Estates (other than qualifying estates), 

trusts (other than qualifying revocable 

trusts that made a section 645 election), 

and corporations can’t actively participate.

You aren’t considered to actively 

participate in a rental real estate activity if 

at any time during the tax year your 

interest (including your spouse's interest) 

in the activity was less than 10% (by 

value) of all interests in the activity.

Active participation is a less stringent 

requirement than material participation. 

You may be treated as actively 

participating if you participated, for 

example, in making management 

decisions or arranging for others to 

provide services (such as repairs) in a 

-4- Instructions for Schedule K-1 (1065-B)
significant and bona fide sense. 

Management decisions that can count as 

active participation include approving new 

tenants, deciding rental terms, approving 

capital or repair expenditures, and other 

similar decisions.

An estate is a qualifying estate if the 

decedent would have satisfied the active 

participation requirement for the activity 

for the tax year the decedent died. A 

qualifying estate is treated as actively 

participating for tax years ending less than 

2 years after the date of the decedent's 

death.

Modified adjusted gross income 

limitation. The maximum special 

allowance that single individuals and 

married individuals filing a joint return can 

qualify for is $25,000. The maximum is 

$12,500 for married individuals who file 

separate returns and who lived apart all 

times during the year. The maximum 

special allowance for which an estate can 

qualify is $25,000 reduced by the special 

allowance for which the surviving spouse 

qualifies.

If your modified adjusted gross income 

(defined below) is $100,000 or less 

($50,000 or less if married filing 

separately), your loss is deductible up to 

the amount of the maximum special 

allowance referred to in the preceding 

paragraph. If your modified adjusted gross 

income is more than $100,000 (more than 

$50,000 if married filing separately), the 

special allowance is limited to 50% of the 

difference between $150,000 ($75,000 if 

married filing separately) and your 

modified adjusted gross income. When 

modified adjusted gross income is 

$150,000 or more ($75,000 or more if 

married filing separately), there is no 

special allowance.

Modified adjusted gross income is your 

adjusted gross income figured without 

taking into account the following amounts, 

if applicable.

Any passive activity loss.

Any rental real estate loss allowed 

under section 469(c)(7) to real estate 

professionals (as defined earlier).

Any overall loss from a publicly traded 

partnership.

Any taxable social security or 

equivalent railroad retirement benefits.

Any deductible contributions to an IRA 

or certain other qualified retirement plans 

under section 219.

The domestic production activities 

deduction.

The student loan interest deduction.

The tuition and fees deduction.

The deduction for one-half of 

self-employment taxes.

The exclusion from income of interest 

from Series EE and I U.S. Savings Bonds 

used to pay higher education expenses.

The exclusion of amounts received 

under an employer's adoption assistance 

program.

Commercial revitalization 

deduction. The special $25,000 

allowance for the commercial revitalization 

deduction from rental real estate activities 

isn’t subject to the active participation 

rules or modified adjusted gross income 

limits discussed above. See Code Q. 

Commercial Revitalization Deduction, 

later.

Special rules for certain other activities. If you have net income (loss), 

deductions, or credits from any activity to 

which special rules apply, the partnership 

will identify the activity and all amounts 

relating to it on Schedule K-1 or on an 

attached statement.

If you have net income subject to 

recharacterization under Temporary 

Regulations section 1.469-2T(f) and 

Regulations section 1.469-2(f), report 

such amounts according to the 

Instructions for Form 8582 (or Form 8810).

If you have net income (loss), 

deductions, or credits from any of the 

following activities, treat such amounts as 

nonpassive and report them as instructed 

in these instructions.

Working interests in oil and gas wells.

The rental of a dwelling unit any partner 

used for personal purposes during the 

year for more than the greater of 14 days 

or 10% of the number of days that the 

residence was rented at fair rental value.

Trading personal property for the 

account of owners of interests in the 

activity.

Self-charged interest. The partnership 

must report any “self-charged” interest 

income or expense that resulted from 

loans between you and the partnership (or 

between the partnership and another 

partnership in which you have an interest). 

If there was more than one activity, the 

partnership will provide a statement 

allocating the interest income or expense 

with respect to each activity. The 

self-charged interest rules don’t apply to 

your partnership interest if the partnership 

made an election under Regulations 

section 1.469-7(g) to avoid the application 

of these rules. See the Instructions for 

Form 8582 for more information.

Publicly traded partnerships. The 

passive activity limitations are applied 

separately for items (other than the 

low-income housing credit and the 

rehabilitation credit) from each PTP. Thus, 

a net passive loss from a PTP may not be 

deducted from other passive income. 

Instead, a passive loss from a PTP is 

suspended and carried forward to be 

applied against passive income from the 

same PTP in later years. If the partner's 

entire interest in the PTP is completely 

disposed of, any unused losses are 

allowed in full in the year of disposition.

If you have an overall gain from a PTP, 

the net gain is nonpassive income. In 

addition, the nonpassive income is 

included in investment income to figure 

your investment interest expense 

deduction.

Don’t report passive income, gains, or 

losses from a PTP on Form 8582. Instead, 

use the following rules to figure and report 

on the proper form or schedule your 

income, gains, and losses from passive 

activities that you held through each PTP 

you owned during the tax year.

1. Combine any current year income, 

gains (losses), and any prior year 

unallowed losses to see if you have an 

overall gain (loss) from the PTP. Include 

only the same types of income and losses 

you would include in your net income or 

loss from a non-PTP passive activity. See 

Pub. 925 for more details.

2. If you have an overall gain, the net 

gain portion (total gain minus total losses) 

is nonpassive income. On the form or 

schedule you normally use, report the net 

gain portion as nonpassive income and 

the remaining income and the total losses 

as passive income and loss. To the left of 

the entry space, enter “From PTP.” It is 

important to identify the nonpassive 

income because the nonpassive portion is 

included in modified adjusted gross 

income for purposes of figuring on Form 

8582 the “special allowance” for active 

participation in a non-PTP rental real 

estate activity. In addition, the nonpassive 

income is included in investment income 

when figuring your investment interest 

expense deduction on Form 4952, 

Investment Interest Expense Deduction.

Example. If you have Schedule E 

income of $8,000, and a Form 4797 prior 

year unallowed loss of $3,500 from the 

passive activities of a particular PTP, you 

have a $4,500 overall gain ($8,000 − 

$3,500). On Schedule E (Form 1040), 

line 28, report the $4,500 net gain as 

nonpassive income in column (j). In 

column (g), report the remaining 

Schedule E gain of $3,500 ($8,000 − 

$4,500). On the appropriate line of Form 

4797, report the prior year unallowed loss 

of $3,500. Be sure to enter “From PTP” to 

the left of each entry space.

3. If you have an overall loss (but 

didn’t dispose of your entire interest in the 

PTP to an unrelated person in a fully 

taxable transaction during the year), the 

losses are allowed to the extent of the 

income, and the excess loss is carried 

forward to use in a future year when you 

have income to offset it. Report as a 

passive loss on the schedule or form you 

normally use the portion of the loss equal 

to the income. Report the income as 

Instructions for Schedule K-1 (1065-B) -5-
passive income on the form or schedule 

you normally use.

Example. You have a Schedule E loss 

of $12,000 (current year losses plus prior 

year unallowed losses) and a Schedule D 

gain of $7,200. Report the $7,200 gain on 

the appropriate line of Schedule D. On 

Schedule E (Form 1040), line 28, report 

$7,200 of the losses as a passive loss in 

column (f). Carry forward to 2018 the 

unallowed loss of $4,800 ($12,000 − 

$7,200).

If you have unallowed losses from 

more than one activity of the PTP or from 

the same activity of the PTP that must be 

reported on different forms, you must 

allocate the unallowed losses on a pro 

rata basis to figure the amount allowed 

from each activity or on each form.

To allocate and keep a record of 

the unallowed losses, use 

Worksheets 5, 6, and 7 of Form 

8582. List each activity of the PTP in 

Worksheet 5. Enter the overall loss from 

each activity in column (a). Complete 

column (b) of Worksheet 5 according to its 

instructions. Multiply the total unallowed 

loss from the PTP by each ratio in column 

(b) and enter the result in column (c) of 

Worksheet 5. Then, complete Worksheet 

6 if all the loss from the same activity is to 

be reported on one form or schedule. Use 

Worksheet 7 instead of Worksheet 6 if you 

have more than one loss to be reported on 

different forms or schedules for the same 

activity. Enter the net loss plus any prior 

year unallowed losses in column (a) of 

Worksheet 6 (or Worksheet 7, if 

applicable). The losses in column (c) of 

Worksheet 6 (column (e) of Worksheet 7) 

are the allowed losses to report on the 

forms or schedules. Report both these 

losses and any income from the PTP on 

the forms and schedules you normally 

use.

4. If you have an overall loss and you 

disposed of your entire interest in the PTP 

to an unrelated person in a fully taxable 

transaction during the year, your losses 

(including prior year unallowed losses) 

allocable to the activity for the year are not 

limited by the passive loss rules. A fully 

taxable transaction is one in which you 

recognize all your realized gain (loss). 

Report the income and losses on the 

forms and schedules you normally use.

For rules on the disposition of an 

entire interest reported using the 

installment method, see the 

Instructions for Form 8582.

Specific Instructions

Partner's identifying number. For your 

protection, this Schedule K-1 may show 

only the last four digits of your social 

TIP TIP

security number (SSN), individual 

taxpayer identification number (ITIN), or 

employer identification number (EIN). 

However, the partnership has reported 

your complete identification number to the 

IRS.

Publicly Traded 

Partnership (PTP)

If the “publicly traded partnership” box is 

checked, you are a partner in a publicly 

traded partnership (PTP) and must follow 

the rules under Publicly traded 

partnerships discussed above.

Partner's Share of 

Liabilities

The partnership will show your share of 

the partnership's nonrecourse liabilities, 

partnership-level qualified nonrecourse 

financing, and other liabilities as of the end 

of the partnership's tax year. If you 

terminated your interest in the partnership 

during the tax year, the amounts should 

reflect the share that existed immediately 

before the total disposition. A partner's 

“other liability” is any partnership liability 

for which a partner is personally liable.

Use the total of the three amounts for 

figuring the adjusted basis of your 

partnership interest.

Generally, you can use only the 

amounts shown next to “Qualified 

nonrecourse financing” and “Other” to 

figure your amount at risk. Don’t include 

any amounts that aren’t at risk if such 

amounts are included in either of these 

categories.

If your partnership is engaged in two or 

more different types of activities subject to 

the at-risk provisions, or a combination of 

at-risk activities and any other activity, the 

partnership should give you a statement 

showing your share of nonrecourse 

liabilities, partnership-level qualified 

nonrecourse financing, and other liabilities 

for each activity.

Qualified nonrecourse financing. 

Qualified nonrecourse financing generally 

includes financing for which no one is 

personally liable for repayment that is 

borrowed for use in an activity of holding 

real property and that is loaned or 

guaranteed by a federal, state, or local 

government or borrowed from a “qualified” 

person. Qualified 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 persons. Qualified persons 

include any persons actively and regularly 

engaged in the business of lending 

money, such as a bank or savings and 

loan association. Qualified persons 

generally 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 Pub. 925 for more information on 

qualified nonrecourse financing.

Both the partnership and you must 

meet the qualified nonrecourse rules on 

this debt before you can include the 

amount shown next to “Qualified 

nonrecourse financing” in your at-risk 

computation.

See Limitations on Losses, 

Deductions, and Credits, earlier, for more 

information on the at-risk limitations.

Boxes 1 Through 9

The amounts shown in boxes 1 through 9 

reflect your share of income, loss, 

deductions, credits, etc., from the 

partnership. These amounts don’t take 

into consideration the following limitations.

The adjusted basis of your partnership 

interest.

The amount for which you are at risk.

The passive activity limitations.

For information on these provisions, 

see Limitations on Losses, Deductions, 

and Credits, earlier.

For individuals, the following 

instructions explain how to report the 

amounts shown in the boxes. For all other 

entities, report the amounts in the boxes 

as instructed on your income tax return.

The line numbers in these instructions 

are references to forms in use for calendar 

year 2017. If you file your tax return on a 

calendar year basis, but your partnership 

files a return for a fiscal year, enter the 

amounts shown in the boxes on your tax 

return for the year in which the 

partnership's fiscal year ends. For 

example, if the partnership's tax year ends 

on June 30, 2018, report the amounts in 

the boxes on your 2018 income tax return.

If you have losses, deductions, or 

credits from a prior year that were not 

deductible or usable because of certain 

limitations, such as the basis limitations or 

the at-risk limitations, take them into 

account in determining your net income, 

loss, or credits for this year. However, 

except for passive activity losses and 

credits, don’t combine the prior year 

amounts with any amounts shown on this 

Schedule K-1 to get a net figure to report 

on any supporting schedules, statements, 

or forms attached to your return. Instead, 

report the amounts separately on the 

attached schedule, statement, or form on 

a year-by-year basis.

For amounts other than those shown 

on Schedule K-1, enter each item on a 

-6- Instructions for Schedule K-1 (1065-B)
separate line of Part II of Schedule E 

(Form 1040).

Box 1. Taxable Income (Loss) 

From Passive Activities

Limited partners only. Any amount 

reported in box 1 is treated as being from 

a trade or business that is a single passive 

activity. Report this amount as follows.

If income is reported in box 1, report the 

income on Schedule E (Form 1040), 

line 28, column (g). However, if the PTP 

box is checked, report the income 

following the rules for Publicly traded 

partnerships, earlier.

If a loss is reported in box 1, follow the 

Instructions for Form 8582 to figure how 

much of the loss can be reported on 

Schedule E (Form 1040), line 28, column 

(f). However, if the PTP box is checked, 

report the loss following the rules for 

Publicly traded partnerships, earlier.

Box 2. Taxable Income (Loss) 

From Other Activities

This amount isn’t subject to the passive 

activity limitations. Report the amount as 

follows.

If the amount is income, report it on 

Schedule E (Form 1040), line 28, column 

(j).

If the amount is a loss, report it on 

Schedule A (Form 1040), line 28.

Note. If the amount of interest included in 

box 2 includes interest from the credit to 

holders of clean renewable energy bonds, 

the partnership will attach a statement to 

Schedule K-1 showing your share of 

interest income from these credits. 

Because the basis in your partnership 

interest is increased by your share of the 

interest income from these credits, you 

must reduce your basis by the same 

amount to offset the increase. See line 4 

of the Worksheet for Adjusting the Basis of 

a Partner's Interest in the Partnership, 

earlier.

Box 3. Qualified Dividends

Report this amount on lines 9a and 9b of 

Form 1040.

Note. Qualified dividends are excluded 

from investment income, but you can elect 

to include part or all of these amounts in 

investment income. See the instructions 

for line 4g of Form 4952, Investment 

Interest Expense Deduction, for important 

information on making this election.

If you have any foreign source 

qualified dividends, see the 

instructions for box 9, Code K.

Note. In the case of a corporate partner, 

the partnership will attach a statement to 

the Schedule K-1 explaining what part of 

the dividends included in box 3 is eligible 

for the “dividends received by 

CAUTION

!

corporations deduction” under section 

243(a), (b), or (c).

Box 4a. Net Capital Gain or 

(Loss) From Passive Activities

Limited partners only. The net capital 

gain (loss) reported in box 4a is treated as 

being from a trade or business that is a 

single passive activity. If a net capital gain 

is reported in box 4a, report the gain on 

Schedule D (Form 1040), line 12.

If a loss is reported in box 4a, report it 

following the Form 8582 instructions to 

figure how much of the loss can be 

reported on Schedule D (Form 1040), 

line 12. However, if the PTP box is 

checked, report the loss following the 

rules for Publicly traded partnerships, 

earlier.

If you have any foreign source 

capital gains or losses, see the 

instructions for box 9, Code K.

Box 4b. Net Capital Gain or 

(Loss) From Other Activities

Net capital gain or (loss) from other 

activities isn’t subject to the passive 

activity limitations. Report the gain or 

(loss) on Schedule D (Form 1040), line 12.

If you have any foreign source 

capital gains or losses, see the 

instructions for box 9, Code K.

Box 5. Net Passive AMT 

Adjustment

Limited partners only. Use this amount 

(as well as your adjustments and tax 

preference items from other sources) to 

prepare your Form 6251, Alternative 

Minimum Tax—Individuals; Form 4626, 

Alternative Minimum Tax—Corporations; 

or Schedule I (Form 1041), Alternative 

Minimum Tax—Estates and Trusts. The 

adjustment is treated as being from a 

trade or business that is a single passive 

activity.

Individuals should enter the amount on 

Form 6251, line 19, where it is taken into 

account with adjustments and preferences 

from other passive activities.

Box 6. Net Other AMT 

Adjustment

Individual general and limited partners 

should enter this amount on Form 6251, 

line 16.

Box 7. General Credits

Limited partners only. Enter this amount 

from box 7 on Form 3800, General 

Business Credit, Part III, line 1bb. 

Because general credits are treated as 

being from a trade or business that is a 

single passive activity, you must also 

report the box 7 amount on Form 3800, 

Part III, as a credit from a passive activity.

CAUTION

!

CAUTION

!

Box 8. Low-Income Housing 

Credit

Limited partners only. Enter the amount 

reported in box 8 of Schedule K-1 on Form 

8586, Low-Income Housing Credit, line 4. 

If an amount is reported in box 8, all of the 

low-income housing credit is for buildings 

placed in service before 2008. If any of the 

low-income housing credit is for buildings 

placed in service after 2007, the 

partnership will enter “STMT” in box 8 and 

attach a statement which lists separately 

the amount of the credit for buildings 

placed in service prior to 2008 (reported 

on Form 8586, line 4, or Form 3800, Part 

lll, line 1d), and the amount for buildings 

placed in service after 2007 (reported on 

Form 8586, line 11, or Form 3800, Part lll, 

line 4d). See the Instructions for Form 

8586 for more information.

Box 9. Other

Codes A Through C

General partners in an ELP must 

separately account for any items 

attributable to passive loss limitation 

activities to the extent necessary to 

comply with the section 469 passive loss 

rules. Therefore, the partnership is 

required to report income or (loss), capital 

gain or (loss), 28% rate gain or (loss), 

credits, and the alternative minimum tax 

adjustment separately for all trade or 

business activities, rental real estate 

activities, and rental activities other than 

rental real estate.

Code A1. General partner's taxable income (loss) from trade or business activities. Report Code A1 income (loss) 

from partnership trade or business 

activities in which you materially 

participated on Schedule E (Form 1040), 

line 28, column (h) or (j). See the 

instructions to determine whether you 

materially participated in a trade or 

business activity.

Report Code A1 income or (loss) from 

partnership trade or business activities in 

which you didn’t materially participate as 

follows.

1. Report any income on Schedule E 

(Form 1040), line 28, column (g). 

However, if the PTP box on Schedule K-1 

is checked, report the income following 

the rules for Publicly traded partnerships, 

earlier.

2. Report a loss following the 

Instructions for Form 8582 to figure how 

much of the loss can be reported on 

Schedule E (Form 1040), line 28, column 

(f). However, if the PTP box is checked, 

report the loss following the rules for 

Publicly traded partnerships, earlier.

Code A2. General partner's net capital 

gain or (loss) from trade or business 

activities. If you didn’t materially 

Instructions for Schedule K-1 (1065-B) -7-
participate in the trade or business activity, 

the net capital gain or (loss) is a passive 

activity amount. If the amount is either (a) 

a loss that isn’t from a passive activity or 

(b) a gain, report it on Schedule D (Form 

1040), line 12.

If the amount is a loss from a passive 

activity, report it following the Instructions 

for Form 8582 to figure how much of the 

loss can be reported on Schedule D (Form 

1040), line 12. However, if the PTP box is 

checked, report the loss following the 

rules for Publicly traded partnerships, 

earlier.

Code A3. General partner's 28% rate 

gain (loss) from trade or business activities. If you didn’t materially participate 

in the trade or business activity, the 28% 

rate gain or (loss) is a passive activity 

amount. If the amount is either (a) a loss 

that isn’t from a passive activity or (b) a 

gain, include it on line 4 of the 28% Rate 

Gain Worksheet in the Instructions for 

Schedule D (Form 1040).

If the amount is a loss from a passive 

activity, report it following the Instructions 

for Form 8582 to figure how much of the 

loss can be included on line 4 of the 28% 

Rate Gain Worksheet in the Instructions 

for Schedule D (Form 1040). However, if 

the PTP box is checked, report the loss 

following the rules for Publicly traded 

partnerships, earlier.

Code A4. General partner's general 

credits from trade or business activities. Report the general credits on Form 

3800, Part lll, line 1bb. If you didn’t 

materially participate in the trade or 

business activity, you must also report the 

general credits on Form 3800, Part III, as a 

credit from a passive activity.

Code A5. General partner's alternative 

minimum tax adjustment from trade or 

business activities. Generally, an AMT 

adjustment must be reported on Form 

6251, line 16. However, if the AMT 

adjustment is from a passive activity, it 

must be taken into account on line 19 with 

adjustments and preferences from other 

passive activities.

Code B1. General partner's taxable income (loss) from rental real estate activities. Generally, the income or (loss) 

reported in box 9, Code B1, is a passive 

activity amount for all general partners. 

However, the income or (loss) in box 9 

isn’t from a passive activity if you were a 

real estate professional and you materially 

participated in the activity.

Use the following instructions to 

determine where to enter the Code B1 

amount.

1. If you have a loss from a passive 

activity in box 9, Code B1, and you meet 

all of the following conditions, enter the 

loss on Schedule E (Form 1040), line 28, 

column (f).

a. You actively participated in the 

partnership rental real estate activities. 

See Special allowance for rental real 

estate activities, earlier.

b. Rental real estate activities with 

active participation were your only passive 

activities.

c. You have no prior year unallowed 

losses from these activities.

d. Your total loss from the rental real 

estate activities wasn’t more than $25,000 

(not more than $12,500 if married filing 

separately and you lived apart from your 

spouse all year).

e. If you are a married person filing 

separately, you lived apart from your 

spouse all year.

f. You have no current or prior year 

unallowed credits from a passive activity.

g. Your modified adjusted gross 

income wasn’t more than $100,000 (not 

more than $50,000 if married filing 

separately and you lived apart from your 

spouse all year).

2. If you have a (loss) from a passive 

activity in box 9 and you don’t meet all the 

conditions in (1) above, report the loss 

following the Instructions for Form 8582 to 

figure how much of the loss you can report 

on Schedule E (Form 1040), line 28, 

column (f). However, if the PTP box is 

checked, report the loss following the 

rules for Publicly traded partnerships, 

earlier.

3. If you were a real estate 

professional and you materially 

participated in the activity, report box 9 

income or (loss) on Schedule E (Form 

1040), line 28, column (h) or (j).

4. If you have income from a passive 

activity in box 9, Code B1, enter the 

income on Schedule E (Form 1040), 

line 28, column (g). However, if the PTP 

box is checked, report the income 

following the rules for Publicly traded 

partnerships, earlier.

Code B2. General partner's net capital 

gain or (loss) from rental real estate 

activities (for the entire year). The net 

capital gain or (loss) from a rental real 

estate activity is a passive activity amount 

unless you were a real estate professional 

and you materially participated in the 

activity. If the amount is either (a) a loss 

that isn’t from a passive activity or (b) a 

gain, report it on Schedule D (Form 1040), 

line 12.

If the amount is a loss from a passive 

activity, report it following the Instructions 

for Form 8582 to figure how much of the 

loss can be reported on Schedule D, 

line 12. However, if the PTP box is 

checked, report the loss following the 

rules for Publicly traded partnerships, 

earlier.

Code B3. General partner's 28% rate 

gain or (loss) from rental real estate 

activities. The 28% rate gain or (loss) 

from a rental real estate activity is a 

passive activity amount unless you were a 

real estate professional and you materially 

participated in the activity. If the amount is 

either (a) a loss that isn’t from a passive 

activity or (b) a gain, include it on line 4 of 

the 28% Rate Gain Worksheet in the 

Instructions for Schedule D (Form 1040).

If the amount is a loss from a passive 

activity, report it following the Instructions 

for Form 8582 to figure how much of the 

loss can be included on line 4 of the 28% 

Rate Gain Worksheet in the Instructions 

for Schedule D (Form 1040). However, if 

the PTP box is checked, report the loss 

following the rules for Publicly traded 

partnerships, earlier.

Code B4. General partner's general 

credits from rental real estate activities. Report the general credits on Form 

3800, Part lll, line 1bb. Unless you were a 

real estate professional and materially 

participated in the rental real estate 

activity, you must also report the general 

credits on Form 3800, Part III, as a credit 

from a passive activity.

Code B5. General partner's low-income housing credit from rental real 

estate activities. Report the low-income 

housing credit on Form 8586, line 4, or 

Form 3800, Part lll, line 1d, for buildings 

placed in service before 2008, and on 

Form 8586, line 11, or Form 3800, Part lll, 

line 4d, for buildings placed in service after 

2007. Unless you were a real estate 

professional and materially participated in 

the rental real estate activity, the 

low-income housing credit is a passive 

activity credit.

Code B6. General partner's rehabilitation credit from rental real estate activities. Report the rehabilitation credit on 

Form 3468, Investment Credit, line 11i. 

Unless you were a real estate professional 

and materially participated in the rental 

real estate activity, the credit is a passive 

activity credit, and you must also file Form 

3800.

Code B7. General partner's alternative 

minimum tax adjustment from rental 

real estate activities. An AMT 

adjustment must be reported on Form 

6251, line 16. However, if the AMT 

adjustment is from a passive activity, it 

must be taken into account on line 19 with 

other passive activities instead of being 

reported on line 16.

Code C1. General partner's taxable income or (loss) from other rental activities. Income (loss) reported in box 9, 

Code C1, is a passive activity amount for 

-8- Instructions for Schedule K-1 (1065-B)
all general partners. Report a loss 

following the Instructions for Form 8582. 

Report income on Schedule E (Form 

1040), line 28, column (g). However, if the 

PTP box is checked, report the income 

(loss) following the rules for Publicly 

traded partnerships, earlier.

Code C2. General partner's net capital 

gain or (loss) from other rental activities. The net capital gain (loss) from other 

rental activities is a passive activity 

amount for all general partners. Report the 

gain on Schedule D (Form 1040), line 12. 

Report a loss following the Instructions for 

Form 8582 to figure how much of the loss 

can be reported on Schedule D (Form 

1040), line 12. However, if the PTP box is 

checked, report the loss following the 

rules for Publicly traded partnerships, 

earlier.

Code C3. General partner's 28% rate 

gain or (loss) from other rental activities. The 28% rate gain or (loss) from 

other rental activities is a passive activity 

amount for all general partners. If the 

amount is a gain, include it on line 4 of the 

28% Rate Gain Worksheet in the 

Instructions for Schedule D (Form 1040). 

Report a loss following the Instructions for 

Form 8582 to figure how much of the loss 

can be included on line 4 of the 28% Rate 

Gain Worksheet in the Instructions for 

Schedule D (Form 1040). However, if the 

PTP box is checked, report the loss 

following the rules for Publicly traded 

partnerships, earlier.

Code C4. General partner's general 

credits from other rental activities. 

Report the general credits on Form 3800, 

Part III, line 1bb. Because general credits 

from other rental activities are passive 

activity credits for all general partners, you 

must also report the general credits on 

Form 3800, Part III, as a credit from a 

passive activity.

Code C5. General partner's alternative 

minimum tax adjustment from other 

rental activities. An AMT adjustment 

must be reported on Form 6251, line 16. 

However, if the AMT adjustment is from a 

passive activity, it must be taken into 

account on line 19 with adjustments and 

preferences from other passive activities 

instead of being reported on line 16.

Code D. Limited Partner's 28% 

Rate Gain or (Loss) From Passive 

Activities

Limited partners only. The 28% rate 

gain or (loss) is treated as being from a 

trade or business that is a single passive 

activity. If a gain is reported, include it on 

line 4 of the 28% Rate Gain Worksheet in 

the Instructions for Schedule D (Form 

1040).

If a loss is reported, report the loss 

following the Instructions for Form 8582 to 

figure how much of the loss can be 

included on line 4 of the 28% Rate Gain 

Worksheet in the Instructions for 

Schedule D (Form 1040). However, if the 

PTP box is checked, report the loss 

following the rules for Publicly traded 

partnerships, earlier.

Code E. Limited Partner's 28% 

Rate Gain or (Loss) From Other 

Activities

The 28% gain or (loss) from other 

activities isn’t subject to the passive 

activity limitations. Include it on line 4 of 

the 28% Rate Gain Worksheet in the 

Instructions for Schedule D (Form 1040).

Code F. Guaranteed Payments

Generally, these amounts aren’t passive 

income. Report them on Schedule E 

(Form 1040), line 28, column (j) (for 

example, guaranteed payments for 

personal services).

Code G. Income From Discharge 

of Indebtedness

The amount reported under Code G is 

excluded from your gross income to the 

extent provided in section 108 if the 

discharge:

Occurred in a title 11 case relating to 

bankruptcy;

Occurred when you were insolvent;

Involved qualified farm indebtedness, 

as defined in section 108(g); or

Involved qualified real property 

business indebtedness, as defined in 

section 108(c)(3), unless the partner is a C 

corporation.

This amount is applied, instead, to 

reduce certain tax attributes. File Form 

982, Reduction of Tax Attributes Due to 

Discharge of Indebtedness (and Section 

1082 Basis Adjustment), to explain why 

any amount received from the discharge 

of indebtedness should be excluded and 

to report your reduction of tax attributes.

For a discharge of indebtedness not 

described above, you must include this 

amount in income on Form 1040, line 21.

Code H. Tax-Exempt Interest 

Income

Report on your income tax return, as an 

item of information, your share of the 

tax-exempt interest received or accrued 

by the partnership during the year. 

Individual partners must include this 

amount on Form 1040, line 8b. Increase 

the adjusted basis of your interest in the 

partnership by this amount.

Code I. Limited Partner's 

Rehabilitation Credit From Rental 

Real Estate Activities

Limited partners only. Report this 

amount on Form 3468, line 11i. Because 

the credit is treated as being from a single 

passive activity, you must also file Form 

3800.

Codes J1 and J2. Self-Employment

Code J1. Net earnings or (loss) from 

self-employment. Enter this amount on 

Schedule SE (Form 1040), line 2, 

Section A or B, whichever is applicable. 

General partners should reduce this 

amount by unreimbursed partnership 

expenses claimed. General partners who 

are disqualified persons also should 

reduce this amount by depletion claimed 

on oil and gas properties. If this amount is 

a loss, enter only the deductible amount 

on Schedule SE. For purposes of 

self-employment tax, no income from an 

ELP is treated as farming or fishing 

income.

Code J2. Gross nonfarm income. 

Individual partners use this amount to 

figure net earnings from self-employment 

under the nonfarm optional method on 

Schedule SE (Form 1040), Section B, Part 

II.

Codes K1 Through K9. Foreign Tax 

Credit Information

Use the information reported under Codes 

K1 through K9 to figure your foreign tax 

credit.

Taxpayers filing Form 1116, 

Foreign Tax Credit—If you have 

any qualified dividends, capital 

gains (including any capital gain 

distributions), or capital losses, you may 

have to make certain adjustments to those 

amounts before taking them into account 

on Form 1116. For more information, see 

Form 1116, Foreign Tax Credit (Individual, 

Estate, or Trust), and its instructions; Form 

1118, Foreign Tax Credit—Corporations, 

and its instructions; and Pub. 514, Foreign 

Tax Credit for Individuals. See the 

Instructions for Form 1116 for detailed 

instructions for reporting foreign tax 

information from partnerships.

Code K1. Name of foreign country or 

U.S. possession. Include on Form 1116, 

Part I, item g. For each country reported, 

the partnership must give you the amount 

and a description of your share of the 

following items for Codes K2 through K9. 

For each country or possession being 

reported, a separate column in Part I and a 

separate line in Part II is needed on Form 

1116.

CAUTION

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Instructions for Schedule K-1 (1065-B) -9-
Code K2. Gross income from all sources. Enter this amount on Form 1116, 

line 3e.

Code K3. Gross income sourced at 

partner level. Although all this income 

reported has been apportioned to foreign 

source categories of income, you must 

nevertheless determine whether the 

income being reported is U.S. source 

income or foreign source income. See the 

Instructions for Form 1116 for the rules to 

source the income reported to you. Enter 

only foreign source income on lines 1a 

and 3d of Form 1116. A separate Form 

1116 or 1118 is required for each foreign 

source category of income. Do not include 

income that you determined to be U.S. 

source income.

Codes K4(a) through K4(c). Foreign 

gross income sourced at partnership 

level. The following types of income have 

already been sourced for you by the 

partnership. Include these amounts on 

lines 1a and 3d of the applicable Form 

1116 (that is, the Form 1116 for each 

category of income provided to you).

Code K4(a). Passive category 

foreign source income.

Code K4(b). General category 

foreign source income.

Code K4(c). Other foreign source 

income.

Code K5. Interest expense allocated 

and apportioned at the partner level. 

Include this amount on line 4b of the 

applicable Forms 1116.

Code K6. Other expenses allocated 

and apportioned at the partner level. 

Include this amount on line 2 of the 

applicable Forms 1116.

For Codes K5 and K6, do not 

include any expenses allocated 

and apportioned to U.S. source 

income on any line of Part I of Form 1116.

Codes K7(a) through K7(c). Deductions allocated and apportioned at 

partnership level to foreign source income. The following codes report the 

expenses allocated and apportioned by 

the partnership to foreign source 

categories of income. Include these 

amounts on line 2 of the applicable Forms 

1116 (that is, the Forms 1116 for each 

category of income provided to you).

Code K7(a). Deductions allocated 

and apportioned at partnership level 

to passive category foreign source 

income.

Code K7(b). Deductions allocated 

and apportioned at partnership level 

to general category foreign source 

income.

Code K7(c). Deductions allocated 

and apportioned at partnership level 

to other foreign source income.

CAUTION

!

Code K8(a). Total foreign taxes paid. 

Include this amount in Part II of Form 

1116.

Code K8(b). Total foreign taxes accrued. Include this amount in Part II of 

Form 1116.

The partnership will attach a 

statement that separately 

identifies any arrangement, along 

with the taxes paid or accrued in 

connection with the arrangement, in which 

the partnership participates that would 

qualify as a splitter arrangement under 

section 909 if one or more partners are 

covered persons with respect to an entity 

that took into account related income from 

the arrangement. The statement will also 

indicate whether the partnership has taken 

into account any related income from any 

such splitter arrangement. See section 

909 and the related regulations for rules 

regarding splitter arrangements.

Code K9. Reduction in taxes available 

for credit. Enter this amount on Form 

1116, line 12.

Code L. Oil and Gas Activities

Generally, oil and gas income, deductions, 

credits, and other items are included in 

your share of income or loss from passive 

loss limitation activities, general credits, 

and the alternative minimum tax 

adjustment.

However, shares of all oil and gas 

income, deductions, credits, and other 

items are separately reported to partners 

who are disqualified persons in 

accordance with the regular partnership 

rules, here or on an attached statement.

Note. A partner must notify the ELP of its 

status as a “disqualified person.”

Codes M1 Through M9. 

Miscellaneous

Code M1. Other tax-exempt income. 

Increase the adjusted basis of your 

interest in the partnership by this amount, 

but don’t include it in income on your 

income tax return.

The partnership will attach a 

statement to Schedule K-1 for the 

amount included in box 9, Code 

M1, that is exempt due to section 892 and 

describe the nature of the income.

Code M2. Nondeductible expenses. 

Decrease the adjusted basis of your 

interest in the partnership by this amount. 

The nondeductible expenses paid or 

incurred by the partnership are not 

deductible on your income tax return, but 

they do affect your basis.

CAUTION

!

CAUTION

!

Code M3. Unrelated business taxable 

income. The partnership must give you 

any information you need to figure 

unrelated business taxable income under 

section 512(a)(1) (but excluding any 

modifications required by paragraphs (8) 

through (15) of section 512(b)) for a 

partner that is a tax-exempt organization.

Reminder. A partner is required to notify 

the partnership of its tax-exempt status.

Code M4. Health insurance. Include 

any amounts paid during the tax year for 

insurance that constitutes medical care for 

you, your spouse, your dependents, and 

your children under age 27 who aren’t 

dependents on line 29 of your 2017 Form 

1040. You may be allowed to deduct such 

amounts, even if you do not itemize 

deductions. If you do itemize deductions, 

enter on line 1 of Schedule A (Form 1040) 

any amounts not deducted on line 29 of 

Form 1040.

Code M5. Distributions of money (cash 

and marketable securities). This 

amount includes the distributions the 

partnership made to you of cash and 

certain marketable securities. The 

marketable securities are included at their 

fair market value (FMV) on the date of 

distribution (minus your share of the 

partnership's gain on the securities 

distributed to you). If this amount exceeds 

the adjusted basis of your partnership 

interest immediately before the 

distribution, the excess is treated as gain 

from the sale or exchange of your 

partnership interest. Generally, this gain is 

treated as gain from the sale of a capital 

asset and should be reported on Form 

8949 and the Schedule D for your return. 

However, the gain may be ordinary 

income. For details, see Pub. 541.

The partnership must separately 

identify both of the following.

The FMV of the marketable securities 

when distributed (minus your share of the 

gain on the securities distributed to you).

The partnership's adjusted basis of 

those securities immediately before the 

distribution.

Decrease the adjusted basis of your 

interest in the partnership (but not below 

zero) by the amount of cash distributed to 

you and the partnership's adjusted basis 

of the distributed securities. Advances or 

drawings of money or property against 

your share are treated as current 

distributions made on the last day of the 

partnership's tax year.

Your basis in the distributed 

marketable securities (other than in 

liquidation of your interest) is the smaller 

of:

The partnership's adjusted basis in the 

securities immediately before the 

distribution increased by any gain 

-10- Instructions for Schedule K-1 (1065-B)
recognized on the distribution of the 

securities, or

The adjusted basis of your partnership 

interest reduced by any cash distributed in 

the same transaction and increased by 

any gain recognized on the distribution of 

the securities.

If you received the securities in 

liquidation of your partnership interest, 

your basis in the marketable securities is 

equal to the adjusted basis of your 

partnership interest reduced by any cash 

distributed in the same transaction and 

increased by any gain recognized on the 

distribution of the securities.

If, within 7 years of a distribution to you 

of marketable securities, you contributed 

appreciated property (other than those 

securities) to the partnership and the FMV 

of those securities exceeded the adjusted 

basis of your partnership interest 

immediately before the distribution 

(reduced by any cash received in the 

distribution), you may have to recognize 

gain on the appreciated property. See 

section 737 for details.

Code M6. Distributions of property 

other than money. Box 9, Code M6, 

shows the partnership's adjusted basis of 

property other than money immediately 

before the property was distributed to you. 

In addition, the partnership should attach a 

statement showing the cost basis and 

FMV of each property distributed. 

Decrease the adjusted basis of your 

interest in the partnership by the amount 

of your basis in the distributed property. 

Your basis in the distributed property 

(other than in liquidation of your interest) is 

the smaller of:

The partnership's adjusted basis 

immediately before the distribution, or

The adjusted basis of your partnership 

interest reduced by any cash distributed in 

the same transaction.

If you received the property in 

liquidation of your interest, your basis in 

the distributed property is equal to the 

adjusted basis of your partnership interest 

reduced by any cash distributed in the 

same transaction.

If you contributed appreciated property 

to the partnership within 7 years of a 

distribution of other property to you, and 

the FMV of the other property exceeded 

the adjusted basis of your partnership 

interest immediately before the distribution 

(reduced by any cash received in the 

distribution), you may have to recognize 

gain on the appreciated property. See 

section 737 for details.

Code M7. Gain eligible for section 

1202 exclusion. This gain from the sale 

or exchange of qualified small business 

(QSB) stock (as defined in the Instructions 

for Schedule D) is eligible for the section 

1202 exclusion. The partnership must also 

provide you with:

The name of the corporation that issued 

the QSB stock,

Your share of the partnership's adjusted 

basis of the QSB stock,

Your share of the partnership's sales 

price of the QSB stock, and

The dates the QSB stock was bought 

and sold.

Corporate partners are not eligible for 

the section 1202 exclusion. The following 

additional limitations apply at the partner 

level.

You must have held an interest in the 

partnership when the partnership acquired 

the QSB stock and at all times thereafter 

until the partnership disposed of the QSB 

stock.

Your share of the eligible section 1202 

gain can’t exceed the amount that would 

have been allocated to you based on your 

interest in the partnership at the time the 

QSB stock was acquired.

See the Instructions for Schedule D 

(Form 1040) and the Instructions for Form 

8949 for details on how to report the gain 

and the amount of the allowable exclusion.

Code M8. Gain eligible for section 

1045 rollover-stock replaced. This gain 

is eligible for the section 1045 rollover. 

Replacement stock has been purchased 

by the partnership. The partnership must 

also provide you with:

The name of the corporation that issued 

the QSB stock,

Your share of the partnership's adjusted 

basis of the QSB stock,

Your share of the partnership's sales 

price of the QSB stock,

The dates the QSB stock was bought 

and sold,

Your share of gain from the sale of the 

QSB stock, and

Your share of the gain that was 

deferred by the partnership under section 

1045.

Corporate partners aren’t eligible for 

the section 1045 rollover. To qualify for the 

section 1045 rollover:

You must have held an interest in the 

partnership during the entire period in 

which the partnership held the QSB stock, 

and

Your share of the gain eligible for the 

section 1045 rollover can’t exceed the 

amount that would have been allocated to 

you based on your interest in the 

partnership at the time the QSB stock was 

acquired.

See the Instructions for Schedule D 

(Form 1040) and the Instructions for Form 

8949 for details on how to report the gain 

and the amount of the allowable 

postponed gain.

Opting out of partnership election. 

You can opt out of the partnership's 

section 1045 election and either (1) 

recognize the gain, or (2) elect to 

purchase different replacement QSB 

stock, either directly or through ownership 

of a different partnership that acquired 

replacement QSB stock. You satisfy the 

requirement to purchase replacement 

QSB stock if you own an interest in a 

partnership that purchases QSB stock 

during the 60-day period. You also must 

notify the partnership, in writing, if you opt 

out of the partnership's section 1045 

election. If you recognize gain, you must 

notify the partnership, in writing, of the 

amount of gain that you are recognizing.

Code M9. Gain eligible for section 

1045 rollover-stock not replaced. This 

gain is eligible for the section 1045 

rollover. Replacement stock has not been 

purchased by the partnership. The 

partnership must also provide you with:

The name of the corporation that issued 

the QSB stock,

Your share of the partnership's adjusted 

basis of the QSB stock,

Your share of the partnership's sales 

price of the QSB stock,

The dates the QSB stock was bought 

and sold, and

Your share of the gain from the sale of 

the QSB stock.

Corporate partners are not eligible for 

the section 1045 rollover. To qualify for the 

section 1045 rollover:

You must have held an interest in the 

partnership during the entire period in 

which the partnership held the QSB stock,

Your share of the gain eligible for the 

section 1045 rollover can’t exceed the 

amount that would have been allocated to 

you based on your interest in the 

partnership at the time the QSB stock was 

acquired, and

You must purchase other QSB stock 

(as defined in the Instructions for 

Schedule D (Form 1040) and the 

Instructions for Form 8949) and during the 

60-day period that began on the date the 

QSB stock was sold by the partnership.

See the Instructions for Schedule D 

(Form 1040) and the Instructions for Form 

8949 for details on how to report the gain 

and the amount of the allowable 

postponed gain.

Making the section 1045 election. 

You make a section 1045 election on a 

timely filed return for the tax year during 

which the partnership's tax year ends. 

Attach to your Schedule D (Form 1040) a 

statement that includes the following 

information for each amount of gain that 

you do not recognize under section 1045.

The name of the corporation that issued 

the QSB stock.

The name and EIN of the selling 

partnership.

The dates the QSB stock was 

purchased and sold.

Instructions for Schedule K-1 (1065-B) -11-
The amount of gain that is not 

recognized under section 1045.

If a partner purchases QSB stock, the 

name of the corporation that issued the 

replacement QSB stock, the date the 

stock was purchased, and the cost of the 

stock.

If a partner treats the partner's interest 

in QSB stock that is purchased by a 

purchasing partnership as the partner's 

replacement QSB stock, the name and 

EIN of the purchasing partnership, the 

name of the corporation that issued the 

replacement QSB stock, the partner's 

share of the cost of the QSB stock that 

was purchased by the partnership, the 

computation of the partner's adjustment to 

basis with respect to that QSB stock, and 

the date the stock was purchased by the 

partnership.

Distribution of replacement QSB stock 

to a partner that reduces another partner's interest in replacement QSB 

stock. You must recognize gain upon a 

distribution of replacement QSB stock to 

another partner that reduces your share of 

the replacement QSB stock held by a 

partnership. The amount of gain that you 

must recognize is based on the amount of 

gain that you would recognize upon the 

sale of the distributed replacement QSB 

stock for its FMV on the date of the 

distribution, but not to exceed the amount 

you previously deferred under section 

1045 with respect to the distributed 

replacement QSB stock. If the partnership 

distributed your share of replacement 

QSB stock to another partner, the 

partnership should give you (a) the name 

of the corporation that issued the 

replacement QSB stock, (b) the date the 

replacement QSB stock was distributed to 

another partner or partners, and (c) your 

share of the partnership's adjusted basis 

and fair market value of the replacement 

QSB stock on such date.

For more information, see Regulations 

section 1.1045-1.

Code N. Unrecaptured Section 

1250 Gain

Report this gain on line 11 of the 

Unrecaptured Section 1250 Gain 

Worksheet in the Instructions for 

Schedule D (Form 1040). Do not report 

the gain on line 5 as stated on the 

worksheet.

Codes O1 and O2. Extraterritorial 

Income Exclusion

Partnership did not claim the exclusion. If the partnership reports your share 

of foreign trading gross receipts (Code 

O1) and the extraterritorial income 

exclusion (Code O2), the partnership was 

not entitled to claim the exclusion because 

it did not meet the foreign economic 

process requirements. You may still 

qualify for your share of this exclusion if 

the partnership's foreign trading gross 

receipts for the tax year were $5 million or 

less.

To qualify for this exclusion, your 

foreign trading gross receipts from all 

sources for the tax year also must have 

been $5 million or less.

Limited partners who qualify for the 

exclusion. Report the extraterritorial 

exclusion amount (Code O2) as a 

deduction reducing the amount reported in 

box 1 (see the box 1 instructions, earlier).

General partners who qualify for the 

exclusion. Report the Code O2 amount 

in accordance with the instructions for 

box 9, Code A1, B1, or C1, whichever 

applies. See Form 8873, Extraterritorial 

Income Exclusion, for more information.

Partnership claimed the exclusion. If 

the partnership reports your share of 

foreign trading gross receipts (Code O1) 

but not the amount of the extraterritorial 

income exclusion, the partnership met the 

foreign economic process requirements 

and claimed the exclusion when figuring 

your share of partnership income. You 

also may need to know the amount of your 

share of foreign trading gross receipts 

from this partnership to determine if you 

met the $5 million or less exception 

discussed above for purposes of 

qualifying for an extraterritorial income 

exclusion from other sources.

Upon request, the partnership 

should furnish you a copy of the 

partnership's Form 8873 if there is 

a reduction for international boycott 

operations, illegal bribes, kickbacks, etc.

Code P. Inversion Gain

The partnership must provide a statement 

showing the amounts of each type of 

income or gain that is included in inversion 

gain. The partnership has included 

inversion gain in income elsewhere on 

Schedule K-1. Inversion gain is also 

reported under Code P because your 

taxable income and alternative minimum 

taxable income can’t be less than the 

inversion gain. Also, your inversion gain 

(a) isn’t taken into account in figuring the 

amount of net operating loss (NOL) for the 

tax year or the amount of NOL that can be 

carried over to each tax year, (b) may limit 

the amount of your credits, and (c) is 

treated as income from sources within the 

United States for the foreign tax credit. 

See section 7874 for details.

CAUTION

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Code Q. Commercial Revitalization 

Deduction

Follow the Instructions for Form 8582 for 

commercial revitalization deductions from 

rental real estate activities to figure how 

much of the deduction can be reported on 

Schedule E (Form 1040), line 28, column 

(f).

The commercial revitalization 

deduction is not available for any 

building placed in service after 

December 31, 2009.

Codes R1 and R2. Interest 

Deduction Limitation for Corporate 

Partners

A corporate partner is required to treat its 

share of interest income, interest expense, 

and partnership liabilities as income, 

expense, and liabilities of the corporation 

for purposes of the interest deduction 

limitation under section 163(j). The 

corporation's share of interest income is 

reported in box 9 using code R1. Its share 

of interest expense is reported using code 

R2. The amounts reported using code R1 

and R2 are for information only, and are 

included in amounts reported elsewhere 

on Schedule K-1. The corporation's share 

of partnership liabilities is shown in the first 

column of Schedule K-1.

Code S1. Domestic Production 

Activities Information

The partnership must attach a statement 

to Schedule K-1 that provides the 

information you need to figure the 

domestic production activities deduction. 

Use Form 8903, Domestic Production 

Activities Deduction, to figure this 

deduction. See the Instructions for Form 

8903 for details.

Code S2. Qualified Production 

Activities Income (QPAI)

Report the QPAI reported to you by the 

partnership (in box 9 using Code S2) on 

Form 8903, in the applicable column of 

line 7.

Code S3. Employer's W-2 Wages

Report the portion of W-2 wages reported 

to you by the partnership (in box 9 using 

Code S3) on Form 8903, line 17.

Code T. Section 409A Income

This is compensation to partners deferred 

under a section 409A nonqualified 

deferred compensation plan that doesn’t 

meet the requirements of section 409A. 

This amount is also reported in box 9 

using Code F. This amount is subject to 

interest and additional tax to be reported 

CAUTION

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-12- Instructions for Schedule K-1 (1065-B)
on Form 1040, line 62. See the 

instructions for line 62 of Form 1040 for 

details.

Code U. Net Investment Income

The partnership may use this Code U to 

report information you may need to 

determine your net investment income tax 

under section 1411 including information 

regarding income from controlled foreign 

corporations (CFCs) and passive foreign 

investment companies (PFICs) the stock 

of which is owned by the partnership. Any 

information that isn’t provided elsewhere 

on Schedule K-1 (or an attachment to 

Schedule K-1) is provided using Code U. 

For CFCs and PFICs that you treat as 

qualified electing funds (QEFs), the 

information that is relevant to you will 

depend on whether you, the partnership, 

or a lower-tier entity has made an election 

under Regulations section 1.1411-10(g) 

with respect to the CFC or QEF. For 

example, if the partnership made an 

election under Regulations section 

1.1411-10(g) for a CFC the stock of which 

is owned by the partnership, and the 

relevant income and deduction items 

derived from that CFC are reported 

elsewhere on the Schedule K-1, then you 

will not need the information provided 

using Code U to complete your Form 

8960.

If you are an individual who is a U.S. 

citizen or resident, or a domestic trust or 

estate, follow the Instructions for Form 

8960 to figure and report your net 

investment income and adjusted gross 

income or modified adjusted gross 

income. Corporate partners aren’t subject 

to the net investment income tax. See 

Regulations sections 1.1411-1 through 10 

for details.

Code V. Other Information

The partnership will use Code V to report 

the following to partners.

The recapture of any credit (other than 

partnership level low-income housing 

credit or investment credit) is reported to 

you as a separately stated item. See the 

instructions for the specific form identified 

with the credit for more information on 

reporting the recapture.

Any information a partner that is a 

publicly traded partnership may need to 

determine if it meets the 90% qualifying 

income test of section 7704(c)(2). 

Partners are required to notify the 

partnership of their status as a publicly 

traded partnership.

Any information you need to complete a 

disclosure statement for reportable 

transactions in which the partnership 

participates. If the partnership participates 

in a transaction that must be disclosed on 

Form 8886, Reportable Transaction 

Disclosure Statement, both you and the 

partnership may be required to file Form 

8886 for the transaction. The 

determination of whether you are required 

to disclose a transaction of the partnership 

is based on the category(s) under which 

the transaction qualifies for disclosure and 

is determined by the partnership. See the 

Instructions for Form 8886 for details.

Conservation reserve program 

payments. Individuals who received social 

security retirement or disability benefits, 

and are partners in a farm partnership that 

receives conservation reserve program 

payments, don’t pay self-employment tax 

on their share of the conservation reserve 

payments. The partnership will report your 

share of the conservation reserve program 

payments in box 9 using Code V. See 

Schedule SE (Form 1040) for information 

on excluding the payments from your 

calculation of self-employment tax.

Gain or loss attributable to the sale or 

exchange of qualified preferred stock of 

the Federal National Mortgage 

Association (Fannie Mae) and the Federal 

Home Loan Mortgage Corporation 

(Freddie Mac). The partnership will report 

on an attached statement the amount of 

gain or loss attributable to the sale or 

exchange of the qualified preferred stock, 

the date the stock was acquired by the 

partnership, and the date the stock was 

sold or exchanged by the partnership. If 

the partner is not a financial institution, 

report the gain or loss on line 5 or line 12 

of Schedule D (Form 1040) in accordance 

with the instructions for Schedule D. If a 

partner is a financial institution referred to 

in section 582(c)(2) or a depositary 

institution holding company (as defined in 

section 3(w)(1) of the Federal Deposit 

Insurance Act), report the gain or loss in 

accordance with the Instructions for Form 

4797, and Rev. Proc. 2008-64, 2008-47 

I.R.B. 1195.

If the partnership made a section 108(i) 

election or allocates any section 108(i) 

items to its partners, it will provide a 

statement identifying your share of the 

following.

1. The deferred section 108(i) 

cancellation of debt (COD) income that 

hasn’t been included in income in the 

current or prior tax years.

2. The partnership's original issue 

discount (OID) deduction deferred under 

section 108(i)(2)(A)(i) that hasn’t been 

deducted in the current or prior tax years.

3. The deferred section 752 amount 

that is treated as a distribution of money 

under section 752 in the current tax year.

4. The deferred section 752 amount 

remaining as of the end of the current tax 

year.

5. Any income previously deferred as 

a result of a section 108(i) election that is 

includible in the current year. See section 

108(i) for events that will cause previously 

deferred income to be reportable, and a 

special rule for allocating deferred income 

to partners.

6. The current year section 108(i) OID 

deduction. The partnership will provide 

your share of the partnership's OID 

deduction deferred under section 108(i)(2)

(A)(i) that is allowable as a deduction in 

the current tax year under section 108(i)

(2)(A)(ii) or section 108(i)(5)(D)(i) or (ii).

The information needed to complete 

Schedule P (Form 1120-F), List of Foreign 

Partner Interests in Partnerships. When 

required, the partnership will make this 

report on an attached statement to 

partners that are a corporation identified 

as a foreign partner under Regulations 

section 1.1446-1(c)(3) or partners that are 

a partnership (domestic or foreign) if the 

reporting partnership knows, or has 

reason to know, that one or more of the 

partners is a foreign corporation. If the 

partnership allocates effectively 

connected income to the partner, the 

statement will contain the information 

needed to complete lines 1 through 10, 

13, 14, 15b, 17a, 17b, and 18 of 

Schedule P (Form 1120-F). If the 

partnership does not allocate effectively 

connected income to the partner, the 

statement will contain the information 

needed to complete lines 13, 14, and 18 of 

Schedule P (Form 1120-F), information 

that might be relevant for purposes of 

completing Schedule P in determining 

your interest expense deduction under 

Regulations section 1.882-5.

The partner's share of the credit for 

each separate bond credit that was 

reported on the partnership's Form 8912. 

Do not add these amounts to your income, 

as they were included in the income (loss) 

reported in box 1 or 2. The partnership will 

report the following credits separately: 

clean renewable energy bond credit, new 

clean renewable energy bond credit, 

qualified energy conservation bond credit, 

qualified zone academy bond credit, 

qualified school construction bond credit, 

and build America bond credit.

Excess farm loss limitation. If the 

partnership has deductions attributable to 

a farming activity, it will provide a 

statement showing the aggregate gross 

income or gain and the aggregate 

deductions from the farming activity that 

you need to figure any excess farm loss 

limitation. See section 461(j) for details.

Any other information you may need to 

file with your return not shown elsewhere 

on Schedule K-1. The partnership must 

give you a description and the amount of 

your share for each of these items.

Instructions for Schedule K-1 (1065-B) -13-