2023

Partner’s Instructions for 

Schedule K-1 (Form 1065)

Partner's Share of Income, Deductions, Credits, etc.

(For Partner's Use Only)

Department of the Treasury

Internal Revenue Service

Contents Page

General Instructions ......................... 2

Specific Instructions ........................ 12

Part I. Information About the Partnership .......... 12

Part II. Information About the Partner ............ 12

Part III. Partner's Share of Items ................ 14

Income (Loss) ............................ 15

Box 11. Other Income (Loss) ................. 17

Box 12. Section 179 Deduction ................ 19

Box 13. Other Deductions .................... 19

Box 14. Self-Employment Earnings (Loss) ........ 22

Box 15. Credits ............................ 22

Box 16. International Transactions .............. 24

Box 17. Alternative Minimum Tax (AMT) Items ..... 25

Box 18. Tax-Exempt Income and Nondeductible 

Expenses ............................. 25

Box 19. Distributions ........................ 25

Box 20. Other Information .................... 26

List of Codes ............................. 32

Section references are to the Internal Revenue Code 

unless otherwise noted.

Future Developments

For the latest information about developments related to 

Schedule K-1 (Form 1065) and the Partner's Instructions 

for Schedule K-1 (Form 1065), such as legislation enacted 

after they were published, go to IRS.gov/Form1065.

What’s New

Partner’s basis. The Worksheet for Adjusting the Basis 

of a Partner’s Interest in the Partnership has been 

changed to provide more details. Specific instructions are 

also included.

Item J. The checkbox under item J has been expanded 

to include a Sale checkbox and an Exchange checkbox. 

The instructions outline what is considered a sale and an 

exchange; see Item J, later, for more information.

Item K. Item K was expanded to 3 sections: K1, K2, and 

K3. Item K3 is a new checkbox to indicate whether the 

listed liabilities are subject to guarantees or other payment 

obligations. See Item K3, later.

Box 11. Other income (loss). Code I, Other income 

(loss), previously included a number of bulleted items. 

These items have been assigned individual codes. See 

Box 11. Other Income (Loss), later, for the expanded list of 

codes.

Box 13. Other deductions. Code W, Other deductions, 

previously included a number of bulleted items. These 

items have been assigned individual codes. See Box 13. 

Other Deductions, later, for the expanded list of codes.

Box 15. Credits. Code P, Other credits, previously 

included a number of bulleted items. These items have 

been assigned individual codes. See Box 15. Credits, 

later, for the expanded list of codes and codes for new 

energy credits.

Box 19. Distributions. For 2023, partners receiving 

distributions of property from a partnership in a liquidating 

or non-liquidating distribution under certain circumstances 

must attach a statement to their tax return. See Box 19. 

Distributions, later.

Box 20. Other information. Code AH, Other 

information, previously included a number of bulleted 

items. These items have been assigned individual codes. 

See Box 20. Other Information, later, for the expanded list 

of codes.

Box 20, code P. The instructions have been updated 

relating to section 453A information required to be 

provided by the partnership.

Box 20, code X. Disclosure of payment obligations 

including guarantees and deficit obligations (DROs).

Reminders

Domestic partnerships treated as aggregates for purposes of sections 951, 951A, and 956(a). Final 

regulations announced in T.D. 9960 treat domestic 

partnerships as aggregates of their partners for purposes 

of sections 951, 951A, and 956(a), and any provision that 

specifically applies by reference to any of those sections, 

for tax years of foreign corporations beginning on or after 

January 25, 2022, and for tax years of U.S. persons in 

which or with which such tax years of foreign corporations 

end. Domestic partnerships may apply the final 

regulations to tax years of foreign corporations beginning 

after December 31, 2017, and to tax years of the domestic 

partnership in which or with which such tax years of the 

foreign corporations end, provided certain consistency 

requirements are met.

Line 16. International transactions notice requirement. If box 16 isn't checked, you should receive 

notification from the partnership that you won't be 

receiving a Schedule K-3 unless you request one.

Individual retirement account (IRA) partners. The 

partnership has entered the identifying number of the IRA 

custodian in item E. The partnership has entered the 

Jan 18, 2024 Cat. No. 11396N
identifying number of the IRA itself in box 20, code AR, if 

there is unrelated business taxable income reported in 

box 20, code V. The IRA partner uses this information in 

filing Form 990-T, Exempt Organization Business Income 

Tax Return.

General Instructions

Purpose of Schedule K-1

The partnership uses Schedule K-1 to report your share of 

the partnership's income, deductions, credits, etc. Keep it 

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

you're specifically required to do so. (See Code O under 

Box 15, later.) The partnership files a copy of 

Schedule K-1 (Form 1065) with the IRS.

For your protection, Schedule K-1 may show only the 

last four digits of your identifying number (social security 

number (SSN), etc.). However, the partnership has 

reported your complete identifying number to the IRS.

Although the partnership generally isn't subject to 

income tax, you may be liable for tax on your share of the 

partnership income, whether or not distributed. Include 

your share on your tax return if a return is required. Use 

these instructions to help you report the items shown on 

Schedule K-1 on your tax return.

The amount of loss and deduction you may claim on 

your tax return may be less than the amount reported on 

Schedule K-1. It's the partner's responsibility to consider 

and apply any applicable limitations. See Limitations on 

Losses, Deductions, and Credits, later, for more 

information.

Inconsistent Treatment of Items

If you're a partner in a partnership that hasn't elected out 

of the centralized partnership audit regime enacted by the 

Bipartisan Budget Act of 2015 (BBA), you must report the 

items shown on your Schedule K-1 (and any attached 

statements) the same way that the partnership treated the 

items on its return.

If the treatment on your original or amended return is 

inconsistent with the partnership's treatment, or if the 

partnership was required to but hasn't filed a return, you 

must file Form 8082, Notice of Inconsistent Treatment or 

Administrative Adjustment Request (AAR), with your 

original or amended return to identify and explain any 

inconsistency (or to note that a partnership return hasn't 

been filed).

If you're required to file Form 8082 but don't do so, you 

may be subject to the accuracy-related penalty. This 

penalty is in addition to any tax that results from making 

your amount or treatment of the item consistent with that 

shown on the partnership's return. Any deficiency that 

results from making the amounts consistent may be 

assessed immediately.

Errors

If you believe the partnership has made an error on your 

Schedule K-1, notify the partnership and ask for a 

corrected Schedule K-1. Don't change any items on your 

copy of Schedule K-1. Be sure that the partnership sends 

a copy of the corrected Schedule K-1 to the IRS.

Decedent’s Schedule K-1

If you're the executor of an estate and you have received a 

decedent's Schedule K-1, then you have the responsibility 

to notify the partnership of the name and taxpayer 

identification number (TIN) of the decedent's estate if the 

partnership interest is part of the decedent's estate. If a 

decedent died in a prior year and the partnership 

continues to send the decedent a Schedule K-1 after 

being notified of the decedent's death, then you should 

request that the partnership send a corrected 

Schedule K-1. If you receive an interest in a partnership by 

reason of a former partner's death, you must provide the 

partnership with your name and TIN. For treatment of 

partnership income upon the death of a partner, see Pub. 

559, Survivors, Executors, and Administrators.

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. See Form 8308, Report of a Sale or Exchange of 

Certain Partnership Interests, and its instructions, for 

additional information.

Gain or loss from the disposition of your 

partnership interest may be net investment 

income (NII) under section 1411 and could be 

subject to the net investment income tax (NIIT). See Form 

8960, Net Investment Income Tax—Individuals, Estates, 

and Trusts, and its instructions for information about how 

to report and figure the tax due.

Three-year holding period requirement for 

applicable partnership interests. Section 1061 

increases the required long-term capital gains 

holding period for an applicable partnership interest from 

more than 1 year to more than 3 years. The holding period 

applies only to applicable partnership interests held in 

connection with the performance of services as defined in 

TIP

CAUTION

!

2 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
section 1061. See section 1061 and Pub. 541, 

Partnerships, for details.

Nominee Reporting

Any person who holds, directly or indirectly, an interest in 

a partnership as a nominee for another person must 

furnish a written statement to the partnership by the last 

day of the month following the end of the partnership's tax 

year. This statement must include the name, address, and 

identifying number of the nominee and such other person; 

description of the partnership interest held as nominee for 

that person; and other information required by Temporary 

Regulations section 1.6031(c)-1T. A nominee that fails to 

furnish this statement must furnish to the person for whom 

the nominee holds the partnership interest a copy of 

Schedule K-1 and related information within 30 days of 

receiving it from the partnership.

A nominee who fails to furnish all the information 

required by Temporary Regulations section 1.6031(c)-1T 

when due, or who furnishes incorrect information, is 

subject to a $310 penalty for each failure. The maximum 

penalty is $3,783,000 for all such failures during a 

calendar year. If the nominee intentionally disregards the 

requirement to report correct information, each $310 

penalty increases to $630 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.

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 (LLCs) that are 

classified as partnerships, may be treated as limited 

partners for certain purposes.

However, whether a partner qualifies as a limited 

partner for purposes of self-employment tax depends on 

whether the partner meets the definition of a limited 

partner under section 1402(a)(13).

Nonrecourse Loans

Nonrecourse loans are those liabilities of the partnership 

for which no partner or related person bears the economic 

risk of loss.

Elections

Generally, the partnership decides how to figure taxable 

income from its operations. However, certain elections are 

made by you separately on your income tax return and not 

by the partnership. These elections are made under the 

following code sections.

• Section 59(e) (deduction of certain qualified 

expenditures ratably over the period of time specified in 

that section). For details, see the instructions for code J in 

box 13.

• Section 108(b)(5) (election related to reduction of tax 

attributes due to exclusion from gross income of discharge 

of indebtedness).

• Section 263A(d) (preproductive expenses). See the 

instructions for code P in box 13.

• Section 617 (deduction and recapture of certain mining 

exploration expenditures).

• Section 901 (foreign tax credit). See Schedule K-3.

Additional Information

To get forms and publications, see the instructions for your 

tax return or go to IRS.gov.

Limitations on Losses, Deductions, 

and Credits

There are potential limitations on partnership losses that 

you can deduct on your return. These limitations and the 

order in which you must apply them are as follows: the 

basis limitations, the at-risk limitations, and the passive 

activity limitations. These limitations are discussed below.

Other limitations may apply to specific deductions (for 

example, the section 179 expense deduction). Generally, 

specific limitations apply before the at-risk and passive 

loss limitations.

Basis Limitations

Generally, partners may only claim their share of a 

partnership loss (including a capital loss) to the extent it 

doesn’t exceed their adjusted basis in the partnership at 

the end of the partnership’s tax year. Any losses and 

deductions not allowed can be carried forward.

It’s the partner’s responsibility to track and maintain the 

information necessary to figure their adjusted basis in the 

partnership (also known as outside basis). Regulations 

section 1.705–1(a)(1) requires partners to determine the 

adjusted basis in their partnership interest as necessary to 

determine their tax liability. For example, a determination 

is required when a partner sells or exchanges all or part of 

their partnership interest or when a partner’s entire 

partnership interest is liquidated. In general, a partner’s 

adjusted basis is determined under the principles of 

subchapter K, including sections 705, 722, 733, and 742.

Although the partnership provides an analysis of the 

partner’s capital account on item L of Schedule K-1, that 

information is based on the partnership’s books and 

records and can’t be used to figure the partner’s adjusted 

basis.

Use the Worksheet for Adjusting the Basis of a 

Partner’s Interest in the Partnership to figure the basis of 

your interest in the partnership.

For partnership tax years beginning after 2017, a 

partner's share of the adjusted basis in partnership 

charitable contributions (defined in section 170(c)) and 

taxes, described in section 901, paid or accrued to foreign 

countries and to U.S. territories is subject to this basis 

limitation (defined in section 704(d)).

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 3
Partnership Basis Worksheet Specific 

Instructions

There may be some transactions or certain distributions 

that require you to determine the adjusted basis of your 

partnership interest at the point in time of the transaction 

or distribution rather than in the order and amounts 

specified in these instructions.

Part I—Partner Basis

Line 1. Enter your adjusted basis at the beginning of the 

partnership’s tax year. This will equal your adjusted basis 

at the end of the prior year. Basis can’t be less than zero.

Section A—Increases 

Line 2. Enter the purchase price of any partnership 

interests acquired during the year, plus the amount of 

money or cash equivalents contributed to the partnership 

and the adjusted basis of property contributed to the 

partnership less any liabilities associated with the 

property. If liabilities associated with the property are 

greater than your adjusted basis in the property, then 

include the excess liabilities as liabilities assumed by the 

partnership on line 9b. Include the fair market value (FMV) 

of any partnership interests received in exchange for 

services provided to the partnership. Don’t include the 

FMV of services performed in exchange for guaranteed 

payments.

Line 3a. Enter the total ending liabilities from your 

Schedule K-1, item K1.

Line 3b. Enter the total beginning liabilities from your 

Schedule K-1, item K1.

Line 3c. Subtract line 3b from line 3a.

Line 3d. Enter the amount of partnership liabilities you 

assumed during the tax year. See Regulations section 

1.752-1(d).

Line 3e. Add lines 3c and 3d. If the sum is negative, enter 

the amount on line 9a. If the sum is zero or positive, enter 

the amount on line 3e.

Line 4. Enter on lines 4a through 4n all separately figured 

and non-separately figured items of income from 

Schedule K-1. See below for special line item instructions.

Note. Enter only positive amounts from Schedule K-1 on 

line 4. Negative amounts (decreases to basis) are entered 

on lines 8 through 10.

Line 4d. Reduce interest income reported on this line by 

any amount included in interest income with respect to the 

credit to holders of clean renewable energy bonds.

Line 4n. Enter the business interest expense (BIE) 

reported in box 20, code N, of Schedule K-1, or the 

amount by which BIE reduced positive ordinary income 

amounts in box 1, 2, or 3 of Schedule K-1, if less.

Line 4o. Enter the sum of the amounts on lines 4a 

through 4n.

Line 5. Enter any gain recognized on contributions of 

property during the year. For example, a contribution to a 

partnership which would be treated as an investment 

company if it were incorporated would be subject to gain 

and that gain increases basis. Don’t include gain from the 

transfer of liabilities.

Line 6. Enter the amount by which your cumulative 

depletion deduction (other than oil and gas depletion) 

exceeds your proportionate share of basis in the property 

subject to depletion.

Line 7. Add lines 1, 2, 3e, 4o, 5, and 6.

Section B—Decreases 

Line 8a. Enter the cash and marketable securities 

distributed to you by the partnership as reported in box 19, 

code A, of Schedule K-1.

Line 8b. Enter the property distributed subject to 

recognition of precontribution gain under section 737 as 

reported in box 19, code B, of Schedule K-1. Don’t include 

the amount of property distributions included in your 

taxable income.

Line 8c. Enter the partnership’s adjusted basis in the 

property distributed or, if less, your remaining outside 

basis assigned to the property. See Pub. 541.

Line 8d. Add lines 8a, 8b, and 8c.

Line 9a. If the sum of lines 3c and 3d is negative, enter 

the amount here; otherwise, enter zero.

Line 9b. Enter the amount of your individual liabilities that 

the partnership assumed during the tax year.

Line 9c. Add lines 9a and 9b.

Line 10. Add lines 8d and 9c.

Line 11a. Add lines 7 and 10. If the amount is negative, 

enter zero on line 11a and enter the amount as a positive 

number on line 11b.

Line 11b. See the instructions for line 11a. The amount 

reported on this line represents a taxable gain on 

distributions in excess of basis. Report the gain on your 

tax return.

Part II—Allowable Loss and Deduction Items

A partner's distributive share of partnership losses and 

deduction items in a given tax year are only allowed to the 

extent of the partner’s adjusted basis in their partnership 

interest following the adjustments described in Part I. 

When basis is insufficient, and there is more than one 

category of loss or deduction items (for example, 

short-term capital loss and long-term capital loss) that 

reduces basis, the amount of each category of loss or 

deduction item that's disallowed is determined on a pro 

rata basis.

A partner's loss and deduction items in excess of basis 

are suspended and carried forward for use in the next tax 

year in which the partner has adjusted basis in their 

partnership interest available. See Regulations section 

1.704-1(d).

Part II shows the pro rata allocation for each category of 

loss or deduction that's suspended and tracks this 

information. Enter numbers as negative amounts.

4 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Note. Positive amounts (increases to basis) are entered 

on line 4.

Column A. 

Line 12. Enter as a negative amount any nondeductible 

expenses reported in box 18 of Schedule K-1.

Line 13. Enter as a negative amount the current year 

deduction for depletion of any partnership oil and gas 

property, not to exceed your allocable share of the 

adjusted basis of the property.

Column B. 

Line 12. Enter any prior-year loss or deduction items 

that were suspended due to basis limitations and carried 

forward to the current tax year.

Line 13. Enter any prior-year loss or deduction items 

that were suspended due to basis limitations and carried 

forward to the current tax year.

Column C. 

Line 12. Enter the sum of line 12, columns A and B.

Line 13. Enter the sum of line 13, columns A and B.

Column D. 

Line 12. If the sum of lines 12 and 13, column C, 

doesn’t exceed the amount on line 11a, then enter the 

amount of line 12, column C, in the corresponding line of 

column D. If the sum of lines 12 and 13, column C, 

exceeds the amount of basis remaining on line 11a, then 

you must allocate the remaining basis proportionately in 

column D between lines 12 and 13, column C.

Line 13. If the sum of lines 12 and 13, column C, 

doesn’t exceed the amount on line 11a, then enter the 

amount of line 13, column C. If the sum of lines 12 and 13, 

column C, exceeds the amount of basis remaining on 

line 11a, then you must allocate the remaining basis 

proportionately in column D between lines 12 and 13, 

column C.

Column E. 

Line 12. If the sum of lines 12 and 13, column C, 

exceeds the amount of basis remaining on line 11a, 

subtract line 12, column D, from line 12, column C, and 

enter the result in column E.

Line 13. If the sum of lines 12 and 13, column C, 

exceeds the amount of basis remaining on line 11a, 

subtract line 13, column D, from line 13, column C, and 

enter the result in column E.

Line 14. Reduce line 11a by the amounts on lines 12 and 

13, column D, and enter on line 14.

Lines 15, column A. Enter the loss and deduction 

amounts for each item as reported on your Schedule K-1. 

See below for special line item instructions.

Line 15a, column A. Exclude BIE that was included in 

reporting losses in box 1, 2, or 3 of Schedule K-1. BIE is 

included as a separate loss class on line 15r.

Line 15i, column A. Include your share of the 

partnership's section 179 expense deduction for the year 

even if you can’t deduct all of it due to limitations.

Line 15n, column A. Enter excess business interest 

expense (EBIE).

Line 15q, column A. Enter BIE reported in box 20, code 

N, of Schedule K-1.

Note that BIE is a separate loss class under 

Regulations section 1.163(j)-6(h)(1). To the extent basis is 

proportionately allocated to this loss class (consisting of 

lines 15n and 15q), interest expense is absorbed by 

applying currently deductible BIE (line 15q) to basis first. 

Once line 15q has been fully absorbed by basis, any 

remaining basis proportionately allocated to the BIE class 

is then absorbed by applying it to EBIE on line 15n. EBIE 

is only applicable to partnerships subject to section 163(j). 

BIE is a separate loss class whether or not the taxpayer is 

subject to the section 163(j) limitation. See Regulations 

sections 1.704-1(d)(2) and 1.163(j)-6(h)(1). If any of the 

suspended loss consists of BIE, EBIE, or negative section 

163(j) expense carryover (which will be reflected as EBIE 

carryforward on line 15n, columns B (prior year) and D 

(current year disallowed carryforward)), see the 

Instructions for Form 8990, Limitation on Business Interest 

Expense Under Section 163(j), regarding the allocation of 

these three items.

Lines 15, column B. Enter any prior-year loss and 

deduction items suspended due to basis limitations that 

were carried forward to the current tax year.

Lines 15, column C. Add each line, column A and 

column B, and enter the amount in the corresponding line 

of column C.

Lines 15, column D. If Part II, line 14, is zero, skip 

column D. If basis, as reported on Part II, line 14, is greater 

than line 15s, column C, enter the amount for each line in 

column C in column D. If basis as reported on Part II, 

line 14, is less than line 15s, column C, enter the pro rata 

amount on the corresponding line in column D. The total 

allocation amount reported in line 15s, column D, can’t 

exceed the amount report on Part II, line 14.

Note. This represents the amount of loss or deduction 

items you’re allowed to report on your return from the 

partnership this tax year, as limited by your basis. This 

amount may not match the amount reported on your 

current year Schedule K-1.

Lines 15, column E. For each line, subtract column D 

from column C and enter the amount in column E.

Line 16. Enter the amount from line 15s, column D.

Line 17. If you had unutilized EBIE and disposed of a 

portion or all of your partnership interest, enter the 

increase in basis on line 17. See Regulations section 

1.163(j)-6(h)(3).

Line 18. Add lines 14, 16, and 17. This amount 

represents your basis in your partnership interest at the 

end of the year.

Basis adjustments computed in different manner 

than specified in these instructions. 

Section 961(a) adjusted basis increases. Your 

adjusted basis may be increased under section 961(a) for 

amounts that you’re required to include in income with 

respect to a controlled foreign corporation (CFC) under 

sections 951(a) (for example, subpart F income) and 951A 

(global intangible low-taxed income (GILTI)) because 

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 5
you’re a U.S. shareholder of the CFC and you own (within 

the meaning of section 958(a)(2)) stock of the CFC 

through the partnership.

For purposes of section 951(a), if the partnership is a 

domestic partnership, then you’ll be treated as owning 

(within the meaning of section 958(a)) stock of a CFC 

through the partnership (a) for a tax year of the foreign 

corporation that begins before January 25, 2022, only if 

the partnership applies Regulations section 1.958-1(d)(1) 

to treat it as not owning stock of the foreign corporation 

within the meaning of section 958(a) for purposes of 

section 951; and (b) for any tax year of the foreign 

corporation that begins on or after January 25, 2022. See 

the Partner’s Instructions for Schedule K-3 for more 

information on sections 951(a) and 951A inclusions.

Section 961(b)(1) adjusted basis decreases. Your 

adjusted basis may be decreased under section 961(b)(1) 

by the sum of (a) the dollar basis in previously taxed 

earnings and profits (PTEP) in your annual PTEP 

accounts that you exclude from your gross income under 

section 959(a) by reason of a distribution made to the 

partnership, and (b) the dollar amount of any foreign 

income taxes allowed as a credit under section 960(b) 

with respect to such PTEP.

6 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Worksheet for Adjusting the Basis of a Partner’s 

Interest in the Partnership Keep for Your Records

Part I—Partner Basis

1. Adjusted basis at the beginning of the tax year. Don’t enter less than zero ................................ 1.

Section A—Increases

2. Acquisitions of partnership interests and contributions of money and property ............................. 2.

3a. Partner's share of liabilities at the end of the year ................................... 3a.

3b. Partner's share of liabilities at the beginning of the year .............................. 3b

3c. Increase (decrease) in partnership liabilities (subtract line 3b from line 3a) ................ 3c.

3d. Partnership liabilities assumed during the tax year .................................. 3d.

3e. Increase in liabilities (add lines 3c and 3d) (If amount is negative, enter on line 9a below.) ..................... 3e.

4a. Ordinary business income ................................................... 4a.

4b. Net rental real estate income ................................................. 4b.

4c. Other net rental income ..................................................... 4c.

4d. Interest income ........................................................... 4d.

4e. Ordinary dividends ........................................................ 4e.

4f. Dividend equivalents ....................................................... 4f.

4g. Royalties ................................................................ 4g.

4h. Net short-term capital gain ................................................... 4h.

4i. Net long-term capital gain ................................................... 4i.

4j. Net section 1231 gain ...................................................... 4j.

4k. Other income ............................................................. 4k.

4l. Tax-exempt income ........................................................ 4l.

4m. Other increases to basis ..................................................... 4m.

4n. BIE (enter as a positive) (see instructions) ........................................ 4n.

4o. Total increases (add lines 4a through 4n) ........................................................ 4o.

5. Gain recognized on contributions of property during the year .......................................... 5.

6. Excess depletion adjustment ................................................................. 6.

7. Total basis before decreases (add lines 1, 2, 3e, 4o, 5, and 6) ......................................... 7.

Section B—Decreases (Enter as a negative.)

8. Withdrawals, distributions of money, and the adjusted basis of distributed property

8a. Cash and marketable securities distributed ....................................... 8a.

8b. Distribution subject to section 737 ............................................. 8b.

8c. Other property distributed ................................................... 8c.

8d. Total distributions (add lines 8a through 8c) ....................................................... 8d.

9a. Decrease in partner's share of liabilities (see instructions) ............................ 9a.

9b. Partner's liabilities assumed by the partnership during the tax year ...................... 9b.

9c. Decrease in liabilities (sum of lines 9a and 9b) .................................................... 9c.

10. Total distributions and decrease in liabilities (add lines 8d and 9c) ...................................... 10.

11a. Basis after distributions (add lines 7 and 10) (If the result is negative, enter -0- on line 11a and enter the amount as a 

positive on line 11b.) ....................................................................... 11a.

11b. Gain on distributions in excess of basis .......................................................... 11b.

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 7
Worksheet for Adjusting the Basis of a Partner’s 

Interest in the Partnership (continued) Keep for Your Records

Part II—Allowable Loss and Deduction Items (Enter as a 

negative.)

Column A Column B Column C Column D Column E

Current 

year 

distributive 

share

Prior-year 

carryforward 

amount

Total of 

columns A 

and B

Amount 

reducing 

basis (see 

instructions)

Suspended 

carryforward

12. Nondeductible expenses ..........................

13. Depletion for oil and gas ...........................

14. Basis after nondeductible expenses and depletion (reduce line 11a by the amounts on lines 12 and 13, 

column D) ........................................................................

Column A Column B Column C Column D Column E

Current 

year 

distributive 

share

Prior-year 

carryforward 

amount

Total of 

columns A 

and B

Allowable 

loss and 

deductions

(see 

instructions)

Disallowed 

loss 

carryforward

15a. Ordinary business loss ............................

15b. Net rental real estate loss (excluding BIE) ..............

15c. Other net rental loss (excluding BIE) ..................

15d. Foreign taxes paid or accrued ......................

15e. Net short-term capital loss .........................

15f. Net long-term capital loss ..........................

15g. Net section 1231 loss .............................

15h. Other losses ...................................

15i. Section 179 deduction ............................

Other Deductions

15j. Charitable contributions ...........................

15k. Investment interest expense ........................

15l. Deductions (royalty income) ........................

15m. Section 59(e)(2) .................................

15n. EBIE .........................................

15o. Deductions—portfolio (other) .......................

15p. All other ......................................

15q. BIE ..........................................

15r. Other decreases to basis ..........................

15s. Subtotal (add lines 15a through 15r) ..................

15t. Total deductions and losses (add lines 15a through 15r, column C) ..................

16. Allowable deductions and losses .......................................................

17. Unutilized EBIE on sale of partnership interest .............................................

18. Adjusted basis at the end of the tax year (Enter the sum of lines 14, 16, and 17.) .....................

8 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
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 aren’t at risk, you’ll have to 

complete Form 6198, At-Risk Limitations, to figure your 

allowable loss for the activity.

The at-risk rules generally limit the amount of loss and 

other deductions that you can claim to the amount you 

could actually lose in the activity. These losses and 

deductions include a loss on the disposition of assets and 

the section 179 expense deduction. However, if you 

acquired your partnership interest before 1987, the at-risk 

rules 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 a 

statement attached to Schedule K-1 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 item K1, 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, a stop-loss agreement, or other similar 

arrangement (excluding casualty insurance and insurance 

against tort liability).

• Amounts borrowed for use in the activity from a person 

who has an interest in the activity, other than as a creditor, 

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

(other than you) having such an interest.

You should get a separate statement of income, 

expenses, and other items for each activity from the 

partnership.

Note. Box 22 of Schedule K-1, Part III, will be checked 

when a statement is attached.

Passive Activity Limitations

Section 469 provides rules that limit the deduction of 

certain losses and credits. These rules apply to partners 

who:

• Are individuals, estates, trusts, closely held C 

corporations, or personal service corporations; and

• Have a passive activity loss or credit for the tax year.

Generally, passive activities include the following.

• Trade or business activities in which you didn't 

materially participate.

• 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.

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 details on 

making this election, see the Instructions for Schedule E 

(Form 1040), Supplemental Income and Loss.

If you're married filing jointly, either you or your spouse 

must separately meet both (a) and (b) of the above 

conditions, without taking into account services performed 

by the other spouse.

A real property trade or business is any real property 

development, redevelopment, construction, 

reconstruction, acquisition, conversion, rental, operation, 

management, leasing, or brokerage trade or business. 

Services you performed as an employee aren't treated as 

performed in a real property trade or business unless you 

owned more than 5% of the stock (or more than 5% of the 

capital or profits interest) in the employer.

3. Working interests in oil or gas wells if you were a 

general partner.

4. The rental of a dwelling unit any partner used for 

personal purposes during the year for more than the 

greater of 14 days or 10% of the number of days that the 

residence was rented at fair rental value.

5. Activities of trading personal property for the 

account of owners of interests in the activities.

If you're an individual, an estate, or a trust, and you 

have a passive activity loss or credit, use Form 8582, 

Passive Activity Loss Limitations, to figure your allowable 

passive losses and Form 8582-CR, Passive Activity Credit 

Limitations, to figure your allowable passive credits. For a 

corporation, use Form 8810, Corporate Passive Activity 

Loss and Credit Limitations. See the instructions for these 

forms for details.

If the partnership had more than one activity, it’ll attach 

a statement to your Schedule K-1 that identifies each 

activity (trade or business activity, rental real estate 

activity, rental activity other than rental real estate, and 

other activity) and specifies the income (loss), deductions, 

and credits from each activity.

Note. Box 23 of Schedule K-1, Part III, will be checked 

when a statement is attached.

TIP

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 9
Material participation. You must determine if you 

materially participated (a) in each trade or business 

activity held through the partnership, and (b) if you were a 

real estate professional (defined earlier) in each rental real 

estate activity held through the partnership. All 

determinations of material participation are based on your 

participation during the partnership's tax year.

Material participation standards for partners who are 

individuals are listed below. Special rules apply to certain 

retired or disabled farmers and to the surviving spouses of 

farmers. See the Instructions for Form 8582 for details.

Corporations should refer to the Instructions for Form 

8810 for the material participation standards that apply to 

them.

Individuals (other than limited partners). If you're 

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 aren't owners 

of interests in the activity).

3. You participated in the activity for more than 100 

hours during the tax year, and your participation in the 

activity for the tax year wasn't less than the participation in 

the activity of any other individual (including individuals 

who weren't owners of interests in the activity) for the tax 

year.

4. The activity was a significant participation activity 

for the tax year, and you participated in all significant 

participation activities (including activities outside the 

partnership) during the year for more than 500 hours. A 

significant participation activity is any trade or business 

activity in which you participated for more than 100 hours 

during the year and in which you didn't materially 

participate under any of the material participation tests 

(other than this test).

5. You materially participated in the activity for any 5 

tax years (whether or not consecutive) during the 10 tax 

years that immediately precede the tax year.

6. The activity was a personal service activity and you 

materially participated in the activity for any 3 tax years 

(whether or not consecutive) preceding the tax year. A 

personal service activity involves the performance of 

personal services in the field of health, law, engineering, 

architecture, accounting, actuarial science, performing 

arts, or 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.

Limited partners. If you're a limited partner, you must 

meet item 1, 5, or 6 above to qualify as having materially 

participated.

Work counted toward material participation. 

Generally, any work that you or your spouse does in 

connection with an activity held through a partnership 

(where you own your partnership interest at the time the 

work is done) is counted toward material participation. 

However, work in connection with the activity isn't counted 

toward material participation if either of the following 

applies.

1. The work isn't the type of work that owners of the 

activity would usually do and one of the principal purposes 

of the work that you or your spouse does is to avoid the 

passive loss or credit limitations.

2. You do the work in your capacity as an investor and 

you 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:

a. Studying and reviewing financial statements or 

reports on operations of the activity,

b. Preparing or compiling summaries or analyses of 

the finances or operations of the activity for your own use, 

and

c. Monitoring the finances or operations of the activity 

in a non-managerial capacity.

Effect of determination. Income (loss), deductions, 

and credits from an activity are nonpassive if you 

determine that:

• You materially participated in a trade or business 

activity of the partnership, or

• You were a real estate professional (defined earlier) in a 

rental real estate activity of the partnership.

If you determine that you didn't materially participate in 

a trade or business activity of the partnership or if you 

have income (loss), deductions, or credits from a rental 

activity of the partnership (other than a rental real estate 

activity in which you materially participated as a real 

estate professional), the amounts from that activity are 

passive. Report passive income (losses), deductions, and 

credits as follows.

• If you have an overall gain (the excess of income over 

deductions and losses, including any prior year unallowed 

loss) from a passive activity, report the income, 

deductions, and losses from the activity as indicated in 

these instructions.

• If you have an overall loss (the excess of deductions 

and losses, including any prior year unallowed loss, over 

income) or credits from a passive activity, report the 

income, deductions, losses, and credits from all passive 

activities using the Instructions for Form 8582 or the 

Instructions for Form 8582-CR (or Form 8810) to see if 

your deductions, losses, and credits are limited under the 

passive activity rules.

Publicly traded partnerships (PTPs). The passive 

activity limitations are applied separately for items (other 

than the low-income housing credit and the rehabilitation 

credit) from each PTP. Thus, a net passive loss from a 

PTP may not be deducted from other passive income. 

Instead, a passive loss from a PTP is suspended and 

carried forward to be applied against passive income from 

the same PTP in later years. If the partner's entire interest 

in the PTP is completely disposed of, any unused losses 

are allowed in full in the year of disposition.

If you have an overall gain from a PTP, the net gain is 

nonpassive income. In addition, the nonpassive income is 

10 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
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, and 

losses, and any prior year unallowed losses to see if you 

have an overall gain or loss from the PTP. Include only the 

same types of income and losses you would include in 

your net income or loss from a non-PTP passive activity. 

See Pub. 925, Passive Activity and At-Risk Rules, for 

more details.

2. If you have an overall gain, the net gain portion (total 

gain minus total losses) is nonpassive income. On the 

form or schedule you normally use, report the net gain 

portion as nonpassive income and the remaining income 

and the total losses as passive income and loss. To the 

left of the entry space, enter “From PTP.” It's important to 

identify the nonpassive income because the nonpassive 

portion is included in modified adjusted gross income 

(MAGI) 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 (Form 1040) income 

of $8,000, and a Form 4797, Sales of Business Property, 

prior year unallowed loss of $3,500 from the passive 

activities of a particular PTP, you have a $4,500 overall 

gain ($8,000 − $3,500). On Schedule E (Form 1040), 

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

in column (k). In column (h), report the remaining 

Schedule E (Form 1040) gain of $3,500 ($8,000 − 

$4,500). On the appropriate line of Form 4797, report the 

prior year unallowed loss of $3,500. Be sure to enter 

“From PTP” to the left of each entry space.

3. If you have an overall loss (but didn't dispose of your 

entire interest in the PTP to an unrelated person in a fully 

taxable transaction during the year), the losses are 

allowed to the extent of the income, and the excess loss is 

carried forward to use in a future year when you have 

income to offset it. Report as a passive loss on the 

schedule or form you normally use the portion of the loss 

equal to the income. Report the income as passive 

income on the form or schedule you normally use.

Example. You have a Schedule E (Form 1040) loss of 

$12,000 (current year losses plus prior year unallowed 

losses) and a Form 4797 gain of $7,200. Report the 

$7,200 gain on the appropriate line of Form 4797. On 

Schedule E (Form 1040), line 28, report $7,200 of the 

losses as a passive loss in column (g). Carry forward the 

unallowed loss of $4,800 ($12,000 − $7,200).

If you have unallowed losses from more than one 

activity of the PTP or from the same activity of the PTP 

that must be reported on different forms, you must allocate 

the unallowed losses on a pro rata basis to figure the 

amount allowed from each activity or on each form.

To allocate and keep a record of the unallowed 

losses, use Form 8582, Parts VII, VIII, and IX. List 

each activity of the PTP in Part VII. Enter the 

overall loss from each activity in column (a). Complete 

Part VII, column (b), according to its instructions. Multiply 

the total unallowed loss from the PTP by each ratio in 

column (b) and enter the result in Part VII, column (c). 

Then, complete Part VIII if all the loss from the same 

activity is to be reported on one form or schedule. Use 

Part IX instead of Part VIII if you have more than one loss 

to be reported on different forms or schedules for the 

same activity. Enter the net loss plus any prior year 

unallowed losses in Part VIII, column (a) (or Part IX, if 

applicable). The losses in Part VIII, column (c), (Part IX, 

column (e)) are the allowed losses to report on the forms 

or schedules. Report both these losses and any income 

from the PTP on the forms and schedules you normally 

use.

4. If you have an overall loss and you disposed of your 

entire interest in the PTP to an unrelated person in a fully 

taxable transaction during the year, your losses (including 

prior year unallowed losses) allocable to the activity for the 

year aren't limited by the passive loss rules. A fully taxable 

transaction is one in which you recognize all your realized 

gain or loss. Report the income and losses on the forms 

and schedules you normally use.

For rules on the disposition of an entire interest 

reported using the installment method, see the 

Instructions for Form 8582.

Special allowance for a rental real estate activity. If 

you actively participated in a rental real estate activity, you 

may be able to deduct up to $25,000 of the loss from the 

activity from nonpassive income. This special allowance is 

an exception to the general rule disallowing losses in 

excess of income from passive activities. The special 

allowance isn't available if you were married, file a 

separate return for the year, and didn't live apart from your 

spouse at all times during the year.

Only individuals, qualifying estates, and qualifying 

revocable trusts that made a section 645 election can 

actively participate in a rental real estate activity. Estates 

(other than qualifying estates), trusts (other than qualifying 

revocable trusts that made a section 645 election), and 

corporations can't actively participate. Limited partners 

can't actively participate unless future regulations provide 

an exception.

You aren't considered to actively participate in a rental 

real estate activity if, at any time during the tax year, your 

interest (including your spouse's interest) in the activity 

was less than 10% (by value) of all interests in the activity.

Active participation is a less stringent requirement than 

material participation. You may be treated as actively 

participating if you participated, for example, in making 

management decisions or arranging for others to provide 

services (such as repairs) in a significant and bona fide 

sense. Management decisions that can count as active 

participation include approving new tenants, deciding 

rental terms, approving capital or repair expenditures, and 

other similar decisions.

TIP TIP

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 11
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.

MAGI limitation. The maximum special allowance that 

single individuals and married individuals filing a joint 

return can qualify for is $25,000. The maximum is $12,500 

for married individuals who file separate returns and who 

lived apart at all times during the year. The maximum 

special allowance for which an estate can qualify is 

$25,000 reduced by the special allowance for which the 

surviving spouse qualifies.

If your MAGI (defined below) is $100,000 or less 

($50,000 or less if married filing separately), your loss is 

deductible up to the maximum special allowance referred 

to in the preceding paragraph. If your MAGI is more than 

$100,000 (more than $50,000 if married filing separately), 

the special allowance is limited to 50% of the difference 

between $150,000 ($75,000 if married filing separately) 

and your MAGI. When MAGI is $150,000 or more 

($75,000 or more if married filing separately), there is no 

special allowance.

MAGI. This is your adjusted gross income (AGI) from 

Form 1040 or 1040-SR, line 11, figured without taking into 

account:

1. The taxable amount of social security or equivalent 

tier 1 railroad retirement benefits,

2. The deductible contributions to traditional IRAs and 

section 501(c)(18) pension plans,

3. The exclusion from income of interest from series 

EE or I U.S. savings bonds used to pay higher education 

expenses,

4. The exclusion of amounts received under an 

employer's adoption assistance program,

5. Any passive activity income or loss included on 

Form 8582,

6. Any rental real estate loss allowed to real estate 

professionals,

7. Any overall loss from a PTP (see Publicly Traded 

Partnerships (PTPs) in the Instructions for Form 8582),

8. The deduction allowed for one-half of 

self-employment tax,

9. The deduction allowed for interest paid on student 

loans, and

10. The deduction allowed for foreign-derived intangible 

income and GILTI.

Special rules for certain other activities. If you have 

net income (loss), deductions, or credits from any activity 

to which special rules apply, the partnership will identify 

the activity and all amounts relating to it on Schedule K-1 

or on an attached statement.

If you have net income subject to recharacterization 

under Temporary Regulations section 1.469-2T(f) and 

Regulations sections 1.469-2(f)(5) and (6), report such 

amounts according to the Instructions for Form 8582 (or 

Form 8810).

If you have net income (loss), deductions, or credits 

from any of the following activities, treat such amounts as 

nonpassive and report them as indicated in these 

instructions.

1. Working interests in oil and gas wells if you're a 

general partner.

2. The rental of a dwelling unit any partner used for 

personal purposes during the year for more than the 

greater of 14 days or 10% of the number of days that the 

residence was rented at fair rental value.

3. Trading personal property for the account of owners 

of interests in the activity.

Self-charged interest. The partnership will report any 

self-charged interest income or expense that resulted from 

loans between you and the partnership (or between the 

partnership and another partnership or S corporation if 

both entities have the same owners with the same 

proportional ownership interest in each entity). If there was 

more than one activity, the partnership will provide a 

statement allocating the interest income or expense with 

respect to each activity. The self-charged interest rules 

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 details.

Excess Business Loss

Your distributive share of losses attributable to all of the 

partnership's trades or businesses may be limited under 

section 461(l). See Form 461, Limitation on Business 

Losses, and its instructions for more information.

Specific Instructions

Part I. Information About the 

Partnership

Item D

If the box in item D is checked, you're a partner in a PTP 

and must follow the rules discussed earlier under Publicly 

traded partnerships.

Part II. Information About the Partner

Item E

If the partner is an individual, the partnership will enter the 

partner's SSN or individual taxpayer identification number 

(ITIN). For all other partners, the partnership will enter the 

partner's employer identification number (EIN). In the case 

of a disregarded entity (DE), the partnership will enter the 

TIN of the beneficial owner of the DE in item E and the 

beneficial owner's address in item F.

If the partner is an IRA, the partnership will enter the 

identifying number of the custodian of the IRA.

For your protection, this form may show only the last 

four digits of the TIN in items E and H2, as noted under 

Purpose of Schedule K-1, earlier. However, the 

partnership has reported your complete identification 

number to the IRS.

12 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Item H2

If the partner is a DE, such as a single-member LLC that 

didn’t elect to be treated as a corporation, the partnership 

will check the DE box and enter the name and TIN of the 

DE.

Item J

Generally, the amounts reported in item J are based on 

the partnership agreement. If your interest commenced 

after the beginning of the partnership's tax year, the 

partnership will have entered, in the Beginning column, 

the percentages that existed for you immediately after 

admission. If your interest terminated before the end of the 

partnership's tax year, the partnership will have entered, in 

the Ending column, the percentages that existed 

immediately before termination.

The ending percentage share shown on the Capital line 

is the portion of the capital you would receive if the 

partnership was liquidated at the end of its tax year by the 

distribution of undivided interests in the partnership's 

assets and liabilities. If your capital account is negative or 

zero, the partnership will have entered zero on this line.

There are two options the partnership can use to 

indicate the source of a decrease: sale or exchange. The 

Sale checkbox will be checked if you sold all or part of 

your partnership interest to a new or pre-existing partner 

during this tax year, regardless of whether you recognized 

gain or loss on the transaction(s). The Exchange 

checkbox will be checked if you exchanged all or part of 

your partnership interest with a new or pre-existing partner 

during this tax year, regardless of whether you recognized 

gain or loss on the transaction(s). You may have realized a 

gain or loss on the transfer or disposition of your interest. 

See codes AB, AC, and AD on line 20 for items that have 

special gain or loss treatment. For more information, see 

Disposition of Partner's Interest and Partnership 

Distributions in Pub. 541.

Item K1

Item K1 should show your share of the partnership's 

nonrecourse liabilities, partnership-level qualified 

nonrecourse financing, and other recourse liabilities at the 

beginning and the end of the partnership's tax year. If you 

terminated your interest in the partnership during the tax 

year, item K1 should show the share that existed 

immediately before the total disposition. A partner's 

recourse liability is any partnership liability for which a 

partner is personally liable.

If this partnership invested in other partnerships, item 

K1 will include your share of partnership liabilities from 

those other partnerships, except to the extent the liabilities 

from those other partnerships are owed to this 

partnership.

Use the total of the three amounts for figuring the 

adjusted basis of your partnership interest.

Generally, you may use only the amounts shown next to 

Qualified nonrecourse financing and Recourse 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 recourse liabilities for 

each activity.

Qualified nonrecourse financing secured by real 

property used in an activity of holding real property that's 

subject to the at-risk rules is treated as an amount at risk. 

Qualified nonrecourse financing generally includes 

financing for which no one is personally liable for 

repayment that's borrowed for use in an activity of holding 

real property and that's loaned or guaranteed by a federal, 

state, or local government or borrowed from a qualified 

person.

Qualified persons include any persons actively and 

regularly engaged in the business of lending money, such 

as a bank or savings and loan association. Qualified 

persons generally 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.

Item K3

If the box in item K3 is checked, see the instructions for 

box 20, code X, for additional information.

Item L

The partnership must report your beginning capital 

account and ending capital account for the year using the 

tax-basis method, including the amount of capital you 

contributed to the partnership during the year, your share 

of the partnership's current year net income or loss as 

computed for tax purposes, any withdrawals and 

distributions made to you by the partnership, and any 

other increases or decreases to your capital account 

determined in a manner generally consistent with figuring 

the partner's adjusted tax basis in its partnership interest 

(without regard to partnership liabilities), taking into 

account the rules and principles of sections 705, 722, 733, 

and 742. See the Instructions for Form 1065 for more 

details.

For many reasons, your ending capital account as 

reported to you by the partnership in item L may not equal 

the adjusted tax basis in your partnership interest. 

Generally, this is because a partner's adjusted tax basis in 

its partnership interest includes the partner's share of 

partnership liabilities (and capital accounts determined by 

using the tax-basis method don't). In addition, your 

partnership may not have all the necessary information 

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 13
from you to accurately figure the adjusted tax basis in your 

partnership interest due to partner-level adjustments. 

You're responsible for maintaining an annual record of the 

adjusted tax basis in your partnership interest as 

determined under the principles and provisions of 

subchapter K, including, for example, those under 

sections 705, 722, 733, and 742. Regulations section 

1.705-1(a)(1) provides that a partner is required to 

determine the adjusted basis of its interest in a 

partnership when necessary to determine its tax liability or 

that of any other person. For example, a determination is 

required in ascertaining the extent to which a partner's 

share of loss is allowed, when there is a sale or exchange 

of all or part of a partnership interest, and when a partner's 

entire partnership interest is liquidated. The adjusted 

basis of a partner's interest in a partnership is determined 

without regard to any amount shown in the partnership 

books as the partner's capital, equity, or similar account.

Item M

If you’ve contributed property with a built-in gain or loss 

during the tax year, the partnership will check the “Yes” 

box. Also, the partnership will attach a statement showing 

the property contributed, the date of the contribution, and 

the amount of any built-in gain or loss. A built-in gain or 

loss is the difference between the FMV of the property 

and your adjusted basis in the property at the time it was 

contributed to the partnership. If you contributed more 

than 10 properties on a single date during the tax year, the 

statement may instead show the number of properties 

contributed on that date, the total amount of built-in gain, 

and the total amount of built-in loss.

The partnership is providing this for your information. 

Contributions of property with a built-in gain or loss could 

affect a partner's tax liability (in matters concerning 

precontribution gain or loss, and distributions subject to 

section 737) and may also affect how the partnership 

allocated certain items on your Schedule K-1. For 

information on precontribution gain or loss, see the 

instructions for box 20, code W. For information on 

distributions subject to section 737, see the instructions 

for box 19, code B.

Item N

If you're allocated a share of section 704(c) gain or loss, 

the partnership will report your net unrecognized section 

704(c) gain or loss both at the beginning and at the end of 

the partnership's tax year in item N. The partnership can 

use any reasonable method in reporting net unrecognized 

section 704(c) built-in gain or loss to you. You'll be 

allocated unrecognized section 704(c) gain or loss if:

• You contributed property with FMV in excess of 

adjusted tax basis (built-in gain property);

• You contributed property with FMV less than adjusted 

tax basis (built-in loss property); or

• The partnership elected, under certain circumstances, 

to revalue property (book-up or book-down) on its books 

to reflect changes in the FMV of such property. These 

revaluations are sometimes referred to as “reverse section 

704(c) allocations.”

The partnership is providing this for your information. If 

the partnership disposes of the property or there are 

special allocations due to depreciation, depletion, or 

amortization, the partnership will report these items on 

other parts of Schedule K-1.

Note. Although the partnership is reporting the beginning 

and ending balances on an aggregate net basis, it's 

generally required to keep records of this information on a 

property-by-property basis.

Part III. Partner's Share of Current 

Year Income, Deductions, Credits, 

and Other Items

The amounts shown in boxes 1 through 21 reflect your 

share of income, loss, deductions, credits, and other items 

from partnership business or rental activities without 

reference to limitations on losses or adjustments that may 

be required of you because of:

1. The adjusted basis of your partnership interest,

2. The amount for which you're at risk, and

3. The passive activity limitations.

For information on these provisions, see Limitations on 

Losses, Deductions, and Credits, earlier.

Other limitations may apply to specific deductions (for 

example, the section 179 expense deduction). Generally, 

specific limitations apply before the at-risk and passive 

loss limitations.

If you're an individual and the passive activity rules 

don't apply to the amounts shown on your Schedule K-1, 

take the amounts shown and enter them on the 

appropriate lines of your tax return. If the passive activity 

rules do apply, report the amounts shown as indicated in 

these instructions.

If you aren't an individual, report the amounts in each 

box as instructed on your tax return.

If you file your tax return on a calendar-year basis, but 

your partnership files a return for a fiscal year, report the 

amounts on your tax return for the year in which the 

partnership's fiscal year ends. For example, if the 

partnership's tax year ends in February 2024, report the 

amounts on your 2024 tax return.

If you have losses, deductions, or credits from a prior 

year that weren’t 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 on the attached 

schedule, statement, or form on a year-by-year basis.

If the partnership reports a section 743(b) adjustment 

to partnership items, report these adjustments as 

separate items on Form 1040 or 1040-SR in accordance 

with the reporting instructions for the partnership item 

being adjusted. A section 743(b) adjustment increases or 

decreases your share of income, deduction, gain, or loss 

for a partnership item. For example, if the partnership 

reports a section 743(b) adjustment to depreciation for 

14 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
property used in its trade or business, report the 

adjustment on Schedule E (Form 1040), line 28, in 

accordance with the instructions for box 1 of 

Schedule K-1.

If you have amounts other than those shown on 

Schedule K-1 to report on Schedule E (Form 

1040), enter each item separately on Schedule E 

(Form 1040), line 28.

Codes. In box 11, boxes 13 through 15, and boxes 17 

through 20, the partnership will identify each item by 

entering a code in the column to the left of the dollar 

amount entry space. These codes are identified under List 

of Codes and References Used in Schedule K-1 (Form 

1065) at the end of these instructions.

Attached statements. The partnership will enter an 

asterisk (*) after the code, if any, in the column to the left of 

the dollar amount entry space for each item for which it 

has attached a statement providing additional information. 

For those informational items that can’t be reported as a 

single dollar amount, the partnership will enter an asterisk 

(*) in the left column and enter “STMT” in the dollar 

amount entry space to indicate the information is provided 

on an attached statement.

Income (Loss)

Box 1. Ordinary Business Income (Loss)

The amount reported in box 1 is your share of the ordinary 

income (loss) from trade or business activities of the 

partnership. Generally, where you report this amount on 

Form 1040 or 1040-SR depends on whether the amount is 

from an activity that's a passive activity to you. If you're an 

individual partner filing a 2023 Form 1040 or 1040-SR, 

find your situation below and report your box 1 income 

(loss) as instructed, after applying the basis and at-risk 

limitations on losses. If the partnership had more than one 

trade or business activity, it will attach a statement 

identifying the income or loss from each activity.

1. Report box 1 income (loss) from partnership trade 

or business activities in which you materially participated 

on Schedule E (Form 1040), line 28, column (i) or (k).

2. Report box 1 income (loss) from partnership trade 

or business activities in which you didn't materially 

participate, as follows.

a. If income is reported in box 1, report the income on 

Schedule E (Form 1040), line 28, column (h). However, if 

the box in item D is checked, report the income following 

the rules for Publicly traded partnerships, earlier.

b. If a loss is reported in box 1, follow the Instructions 

for Form 8582 to figure how much of the loss can be 

reported on Schedule E (Form 1040), line 28, column (g). 

However, if the box in item D is checked, report the loss 

following the rules for Publicly traded partnerships, earlier.

Box 2. Net Rental Real Estate Income (Loss)

Generally, the income (loss) reported in box 2 is a passive 

activity amount for all partners. However, the income 

(loss) in box 2 isn't from a passive activity if you were a 

real estate professional (defined earlier) and you 

materially participated in the activity. If the partnership had 

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more than one rental real estate activity, it'll attach a 

statement identifying the income or loss from each activity.

If you're filing a 2023 Form 1040 or 1040-SR, use the 

following instructions to determine where to report a box 2 

amount.

1. If you have a loss from a passive activity in box 2 

and you meet all the following conditions, report the loss 

on Schedule E (Form 1040), line 28, column (g).

a. You actively participated in the partnership rental 

real estate activities. See Special allowance for a rental 

real estate activity, earlier.

b. Rental real estate activities with active participation 

were your only passive activities.

c. You have no prior year unallowed losses from these 

activities.

d. Your total loss from the rental real estate activities 

wasn't more than $25,000 (not more than $12,500 if 

married filing separately and you lived apart from your 

spouse all year).

e. If you're a married person filing separately, you lived 

apart from your spouse all year.

f. You have no current or prior year unallowed credits 

from a passive activity.

g. Your MAGI wasn’t more than $100,000 (not more 

than $50,000 if married filing separately and you lived 

apart from your spouse all year).

h. Your interest in the rental real estate activity wasn't 

held as a limited partner.

2. If you have a loss from a passive activity in box 2 

and you don't meet all the conditions in (1) above, follow 

the Instructions for Form 8582 to figure how much of the 

loss you can report on Schedule E (Form 1040), line 28, 

column (g). However, if the box in item D is checked, 

report the loss following the rules for Publicly traded 

partnerships, earlier.

3. If you were a real estate professional and you 

materially participated in the activity, report box 2 income 

(loss) on Schedule E (Form 1040), line 28, column (i) or 

(k).

4. If you have income from a passive activity in box 2, 

report the income on Schedule E (Form 1040), line 28, 

column (h). However, if the box in item D is checked, 

report the income following the rules for Publicly traded 

partnerships, earlier.

Box 3. Other Net Rental Income (Loss)

The amount in box 3 is a passive activity amount for all 

partners. If the partnership had more than one rental 

activity, it'll attach a statement identifying the income or 

loss from each activity. Report the income or loss as 

follows.

• If box 3 is a loss, follow the Instructions for Form 8582 to 

figure how much of the loss can be reported on 

Schedule E (Form 1040), line 28, column (g). However, if 

the box in item D is checked, report the loss following the 

rules for Publicly traded partnerships, earlier.

• If income is reported in box 3, report the income on 

Schedule E (Form 1040), line 28, column (h). However, if 

the box in item D is checked, report the income following 

the rules for Publicly traded partnerships, earlier.

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 15
Box 4a. Guaranteed Payments for Services

Guaranteed payments are payments made by a 

partnership to a partner that are determined without 

regard to the partnership's income. Generally, amounts on 

this line aren't passive income, and you should report 

them on Schedule E (Form 1040), line 28, column (k) (for 

example, guaranteed payments for personal services).

Box 4b. Guaranteed Payments for Capital

These are guaranteed payments other than for services, 

such as for the use of capital or attributable to section 

736(a)(2) payments for unrealized receivables or goodwill. 

Amounts on this line should be reported on Schedule E 

(Form 1040), line 28, column (k) (for example, guaranteed 

payments for capital).

Box 4c. Total Guaranteed Payments

Amounts on this line include total guaranteed payments 

paid to you by the partnership.

Portfolio Income

Portfolio income or loss (shown in boxes 5 through 9b and 

in box 11, code A) isn't subject to the passive activity 

limitations. Portfolio income includes income (not derived 

in the ordinary course of a trade or business) from 

interest, ordinary dividends, annuities or royalties, and 

gain or loss on the sale of property that produces such 

income or is held for investment.

Box 5. Interest Income

Report interest income on Form 1040 or 1040-SR, line 2b. 

If the amount of interest income included in box 5 includes 

interest from the credit for holders of clean renewable 

energy bonds, the partnership will attach a statement to 

Schedule K-1 showing your share of interest income from 

these credits. Because the basis of your interest in the 

partnership has been increased by your share of the 

interest income from these credits, you must reduce your 

basis by the same amount. See the line 4d instructions for 

the Worksheet for Adjusting the Basis of a Partner’s 

Interest in the Partnership.

Box 6a. Ordinary Dividends

Report ordinary dividends on Form 1040 or 1040-SR, 

line 3b.

Some of the amounts reported in this box may be 

attributable to PTEP in annual PTEP accounts that you 

have with respect to a foreign corporation and are 

therefore excludable from your gross income. Don't 

include the amount attributable to PTEP in your annual 

PTEP accounts on Form 1040 or 1040-SR, line 3b. Use 

Schedule K-3, Part V, to determine your share of 

distributions by foreign corporations to the partnership that 

are attributable to PTEP in your annual PTEP accounts 

with respect to the foreign corporations.

Box 6b. Qualified Dividends

Report any qualified dividends on Form 1040 or 1040-SR, 

line 3a.

Some of the amounts reported in this box may be 

attributable to PTEP in annual PTEP accounts that you 

have with respect to a foreign corporation and are 

therefore excludable from your gross income. Don't 

include the amount attributable to PTEP in your annual 

PTEP accounts on Form 1040 or 1040-SR, line 3a. Use 

Schedule K-3, Part V, to determine your share of 

distributions by foreign corporations to the partnership that 

are attributable to PTEP in your annual PTEP accounts 

with respect to the foreign corporations.

Qualified dividends are excluded from investment 

income, but you may elect to include part or all of 

these amounts in investment income. See the 

instructions for Form 4952, line 4g, for important 

information on making this election.

If you have any foreign source qualified dividends, 

see the Partner’s Instructions for Schedule K-3 for 

additional information.

Attach a statement to the Schedule K-1 identifying the 

dividends included in box 6a or 6b that are:

• Eligible for the deduction for dividends received under 

section 243(a), (b), or (c);

• Eligible for the deduction for dividends received under 

section 245;

• Eligible for the deduction for dividends received under 

section 245A; and

• Hybrid dividends as defined in section 245A(e)(4).

Box 6c. Dividend Equivalents

Dividend equivalents aren't reported on Form 1040 or 

1040-SR. This information is provided for persons that 

aren't U.S. persons, who are generally required to treat 

dividend equivalents as U.S. source dividends, and 

domestic partnerships with partners who may need this 

information. The ordinary dividends amount in box 6a 

doesn't include the amount of dividend equivalents.

Box 7. Royalties

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

Box 8. Net Short-Term Capital Gain (Loss)

Report the net short-term capital gain (loss) on 

Schedule D (Form 1040), line 5.

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

Report the net long-term capital gain (loss) on Schedule D 

(Form 1040), line 12.

If you have any foreign source net long-term 

capital gain (loss), see the Partner’s Instructions 

for Schedule K-3 for additional information.

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

Report collectibles gain or loss on line 4 of the 28% Rate 

Gain Worksheet—Line 18 in the Instructions for 

Schedule D (Form 1040).

If you have any foreign source collectibles (28%) 

gain (loss), see the Partner’s Instructions for 

Schedule K-3 for additional information.

Box 9c. Unrecaptured Section 1250 Gain

There are three types of unrecaptured section 1250 gain. 

Report your share of this unrecaptured gain on the 

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16 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Unrecaptured Section 1250 Gain Worksheet—Line 19 in 

the Instructions for Schedule D (Form 1040) as follows.

• Report unrecaptured section 1250 gain from the sale or 

exchange of the partnership's business assets on line 5.

• Report unrecaptured section 1250 gain from the sale or 

exchange of an interest in a partnership on line 10.

• Report unrecaptured section 1250 gain from an estate, 

trust, regulated investment company (RIC), or real estate 

investment trust (REIT) on line 11.

If the partnership reports only unrecaptured section 

1250 gain from the sale or exchange of its business 

assets, it'll enter a dollar amount in box 9c. If it reports the 

other two types of unrecaptured gain, it'll provide an 

attached statement that shows the amount for each type 

of unrecaptured section 1250 gain.

If you have any foreign source unrecaptured 

section 1250 gain, see the Partner’s Instructions 

for Schedule K-3 for additional information.

Box 10. Net Section 1231 Gain (Loss)

The amount in box 10 is generally passive if it's from a:

• Rental activity, or

• Trade or business activity in which you didn't materially 

participate.

However, an amount from a rental real estate activity 

isn't from a passive activity if you were a real estate 

professional (defined earlier) and you materially 

participated in the activity.

If the amount is either (a) a loss that isn't from a passive 

activity or (b) a gain, report it in Form 4797, line 2, column 

(g). Don't complete Form 4797, line 2, columns (b) 

through (f). Instead, enter “From Schedule K-1 (Form 

1065)” across these columns.

If the amount is a loss from a passive activity, see 

Passive Loss Limitations in the Instructions for Form 4797. 

Report the loss following the Instructions for Form 8582 to 

figure how much of the loss is allowed on Form 4797. 

However, if the box in item D is checked, report the loss 

following the rules for Publicly traded partnerships, earlier. 

If the partnership had net section 1231 gain (loss) from 

more than one activity, it’ll attach a statement that will 

identify the section 1231 gain (loss) from each activity.

If you have any foreign source net section 1231 

gain (loss), see the Partner’s Instructions for 

Schedule K-3 for additional information.

Box 11. Other Income (Loss)

Code A. Other portfolio income (loss). The 

partnership will report portfolio income other than interest, 

ordinary dividend, royalty, and capital gain (loss) income, 

and attach a statement to tell you what kind of portfolio 

income is reported.

If the partnership held a residual interest in a real estate 

mortgage investment conduit (REMIC), it’ll report on the 

statement your share of REMIC taxable income (net loss) 

that you report in Schedule E (Form 1040), line 38, column 

(d). The statement will also report your share of any 

excess inclusion that you report in Schedule E (Form 

1040), line 38, column (c), and your share of section 212 

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expenses that you report in Schedule E (Form 1040), 

line 38, column (e).

Code B. Involuntary conversions. This is your net gain 

(loss) from involuntary conversions due to casualty or 

theft. The partnership will give you a statement that shows 

the amounts to be reported in Form 4684, Casualties and 

Thefts, line 34, columns (b)(i), (b)(ii), and (c).

If there was a gain (loss) from a casualty or theft to 

property not used in a trade or business or for 

income-producing purposes, the partnership will provide 

you with the information you need to complete Form 4684.

Code C. Section 1256 contracts and straddles. The 

partnership will report any net gain or loss from section 

1256 contracts. Report this amount on Form 6781, Gains 

and Losses From Section 1256 Contracts and Straddles.

Code D. Mining exploration costs recapture. The 

partnership will give you a statement that shows the 

information needed to recapture certain mining 

exploration costs (section 617). See the 2022 Pub. 535, 

Business Expenses, for details.

Code E. Cancellation of debt. Generally, this 

cancellation of debt (COD) amount is included in your 

gross income (Schedule 1 (Form 1040), line 8c). Under 

section 108(b)(5), you may elect to apply any portion of 

the COD amount excluded from gross income to the 

reduction of the basis of depreciable property. See Form 

982, Reduction of Tax Attributes Due to Discharge of 

Indebtedness, for more details.

Code F. Section 743(b) positive income adjustments. 

The partnership will use this code to report the net positive 

income adjustment resulting from all section 743(b) basis 

adjustments. The partnership will provide your section 

743(b) adjustment net of cost recovery at year end by 

asset grouping in box 20, code U.

Code G. Reserved for future use.

Code H. Section 951(a) income inclusions. If the 

partnership is a domestic partnership that doesn't apply 

Regulations sections 1.958-1(d)(1) through (3) to a tax 

year of a foreign corporation that begins before January 

25, 2022, to treat it as not owning stock of the foreign 

corporation within the meaning of section 958(a) for 

purposes of section 951, and is a U.S. shareholder of the 

foreign corporation, then any section 951(a) income 

inclusions with respect to the foreign corporation and such 

tax year are section 951(a) income inclusions of the 

partnership, a distributive share of which you generally 

include in gross income. The partnership will use this 

code to report your share of its section 951(a) income 

inclusions. Additionally, if the partnership has a distributive 

share of a lower-tier partnership's section 951(a) income 

inclusions, the partnership will use this code to report your 

share of that inclusion.

Note. In all other cases, the partnership will report 

information needed for you to determine section 951(a) 

income inclusions with respect to CFCs owned by the 

partnership, directly or indirectly, on Schedule K-3, Part VI.

The partnership will attach a statement to the 

Schedule K-1 identifying any subpart F inclusion 

attributable to:

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 17
• The sale or exchange by a CFC of stock in another 

foreign corporation described in section 964(e)(4), or

• Hybrid dividends of tiered corporations under section 

245A(e)(2).

Code I. Gain (loss) from disposition of oil, gas, geothermal, or other mineral properties (section 59(e)). 

The partnership will attach a statement that provides a 

description of the property; your share of the amount 

realized from the disposition; your share of the 

partnership's adjusted basis in the property (for other than 

oil or gas properties); and your share of the total intangible 

drilling costs, development costs, and mining exploration 

costs (section 59(e) expenditures) passed through for the 

property. You must figure your gain or loss from the 

disposition by increasing your share of the adjusted basis 

by the intangible drilling costs, development costs, or mine 

exploration costs for the property that you capitalized (that 

is, costs that you didn't elect to deduct under section 

59(e)). Report a loss on Form 4797, Part I. Report a gain 

on Form 4797, Part III, in accordance with the instructions 

for line 28. See Regulations section 1.1254-5 for details.

Code J. Recoveries of tax benefit items. A tax benefit 

item is an amount you deducted in a prior tax year that 

reduced your income tax. Report this amount on Schedule 

1 (Form 1040), line 8z, to the extent it reduced your tax in 

the prior tax year.

Code K. Gambling gains and losses. If the partnership 

wasn't engaged in the trade or business of gambling, (a) 

report gambling winnings on Schedule 1 (Form 1040), 

line 8b; and (b) deduct gambling losses to the extent of 

winnings on Schedule A (Form 1040), line 16.

If the partnership was engaged in the trade or business 

of gambling, (a) report gambling winnings on Schedule E 

(Form 1040), line 28, column (k); and (b) deduct gambling 

losses (to the extent of winnings) on Schedule E (Form 

1040), line 28, column (i).

Code L. Any income, gain, or loss to the partnership 

from a distribution under section 751(b) (certain distributions treated as sales or exchanges). Report this 

amount on Form 4797, line 10.

Code M. Gain eligible for section 1045 rollover (replacement stock purchased by partnership). The 

partnership should give you (a) the name of the 

corporation that issued the qualified small business (QSB) 

stock, (b) your share of the partnership's adjusted basis 

and sales price of the QSB stock, (c) the dates the QSB 

stock was bought and sold, (d) your share of gain from the 

sale of the QSB stock, and (e) your share of the gain that 

was deferred by the partnership under section 1045. 

Corporate partners 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 (more than 6 months prior to the sale), 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 (a) 

recognize the gain, or (b) elect to purchase different 

replacement QSB stock, either directly or through 

ownership of a different partnership that acquired 

replacement QSB stock. You satisfy the requirement to 

purchase replacement QSB stock if you own an interest in 

a partnership that purchases QSB stock during the 60-day 

period. You must also notify the partnership, in writing, if 

you opt out of the partnership's section 1045 election. If 

you recognize gain, you must notify the partnership, in 

writing, of the amount of the gain that you're recognizing.

Code N. Gain eligible for section 1045 rollover (replacement stock not purchased by the partnership). 

The partnership should give you (a) the name of the 

corporation that issued the QSB stock, (b) your share of 

the partnership's adjusted basis and sales price of the 

QSB stock, (c) the dates the QSB stock was bought and 

sold, and (d) your share of gain from the sale of the QSB 

stock. Corporate partners 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,

• 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)) 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. See the 

Instructions for Form 8949 and the Instructions for 

Schedule D (Form 1040) for more information. Attach to 

your Schedule D (Form 1040) a statement that includes 

the following information for each amount of gain that you 

don't recognize under section 1045.

• The name of the corporation that issued the QSB stock.

• The name and EIN of the selling partnership.

• The dates the QSB stock was purchased and sold.

• The amount of gain that isn't recognized under section 

1045.

• If a partner purchases QSB stock, the name of the 

corporation that issued the replacement QSB stock, the 

date the stock was purchased, and the cost of the stock.

• If a partner treats the partner's interest in QSB stock 

that's 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 

18 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
replacement QSB stock. You must recognize gain upon 

a distribution of replacement QSB stock to another partner 

that reduces your share of the replacement QSB stock 

held by a partnership. The amount of gain that you must 

recognize is based on the amount of gain that you would 

recognize upon a sale of the distributed replacement QSB 

stock for its FMV on the date of the distribution, but not to 

exceed the amount you previously deferred under section 

1045 with respect to the distributed replacement QSB 

stock. If the partnership distributed your share of 

replacement QSB stock to another partner, the 

partnership should give you (a) the name of the 

corporation that issued the replacement QSB stock, (b) 

the date the replacement QSB stock was distributed to 

another partner or partners, and (c) your share of the 

partnership's adjusted basis and FMV of the replacement 

QSB stock on such date.

For more information, see Regulations section 

1.1045-1.

Code O. Sale or exchange of QSB stock with section 

1202 exclusion. Gain from the sale or exchange of QSB 

stock (as defined in the Instructions for Schedule D (Form 

1065)) that's eligible for a section 1202 exclusion. The 

partnership should also give you (a) the name of the 

corporation that issued the QSB stock, (b) your share of 

the partnership's adjusted basis and sales price of the 

QSB stock, and (c) the dates the QSB stock was bought 

and sold. Corporate partners aren't 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 P. Gain or loss on disposition of farm recapture 

property and other items to which section 1252 applies. Partnership gains from the disposition of farm 

recapture property (see the instructions for Form 4797, 

line 27) and other items to which section 1252 applies.

Code Q. Gain or loss on Fannie Mae or Freddie Mac 

qualified preferred stock. 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 isn’t a financial institution, report the gain or loss 

on Schedule D (Form 1040), line 5 or line 12, in 

accordance with the Instructions for Schedule D (Form 

1040) and the Instructions for Form 8949. If a partner is a 

financial institution referred to in section 582(c)(2) or a 

depositary institution holding company (as defined in 

section 3(w)(1) of the Federal Deposit Insurance Act), 

report the gain or loss in accordance with the Instructions 

for Form 4797, and Rev. Proc. 2008-64, 2008-47 I.R.B. 

1195.

Code R. Specially allocated ordinary gain (loss). 

Report this amount on Form 4797, line 10.

Code S. Non-portfolio capital gain (loss). Net 

short-term capital gain (loss) and net long-term capital 

gain (loss) from Schedule D (Form 1065) that aren’t 

portfolio income. An example is gain or loss from the 

disposition of nondepreciable personal property used in a 

trade or business activity of the partnership. Report total 

net short-term gain (loss) on Schedule D (Form 1040), 

line 5. Report the total net long-term gain (loss) on 

Schedule D (Form 1040), line 12.

Codes T through X. Reserved for future use.

Code ZZ. Other. Any other information you may need to 

file your tax return.

Report loss items that are passive activity amounts to 

you following the Instructions for Form 8582. However, if 

the box in item D is checked, report the loss following the 

rules for Publicly traded partnerships, earlier.

Deductions

Box 12. Section 179 Deduction

Use this amount, along with the total cost of section 179 

property placed in service during the year from other 

sources, to complete Part I of Form 4562, Depreciation 

and Amortization. The partnership will report on an 

attached statement your allowable share of the cost of any 

qualified enterprise zone or qualified real property it 

placed in service during the tax year. Report the amount 

from Form 4562, line 12, allocable to a passive activity 

using the Instructions for Form 8582. If the amount isn't a 

passive activity deduction, report it on Schedule E (Form 

1040), line 28, column (j). However, if the box in item D is 

checked, report this amount following the rules for Publicly 

traded partnerships, earlier.

Box 13. Other Deductions

Contributions. Codes A through G. The partnership 

will give you a statement that shows charitable 

contributions subject to the 100%, 60%, 50%, 30%, and 

20% AGI limitations. For more details, see Pub. 526, 

Charitable Contributions, and the Instructions for 

Schedule A (Form 1040). If your contributions are subject 

to more than one of the AGI limitations, see Worksheet 2 

in Pub. 526.

Charitable contribution deductions aren't taken into 

account in figuring your passive activity loss for the year. 

Don't include them on Form 8582.

Code A. Cash contributions (60%). Report this 

amount, subject to the 60% AGI limitation, on Schedule A 

(Form 1040), line 11.

Code B. Cash contributions (30%). Report this 

amount, subject to the 30% AGI limitation, on Schedule A 

(Form 1040), line 11.

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 19
Code C. Noncash contributions (50%). If property 

other than cash is contributed, and if the claimed 

deduction for one item or group of similar items of 

property exceeds $500, the partnership must give you a 

copy of Form 8283, Noncash Charitable Contributions, to 

attach to your tax return. Don't deduct the amount shown 

on Form 8283. It's the partnership's contribution. Instead, 

deduct the amount identified by code C in box 13, subject 

to the 50% AGI limitation, on Schedule A (Form 1040), 

line 12.

If the partnership provides you with information that the 

contribution was property other than cash and doesn't 

give you a Form 8283, see the Instructions for Form 8283 

for filing requirements. Don't file Form 8283 unless the 

total claimed deduction for all contributed items of 

property exceeds $500.

Food inventory contributions. The partnership will 

report on an attached statement your share of qualified 

food inventory contributions. The food inventory 

contribution isn't included in the amount reported in 

box 13 using code C. The partnership will also report your 

share of the partnership's net income from the business 

activities that made the food inventory contribution(s). 

Your deduction for food inventory contributions made 

during 2023 can't exceed 15% of your aggregate net 

income for the tax year from the business activities from 

which the food inventory contribution was made (including 

your share of net income from partnership or S 

corporation businesses that made food inventory 

contributions). Amounts that exceed the 15% limitation 

may be carried over for up to 5 years. Report this amount, 

subject to the 50% AGI limitation, on Schedule A (Form 

1040), line 12.

Noncash contributions You must fill out your own 

Form 8283 with the information the partnership provides 

you. If the partnership is the entity where the noncash 

charitable contribution was originally reported, insert the 

entity name and identifying number on your own Form 

8283. See the Instructions for Form 8283 for more details. 

If the partnership isn't the entity where the noncash 

charitable contribution was originally reported, the 

partnership will provide you the entity name and 

identifying number that the noncash charitable 

contribution was originally reported. Insert this information 

on your own Form 8283.

Qualified conservation contributions. The 

partnership will report your share of qualified conservation 

contributions of property. In general, each partner’s claim 

of a charitable contribution deduction for a conservation 

contribution is disallowed if the amount of the 

partnership’s contribution of a qualified real property 

interest exceeds 2.5 times the sum of each partner’s 

relevant basis in the partnership. See Qualified 

Conservation Contribution in Pub. 526 and Disallowance 

of conservation contribution deductions by certain 

pass-through entities in the Instructions for Form 8283. 

You must fill out your own Form 8283 and attach the Form 

8283 the partnership provides you. See the Instructions 

for Form 8283 for more details. The partnership will 

provide you your relevant basis. You must report this on 

your own Form 8283, line 3, column (h). The partnership 

may need information from you to calculate relevant basis.

Code D. Noncash contributions (30%). Report this 

amount, subject to the 30% AGI limitation, on Schedule A 

(Form 1040), line 12.

Code E. Capital gain property to a 50% organization 

(30%). Report this amount, subject to the 30% AGI 

limitation, on Schedule A (Form 1040), line 12. See 

Worksheet 2 in Pub. 526.

Code F. Capital gain property (20%). Report this 

amount, subject to the 20% AGI limitation, on Schedule A 

(Form 1040), line 12.

Code G. Contributions (100%). The partnership will 

report your distributive share of the following contributions 

(both cash and noncash) that may be subject to the 100% 

AGI limitation.

Qualified conservation contributions of property 

used in agriculture or livestock production. The 

partnership will report your share of qualified conservation 

contributions of property used in agriculture or livestock 

production. This contribution isn't included in the amount 

reported in box 13 using code C. If you're a farmer or 

rancher, you qualify for a 100% AGI limitation for this 

contribution. Otherwise, your deduction for this 

contribution is subject to a 50% AGI limitation. Report this 

amount on Schedule A (Form 1040), line 12. See Pub. 

526 for more information on qualified conservation 

contributions.

Code H. Investment interest expense. Include this 

amount on Form 4952, line 1. If the partnership has 

investment income or other investment expense, it'll report 

your share of these items in box 20 using codes A and B. 

Include investment income and expenses from other 

sources to figure how much of your total investment 

interest is deductible. You'll also need this information to 

figure your investment interest expense deduction.

If the partnership paid or accrued interest on debts 

properly allocable to investment property, the amount of 

interest you're allowed to deduct may be limited.

For more information on the special provisions that 

apply to investment interest expense, see Form 4952 and 

Pub. 550, Investment Income and Expenses.

Code I. Deductions—royalty income. Include 

deductions allocable to royalties on Schedule E (Form 

1040), line 19. For this type of expense, enter “From 

Schedule K-1 (Form 1065).”

These deductions aren't taken into account in figuring 

your passive activity loss for the year. Don't enter them on 

Form 8582.

Code J. Section 59(e)(2) expenditures. On an 

attached statement, the partnership will show the type and 

the amount of qualified expenditures for which you may 

make a section 59(e) election. The statement will also 

identify the property for which the expenditures were paid 

or incurred. If there is more than one type of expenditure, 

the amount of each type will also be listed.

If you deduct these expenditures in full in the current 

year, they're treated as adjustments or tax preference 

items for purposes of alternative minimum tax (AMT). 

However, you may elect to amortize these expenditures 

over the number of years in the applicable period rather 

20 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
than deducting the full amount in the current year. If you 

make this election, these items aren't treated as 

adjustments or tax preference items.

Under the election, you can deduct circulation 

expenditures ratably over a 3-year period. Research and 

experimental expenditures and mining exploration and 

development costs can be amortized over a 10-year 

period. Intangible drilling and development costs can be 

amortized over a 60-month period. The amortization 

period begins with the month in which such costs were 

paid or incurred.

Make the election on Form 4562. If you make the 

election, report the current year amortization of section 

59(e) expenditures from Form 4562, Part VI, on 

Schedule E (Form 1040), line 28. If you don't make the 

election, report the section 59(e)(2) expenditures on 

Schedule E (Form 1040), line 28, and figure the resulting 

adjustment or tax preference item (see Form 6251, 

Alternative Minimum Tax—Individuals). Whether you 

deduct the expenditures or elect to amortize them, report 

the amount on a separate line of Schedule E, line 28, 

column (i), if you materially participated in the partnership 

activity. If you didn't materially participate, follow the 

Instructions for Form 8582 to figure how much of the 

deduction can be reported in column (g) of Schedule E, 

line 28.

Code K. Excess business interest expense (EBIE). If 

the partnership reports EBIE to the partner, the partner is 

required to file Form 8990. See the Instructions for Form 

8990 for additional information.

For tax years beginning after 2017, the partner’s basis 

in its partnership interest at the end of the tax year is 

reduced (but not below zero) by the amount of excess 

business interest allocated to the partner for the tax year, 

even if the partner isn't allowed a deduction for the 

allocated excess business interest in the year of the basis 

reduction. If the partner disposes of a partnership interest 

in which the basis has been reduced before all of the 

allocated excess business interest was used, the partner 

increases its basis immediately before the sale for the 

amount not yet deducted.

Code L. Deductions—portfolio income (other). 

Generally, you should report these amounts on 

Schedule A (Form 1040), line 16. See the instructions for 

Schedule A, line 16, for details. These deductions aren't 

taken into account in figuring your passive activity loss for 

the year. Don't enter them on Form 8582.

Code M. Amounts paid for medical insurance. Any 

amounts paid during the tax year for insurance that 

constitutes medical care for you, your spouse, your 

dependents, and your children under age 27 who aren't 

dependents. On Schedule 1 (Form 1040), line 17, you 

may be allowed to deduct such amounts, even if you don't 

itemize deductions. If you do itemize deductions, enter on 

Schedule A (Form 1040), line 1, any amounts not 

deducted on Schedule 1 (Form 1040), line 17.

Code N. Educational assistance benefits. Deduct your 

educational assistance benefits on a separate line of 

Schedule E (Form 1040), line 28, up to the $5,250 

limitation. If your benefits exceed $5,250, you may be able 

to use the excess amount on Form 8863 to figure the 

education credits.

Code O. Dependent care benefits. The partnership will 

report the dependent care benefits you received. You 

must use Form 2441, Part III, to figure the amount, if any, 

of the benefits you may exclude from your income.

Code P. Preproductive period expenses. You may be 

able to deduct these expenses currently or you may need 

to capitalize them under section 263A. See Pub. 225, 

Farmer's Tax Guide, and Regulations section 1.263A-4 for 

details.

Code Q. Reserved for future use.

Code R. Pensions and IRAs. Payments made on your 

behalf to an IRA, a qualified plan, a simplified employee 

pension (SEP), or a SIMPLE IRA plan. See the 

instructions for Schedule 1 (Form 1040), line 20, to figure 

your IRA deduction. Enter payments made to a qualified 

plan, SEP, or SIMPLE IRA plan on Schedule 1 (Form 

1040), line 16. If the payments to a qualified plan were to a 

defined benefit plan, the partnership should give you a 

statement showing the amount of the benefit accrued for 

the current tax year.

Code S. Reforestation expense deduction. The 

partnership will provide a statement that describes the 

qualified timber property for these reforestation expenses. 

The expense deduction is limited to $10,000 ($5,000 if 

married filing separately) for each qualified timber 

property, including your share of the partnership's 

expense and any reforestation expenses you separately 

paid or incurred during the tax year.

If you didn't materially participate in the activity, use 

Form 8582 to figure the amount to report on Schedule E 

(Form 1040), line 28, column (g). If you materially 

participated in the reforestation activity, report the 

deduction on Schedule E (Form 1040), line 28, column (i).

Codes T through U. Reserved for future use.

Code V. Section 743(b) negative income adjustments. The partnership will use this code to report the 

net negative income adjustment resulting from all section 

743(b) basis adjustments. The partnership will provide 

your section 743(b) adjustment net of cost recovery at 

year end by asset grouping in box 20, code U.

Code W. Soil and water conservation. Soil and water 

conservation expenditures and endangered species 

recovery expenditures. See section 175 for limitations on 

the amount you're allowed to deduct.

Code X. Film, television, and theatrical production 

expenditures. The partnership will provide a statement 

that describes the film, television, or live theatrical 

production generating these expenses. Generally, if the 

aggregate cost of the production exceeds $15 million, you 

aren't entitled to the deduction. The limitation is $20 

million for productions in certain areas (see section 181 

for details). If you didn't materially participate in the 

activity, use Form 8582 to determine the amount that can 

be reported on Schedule E (Form 1040), line 28, column 

(g). If you materially participated in the production activity, 

report the deduction on Schedule E (Form 1040), line 28, 

column (i).

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 21
Code Y. Expenditures for removal of barriers. 

Expenditures for the removal of architectural and 

transportation barriers to the elderly and disabled that the 

partnership elected to treat as a current expense. The 

deductions are limited by section 190(c) to $15,000 per 

year from all sources.

Code Z. Itemized deductions. Itemized deductions that 

Form 1040 or 1040-SR filers report on Schedule A (Form 

1040).

Code AA. Contributions to a capital construction 

fund (CCF). The deduction for a CCF investment isn't 

taken on Schedule E (Form 1040). Instead, you subtract 

the deduction from the amount that would normally be 

entered as taxable income on Form 1040 or 1040-SR, 

line 15. In the margin to the left of line 15, enter "CCF" and 

the amount of the deduction.

Code AB. Penalty on early withdrawal of savings. 

Report this amount on Schedule 1 (Form 1040), line 18.

Code AC. Interest expense allocated to debt-financed 

distributions. The manner in which you report such 

interest expense depends on your use of the distributed 

debt proceeds. If the proceeds were used in a trade or 

business activity, report the interest on Schedule E (Form 

1040), line 28. In column (a), enter the name of the 

partnership and “interest expense.” If you materially 

participated in the trade or business activity, enter the 

interest expense in column (i). If you didn't materially 

participate in the activity, follow the Instructions for Form 

8582 to figure the interest expense you can report in 

column (g). See the definition of material participation, 

earlier. If the proceeds were used in an investment activity, 

report the interest on Form 4952. If the proceeds are used 

for personal purposes, the interest is generally not 

deductible.

Code AD. Interest expense on working interest in oil 

or gas. Interest paid or accrued on debt properly 

allocable to your share of a working interest in any oil or 

gas property (if your liability isn't limited). If you didn't 

materially participate in the oil or gas activity, this interest 

is investment interest reportable as described earlier 

under Code H; otherwise, it's trade or business interest. If 

you didn't materially participate in the oil or gas activity, 

this interest is investment interest expense and should be 

reported on Form 4952. If you materially participated in 

the activity, report the interest on Schedule E (Form 1040), 

line 28. On a separate line, enter “interest expense” and 

the name of the partnership in column (a) and the amount 

in column (i).

Code AE. Deductions—portfolio income. Formerly 

deductible by individuals under section 67 subject to the 

2% AGI floor. For taxpayers other than individuals, deduct 

amounts that are clearly and directly allocable to portfolio 

income (other than investment interest expense and 

section 212 expenses from a REMIC).

The partnership will give you a description and the 

amount of your share for each of these items.

Codes AF through AJ. Reserved for future use.

Code ZZ. Other. Any other information you may need to 

file your tax return.

Box 14. Self-Employment Earnings 

(Loss)

If you and your spouse are both partners, each of you 

must complete and file your own Schedule SE (Form 

1040), Self-Employment Tax, to report your partnership 

net earnings (loss) from self-employment.

Code A. Net earnings (loss) from self-employment. If 

you're a general partner, reduce this amount before 

entering it on Schedule SE (Form 1040) by any section 

179 expense deduction claimed, unreimbursed 

partnership expenses claimed, and depletion claimed on 

oil and gas properties. Don't reduce net earnings from 

self-employment by any separately stated deduction for 

health insurance expenses.

If the amount on this line is a loss, enter only the 

deductible amount on Schedule SE (Form 1040). See 

Limitations on Losses, Deductions, and Credits, earlier.

If your partnership is an options dealer or a 

commodities dealer, see section 1402(i).

If your partnership is an investment club, see Rev. Rul. 

75-525, 1975-2 C.B. 350.

Code B. Gross farming or fishing income. If you're an 

individual partner, enter the amount from this line, as an 

item of information, on Schedule E (Form 1040), line 42. 

Also use this amount to figure net earnings from 

self-employment under the farm optional method on 

Schedule SE (Form 1040), Part II.

Code C. Gross nonfarm income. If you're an individual 

partner, use this amount to figure net earnings from 

self-employment under the nonfarm optional method on 

Schedule SE (Form 1040), Part II.

Box 15. Credits

If you have credits that are passive activity credits to you, 

you must complete Form 8582-CR (or Form 8810 for 

corporations) in addition to the credit forms identified 

below. See Passive Activity Limitations, earlier, and the 

Instructions for Form 8582-CR (or Form 8810) for details.

Generally, you aren't required to complete the 

source credit form or attach it to Form 3800 if 

you're a taxpayer that isn't a partnership or S 

corporation, and your only source for a credit listed on 

Form 3800, Part III, is from a partnership, S corporation, 

estate, trust, or cooperative. (Instead, you can report this 

credit directly on Form 3800, Part III, and enter the EIN of 

the partnership in column (d) of Part III.) The following 

exceptions apply.

• You're claiming the investment credit (Form 3468) or the 

biodiesel, renewable diesel, or sustainable aviation fuels 

credit (Form 8864).

• The taxpayer is an estate or trust and the source credit 

can be allocated to beneficiaries. For more details, see the 

instructions for box 13 of Schedule K-1 (Form 1041), 

Beneficiary’s Share of Income, Deductions, Credits, etc.

• The taxpayer is a cooperative and the source credit can 

or must be allocated to patrons. For more details, see the 

instructions for Form 1120-C, U.S. Income Tax Return for 

Cooperative Associations, Schedule J, line 5c.

TIP

22 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Code A. Zero-emission nuclear power production 

credit. Report this amount on Form 7213, Part II; or Form 

3800, Part III, line 1u.

Code B. Production from advanced nuclear power facilities credit. Report this amount on Form 7213, Part I; 

or Form 3800, Part III, line 1cc.

Codes C and D. Low-income housing credit. If 

section 42(j)(5) applies, the partnership will report your 

share of the low-income housing credit using code C. If 

section 42(j)(5) doesn't apply, your share of the credit will 

be reported using code D. Any allowable low-income 

housing credit reported using code C or D is reported on 

Form 8586, line 4; or Form 3800, Part III, line 4d.

Keep a separate record of the low-income housing 

credit from each separate source so that you can correctly 

figure any recapture of low-income housing credit that 

may result from the disposition of all or part of your 

partnership interest. For more information on recapture, 

see the instructions for Form 8611, Recapture of 

Low-Income Housing Credit.

Code E. Qualified rehabilitation expenditures (rental 

real estate). The partnership will report your share of the 

qualified rehabilitation expenditures and other information 

you need to complete Form 3468 related to rental real 

estate activities using code E. Your share of qualified 

rehabilitation expenditures from property not related to 

rental real estate activities will be reported in box 20 using 

code D. See the Instructions for Form 3468 for details. If 

the partnership is reporting expenditures from more than 

one activity, the attached statement will separately identify 

the expenditures from each activity.

Combine the expenditures (for Form 3468 reporting) 

from box 15, code E, and box 20, code D. The 

expenditures related to rental real estate activities (box 15, 

code E) are reported on Schedule K-1 separately from 

other qualified rehabilitation expenditures (box 20, code 

D) because they're subject to different passive activity 

limitation rules. See the Instructions for Form 8582-CR for 

details.

Code F. Other rental real estate credits. The 

partnership will identify the type of credit and any other 

information you need to figure these credits from rental 

real estate activities (other than the low-income housing 

credit and qualified rehabilitation expenditures). These 

credits may be limited by the passive activity limitations. If 

the credits are from more than one activity, the partnership 

will identify the credits from each activity on an attached 

statement. See Passive Activity Limitations, earlier, and 

the Instructions for Form 8582-CR for details.

Code G. Other rental credits. The partnership will 

identify the type of credit and any other information you 

need to figure these rental credits. These credits may be 

limited by the passive activity limitations. If the credits are 

from more than one activity, the partnership will identify 

the credits from each activity on an attached statement. 

See Passive Activity Limitations, earlier, and the 

Instructions for Form 8582-CR for details.

Code H. Undistributed capital gains credit. Code H 

represents taxes paid on undistributed capital gains by a 

RIC or REIT. Report these taxes on Schedule 3 (Form 

1040), line 13a.

Code I. Biofuel producer credit. Report this amount on 

Form 6478, Biofuel Producer Credit, line 3; or Form 3800, 

Part III, line 4c (see TIP, earlier).

Code J. Work opportunity credit. Report this amount 

on Form 5884, Work Opportunity Credit, line 3; or Form 

3800, Part III, line 4b (see TIP, earlier).

Code K. Disabled access credit. Report this amount 

on Form 8826, Disabled Access Credit, line 7; or Form 

3800, Part III, line 1e (see TIP, earlier).

Code L. Empowerment zone employment credit. 

Report this amount on Form 8844, Empowerment Zone 

Employment Credit, line 3; or Form 3800, Part III, line 3 

(see TIP, earlier).

Code M. Credit for increasing research activities. 

Report this amount on Form 6765, Credit for Increasing 

Research Activities, line 37; or on Form 3800, Part III (see 

TIP, earlier) as follows.

• The partnership will provide information necessary to 

determine if it's an eligible small business under section 

38(c)(5)(A). If you and the partnership are eligible small 

businesses, report the credit on line 4i. For more 

information, see the Instructions for Form 3800.

• All others, report the credit on line 1c.

Code N. Credit for employer social security and Medicare taxes. Report this amount on Form 8846, Credit for 

Employer Social Security and Medicare Taxes Paid on 

Certain Employee Tips, line 5; or Form 3800, Part III, 

line 4f (see TIP, earlier).

Code O. Backup withholding. This is your share of the 

credit for backup withholding on dividends, interest 

income, and other types of income. Include this amount in 

the total you enter on Form 1040 or 1040-SR, line 25c, 

and attach a copy of the Schedule K-1 to your tax return. 

Instead of attaching a copy of the Schedule K-1 to the tax 

return, you can include a statement with the return that 

provides the partnership's name, address, EIN, and 

backup withholding amount.

Other credits. Most credits identified by codes P through 

ZZ will be reported on Form 3800 (see TIP, earlier).

Code P. Unused investment credit from the qualifying 

advanced coal project credit or qualifying gasification project credit allocated from cooperatives. 

Report this amount on Form 3468, Part II, line 6.

Code Q. Unused investment credit from the qualifying advanced energy project credit allocated from 

cooperatives. Report this amount on Form 3468, Part III, 

line 2.

Code R. Unused investment credit from the advanced manufacturing investment credit allocated 

from cooperatives. Report this amount on Form 3468, 

Part IV, line 2.

Code S. Reserved for future use.

Code T. Unused investment credit from the energy 

credit allocated from cooperatives. Report this amount 

on Form 3468, Part VI, line 31.

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 23
Code U. Unused investment credit from the rehabilitation credit allocated from cooperatives. Report this 

amount on Form 3468, Part VII, line 2.

Code V. Advanced manufacturing production credit. 

Report this amount on Form 7207; or Form 3800, Part III, 

line 1b.

Codes W and X. Reserved for future use.

Code Y. Clean hydrogen production credit. Report 

this amount on Form 7210; or Form 3800, Part III, line 1g.

Code Z. Orphan drug credit. Report this amount on 

Form 8820; or Form 3800, Part III, line 1h.

Code AA. Enhanced oil recovery credit. Report this 

amount on Form 8830; or Form 3800, Part III, line 1t.

Code AB. Renewable electricity production credit. 

Report this amount on Form 8835, Part II; or Form 3800, 

Part III, line 1f.

Code AC. Biodiesel, renewable diesel, or sustainable 

aviation fuels credit. If this credit includes the small 

agri-biodiesel producer credit, the partnership will provide 

additional information on an attached statement. If no 

statement is attached, report this amount on Form 8864, 

line 10. If a statement is attached, see the instructions for 

Form 8864, line 10.

Code AD. New markets credit. Report this amount on 

Form 8874; or Form 3800, Part III, line 1i.

Code AE. Credit for small employer pension plan 

startup costs. Report this amount on Form 8881, Part I; 

or Form 3800, Part III, line 1j.

Code AF. Credit for small employer auto-enrollment. 

Report this amount on Form 8881, Part II; or Form 3800, 

Part III, line 1dd.

Code AG. Credit for small employer military spouse 

retirement plan eligibility. Report this amount on Form 

8881, Part III; or Form 3800, Part III, line 1ee.

Code AH. Credit for employer-provided childcare facilities and services. Report this amount on Form 8882; 

or Form 3800, Part III, line 1k.

Code AI. Low sulfur diesel fuel production credit. 

Report this amount on Form 8896; or Form 3800, Part III, 

line 1m.

Code AJ. Qualified railroad track maintenance credit. 

Report this amount on Form 8900; or Form 3800, Part III, 

line 4g.

Code AK. Credit for oil and gas production from marginal wells. Report this amount on Form 8904; or Form 

3800, Part III, line 1bb.

Code AL. Distilled spirits credit. Report this amount on 

Form 8906; or Form 3800, Part III, line 1n.

Code AM. Energy efficient home credit. Report this 

amount on Form 8908; or Form 3800, Part III, line 1p.

Code AN. Alternative motor vehicle credit. Report this 

amount on Form 8910; or Form 3800, Part III, line 1r.

Code AO. Alternative fuel vehicle refueling property 

credit. Report this amount on Form 8911, Part II; or Form 

3800, Part III, line 1s.

Code AP. Clean renewable energy bond credit. 

Report this amount on Form 8912.

Code AQ. New clean renewable energy bond credit. 

Report this amount on Form 8912.

Code AR. Qualified energy conservation bond credit. 

Report this amount on Form 8912.

Code AS. Qualified zone academy bond credit. 

Report this amount on Form 8912.

Code AT. Qualified school construction bond credit. 

Report this amount on Form 8912.

Code AU. Build America bond credit. Report this 

amount on Form 8912.

Code AV. Credit for employer differential wage payments. Report this amount on Form 8932; or Form 3800, 

Part III, line 1w.

Code AW. Carbon oxide sequestration credit. Report 

this amount on Form 8933, Part III, Section D, line 20; or 

Form 3800, Part III, line 1x.

Code AX. Carbon oxide sequestration credit recapture. Report this amount on Form 8933, Part III, 

Section D, line 22.

Code AY. New clean vehicle credit. Report this amount 

on Form 8936, Part II; or Form 3800, Part III, line 1y.

Code AZ. Qualified commercial clean vehicle credit. 

Report this amount on Form 8936, Part V; or Form 3800, 

Part III, line 1aa.

Code BA. Credit for small employer health insurance 

premiums. Report this amount on Form 8941; or Form 

3800, Part III, line 4h.

Code BB. Employer credit for paid family and medical leave. Report this amount on Form 8944; or Form 

3800, Part III, line 4j.

Code BC. Eligible credits from transferor(s) under 

section 6418. Report this amount on Form 3800. See the 

instructions for Form 3800, Parts III and V, for additional 

information.

Codes BD through BG. Reserved for future use.

Code ZZ. Other. Any other information you may need to 

file your tax return.

Box 16. International Transactions

If the partnership checked the box, see the attached 

Schedule K-3 with respect to items of international tax 

relevance.

If the partnership didn't check the box, the partnership 

attached a statement to the Schedule K-1 (or issued a 

statement prior to furnishing the Schedule K-1) notifying 

the partner that the partner won't receive Schedule K-3 

from the partnership unless the partner requests the 

schedule.

For additional information, see the Partner’s 

Instructions for Schedule K-3.

24 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Box 17. Alternative Minimum Tax 

(AMT) Items

Use the information reported in box 17 (as well as your 

adjustments and tax preference items from other sources) 

to prepare your Form 6251; or Schedule I (Form 1041), 

Alternative Minimum Tax—Estates and Trusts.

Code A. Post-1986 depreciation adjustment. This 

amount is your share of the partnership's post-1986 

depreciation adjustment. If you're an individual partner, 

report this amount on Form 6251, line 2l.

Code B. Adjusted gain or loss. This amount is your 

share of the partnership's adjusted gain or loss. If you're 

an individual partner, report this amount on Form 6251, 

line 2k.

Code C. Depletion (other than oil & gas). This amount 

is your share of the partnership's depletion adjustment. If 

you're an individual partner, report this amount on Form 

6251, line 2d.

Codes D and E. Oil, gas, & geothermal properties—gross income and deductions. The amounts 

reported on these lines include only the gross income 

(code D) from, and deductions (code E) allocable to, oil, 

gas, and geothermal properties included in box 1 of 

Schedule K-1. The partnership should have attached a 

statement that shows any income from or deductions 

allocable to such properties that are included in boxes 2 

through 13, 18, and 20 of Schedule K-1. Use the amounts 

reported and the amounts on the attached statement to 

help you figure the net amount to enter on Form 6251, 

line 2t.

Code F. Other AMT items. Enter the information on the 

statement attached by the partnership on the applicable 

lines of Form 6251, Form 466, or Schedule I (Form 1041).

Box 18. Tax-Exempt Income and 

Nondeductible Expenses

Code A. Tax-exempt interest income. Report on your 

return, as an item of information, your share of the 

tax-exempt interest received or accrued by the partnership 

during the year. Individual partners include this amount on 

Form 1040 or 1040-SR, line 2a. Increase the adjusted 

basis of your interest in the partnership by this amount.

Code B. Other tax-exempt income. Increase the 

adjusted basis of your interest in the partnership by the 

amount shown, but don't include it in income on your tax 

return.

The partnership will attach a statement for the 

amount included under code B that's exempt by 

reason of section 892 and describe the nature of 

the income.

Code C. Nondeductible expenses. The nondeductible 

expenses paid or incurred by the partnership aren't 

deductible on your tax return. Decrease the adjusted 

basis of your interest in the partnership by this amount.

TIP

Box 19. Distributions

Code A. Cash and marketable securities. Code A 

shows the distributions the partnership made to you of 

cash and certain marketable securities. The marketable 

securities are included at their FMVs on the date of 

distribution (minus your share of the partnership's gain on 

the securities distributed to you). If the amount shown as 

code A exceeds the adjusted basis of your partnership 

interest immediately before the distribution, the excess is 

treated as gain from the sale or exchange of your 

partnership interest. Generally, this gain is treated as gain 

from the sale of a capital asset and should be reported on 

Form 8949 and the Schedule D for your return. However, if 

you receive cash or property in exchange for any part of a 

partnership interest, the amount of the distribution 

attributable to your share of the partnership's unrealized 

receivable or inventory items results in ordinary income 

(see Regulations section 1.751-1(a) and Sale or 

Exchange of Partnership Interest, earlier). For details, see 

Form 8308.

The partnership will separately identify both of the 

following.

• The FMVs 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 

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.

Code B. Distribution subject to section 737. If a 

partner contributed section 704(c) built-in gain property 

within the last 7 years and the partnership made a 

distribution of property to that partner other than the 

previously contributed built-in gain property, the partner 

may be required to recognize gain under section 737. This 

gain is in addition to any gain recognized under section 

731 on the distribution.

When this occurs, the partnership will enter code B in 

box 19 of the contributing partner's Schedule K-1 and 

attach a statement that provides the information the 

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 25
partner needs to figure the recognized gain under section 

737. The partnership is required to provide the following 

information.

• The FMV of the distributed property (other than money).

• The amount of money received in the distribution.

• The net precontribution gain of the partner.

Using the information from the attached statement, 

complete the worksheet below to figure your recognized 

gain under section 737.

Computation of Section 737 Gain

1. Enter the FMV of the distributed property 

(other than money) .............. $

2. Enter your adjusted basis in the partnership 

immediately before the distribution. See Basis 

Limitations, earlier ...............

3. Enter the amount of money received in the 

distribution ...................

4. Subtract line 3 from line 2. If zero or less, 

enter -0- .....................

5. Subtract line 4 from line 1 ..........

6. Enter your net precontribution gain ....

7. Section 737 gain. Enter the lesser of the 

amount on line 5 or line 6 ..........

The type of gain (section 1231 gain, capital gain) 

generated is determined by the type of gain you would 

have recognized if you sold the property rather than 

contributing it to the partnership. Accordingly, report the 

amount from line 7, above, on Form 4797 or Form 8949 

and the Schedule D of your tax return.

Code C. Other property. Code C shows the 

partnership's adjusted basis of property other than money 

immediately before the property was distributed to you. In 

addition, the partnership should report the adjusted basis 

and FMV of each property distributed. Decrease the 

adjusted basis of your interest in the partnership by the 

amount of your basis in the distributed property. Your 

basis in the distributed property (other than in liquidation 

of your interest) is the smaller of:

• The partnership's adjusted basis immediately before 

the distribution, or

• The adjusted basis of your partnership interest reduced 

by any cash distributed in the same transaction.

If you received the property in liquidation of your 

interest, your basis in the distributed property is equal to 

the adjusted basis of your partnership interest reduced by 

any cash distributed in the same transaction.

If you receive cash or property in exchange for any part 

of a partnership interest, the amount of the distribution 

attributable to your share of the partnership's unrealized 

receivable or inventory items results in ordinary income 

(see Regulations section 1.751-1(a) and Sale or 

Exchange of Partnership Interest, earlier).

A partner must attach a statement to their return for the 

tax year of the distribution if either of the following 

situations is applicable.

Section 732(a)(2) basis adjustment. If the basis of 

distributed property in a non-liquidating distribution is 

different to the recipient partner from the basis the 

partnership had in the property immediately before the 

distribution as a result of section 732(a)(2).

Section 732(b) basis adjustment. If the basis of 

distributed property in a liquidating distribution is different 

to the recipient partner from the basis the partnership had 

in the property immediately before the distribution as a 

result of section 732(b).

The statement must include the following information.

• The name and EIN of the partnership from which a 

distribution was received.

• The computation of the adjustment to the basis of the 

distributed property or properties.

• The allocation of the basis adjustment to the distributed 

properties in the hands of the partner.

Box 20. Other Information

Code A. Investment income. Report this amount on 

Form 4952, line 4a.

Code B. Investment expenses. Report this amount on 

Form 4952, line 5.

Code C. Fuel tax credit information. The partnership 

will report the number of gallons of each fuel sold or used 

during the tax year for a nontaxable use qualifying for the 

credit for taxes paid on fuels, type of use, and the 

applicable credit per gallon. Use this information to 

complete Form 4136, Credit for Federal Tax Paid on Fuels.

Code D. Qualified rehabilitation expenditures (other 

than rental real estate). The partnership will report your 

share of qualified rehabilitation expenditures and other 

information you need to complete Form 3468 for property 

not related to rental real estate activities in box 20 using 

code D. Your share of qualified rehabilitation expenditures 

related to rental real estate activities is reported in box 15 

using code E. See the Instructions for Form 3468 for 

details. If the partnership is reporting expenditures from 

more than one activity, the attached statement will 

separately identify the expenditures from each activity.

Combine the expenditures (for Form 3468 reporting) 

from box 15, code E, and box 20, code D. The 

expenditures related to rental real estate activities (box 15, 

code E) are reported on Schedule K-1 separately from 

other qualified rehabilitation expenditures (box 20, code 

D) because they're subject to different passive activity 

limitation rules. See the Instructions for Form 8582-CR for 

details.

Code E. Basis of energy property. If the partnership 

provides an attached statement for code E, use the 

information on the statement to complete the applicable 

energy credit on Form 3468, Part VI. See Part VI—Energy 

Credit Under Section 48 in the Instructions for Form 3468.

Codes F and G. Recapture of low-income housing 

credit. A section 42(j)(5) partnership will report recapture 

of a low-income housing credit with code F. All other 

partnerships will report recapture of a low-income housing 

credit with code G. Keep a separate record of recapture 

from each of these sources so that you'll be able to 

correctly figure any recapture of low-income housing 

credit that may result from the disposition of all or part of 

your partnership interest. For details, see Form 8611.

26 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Code H. Recapture of investment credit. The 

partnership will provide any information you need to figure 

your recapture tax on Form 4255, Recapture of Investment 

Credit. See the Form 3468 on which you took the original 

credit for other information you need to complete Form 

4255.

You may also need Form 4255 if you disposed of more 

than one-third of your interest in a partnership.

Code I. Recapture of other credits. On a statement 

attached to Schedule K-1, the partnership will report any 

information you need to figure the recapture of the new 

markets credit (see Form 8874; and Form 8874-B, Notice 

of Recapture Event for New Markets Credit); any credit for 

employer-provided childcare facilities and services (see 

Form 8882); the alternative motor vehicle credit (see 

section 30B(h)(8)); the alternative fuel vehicle refueling 

property credit (see section 30C(e)(5)); or the new 

qualified plug-in electric drive motor vehicle credit (see 

section 30D(f)(5)).

Code J. Look-back interest—completed long-term 

contracts. The partnership will report any information 

you need to figure the interest due or to be refunded under 

the look-back method of section 460(b)(2) on certain 

long-term contracts. Use Form 8697, Interest Computation 

Under the Look-Back Method for Completed Long-Term 

Contracts, to report any such interest.

Code K. Look-back interest—income forecast method. The partnership will report any information you need 

to figure the interest due or to be refunded under the 

look-back method of section 167(g)(2) for certain property 

placed in service after September 13, 1995, and 

depreciated under the income forecast method. Use Form 

8866, Interest Computation Under the Look-Back Method 

for Property Depreciated Under the Income Forecast 

Method, to report any such interest.

Code L. Dispositions of property with section 179 deductions. The partnership will report your share of gain 

or loss on the sale, exchange, or other disposition of 

property for which a section 179 expense deduction was 

passed through to partners with code L. If the partnership 

passed through a section 179 expense deduction for the 

property, you must report the gain or loss and any 

recapture of the section 179 expense deduction for the 

property on your income tax return (see the Instructions 

for Form 4797 for details). The partnership will provide all 

the following information.

1. Description of the property.

2. Date the property was acquired and placed in 

service.

3. Date of the sale or other disposition of the property.

4. Your share of the gross sales price or amount 

realized.

5. Your share of the cost or other basis plus the 

expense of sale.

6. Your share of the depreciation allowed or allowable.

7. Your share of the section 179 expense deduction (if 

any) passed through for the property and the partnership's 

tax year(s) in which the amount was passed through. To 

figure the amount of depreciation allowed or allowable for 

Form 4797, line 22, add to the amount from item 6, above, 

the amount of your share of the section 179 expense 

deduction, reduced by any unused carryover of the 

deduction for this property. This amount may be different 

from the amount of section 179 expense you deducted for 

the property if your interest in the partnership has 

changed.

8. If the disposition is due to a casualty or theft, a 

statement providing the information you need to complete 

Form 4684.

9. If the sale was an installment sale, any information 

you need to complete Form 6252, Installment Sale 

Income. The partnership will separately report your share 

of all payments received for the property in future tax 

years. See the Form 6252 instructions for details.

Code M. Recapture of section 179 deduction. The 

partnership will report your share of any recapture of the 

section 179 expense deduction if business use of any 

property for which the section 179 expense deduction was 

passed through to partners dropped to 50% or less. If this 

occurs, the partnership must provide the following 

information.

• Your share of the depreciation allowed or allowable (not 

including the section 179 expense deduction).

• Your share of the section 179 expense deduction (if 

any) passed through for the property and the partnership's 

tax year(s) in which the amount was passed through. 

Reduce this amount by the portion, if any, of your unused 

(carryover) section 179 expense deduction for this 

property.

Code N. Business interest expense (BIE). For tax 

years beginning after November 12, 2020, the partnership 

will report your share of the partnership's deductible BIE 

for inclusion in the separate loss class for computing any 

basis limitation (defined in section 704(d) and Regulations 

section 1.163(j)-6(h)). This information is necessary if your 

losses are limited under section 704(d). Deductible BIE is 

reported elsewhere on Schedule K-1 and the total amount 

is reported here for information only and was already 

included as a deduction on another line of your 

Schedule K-1. Included in the code N information is a 

statement providing the allocation of the BIE already 

deducted by the partnership by line number on 

Schedule K-1.

The partner must remove the BIE deductions from 

these referenced lines when computing any basis 

limitation.

Any EBIE not deductible under section 163(j) will be 

included in box 13, code K, for inclusion in the basis 

limitation and isn't reported here. See Worksheet for 

Adjusting the Basis of a Partner’s Interest in the 

Partnership for additional information about computing the 

loss limitation.

Code O. Section 453(l)(3) information. The 

partnership will report any information you need to figure 

the interest due under section 453(l)(3) with respect to the 

disposition of certain timeshares and residential lots on 

the installment method. If you're an individual, report the 

interest on Schedule 2 (Form 1040), line 14.

CAUTION

!

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 27
Code P. Section 453A(c) information. The partnership 

will report any information you need to figure the interest 

due under section 453A(c) with respect to certain 

installment sales. See Pub. 537, Installment Sales, for 

more information on section 453A(c). The information will 

include the following from each Form 6252 where line 5 is 

greater than $150,000.

• Description of property.

• Date acquired.

• Date property sold.

• Selling price, including mortgages and other debts (not 

including interest, whether stated or unstated).

• Mortgages, debts, and other liabilities the buyer 

assumed or took the property subject to.

• Gross profit.

• Contract price.

• Gross profit percentage.

• Current year payments and deemed payments received 

during the year, not including interest, whether stated or 

unstated.

• Origination year payments and deemed payments 

received during the year, not including interest whether 

stated or unstated.

• Prior year payments, not including interest whether 

stated or unstated.

• Installment sale income.

• Character of the income—capital or ordinary.

See section 453A(c) for information on how to compute 

the interest charge on the deferred tax liability. The section 

453A interest charge is reported as additional or other on 

other tax returns. See Interest on Deferred Tax in Pub. 537 

for additional details on how to compute the section 

453A(c) interest.

Code Q. Section 1260(b) information. The partnership 

will report any information you need to figure the interest 

due under section 1260(b). If the partnership had gain 

from certain constructive ownership transactions, your tax 

liability must be increased by the interest charge on any 

deferral of gain recognition under section 1260(b). Report 

the interest on Schedule 2 (Form 1040), line 17z. Enter 

“1260(b)” and the amount of the interest in the space to 

the left of line 17z. See section 1260(b) for details, 

including how to figure the interest.

Code R. Interest allocable to production expenditures. The partnership will report any information you 

need relating to interest you're required to capitalize under 

section 263A for production expenditures. See 

Regulations sections 1.263A-8 through -15 for details.

Code S. Capital construction fund (CCF) nonqualified 

withdrawals. The partnership will report your share of 

nonqualified withdrawals from a CCF. These withdrawals 

are taxed separately from your other gross income at the 

highest marginal ordinary income or capital gains tax rate. 

Attach a statement to your federal income tax return to 

show your computation of both the tax and interest for a 

nonqualified withdrawal. Include the tax and interest on 

Schedule 2 (Form 1040), line 17z. In the space to the left 

of line 17z, enter the amount of tax and interest and “CCF.” 

See Pub. 595 for details.

Code T. Depletion information—oil and gas. This is 

your share of gross income from the property, your share 

of production for the tax year, and other information 

needed to figure your depletion deduction for oil and gas 

wells. The partnership should also allocate to you a share 

of the adjusted basis of each partnership oil or gas 

property. See the 2022 Pub. 535 for details on how to 

figure your depletion deduction.

Code U. Section 743(b) basis adjustment. The 

partnership will provide your section 743(b) adjustment, 

net of cost recovery, by asset grouping. Go to IRS.gov/

forms-pubs/clarifications-for-disregarded-entity-reportingand-section-743b-reporting for more information.

Code V. Unrelated business taxable income. The 

partnership will report any information you need to figure 

unrelated business taxable income under section 512(a)

(1) (but excluding any modifications required by 

paragraphs (8) through (15) of section 512(b)) for a 

partner that's a tax-exempt organization.

A partner is required to notify the partnership of its 

tax-exempt status.

Code W. Precontribution gain (loss). If the partnership 

distributed any property with precontribution gain or loss 

to any partner other than the contributing partner, and the 

date of the distribution was within 7 years of the date the 

property was contributed to the partnership, the 

contributing partner must recognize a gain or loss under 

section 704(c)(1)(B). If the partnership made such a 

distribution during its tax year, it'll enter code W in box 20 

of the contributing partner's Schedule K-1 and attach a 

statement providing the amount of the partner's 

precontribution gain (loss) and identifying the character of 

the gain or loss (for example, capital gain (loss) or section 

1231 gain (loss)). Report the precontribution gain or loss 

on Form 8949 and/or Schedule D (Form 1040) or Form 

4797 in accordance with the information provided by the 

partnership.

Code X. Payment obligations including guarantees 

and deficit obligations (DROs). If a partnership has 

checked the box in item K3, this indicates that you or a 

person related to you has a payment obligation with 

respect to the partnership's liabilities. The attached 

statement for box 20, code X, reflects the ending balance 

of each payment obligation that was included in the 

aggregate amount reported in box 20 under code X. For 

purposes of box 20, code X, a payment obligation is 

defined as an obligation under Regulations section 

1.752-2(b)(1) that is recognized under Regulations 

sections 1.752-2(b)(3)(i)(A) and (B) (such as a recognized 

guarantee or an obligation to restore a deficit capital 

account upon liquidation) and a related person is defined 

as a related person as defined in Regulations section 

1.752-4(b).

Code Y. Net investment income (NII). The partnership 

may use this code Y to report information you may need to 

determine your NIIT under section 1411 that isn't reported 

elsewhere on the Schedule K-1 or K-3. Code Y is used to 

report information not provided elsewhere on 

Schedule K-3 (or an attachment) regarding income from 

CFCs and passive foreign investment companies (PFICs) 

the stock of which is owned by the partnership. For CFCs 

and PFICs that you treat as qualified electing funds 

TIP

28 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
(QEFs), the information that's relevant to you will depend 

on whether you, the partnership, or a lower-tier entity has 

made an election under Regulations section 1.1411-10(g) 

with respect to the CFC or QEF. For example, if the 

partnership made an election under Regulations section 

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

partnership, and the relevant income and deduction items 

derived from that CFC are reported elsewhere on the 

Schedule K-3, then you won't need the information 

provided in code Y to complete your Form 8960.

If you're 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 NII and AGI or MAGI. 

Corporate partners aren't subject to the NIIT. See 

Regulations sections 1.1411-1 through -10 for details.

Code Z. Section 199A information. Generally, you may 

be allowed a deduction of up to 20% of your net qualified 

business income (QBI) plus 20% of your qualified REIT 

dividends, also known as section 199A dividends, and 

qualified PTP income from your partnership. The 

partnership will provide the information you need to figure 

your deduction. Use one of these forms to figure your QBI 

deduction.

1. Use Form 8995, Qualified Business Income 

Deduction Simplified Computation, if all of the following 

apply.

a. You have QBI, section 199A dividends, or PTP 

income (defined below).

b. Your 2023 taxable income before the QBI deduction 

is equal to or less than $182,100 ($364,200 if married 

filing jointly).

c. You aren’t a patron in a specified agricultural or 

horticultural cooperative.

2. Use Form 8995-A, Qualified Business Income 

Deduction, if you don't meet all three of the above 

requirements.

Use the information provided by your partnership to 

complete the appropriate form listed above. For definitions 

and more information, see the instructions for Form 8995 

or 8995-A, as appropriate.

QBI/qualified PTP items subject to partner-specific 

determinations. The amounts reported to you reflect 

your distributive share of items from the partnership’s 

trade(s), business(es), or aggregation(s), and may include 

items that aren't includible in your calculation of the QBI 

deduction. When determining QBI or qualified PTP 

income, you must include only those items that are 

qualified items of income, gain, deduction, and loss 

included or allowed in determining taxable income for the 

tax year. To determine your QBI or your qualified PTP 

income amounts and for information on where to report 

them, see the instructions for Form 8995 or 8995-A, as 

appropriate.

W-2 wages. The amounts reported reflect your 

distributive share of the partnership’s W-2 wages allocable 

to the QBI of each qualified trade, business, or 

aggregation. See the instructions for Form 8995 or 

8995-A, as appropriate.

Unadjusted basis immediately after acquisition 

(UBIA) of qualified property. The amounts reported 

reflect your distributive share of the partnership’s UBIA of 

qualified property of each qualified trade, business, or 

aggregation. See the instructions for Form 8995 or 

8995-A, as applicable.

Section 199A dividends. The amount reported 

reflects your distributive share of the partnership's net 

section 199A dividends. See the instructions for Form 

8995 or 8995-A, as applicable.

Patrons of specified agricultural and horticultural 

cooperatives. If the partnership was a patron of an 

agricultural or horticultural cooperative (specified 

cooperative), you must use Form 8995-A to figure your 

QBI deduction. You must also complete Schedule D (Form 

8995-A), Special Rules for Patrons of Agricultural or 

Horticultural Cooperatives, to determine your patron 

reduction.

QBI items allocable to qualified payments from 

specified cooperatives subject to partner-specific 

determinations. The amounts reported to you reflect 

your distributive share of items from the partnership’s 

trade(s), business(es), or aggregation(s), and include 

items that may not be includible in your calculation of the 

QBI deduction and patron reduction. When determining 

QBI items allocable to qualified payments, you must 

include only qualified items that are included or allowed in 

determining taxable income for the tax year. To determine 

your QBI items allocable to qualified payments, see the 

Instructions for Form 8995-A.

W-2 wages allocable to qualified payments from 

specified cooperatives. The amounts reported reflect 

your distributive share of the partnership's W-2 wages 

allocable to the qualified payments of each qualified trade, 

business, or aggregation. See the Instructions for Form 

8995-A.

Section 199A(g) deduction from specified 

cooperatives. The amount reported reflects your 

distributive share of the partnership’s net section 199A(g) 

deduction. See the Instructions for Form 8995-A.

Code AA. Section 704(c) information. The partnership 

will show the portion of income or deduction items 

allocated to you under section 704(c). These items are 

included elsewhere in other income or deduction items on 

Schedule K-1.

Code AB. Section 751 gain (loss). This code is used to 

report the partner's share of gain or loss on the sale of the 

partnership interest subject to taxation at ordinary income 

tax rates.

Information reported for codes AB, AC, and AD may 

also have been reported to you on Form 8308. In addition, 

for foreign transferors, the information for code AB must 

also have been reported to you on Schedule K-3, Part XIII. 

See the Partner’s Instructions for Schedule K-3 (Form 

1065). Even if this information is required to be reported 

on multiple forms, it must only be reported on the partner’s 

tax return once.

Code AC. Section 1(h)(5) gain. This code is used to 

report the partner’s share of gain or loss on the sale of the 

partnership interest subject to taxation at the rate for 

collectible assets as defined in section 1(h)(5).

Code AD. Deemed section 1250 unrecaptured gain. 

This code is used to report the partner’s share of gain or 

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 29
loss on the sale of the partnership interest subject to 

taxation at the rate for unrecaptured section 1250 gain 

assets as defined in section 1(h)(6).

Code AE. Excess taxable income. If the partnership 

was required to file Form 8990, it may determine it has 

excess taxable income. Report the amount of excess 

taxable income on Form 8990, Schedule A, line 43, 

column (f), if you're required to file Form 8990. See the 

Instructions for Form 8990 for additional information.

Code AF. Excess business interest income (EBIE). If 

the partnership is required to file Form 8990, it may 

determine it has EBIE. Enter the amount of EBIE on Form 

8990, Schedule A, line 43, column (g), if you're required to 

file Form 8990. See the Instructions for Form 8990 for 

additional information.

Code AG. Gross receipts for section 448(c). 

Regulations section 1.163(j)-2(d)(2)(iii) requires that 

partners in a partnership include a share of partnership 

gross receipts in proportion to their share of gross income 

under section 703 (unless the partnership is treated as 

one person under the aggregation rules of section 448(c)). 

Partnerships with current year gross receipts (defined in 

Regulations section 1.448-1T(f)(2)(iv)) greater than $5 

million are required to report to their partners their 

distributive shares of current year gross receipts, as well 

as their distributive shares of gross receipts for the 3 

immediately preceding tax years. If a partnership and a 

partner are treated as a single employer under the section 

448(c) aggregation rules, and the partnership has current 

year gross receipts greater than $5 million, then the 

partnership should also report its total current year gross 

receipts, as well as its total gross receipts for the 3 

immediately preceding tax years, to that partner. See 

IRS.gov/newsroom/faqs-regarding-the-aggregation-rulesunder-section-448c2–that-apply-to-the-section-163jsmall-business-exemption.

If a partner needs gross receipts information from a 

partnership in order to figure the gross receipts test under 

section 448(c), and the partnership didn't report gross 

receipts on the Schedule K-1, the partner should request 

this information from the partnership.

Code AH. Noncash charitable contributions. If the 

partnership made a noncash charitable contribution, your 

share of the partnership’s adjusted basis in the property is 

limited to basis and is reported here. Additionally, your 

share of the excess of the FMV over the adjusted basis of 

noncash and capital gain property contributions is 

reported here.

Code AI. Interest and tax on deferred compensation 

to partners. Interest and additional tax on compensation 

deferred under a section 409A nonqualified deferred 

compensation plan that doesn't meet the requirements of 

section 409A. See section 409A(a)(1)(B) to figure the 

interest and additional tax on this income. Report this 

interest and tax on Schedule 2 (Form 1040), line 17h. This 

income is included in the amount in either box 4a or 

box 4b.

Code AJ. Excess business loss limitation. If the 

partnership has deductions attributable to a business 

activity, it'll provide a statement showing your distributive 

share of the aggregate gross income or gain, and 

aggregate deductions, from the business activity of all of 

the partnership's trades or businesses. You can use this to 

figure any excess business loss limitation that may apply. 

See section 461(l) and Form 461 and its instructions for 

details.

Code AK. Gain from mark-to-market election. If a 

partnership is a trader in securities, commodities, or both, 

and has properly elected under section 475(f) to mark to 

market the securities, the commodities, or both, the 

partnership reports ordinary gain or loss from the 

securities or commodities (or both securities and 

commodities) trading activities separately from any other 

ordinary gain or loss.

Code AL. Section 721(c) partnership. If the 

partnership is a section 721(c) partnership, the 

partnership should include the amounts relating to any 

remedial items made under the remedial allocation 

method (described in Regulations sections 1.704-3(d) and 

1.704-3(d)(5)(iii)) with respect to section 721(c) property 

allocable to each partner. The partnership will include a 

separate code AL for the total remedial income, if any, 

allocated to the U.S. transferor; total gain recognized due 

to an acceleration event; or total gain recognized due to a 

section 367 transfer reflected on Schedule G (Form 8865), 

Part II, columns (c), (d), and (e), respectively. Only the 

amount of the total remedial income allocated to the U.S. 

transferor will be included in box 1 of Schedule K-1, Part 

III. Any recognized gain due to an acceleration event or 

section 367 transfer must be separately reported by the 

U.S. transferor on its own federal income tax return. For all 

other partners of the section 721(c) partnership, a 

separate code AL is used to provide the remedial items 

allocated to that partner relating to section 721(c) property 

that was taken into account to determine box 1 of 

Schedule K-1, Part III. See Regulations sections 

1.721(c)-3 and 1.721(c)-6.

Code AM. Section 1061 information. The partnership 

will furnish to the partners any information needed to 

figure their capital gains with respect to an applicable 

partnership interest. See Section 1061 Reporting 

Instructions in Pub. 541.

Code AN. Farming and fishing business. If the 

partnership is involved in a farming or fishing business, it 

will report your distributive share of gross income and 

gains, as well as the losses and deductions attributable to 

such business activities. See section 1301.

Code AO. PTP information. Any information a PTP 

needs to determine whether it meets the 90% qualifying 

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

A partner is required to notify the partnership of its 

status as a PTP.

Code AP. Inversion gain. The partnership will provide a 

statement showing the amounts of each type of income or 

gain that's included in inversion gain. The partnership has 

included inversion gain in income elsewhere on 

Schedule K-1. Inversion gain is also reported under code 

AP because your taxable income and alternative minimum 

taxable income can't be less than the inversion gain. Also, 

TIP

30 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
your inversion gain (a) isn't taken into account in figuring 

the net operating loss (NOL) for the tax year or the NOL 

that can be carried over to each tax year, (b) may limit your 

credits, and (c) is treated as income from sources within 

the United States for the foreign tax credit. See section 

7874 for details.

Code AQ. Conservation reserve program payments. 

Individuals who received social security retirement or 

disability benefits, and are partners in farm partnerships 

that receive conservation reserve program payments, 

don't pay self-employment tax on their portion of the 

payments. The partnership will report your portion of the 

conservation reserve program payments in box 20 using 

code AQ. See Schedule SE (Form 1040) for information 

on excluding the payment from your calculation of 

self-employment tax.

Code AR. IRA disclosure. If the partnership reported an 

amount in box 20, code V, the partnership also reported 

an IRA partner's unique EIN in box 20, code AR. See the 

Instructions for Form 990-T; and Pub. 598, Tax on 

Unrelated Business Income of Exempt Organizations.

Code AS. Qualifying advanced coal project property 

and qualifying gasification project property. Use the 

amounts the partnership provides you to figure the 

amounts to report on Form 3468, Part II.

Code AT. Qualifying advanced energy project property. Use the amount the partnership provides you to figure 

the amount to report on Form 3468, Part III.

Code AU. Advanced manufacturing investment property. Use the amount the partnership provides you to 

figure the amount to report on Form 3468, Part IV.

Code AV. Reserved for future use.

Code AW. Reportable transactions. 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're required 

to disclose a transaction of the partnership is based on the 

category(ies) under which the transaction qualifies for 

disclosure and is determined by you and the partnership. 

You may have to pay a penalty if you're required to file 

Form 8886 and don't do so. See the Instructions for Form 

8886 for details.

Code AX. Reserved for future use.

Code AY. Foreign partners, Form 8990, Schedule A. 

The information needed to complete Form 8990, 

Schedule A, for foreign partners which are required to 

report their allocable share of EBIE, excess taxable 

income, and excess business interest income, if any, that's 

attributable to income effectively connected with a U.S. 

trade or business. When required, the partnership will 

make this report on an attached statement to partners that 

are a foreign corporation or a nonresident alien or partners 

that are a partnership (domestic or foreign) in which the 

reporting partnership knows, or has a reason to know, that 

one or more of the partners is a foreign corporation or 

nonresident alien.

Codes AZ through BD. Reserved for future use.

Code ZZ. Other. Any other information you may need to 

file your return not shown elsewhere on Schedule K-1.

Box 21. Foreign Taxes Paid or 

Accrued

Foreign taxes paid or accrued reduce a partner's basis 

and are limited to basis. Don't use this amount to 

complete your Form 1116, Foreign Tax Credit; or Form 

1118, Foreign Tax Credit—Corporations. See 

Schedule K-3 to complete your Form 1116 or 1118.

Box 22. More Than One Activity for 

At-Risk Purposes

When the partnership has more than one activity for 

at-risk purposes, it'll check this box and attach a 

statement. Use the information in the attached statement 

to correctly figure your at-risk limitation. For more 

information, see the discussion under At-Risk Limitations, 

earlier.

Box 23. More than One Activity for 

Passive Activity Purposes

When the partnership has more than one activity for 

passive activity purposes, it'll check this box and attach a 

statement. Use the information in the attached statement 

to correctly figure your passive activity limitation. For more 

information, see the discussion under Passive Activity 

Limitations, earlier.

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 31
List of Codes and References Used in Schedule K-1 (Form 1065)

Box Number / Item Where to report or where to find further reporting information. 

Page numbers refer to these instructions. 

1. Ordinary business income (loss). Determine whether the income (loss) is 

passive or nonpassive and enter on your return as follows.

Passive loss See page 15

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

Nonpassive loss See page 15

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

2. Net rental real estate income (loss) See page 15

3. Other net rental income (loss)

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

Net loss See Instructions for Form 8582

4a. Guaranteed payment services See Instructions for Schedule E (Form 1040)

4b. Guaranteed payment capital See Instructions for Schedule E (Form 1040)

4c. Guaranteed payment total See page 16

5. Interest income Form 1040 or 1040-SR, line 2b

6a. Ordinary dividends Form 1040 or 1040-SR, line 3b

6b. Qualified dividends Form 1040 or 1040-SR, line 3a

6c. Dividend equivalents See page 16

7. Royalties Schedule E (Form 1040), line 4

8. Net short-term capital gain (loss) Schedule D (Form 1040), line 5

9a. Net long-term capital gain (loss) Schedule D (Form 1040), line 12

9b. Collectibles (28%) gain (loss) 28% Rate Gain Worksheet, line 4 (Schedule D instructions)

9c. Unrecaptured section 1250 gain See page 16

10. Net section 1231 gain (loss) See page 17

11. Other income (loss)

Code A. Other portfolio income (loss) See page 17

Code B. Involuntary conversions See page 17

Code C. Section 1256 contracts & straddles Form 6781, line 1

Code D. Mining exploration costs recapture See 2022 Pub. 535

Code E. Cancellation of debt See page 17

Code F. Section 743(b) positive adjustments See page 17

Code G. Reserved for future use

Code H. Section 951(a) income inclusions See page 17

Code I. Gain (loss) from disposition of oil, gas, geothermal, or 

mineral properties (section 59(e)) See page 18

Code J. Recoveries of tax benefit items See page 18

Code K. Gambling gains and losses See page 18

Code L. Any income, gain, or loss to the partnership from a 

distribution under section 751(b) (certain distributions treated as 

sales or exchanges)

See page 18

Code M. Gain eligible for section 1045 rollover (replacement stock 

purchased by partnership) See page 18

Code N. Gain eligible for section 1045 rollover (replacement stock 

not purchased by the partnership) See page 18

Code O. Sale or exchange of QSB stock with section 1202 exclusion See page 19

Code P. Gain or loss on disposition of farm recapture property and 

other items to which section 1252 applies See page 19

Code Q. Gain or loss on Fannie Mae or Freddie Mac qualified 

preferred stock See page 19

Code R. Specially allocated ordinary gain (loss) See page 19

Code S. Non-portfolio capital gain (loss) See page 19

Codes T through X. Reserved for future use

Code ZZ. Other See page 19

12. Section 179 deduction See page 19

13. Other deductions

Code A. Cash contributions (60%) See page 19

Code B. Cash contributions (30%) See page 19

Code C. Noncash contributions (50%) See page 20

32 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Box Number / Item Where to report or where to find further reporting information. 

Page numbers refer to these instructions. 

Code D. Noncash contributions (30%) See page 20

Code E. Capital gain property to a 50% organization (30%) See page 20

Code F. Capital gain property (20%) See page 20

Code G. Contributions (100%) See page 20

Code H. Investment interest expense Form 4952, line 1

Code I. Deductions—royalty income Schedule E (Form 1040), line 19

Code J. Section 59(e)(2) expenditures See page 20

Code K. Excess business interest expense See page 21

Code L. Deductions—portfolio income (other) Schedule A (Form 1040), line 16

Code M. Amounts paid for medical insurance Schedule A (Form 1040), line 1; or Schedule 1 (Form 1040), line 17

Code N. Educational assistance benefits See page 21

Code O. Dependent care benefits Form 2441, line 12

Code P. Preproductive period expenses See page 21

Code Q. Reserved for future use

Code R. Pensions and IRAs See page 21

Code S. Reforestation expense deduction See page 21

Codes T through U. Reserved for future use

Code V. Section 743(b) negative adjustments See page 21

Code W. Soil and water conservation See page 21

Code X. Film, television, and theatrical production expenditures See page 21

Code Y. Expenditures for removal of barriers See page 22

Code Z. Itemized deductions See page 22

Code AA. Contributions to a capital construction fund (CCF) See page 22

Code AB. Penalty on early withdrawal of savings See page 22

Code AC. Interest expense allocated to debt-financed distributions See page 22

Code AD. Interest expense on working interest in oil or gas See page 22

Code AE. Deductions—portfolio income See page 22

Codes AF through AJ. Reserved for future use

Code ZZ. Other See page 22

14. Self-employment earnings (loss)

Note. If you have a section 179 deduction or any partner-level deductions, see page 22 before completing Schedule SE (Form 1040).

Code A. Net earnings (loss) from self-employment Schedule SE (Form 1040)

Code B. Gross farming or fishing income See page 22

Code C. Gross nonfarm income See page 22

15. Credits

Code A. Zero-emission nuclear power production See page 23

Code B. Production from advanced nuclear power facilities credit See page 23

Code C. Low-income housing credit (section 42(j)(5)) from 

post-2007 buildings See page 23

Code D. Low-income housing credit (other) from post-2007 buildings See page 23

Code E. Qualified rehabilitation expenditures (rental real estate) See page 23

Code F. Other rental real estate credits See page 23

Code G. Other rental credits See page 23

Code H. Undistributed capital gains credit Schedule 3 (Form 1040), line 13a

Code I. Biofuel producer credit See page 23

Code J. Work opportunity credit See page 23

Code K. Disabled access credit See page 23

Code L. Empowerment zone employment credit See page 23

Code M. Credit for increasing research activities See page 23

Code N. Credit for employer social security and Medicare taxes See page 23

Code O. Backup withholding See page 23

Code P. Unused investment credit from the qualifying advanced coal 

project credit or qualifying gasification project credit allocated from 

cooperatives

See page 23

Code Q. Unused investment credit from the qualifying advanced 

energy project credit allocated from cooperatives

See page 23

Code R. Unused investment credit from the advanced 

manufacturing investment credit allocated from cooperatives

See page 23

Code S. Reserved for future use

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 33
Box Number / Item Where to report or where to find further reporting information. 

Page numbers refer to these instructions. 

Code T. Unused investment credit from the energy credit allocated 

from cooperatives See page 23

Code U. Unused investment credit from the rehabilitation credit 

allocated from cooperatives See page 24

Code V. Advanced manufacturing production credit See page 24

Codes W and X. Reserved for future use

Code Y. Clean hydrogen production credit See page 24

Code Z. Orphan drug credit See page 24

Code AA. Enhanced oil recovery credit See page 24

Code AB. Renewable electricity production credit See page 24

Code AC. Biodiesel, renewable diesel, or sustainable aviation fuels 

credit See page 24

Code AD. New markets credit See page 24

Code AE. Credit for small employer pension plan startup costs See page 24

Code AF. Credit for small employer auto-enrollment See page 24

Code AG. Credit for small employer military spouse retirement plan 

eligibility See page 24

Code AH. Credit for employer-provided childcare facilities and 

services See page 24

Code AI. Low sulfur diesel fuel production credit See page 24

Code AJ. Qualified railroad track maintenance credit See page 24

Code AK. Credit for oil and gas production from marginal wells See page 24

Code AL. Distilled spirits credit See page 24

Code AM. Energy efficient home credit See page 24

Code AN. Alternative motor vehicle credit See page 24

Code AO. Alternative fuel vehicle refueling property credit See page 24

Code AP. Clean renewable energy bond credit See page 24

Code AQ. New clean renewable energy bond credit See page 24

Code AR. Qualified energy conservation bond credit See page 24

Code AS. Qualified zone academy bond credit See page 24

Code AT. Qualified school construction bond credit See page 24

Code AU. Build America bond credit See page 24

Code AV. Credit for employer differential wage payments See page 24

Code AW. Carbon oxide sequestration credit See page 24

Code AX. Carbon oxide sequestration credit recapture See page 24

Code AY. New clean vehicles credit See page 24

Code AZ. Qualified commercial clean vehicle credit See page 24

Code BA. Credit for small employer health insurance premiums See page 24

Code BB. Employer credit for paid family and medical leave See page 24

Code BC. Eligible credits from transferor(s) under section 6418 See page 24

Codes BD through BG. Reserved for future use

Code ZZ. Other See page 24

17. Alternative minimum tax (AMT) items

Code A. Post-1986 depreciation adjustment See Instructions for Form 6251

Code B. Adjusted gain or loss See Instructions for Form 6251

Code C. Depletion (other than oil & gas) See Instructions for Form 6251

Code D. Oil, gas, and geothermal—gross income See Instructions for Form 6251

Code E. Oil, gas, and geothermal—deductions See Instructions for Form 6251

Code F. Other AMT items See Instructions for Form 6251

18. Tax-exempt income and nondeductible expenses

Code A. Tax-exempt interest income Form 1040 or 1040-SR, line 2a

Code B. Other tax-exempt income See page 25

Code C. Nondeductible expenses See page 25

19. Distributions

Code A. Cash and marketable securities See page 25

Code B. Distribution subject to section 737 See page 25

Code C. Other property See page 26

20. Other information

Code A. Investment income Form 4952, line 4a

Code B. Investment expenses Form 4952, line 5

34 Partner's Inst. for Sch. K-1 (Form 1065) (2023)
Box Number / Item Where to report or where to find further reporting information. 

Page numbers refer to these instructions. 

Code C. Fuel tax credit information Form 4136

Code D. Qualified rehabilitation expenditures (other than rental real 

estate) See page 26

Code E. Basis of energy property See page 26

Code F. Recapture of low-income housing credit for section 42(j)(5) 

partnerships See page 26

Code G. Recapture of low-income housing credit for other 

partnerships See page 26

Code H. Recapture of investment credit See Form 4255

Code I. Recapture of other credits See page 27

Code J. Look-back interest—completed long-term contracts See Form 8697

Code K. Look-back interest—income forecast method See Form 8866

Code L. Dispositions of property with section 179 deductions See page 27

Code M. Recapture of section 179 deduction See page 27

Code N. Business interest expense (information item) See page 27

Code O. Section 453(l)(3) information Schedule 2 (Form 1040), line 14

Code P. Section 453A(c) information Schedule 2 (Form 1040), line 15

Code Q. Section 1260(b) information Schedule 2 (Form 1040), line 17z

Code R. Interest allocable to production expenditures See Regulations sections 1.263A-8 through -15

Code S. Capital construction fund (CCF) nonqualified withdrawals Schedule 2 (Form 1040), line 17z

Code T. Depletion deduction See 2022 Pub. 535

Code U. Section 743(b) basis adjustment See page 28

Code V. Unrelated business taxable income See page 28

Code W. Precontribution gain (loss) Form 8949 and/or Schedule D (Form 1040); or Form 4797

Code X. Payment obligations including guarantees and deficit 

obligations (DROs) See page 28

Code Y. Net investment income See Instructions for Form 8960

Code Z. Section 199A information Form 8995 or Form 8995-A

Code AA. Section 704(c) information See page 29

Code AB. Section 751 gain (loss) See page 29

Code AC. Section 1(h)(5) gain (loss) See page 29

Code AD. Deemed section 1250 unrecaptured gain See page 29

Code AE. Excess taxable income See Instructions for Form 8990

Code AF. Excess business interest income See page 30

Code AG. Gross receipts for section 448(c) See page 30

Code AH. Noncash charitable contributions See page 30

Code AI. Interest and tax on deferred compensation to partners See page 30

Code AJ. Excess business loss limitation See page 30

Code AK. Gain from mark-to-market election See page 30

Code AL. Section 721(c) partnership See page 30

Code AM. Section 1061 information See page 30

Code AN. Farming and fishing business See page 30

Code AO. PTP information See page 30

Code AP. Inversion gain See page 30

Code AQ. Conservation reserve program payments See page 31

Code AR. IRA disclosure See page 31

Code AS. Qualifying advanced coal project property and qualifying 

gasification project property See page 31

Code AT. Qualifying advanced energy project property See page 31

Code AU. Advanced manufacturing investment property See page 31

Code AV. Reserved for future use

Code AW. Reportable transactions See page 31

Code AX. Reserved for future use

Code AY. Foreign partners, Form 8990, Schedule A See page 31

Codes AZ through BD. Reserved for future use

Code ZZ. Other See page 31

21. Foreign taxes paid or accrued See page 31

Partner's Inst. for Sch. K-1 (Form 1065) (2023) 35