2023

Shareholder's Instructions 

for Schedule K-1

(Form 1120-S)

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

(For Shareholder's Use Only)

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue Code 

unless otherwise noted.

Contents Page

General Instructions ......................... 1

Purpose of Schedule K-1 .................. 1

Inconsistent Treatment of Items .............. 1

Errors ................................ 2

Decedent's Schedule K-1 .................. 2

Sale of S Corporation Stock ................. 2

International Boycotts ..................... 2

Elections .............................. 2

Additional Information ..................... 2

Limitations on Losses, Deductions, and 

Credits .............................. 2

Basis Limitations ..................... 2

At-Risk Limitations .................... 3

Passive Activity Limitations .............. 3

Excess Business Loss Limitations ......... 6

Specific Instructions ......................... 6

Box 1. Ordinary Business Income (Loss) ....... 6

Box 2. Net Rental Real Estate Income (Loss) .... 6

Box 3. Other Net Rental Income (Loss) ......... 7

Box 4. Interest Income .................... 7

Boxes 5a and 5b. Dividends ................ 7

Box 6. Royalties ......................... 7

Box 7. Net Short-Term Capital Gain (Loss) ...... 7

Box 8a. Net Long-Term Capital Gain (Loss) ..... 7

Box 9. Net Section 1231 Gain (Loss) .......... 8

Box 10. Other Income (Loss) ................ 8

Box 11. Section 179 Deduction .............. 9

Box 12. Other Deductions ................. 10

Box 13. Credits ......................... 12

Box 14. International Transactions ........... 14

Box 15. AMT Items ...................... 14

Box 16. Items Affecting Shareholder Basis ..... 14

Box 17. Other Information ................. 15

Box 18. More Than One Activity for At-Risk 

Purposes ........................... 18

Box 19. More Than One Activity for Passive 

Activity Purposes ..................... 18

List of Codes ............................. 19

Future Developments

For the latest information about developments related to 

Schedule K-1 (Form 1120-S) and its instructions, such as 

legislation enacted after they were published, go to 

IRS.gov/Form1120S.

General Instructions

Purpose of Schedule K-1

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

the corporation's income, deductions, credits, and other 

items. Keep it for your records. Don't file it with your tax 

return unless backup withholding is reported in box 13 

using code O. (See the instructions for Code O. Backup 

withholding, later.) The corporation files a copy of 

Schedule K-1 with the IRS.

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

last four digits of your identifying number (social security 

number (SSN), employer identification number (EIN), or 

individual taxpayer identification number (ITIN)). However, 

the corporation has reported your complete identifying 

number to the IRS.

You may be liable for tax on your share of the 

corporation's 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.

Your share of S corporation income isn't 

self-employment income and it isn't subject to 

self-employment tax.

The amount of loss and deduction you may claim 

on your tax return may be less than the amount 

reported on Schedule K-1. It is the shareholder's 

responsibility to consider and apply any applicable 

limitations. See Limitations on Losses, Deductions, and 

Credits, later, for more information.

Schedule K-1 doesn't show actual dividend 

distributions the corporation made to you. The corporation 

must report such amounts totaling $10 or more for the 

calendar year on Form 1099-DIV, Dividends and 

Distributions.

Inconsistent Treatment of Items

Generally, you must report corporate items shown on your 

Schedule K-1 (and any attached statements) the same 

way that the corporation treated the items on its return.

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Jan 9, 2024 Cat. No. 11521O
If the treatment on your original or amended return is 

inconsistent with the corporation's treatment, or if the 

corporation hasn't filed a return, 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 

corporate return hasn't been filed).

If you are 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 corporation's return. Any deficiency that 

results from making the amounts consistent may be 

assessed immediately.

Errors

If you believe the corporation has made an error on your 

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

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

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

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

unable to reach an agreement with the corporation 

regarding the inconsistency, file Form 8082.

Decedent's Schedule K-1

If you are the executor of an estate and you have received 

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

responsibility to notify the S corporation of the name and 

tax identification number (TIN) of the decedent’s estate if 

the S corporation stock is part of a decedent’s estate. This 

is information that the S corporation must have to properly 

determine its eligibility to maintain status as a subchapter 

S corporation. If a decedent died in a prior year and the S 

corporation continues to send the decedent a Schedule K1 after being notified of the decedent’s death, then you 

should request that the S corporation send a corrected 

Schedule K-1. If you receive an interest in an S 

corporation by reason of a former shareholder’s death, 

you must provide the S corporation with your name and 

TIN. For treatment of S corporation income upon the 

death of a shareholder, see Pub. 559, Survivors, 

Executors, and Administrators.

Sale of S Corporation Stock

Gain or loss from the disposition of your S corporation 

stock may be net investment income under section 1411 

and could be subject to the net investment income tax. 

See Form 8960, Net Investment Income Tax—Individuals, 

Estates, and Trusts, and its instructions for information 

about how to figure and report the tax.

International Boycotts

Every corporation that had operations in, or related to, a 

boycotting country, company, or a national of a boycotting 

country must file Form 5713, International Boycott Report.

If the corporation cooperated with an international 

boycott, it must give you a copy of its Form 5713. You 

must file your own Form 5713 to report the corporation's 

activities and any other boycott operations that you may 

have. You may lose certain tax benefits if the corporation 

participated in, or cooperated with, an international 

boycott. See Form 5713 and its instructions for details.

Elections

Generally, the corporation 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 corporation. 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 12.

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

instructions for code M in box 12.

• Section 617 (deduction and recapture of certain mining 

exploration expenditures).

• Section 901 (foreign tax credit).

Additional Information

For more information on the treatment of S corporation 

income, deductions, credits, and other items, see Pub. 

550, Investment Income and Expenses; and Pub. 925, 

Passive Activity and At-Risk Rules.

To get forms and publications, see the instructions for 

your tax return or visit the IRS website at IRS.gov.

Limitations on Losses, Deductions, 

and Credits

There are potential limitations on corporate 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, the passive activity 

limitations, and the excess business loss limitations. 

These limitations are discussed below.

Other limitations may apply to specific deductions (for 

example, the section 179 expense deduction). Specific 

limitations generally apply before at-risk and passive loss 

limitations.

Basis Limitations

Generally, the deduction for your share of aggregate 

losses and deductions reported on Schedule K-1 is 

limited to the basis of your stock and loans from you to the 

corporation. For details and exceptions, see section 

1366(d). The basis of your stock is generally figured at the 

end of the corporation's tax year. Any losses and 

deductions not allowed this year because of the basis limit 

can be carried forward indefinitely and deducted in a later 

year subject to the basis limit for that year.

You are responsible for keeping the information needed 

to figure the basis of your stock in the corporation. 

Schedule K-1 provides information to help you figure your 

stock basis at the end of each corporate tax year. The 

basis of your stock (generally, its cost) is adjusted 

annually as follows and, except as noted, in the order 

listed. In addition, basis may be adjusted under other 

provisions of the Internal Revenue Code. You should 

generally use Form 7203, S Corporation Shareholder 

Stock and Debt Basis Limitations, to figure your aggregate 

stock and debt basis.

1. Basis is increased by (a) all income (including 

tax-exempt income) reported on Schedule K-1, and (b) 

the excess of the deduction for depletion (other than oil 

2 Instructions for Schedule K-1 (Form 1120-S) (2023)
and gas depletion) over the basis of the property subject 

to depletion.

You must report on your return (if you are required 

to file one) any amount required to be included in 

gross income for it to increase your basis.

2. Basis is decreased (but not below zero) by (a) 

property distributions (including cash) made by the 

corporation reported on Schedule K-1, box 16, code D, 

minus (b) the amount of such distributions in excess of the 

basis in your stock.

3. Basis is decreased (but not below zero) by (a) 

nondeductible expenses, and (b) the depletion deduction 

for any oil and gas property held by the corporation, but 

only to the extent your share of the property's adjusted 

basis exceeds that deduction.

4. Basis is decreased (but not below zero) by all 

losses and deductions reported on Schedule K-1.

You may elect to decrease your basis under (4) prior to 

decreasing your basis under (3). If you make this election, 

any amount described under (3) that exceeds the basis of 

your stock and debt owed to you by the corporation is 

treated as an amount described under (3) for the following 

tax year.

To make the election, attach a statement to your timely 

filed original or amended return that states you agree to 

the carryover rule of Regulations section 1.1367-1(g) and 

the name of the S corporation to which the rule applies. 

Once made, the election applies to the year for which it is 

made and all future tax years for that S corporation, unless 

the IRS agrees to revoke your election.

The basis of each share of stock is increased or 

decreased (but not below zero) based on its pro rata 

share of the above adjustments. If the total decreases in 

basis attributable to a share exceed that share's basis, the 

excess reduces (but not below zero) the remaining bases 

of all other shares of stock in proportion to the remaining 

basis of each of those shares.

Basis of loans. The basis of your loans to the 

corporation is generally the balance the corporation owes 

you, adjusted for any reductions and restorations of loan 

basis (see the instructions for box 16, code E). Any 

amounts described in (3) and (4), earlier, not used to 

offset amounts in (1), earlier, or to reduce your stock 

basis, are used to reduce your loan basis (to the extent of 

such basis prior to such reduction).

When determining your basis in loans to the 

corporation, remember that:

• Distributions don't reduce loan basis, and

• Loans that a shareholder guarantees or co-signs aren't 

part of a shareholder's loan basis. Shareholders only 

obtain basis from acting as a guarantee or in a similar 

capacity to the extent the shareholder makes a payment 

pursuant to the guarantee.

See the Instructions for Form 7203 for more details.

At-Risk Limitations

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

any activity carried on as a trade or business or for the 

CAUTION

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CAUTION

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production of income by the corporation, and (b) amounts 

in the activity for which you aren't at risk, you will have to 

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

allowable loss for the activity.

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

other deductions that you can claim to the amount you 

could actually lose in the activity. These losses and 

deductions include a loss on the disposition of assets and 

the section 179 expense deduction. However, if you 

acquired your stock 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 corporation. The 

activity of holding mineral property doesn't qualify for this 

exception.

Generally, you aren't at risk for amounts such as the 

following.

• The basis of your stock in the corporation or the basis of 

your loans to the corporation if the cash or other property 

used to purchase the stock or make the loans was from a 

source (a) covered by nonrecourse indebtedness (except 

for certain qualified nonrecourse financing, as defined in 

section 465(b)(6)); (b) protected against loss by a 

guarantee, stop-loss agreement, or other similar 

arrangement; or (c) that is covered by indebtedness from 

a person who has an interest in the activity or from a 

person related to a person (except you) having such an 

interest, other than a creditor.

• Any cash or property contributed to a corporate activity, 

or your interest in the corporate activity, that is (a) covered 

by nonrecourse indebtedness (except for certain qualified 

nonrecourse financing, as defined in section 465(b)(6)); 

(b) protected against loss by a guarantee, stop-loss 

agreement, or other similar arrangement; or (c) covered 

by indebtedness from a person who has an interest in the 

activity or from a person related to a person (except you) 

having such an interest, other than a creditor.

Any loss from a section 465 activity not allowed for this 

tax year will be treated as a deduction allocable to the 

activity in the next tax year.

Since at-risk limitations apply for each activity, you 

should get a separate statement of income, expenses, 

and other items, for each activity from the corporation.

Note. Schedule K-1, box 18, 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 

shareholders who:

• Are individuals, estates, or trusts; and

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

Generally, passive activities include:

1. Trade or business activities in which you didn't 

materially participate, and

2. Activities that meet the definition of rental activities 

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

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

Passive activities don't include the following.

Instructions for Schedule K-1 (Form 1120-S) (2023) 3
1. Trade or business activities in which you materially 

participated.

2. Rental real estate activities in which you materially 

participated if you were a real estate professional for the 

tax year. You were a real estate professional only if you 

met both of the following conditions.

a. More than half of the personal services you 

performed in trades or businesses were performed in real 

property trades or businesses in which you materially 

participated.

b. You performed more than 750 hours of services in 

real property trades or businesses in which you materially 

participated.

If you are married filing jointly, either you or your spouse 

must separately meet both (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. The rental of a dwelling unit any shareholder 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.

4. Activities of trading personal property for the 

account of owners of interests in the activities.

If you have a passive activity loss or credit, use Form 

8582, Passive Activity Loss Limitations, to figure your 

allowable passive losses, and Form 8582-CR, Passive 

Activity Credit Limitations, to figure your allowable passive 

credits. See the instructions for these forms for details.

If the corporation has more than one activity, it will 

attach a statement to your Schedule K-1 that identifies 

each activity (trade or business activity, rental real estate 

activity, rental activity other than rental real estate, 

portfolio income) and specifies the income (loss), 

deductions, and credits from each activity.

Note. Schedule K-1, box 19, will be checked when a 

statement is attached.

Material participation. You must determine if you 

materially participated (a) in each trade or business 

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

real estate professional (defined earlier), in each rental 

real estate activity held through the corporation.

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.

All determinations of material participation are based 

on your participation during the corporation's tax year.

Material participation standards for shareholders 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.

Individuals. If you are an individual, 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 

corporation) 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 fields of health, law, engineering, 

architecture, accounting, actuarial science, performing 

arts, consulting, or any other trade or business in which 

capital isn't a material income-producing factor.

7. Based on all the facts and circumstances, you 

participated in the activity on a regular, continuous, and 

substantial basis during the tax year.

Work counted toward material participation. 

Generally, any work that you or your spouse does in 

connection with an activity held through an S corporation 

(where you own your stock 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 

wouldn't count toward material participation include:

a. Studying and reviewing financial statements or 

reports on operations of the activity,

4 Instructions for Schedule K-1 (Form 1120-S) (2023)
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 nonmanagerial capacity.

Effect of determination. Income (loss), deductions, 

and credits from an activity are nonpassive if you 

determine that:

• You materially participated in a trade or business 

activity of the corporation, or

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

rental real estate activity of the corporation.

If you determine that you didn't materially participate in 

a trade or business activity of the corporation or if you 

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

activity of the corporation (other than a rental real estate 

activity in which you materially participated as a real 

estate professional), the amounts from that activity are 

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

credits as follows.

1. If you have an overall gain (the excess of income 

over deductions and losses, including any prior year 

unallowed loss) from a passive activity, report the income, 

deductions, and losses from the activity as indicated in 

these instructions.

2. If you have an overall loss (the excess of deductions 

and losses, including any prior year unallowed loss, over 

income) or credits from a passive activity, report the 

income, deductions, losses, and credits from all passive 

activities using the Instructions for Form 8582 or Form 

8582-CR, to see if your deductions, losses, and credits 

are limited under the passive activity rules.

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 (or credit 

equivalent to a $25,000 deduction) 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 can actively participate in a rental real 

estate activity. However, a decedent's estate (including a 

qualified revocable trust for which a section 645 election 

has been made) is treated as actively participating for its 

tax years ending less than 2 years after the decedent's 

death, if the decedent would have satisfied the active 

participation requirement for the activity for the tax year 

the decedent died.

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.

Modified adjusted gross income (MAGI) limitation. 

The maximum special allowance that single individuals 

and married individuals filing a joint return can qualify for 

is $25,000. The maximum is $12,500 for married 

individuals who file separate returns and who lived apart 

at all times during the year. The maximum special 

allowance for which an estate can qualify is $25,000 

reduced by the special allowance for which the surviving 

spouse qualifies.

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

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

deductible up to the maximum special allowance referred 

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

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

the special allowance is limited to 50% of the difference 

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

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

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

special allowance.

MAGI is your adjusted gross income figured without 

taking into account the following amounts, if applicable.

• Any passive activity loss.

• Any rental real estate loss allowed under section 469(c)

(7) to real estate professionals (defined earlier).

• Any overall loss from a publicly traded partnership.

• Any taxable social security or equivalent railroad 

retirement benefits.

• Any deductible contributions to an IRA or certain other 

qualified retirement plans under section 219.

• The student loan interest deduction.

• The deductible part of self-employment taxes.

• The exclusion from income of interest from Series EE or 

I U.S. Savings Bonds used to pay higher education 

expenses.

• The exclusion of amounts received under an employer's 

adoption assistance program.

Special rules for certain other activities. If you have 

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

to which special rules apply, the corporation will identify 

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

or on an attached statement.

If you have net income subject to recharacterization 

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

Regulations section 1.469-2(f), report such amounts 

according to the Instructions for Form 8582.

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

from either of the following activities, treat such amounts 

as nonpassive and report them as indicated in these 

instructions.

1. The rental of a dwelling unit any shareholder 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.

2. Trading personal property for the account of owners 

of interests in the activity.

Self-charged interest. The corporation will report any 

“self-charged” interest income or expense that resulted 

Instructions for Schedule K-1 (Form 1120-S) (2023) 5
from loans between you and the corporation (or between 

the corporation and another S corporation or partnership if 

both entities have the same owners with the same 

proportional interest in each entity). If there was more than 

one activity, the corporation 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 interest in the S corporation if the corporation 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 Limitations

Losses attributable to your trade or business may be 

limited, pursuant to section 461(l). See Form 461, 

Limitation on Business Losses, and its instructions for 

more information.

Specific Instructions

Part III. Shareholder's Share of 

Current Year Income, Deductions, 

Credits, and Other Items

The amounts shown in boxes 1 through 17 reflect your 

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

items, from corporate business or rental activities without 

reference to limitations on losses, credits, or other items 

that may have to be adjusted because of:

1. The adjusted basis of your stock and debt in the 

corporation,

2. The at-risk limitations,

3. The passive activity limitations, and

4. The excess business loss limitations.

For information on these provisions, see Limitations on 

Losses, Deductions, and Credits, earlier.

Other limitations may apply to specific deductions (for 

example, the section 179 expense deduction). Generally, 

specific limitations apply before the at-risk and passive 

loss limitations.

If you are an individual, and the above limitations don't 

apply to the amounts shown on your Schedule K-1, take 

the amounts shown and report them on the appropriate 

lines of your tax return. If any of the above limitations 

apply, adjust the amounts on Schedule K-1 before you 

report them on your return.

When applicable, the passive activity limitations on 

losses are applied after the limitations on losses for a 

shareholder's basis in stock and debt and the 

shareholder's at-risk amount.

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

the corporation files a return for a fiscal year, report the 

amounts on your tax return for the year in which the 

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

corporation'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 

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 your return. 

Instead, report the amounts on your return on a 

year-by-year basis.

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 boxes 10, 12, 13, and boxes 15 through 17, the 

corporation will identify each item by entering a code in 

the column to the left of the dollar amount entry space. 

See List of Codes, later.

Attached statements. The corporation 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 corporation 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 

corporation. Generally, where you report this amount on 

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

from an activity that is a passive activity to you. If you are 

an individual shareholder 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. See Limitations on Losses, 

Deductions, and Credits, earlier. If the corporation 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 corporate 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 corporate 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).

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).

Box 2. Net Rental Real Estate Income (Loss)

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

activity amount for all shareholders. 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 corporation had 

more than one rental real estate activity, it will attach a 

statement identifying the income or loss from each activity.

CAUTION

!

6 Instructions for Schedule K-1 (Form 1120-S) (2023)
If you are filing a 2023 Form 1040 or 1040-SR, use the 

following instructions to determine where to report a box 2 

amount after applying the basis and at-risk limitations on 

losses. See Limitations on Losses, Deductions, and 

Credits, earlier.

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 corporate 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. If you are a married person filing separately, you 

lived apart from your spouse all year.

e. Your total loss from the rental real estate activities 

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

married filing separately).

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).

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).

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).

Box 3. Other Net Rental Income (Loss)

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

shareholders. If the corporation had more than one rental 

activity, it will attach a statement identifying the income or 

loss from each activity. After applying the limitations on 

losses and deductions, report the income or loss as 

follows.

1. If box 3 is a loss, follow the Instructions for Form 

8582 to figure how much of the loss can be reported on 

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

2. If income is reported in box 3, report the income on 

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

See Limitations on Losses, Deductions, and Credits, 

earlier.

Portfolio Income

Portfolio income or loss (shown in boxes 4 through 8b and 

in box 10, 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 4. Interest Income

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

Box 5a. Ordinary Dividends

Report ordinary dividends on Form 1040 or 1040-SR, 

line 3b. The amount in box 5a may be attributable to 

previously taxed earnings and profits (PTEP) in annual 

PTEP accounts that you have with respect to a foreign 

corporation. You will need to determine the amount of the 

ordinary dividends that are attributable to PTEP in your 

annual PTEP accounts.

Box 5b. Qualified Dividends

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

line 3a. The amount in box 5b may be attributable to PTEP 

in annual PTEP accounts that you have with respect to a 

foreign corporation. You will need to determine the amount 

of the qualified dividends that are attributable to PTEP in 

your annual PTEP accounts.

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 line 4g of Form 4952, Investment Interest 

Expense Deduction, for important information on making 

this election.

Box 6. Royalties

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

Box 7. Net Short-Term Capital Gain (Loss)

After applying the limitations on losses and deductions, 

report the net short-term capital gain (loss) on Schedule D 

(Form 1040), Capital Gains and Losses, line 5. See 

Limitations on Losses, Deductions, and Credits, earlier.

Box 8a. Net Long-Term Capital Gain (Loss)

After applying the limitations on losses and deductions, 

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

(Form 1040), line 12. See Limitations on Losses, 

Deductions, and Credits, earlier.

Box 8b. Collectibles (28%) Gain (Loss)

After applying the limitations on losses and deductions, 

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

Gain Worksheet—Line 18 in the Instructions for 

Schedule D (Form 1040). See Limitations on Losses, 

Deductions, and Credits, earlier.

Box 8c. Unrecaptured Section 1250 Gain

There are three types of unrecaptured section 1250 gain. 

Report your share of this unrecaptured gain on the 

Unrecaptured Section 1250 Gain Worksheet—Line 19 in 

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

• Report unrecaptured section 1250 gain from the sale or 

exchange of the corporation'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.

TIP

Instructions for Schedule K-1 (Form 1120-S) (2023) 7
• Report unrecaptured section 1250 gain from an estate, 

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

investment trust (REIT) on line 11.

If the corporation reports only unrecaptured section 

1250 gain from the sale or exchange of its business 

assets, it will enter a dollar amount in box 8c. If it reports 

the other two types of unrecaptured gain, it will provide an 

attached statement that shows the amount for each type 

of unrecaptured section 1250 gain.

Box 9. Net Section 1231 Gain (Loss)

The amount in box 9 is generally passive if it is from a:

• Rental activity, or

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

participate.

However, an amount from a rental real estate activity 

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

professional (defined earlier) and you materially 

participated in the activity.

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

activity, or (b) a gain, report it on Form 4797, Sales of 

Business Property, line 2, column (g), after applying the 

basis and at-risk limitations on losses. See Limitations on 

Losses, Deductions, and Credits, earlier. Don't complete 

columns (b) through (f) on line 2 of Form 4797. Instead, 

enter “From Schedule K-1 (Form 1120-S)” across these 

columns.

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

Passive Loss Limitations in the Instructions for Form 4797. 

After applying the limitations on losses and deductions, 

report the loss following the Instructions for Form 8582 to 

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

the corporation had net section 1231 gain (loss) from 

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

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

Box 10. Other Income (Loss)

See List of Codes, later.

Losses reported in box 10 may be limited. See 

Limitations on Losses, Deductions, and Credits, 

earlier.

Code A. Other portfolio income (loss). The 

corporation 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 corporation held a residual interest in a real estate 

mortgage investment conduit (REMIC), it will report on the 

statement your share of REMIC taxable income (net loss) 

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

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

any “excess inclusion” that you report on Schedule E 

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

section 212 expenses that you report on Schedule E 

(Form 1040), line 38, column (e).

Code B. Involuntary conversions. This is your net loss 

from involuntary conversions due to casualty or theft. The 

corporation will give you a statement that shows the 

amounts to be reported on Form 4684, Casualties and 

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

CAUTION

!

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 corporation will provide 

you with the information you need to complete Form 4684.

Code C. Section 1256 contracts and straddles. The 

corporation 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 

corporation will give you a statement that shows the 

information needed to recapture certain mining 

exploration costs (section 617).

Code E. Section 951A(a) income inclusions. If the 

corporation (and its shareholders, as applicable) has 

elected under Proposed Regulations section 1.958-1(e)

(2) to be treated as an entity for purposes of section 951A, 

this is your share of the corporation's global intangible 

low-taxed income amount. Report this amount on 

Schedule 1 (Form 1040), Additional Income and 

Adjustments to Income, line 8o, or the comparable line of 

your income tax return, as an addition to any amount of 

global intangible low-taxed income (GILTI) under section 

951A otherwise computed on Form 8992, U.S. 

Shareholder Calculation of Global Intangible Low-Taxed 

Income (GILTI).

This information will be provided in box 10 using 

code E only if the corporation (and its 

shareholders, if applicable) has elected to be 

treated as an entity for purposes of section 951A under 

Proposed Regulations section 1.958-1(e)(2). If no election 

has been made under the proposed regulations, see the 

instructions for Part V of Schedule K-3 (Form 1120-S), 

Shareholder's Share of Income, Deductions, Credits, 

etc.—International.

Code F. Inclusions of subpart F income. The 

corporation will provide your share of its section 951(a)(1)

(A) inclusions. Report this amount on your Form 1040, 

1040-SR, or relevant income tax return.

Code G. Section 951(a)(1)(B) inclusions. The 

corporation will provide your share of its section 951(a)(1)

(B) inclusions. Report this amount on your Form 1040, 

1040-SR, or relevant income tax return.

If Regulations section 1.958-1(d) applies for the 

tax year (for example, if the corporation did not 

elect to be treated as an entity under Proposed 

Regulations section 1.958-1(e)(2)), no information will be 

provided in box 10 using codes F or G. Instead, the 

corporation will provide information needed to figure your 

section 951(a) inclusions in Part V of Schedule K-3 (Form 

1120-S).

Code H. Reserved for future use.

Code I. Gain (loss) from disposition of oil, gas, geothermal, or other mineral properties. The corporation 

will attach a statement that provides a description of the 

property, your share of the amount realized from the 

disposition, your share of the corporation's adjusted basis 

in the property (for other than oil or gas properties), and 

your share of the total intangible drilling costs, 

CAUTION

!

CAUTION

!

8 Instructions for Schedule K-1 (Form 1120-S) (2023)
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 in Part I of Form 4797. Report a gain 

in Part III of Form 4797 in accordance with the instructions 

for line 28. See Regulations section 1.1254-4 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 income from recoveries 

of tax benefit items on Schedule 1 (Form 1040), line 8z, to 

the extent it reduced your tax in the prior year.

Code K. Gambling gains and losses. 

• If the corporation 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), Itemized Deductions, line 16.

• If the corporation 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. Reserved for future use.

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

corporation should give you (a) the name of the 

corporation that issued qualified small business (QSB) 

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

1040)), (b) your share of the corporation's adjusted basis 

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

QSB stock was bought and sold. To qualify for the section 

1045 rollover:

• You must have held an interest in the corporation during 

the entire period in which the corporation 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 corporation 

at the time the QSB stock was acquired.

See Form 8949, Sales and Other Dispositions of 

Capital Assets, Schedule D (Form 1040), and the related 

instructions for details on how to report the gain and the 

amount of the allowable postponed gain.

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

The corporation should also give you (a) the name of the 

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

the corporation's adjusted basis and sales price of the 

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

and sold. To qualify for the section 1045 rollover:

• You must have held an interest in the corporation during 

the entire period in which the corporation held the QSB 

stock (more than 6 months prior to the sale),

• 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 corporation 

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 corporation.

See Form 8949, Schedule D (Form 1040), and the 

related instructions for details on how to report the gain 

and the amount of the allowable postponed gain.

Code O. Sale or exchange of QSB stock with section 

1202 exclusion. Gain from the sale or exchange of QSB 

stock eligible for the section 1202 exclusion. The 

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

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

the corporation's adjusted basis and sales price of the 

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

and sold. The following additional limitations apply at the 

shareholder level.

• You must have held an interest in the corporation when 

the corporation acquired the QSB stock and at all times 

thereafter until the corporation 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 corporation at the time the 

QSB stock was acquired.

See Form 8949, Sales and Other Dispositions of 

Capital Assets, Schedule D (Form 1040), and the related 

instructions for details on how to report the gain and the 

amount of the allowable exclusion.

Codes P through R. Reserved for future use.

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

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

gain (loss) from Schedule D (Form 1120-S), Capital Gains 

and Losses and Built-in Gains that isn't portfolio income. 

An example is gain or loss from the disposition of 

nondepreciable personal property used in a trade or 

business activity of the corporation. 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 income (loss). Amounts with code ZZ 

are other items of income, gain, or loss not included in 

boxes 1 through 9 or in box 10 using codes A through S. 

The corporation should give you a description and the 

amount of your share for each of these items.

Report loss items that are passive activity amounts to 

you following the Instructions for Form 8582.

Deductions

There are potential limitations on corporate losses 

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, the 

passive activity limitations, and the excess business loss 

limitations. See Limitations on Losses, Deductions, and 

Credits, earlier.

Box 11. Section 179 Deduction

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

property placed in service during the year from other 

CAUTION

!

Instructions for Schedule K-1 (Form 1120-S) (2023) 9
sources, to complete Part I of Form 4562, Depreciation 

and Amortization. The corporation will report on an 

attached statement your share of the cost of any qualified 

enterprise zone property or qualified real property it 

placed in service during its tax year. Report the amount 

from line 12 of Form 4562 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), after applying the basis and 

at-risk limitations on losses. See Limitations on Losses, 

Deductions, and Credits, earlier.

Box 12. Other Deductions

See List of Codes, later.

Deductions reported in box 12 may be limited. 

See Limitations on Losses, Deductions, and 

Credits, earlier.

Contributions. Codes A through G. The corporation 

will give you a statement that shows charitable 

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

20% adjusted gross income (AGI) limitations.

If the corporation made a property contribution, it will 

report on an attached statement your share of both the fair 

market value (FMV) and adjusted basis of the property. 

Use these amounts to adjust your stock basis. If the 

corporation made a qualified conservation contribution, it 

will report the FMV of the underlying property before and 

after the donation, the type of legal interest contributed, 

and a description of the conservation purpose furthered 

by the donation. If the corporation made a contribution of 

real property located in a registered historic district, it will 

report any information you will need to take a deduction.

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 Pub. 526.

Charitable contribution deductions aren't taken into 

account in figuring your passive activity loss for the year. 

Don't enter them on Form 8582.

The corporation will report your share of qualified 

conservation contributions of property. A corporation’s 

charitable conservation contribution (or a corporation’s 

distributive share of a charitable conservation contribution 

from a lower-tier partnership) is not treated as a qualified 

conservation contribution if the amount of such 

contribution (or such distributive share) exceeds 2.5 times 

the sum of each shareholder’s relevant basis in the 

corporation. See Qualified Conservation Contribution in 

Pub. 526 and Disallowance of Conservation Contribution 

deductions by certain pass-through entities in the 

Instructions for Form 8283.

Form 8283. If you received a copy of Form 8283, 

Noncash Charitable Contributions, from the corporation, 

attach the copy to your tax return. Use the amount shown 

on your Schedule K-1, not the amount shown on the Form 

8283, to figure your deduction.

You must fill out your own Form 8283 with the 

information the corporation provides you and attach the 

Form 8283 the corporation provides you to your return. 

See the Instructions for Form 8283 for more details.

CAUTION

!

If the corporation claims a qualified conservation 

contribution, the corporation will provide you with your 

relevant basis. You must report this on your own Form 

8283, line 3, column (h). The corporation may need 

information from you to calculate relevant basis.

If the corporation is the entity where the noncash 

charitable contribution was originally reported, you input 

the entity name and identifying number on your own Form 

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

If the corporation is not the entity where the noncash 

charitable contribution was originally reported, the 

corporation will provide you the entity name and 

identifying number that the noncash charitable 

contribution was originally reported. Input this information 

on your own Form 8283.

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.

Code C. Noncash contributions (50%). Report this 

amount, subject to the 50% AGI limitation, on Schedule A 

(Form 1040), line 12.

Food inventory contributions. The corporation 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 12 using code C. The corporation will also report your 

share of the corporation'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.

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

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

Worksheet 2. Applying the Deduction Limits in Pub. 526.

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

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

(Form 1040), line 12.

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

report on an attached statement 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 12 using code C. If you are a 

farmer or rancher, you qualify for a 100% AGI limitation for 

this contribution. Otherwise, your deduction for this 

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

amount, subject to your applicable limitation, on 

10 Instructions for Schedule K-1 (Form 1120-S) (2023)
Schedule A (Form 1040), line 12. See Pub. 526 for more 

information on qualified conservation contributions.

Code H. Investment interest expense. Report this 

amount on Form 4952, line 1.

If the corporation has investment income or other 

investment expense, it will report your share of these 

items in box 17 using codes A and B. Include investment 

income and expenses from other sources to figure how 

much of your total investment interest is deductible.

For more information on the special provisions that 

apply to investment interest expense, see Form 4952 and 

Pub. 550.

Code I. Deductions—Royalty income. Report 

deductions allocable to royalties on Schedule E (Form 

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

Schedule K-1 (Form 1120-S).”

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. The 

corporation will show on an attached statement the type 

and the amount of qualified expenditures for which you 

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

also identify the property for which the expenditures were 

paid or incurred. If there is more than one type of 

expenditure, the amount of each type will also be listed.

If you deduct these expenditures in full in the current 

year, they are treated as adjustments or tax preference 

items for purposes of alternative minimum tax. However, 

you may elect to amortize these expenditures over the 

number of years in the applicable period rather than 

deduct 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 

periods begin with the month in which such costs were 

paid or incurred.

Make the election on Form 4562. If you make the 

election, report the current year amortization of section 

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

Schedule E (Form 1040), line 28. If you 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 in column (i) of line 28 if you 

materially participated in the activity. If you didn't 

materially participate, follow the Instructions for Form 8582 

to figure how much of the deduction can be reported in 

column (g).

Code K. Reserved for future use.

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 (Form 1040), 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. 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 N. Reserved for future use.

Code O. Reforestation expense deduction. The 

corporation 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 corporation'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 P through V. Reserved for future use.

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 are allowed to deduct.

Code X. Film, television, and theatrical production 

expenditures. The corporation will provide a statement 

that describes the film, television, or live theatrical 

production generating these expenses. 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).

Code Y. Expenditures for removal of barriers. 

Expenditures for the removal of architectural and 

transportation barriers to the elderly and disabled that the 

corporation 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 

Instructions for Schedule K-1 (Form 1120-S) (2023) 11
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 

corporation 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). Material participation is defined earlier under 

Passive Activity Limitations. 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.

Codes AD through AJ. Reserved for future use.

Code ZZ. Other deductions. Amounts with code ZZ are 

other deductions not included in box 12 using codes A 

through AC. The corporation will give you a description 

and the amount of your share for each of these items.

Box 13. Credits

See List of Codes, later.

If you have credits that are passive activity credits to 

you, you must complete Form 8582-CR in addition to the 

credit forms identified below. See Passive Activity 

Limitations, earlier, and the Instructions for Form 8582-CR 

for details.

In general, shareholders whose only sources for a 

credit listed on Form 3800, General Business 

Credit, Part III, are partnerships, S corporations, 

estates, trusts, and cooperatives, aren't required to 

complete the applicable credit form or attach it to their 

return. Instead, they can report the credit amounts 

reported to them by these pass-through entities directly on 

Form 3800, Part III, and enter the EIN of the entity in 

column (d) of Part III. However, when applicable, all 

shareholders must complete and attach the following 

credit forms to their return.

• Form 3468, Investment Credit (Form 3800, Part III, 

line 1a).

• Form 8864, Biodiesel, Renewable Diesel, or 

Sustainable Aviation Fuels Credit (Form 3800, Part III, 

line 1l).

See the Instructions for Form 3800 for more details.

Code A. Zero-emission nuclear power production 

credit. Report this amount in Part II of Form 7213, 

Nuclear Power Production Credit, or Form 3800, Part III, 

line 1u (see TIP, earlier).

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

or Form 3800, Part III, line 1cc (see TIP, earlier).

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

42(j)(5) applies, the corporation will report your share of 

the low-income housing credit using code C. If section 

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

reported using code D. Any allowable low-income housing 

credit reported using code C or code D is reported on 

Form 8586, Low-Income Housing Credit, line 4, or Form 

3800, Part III, line 4d (see TIP, earlier).

TIP

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 stock 

in the corporation. 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 corporation 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 17 using 

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

the corporation is reporting expenditures from more than 

one activity, an attached statement will separately identify 

the expenditures from each activity.

Combine the expenditures (for Form 3468 reporting) 

from box 13, code E, and from box 17, code C. The 

expenditures related to rental real estate activities (box 13, 

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

other qualified rehabilitation expenditures (box 17, code 

C) because they are subject to different passive activity 

limitation rules. See the Instructions for Form 8582-CR for 

details.

Code F. Other rental real estate credits. The 

corporation 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 corporation 

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 corporation 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 corporation 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 

regulated investment company or real estate investment 

trust. Report these taxes on Schedule 3 (Form 1040), 

Additional Credits and Payments, line 13a. Reduce the 

basis of your stock by this tax.

Code I. Biofuel producer credit. Report this amount on 

line 3 of Form 6478, Biofuel Producer Credit, or Form 

3800, Part III, line 4c (see TIP, earlier).

Code J. Work opportunity credit. Report this amount 

on line 3 of Form 5884, Work Opportunity Credit, or Form 

3800, Part III, line 4b (see TIP, earlier).

Code K. Disabled access credit. Report this amount on 

line 7 of Form 8826, Disabled Access Credit, or Form 

3800, Part III, line 1e (see TIP, earlier).

12 Instructions for Schedule K-1 (Form 1120-S) (2023)
Code L. Empowerment zone employment credit. 

Report this amount on line 3 of Form 8844, Empowerment 

Zone Employment Credit, or Form 3800, Part III, line 3 

(see TIP, earlier).

Code M. Credit for increasing research activities. 

Report this amount on line 37 of Form 6765, Credit for 

Increasing Research Activities, or Form 3800, Part III, 

line 1c (see TIP, earlier) as follows.

• The S corporation will provide information necessary to 

determine if it is an eligible small business under section 

38(c)(5)(A). If you and the S corporation 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 line 5 of Form 8846, 

Credit for Employer Social Security and Medicare Taxes 

Paid on Certain Employee Tips, 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 your Schedule K-1 to your tax return. 

Instead of attaching a copy of your Schedule K-1 to your 

tax return, you can include a statement with your return 

that provides the corporation's name, address, EIN, and 

backup withholding amount.

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.

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 on Form 7207, Advanced Manufacturing 

Production Credit, or Form 3800, Part III, line 1b (see TIP, 

earlier).

Codes W and X. Reserved for future use.

Code Y. Clean hydrogen production credit. Report 

this amount on Form 7210, Clean Hydrogen Production 

Credit, or Form 3800, Part III, line 1g (see TIP, earlier).

Code Z. Orphan drug credit. Report this amount on 

Form 8820, Orphan Drug Credit, or Form 3800, Part III, 

line 1h (see TIP, earlier).

Code AA. Enhanced oil recovery credit. Report this 

amount on Form 8830, Enhanced Oil Recovery Credit, or 

Form 3800, Part III, line 1t (see TIP, earlier).

Code AB. Renewable electricity production credit. 

The corporation will provide a statement showing the 

allocation of the credit for production during the 4-year 

period beginning on the date the facility was placed in 

service and for production after that period. Report this 

amount on Form 8835, Renewable Electricity Production 

Credit, or Form 3800, Part III, line 1f (see TIP, earlier).

Code AC. Biodiesel, renewable diesel, or sustainable 

aviation fuels credit. If this credit includes the small 

agri-biodiesel producer credit or the sustainable aviation 

fuels credit, the corporation 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, New Markets Credit, or Form 3800, Part III, 

line 1i (see TIP, earlier).

Code AE. Credit for small employer pension plan 

startup costs. Report this amount on Form 8881, Credit 

for Small Employer Pension Plan Startup Costs, 

Auto-Enrollment, and Military Spouse Retirement Plan, 

Part I, or Form 3800, Part III, line 1j (see TIP, earlier).

Code AF. Credit for small employer auto-enrollment. 

Report this amount on Form 8881, Part II, or Form 3800, 

Part III, line 1dd (see TIP, earlier).

Code AG. Credit for military spouse participation. 

Report this amount on Form 8881, Part III, or Form 3800, 

Part III, line 1ee (see TIP, earlier).

Code AH. Credit for employer-provided childcare facilities and services. Report this amount on Form 8882 

or Form 3800, Part III, line 1k (see TIP, earlier).

Code AI. Low sulfur diesel fuel production credit. 

Report this amount on Form 8896, Low Sulfur Diesel Fuel 

Production Credit, or Form 3800, Part III, line 1m (see TIP, 

earlier).

Code AJ. Qualified railroad track maintenance credit. 

Report this amount on Form 8900, Qualified Railroad 

Track Maintenance Credit, or Form 3800, Part III, line 4g 

(see TIP, earlier).

Code AK. Credit for oil and gas production from marginal wells. Report this amount on Form 8904, Credit for 

Oil and Gas Production From Marginal Wells, or Form 

3800, Part III, line 1bb (see TIP, earlier).

Code AL. Distilled spirits credit. Report this amount on 

Form 8906, Distilled Spirits Credit, or Form 3800, Part III, 

line 1n (see TIP, earlier).

Code AM. Energy efficient home credit. Report this 

amount on Form 8908, Energy Efficient Home Credit, or 

Form 3800, Part III, line 1p (see TIP, earlier).

Instructions for Schedule K-1 (Form 1120-S) (2023) 13
Code AN. Alternative motor vehicle credit. Report this 

amount on Form 8910, Alternative Motor Vehicle Credit, or 

Form 3800, Part III, line 1r (see TIP, earlier).

Code AO. Alternative fuel vehicle refueling property 

credit. Report this amount on Form 8911, Alternative 

Fuel Vehicle Refueling Property Credit, Part II, or Form 

3800, Part III, line 1s (see TIP, earlier).

Code AP. Clean renewable energy bond credit. 

Report this amount on Form 8912, Credit to Holders of 

Tax Credit Bonds.

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, Credit for 

Employer Differential Wage Payments, or Form 3800, Part 

III, line 1w (see TIP, earlier).

Code AW. Carbon oxide sequestration credit. Report 

this amount on Form 8933, Carbon Oxide Sequestration 

Credit, or Form 3800, Part III, line 1x (see TIP, earlier).

Code AX. Carbon oxide sequestration credit recapture. The corporation will provide any information you 

need to figure your recapture tax. Report the carbon oxide 

sequestration credit recapture amount on Form 8933, Part 

III, Section D, line 22.

Code AY. New clean vehicle credit. Report this amount 

on Form 8936, Clean Vehicle Credits, Part II, or Form 

3800, Part III, line 1y (see TIP, earlier).

Code AZ. Qualified commercial clean vehicle credit. 

Report this amount on Form 8936, Part V, or Form 3800, 

Part III, line 1aa (see TIP, earlier).

Code BA. Credit for small employer health insurance 

premiums. Report this amount on Form 8941, Credit for 

Small Employer Health Insurance Premiums, or Form 

3800, Part III, line 4h (see TIP, earlier).

Code BB. Employer credit for paid family and medical leave. Report in Form 8994, Employer Credit for Paid 

Family and Medical Leave, or Form 3800, Part III, line 4j 

(see TIP, earlier).

Code BC. Eligible credits from transferor(s) under 

section 6418. On a statement attached to Schedule K-1, 

the corporation will identify the type of transferred credits 

and any other information you need to file your tax returns. 

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 credits. On a statement attached to 

Schedule K-1, the corporation will identify the type of 

credit and any other information you need to figure credits 

other than those reported with codes A through BC. Most 

credits identified by code ZZ will be reported on Form 

3800, Part III (see TIP, earlier).

Box 14. International Transactions

If the S corporation checked the box, see the attached 

Schedule K-3 with respect to items of international tax 

relevance. If the S corporation did not check the box, the S 

corporation attached a statement to the Schedule K-1 (or 

issued a statement prior to furnishing the Schedule K-1) 

notifying the shareholder that the shareholder will not 

receive Schedule K-3 from the S corporation unless the 

shareholder requests the schedule.

For additional information, see the Shareholder's 

Instructions for Schedule K-3 (Form 1120-S).

Box 15. Alternative Minimum Tax (AMT) Items

See List of Codes, later.

Use the information reported in box 15 (as well as your 

adjustments and tax preference items from other sources) 

to prepare your Form 6251, Alternative Minimum 

Tax—Individuals, or Schedule I (Form 1041), Alternative 

Minimum Tax—Estates and Trusts.

Code A. Post-1986 depreciation adjustment. This 

amount is your share of the corporation's post-1986 

depreciation adjustment. If you are an individual 

shareholder, report this amount on Form 6251, line 2l.

Code B. Adjusted gain or loss. This amount is your 

share of the corporation's adjusted gain or loss. If you are 

an individual shareholder, report this amount on Form 

6251, line 2k.

Code C. Depletion (other than oil & gas). This amount 

is your share of the corporation's depletion adjustment. If 

you are an individual shareholder, 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 corporation should have attached a 

statement that shows any income from, or deductions 

allocable to, such properties that are included in boxes 2 

through 12, 16, and 17 of Schedule K-1. Use the amounts 

reported here and any other reported amounts to help you 

figure the net amount to enter on Form 6251, line 2t.

Code F. Other AMT items. Report the information on the 

statement attached by the corporation on the applicable 

lines of Form 6251 or Schedule I (Form 1041).

Box 16. Items Affecting Shareholder Basis

See List of Codes, later.

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 corporation 

during the year. Individual shareholders include this 

amount on Form 1040 or 1040-SR, line 2a. Generally, you 

must increase the basis of your stock by this amount.

14 Instructions for Schedule K-1 (Form 1120-S) (2023)
Code B. Other tax-exempt income. Generally, you must 

increase the basis of your stock by the amount shown, but 

don't include it in income on your tax return.

Code C. Nondeductible expenses. The nondeductible 

expenses paid or incurred by the corporation aren't 

deductible on your tax return. Generally, you must 

decrease the basis of your stock by this amount.

Code D. Distributions. Reduce the basis of your stock 

(as explained earlier) by distributions, not reported on 

Form 1099-DIV, of property or money. This amount will 

include any amounts included in income with respect to 

new clean renewable energy, qualified energy 

conservation, qualified school construction, build 

America, or (for bonds issued after October 3, 2008) 

qualified zone academy bonds. If these distributions 

exceed the basis of your stock, the excess is treated as 

capital gain from the sale or exchange of property and is 

reported on Form 8949 and Schedule D (Form 1040).

Code E. Repayment of loans from shareholders. If 

these payments are made on a loan with a reduced basis, 

the repayments must be allocated in part to a return of 

your basis in the loan and in part to the receipt of income. 

See Regulations section 1.1367-2 for information on 

reduction in basis of a loan and restoration in basis of a 

loan with a reduced basis. See Rev. Rul. 64-162, 1964-1 

(Part 1) C.B. 304, and Rev. Rul. 68-537, 1968-2 C.B. 372, 

for details.

Code F. Foreign taxes paid or accrued. Report this 

amount on Form 7203, line 46(a). Do not use this amount 

to complete your Form 1116. See Schedule K-3 to 

complete your Form 1116.

Box 17. Other Information

See List of Codes, later.

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. Qualified rehabilitation expenditures (other 

than rental real estate). The corporation 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 17 using 

code C. Your share of qualified rehabilitation expenditures 

related to rental real estate activities is reported in box 13 

using code E. See the Instructions for Form 3468 for 

details. If the corporation 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 13, code E, and from box 17, code C. The 

expenditures related to rental real estate activities (box 13, 

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

other qualified rehabilitation expenditures (box 17, code 

C) because they are subject to different passive activity 

limitation rules. See the Instructions for Form 8582-CR for 

details.

Code D. Basis of energy property. If the corporation 

provides an attached statement for code D, use the 

information on the statement to complete the applicable 

energy credit in Part VI of Form 3468. See the Instructions 

for Form 3468 for details.

Codes E and F. Recapture of low-income housing 

credit. The corporation will identify by code E your share 

of any recapture of a low-income housing credit from its 

investment in partnerships to which the provisions of 

section 42(j)(5) apply. All other recapture of low-income 

housing credits will be identified by code F.

Keep a separate record of each type of recapture so 

that you will be able to correctly figure any credit recapture 

that may result from the disposition of all or part of your 

corporate stock. For details, see Form 8611.

Code G. Recapture of investment credit. The 

corporation 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 your proportionate 

stock interest in the corporation is reduced by more than 

one-third after you were allocated part of an investment 

credit.

Code H. Recapture of other credits. On a statement 

attached to Schedule K-1, the corporation will report any 

information you need to figure the recapture of other 

credits including the new markets credit, Indian 

employment credit, credit for employer-provided childcare 

facilities and services, alternative motor vehicle credit, 

alternative fuel vehicle refueling property credit, and 

qualified plug-in electric drive motor vehicle credit.

Code I. Look-back interest—Completed long-term 

contracts. The corporation 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 J. Look-back interest—Income forecast method. The corporation 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 K. Dispositions of property with section 179 

deductions. The corporation 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 shareholders with code K. If the 

corporation passed through a section 179 expense 

deduction for the property, you must report the gain or 

loss, if any, 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 corporation 

will provide all the following information.

1. Description of the property.

Instructions for Schedule K-1 (Form 1120-S) (2023) 15
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 corporation's 

tax year(s) in which the amount was passed through.

To figure the 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 

than the amount of section 179 expense you deducted for 

the property if your interest in the corporation has 

changed.

8. If the disposition is due to a casualty or theft, any 

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 corporation will separately report your share 

of all payments received for the property in the following 

tax years. See the Instructions for Form 6252 for details.

Code L. Recapture of section 179 deduction. The 

corporation will report your share of any recapture of 

section 179 expense deduction if business use of any 

property for which the section 179 expense deduction was 

passed through to shareholders dropped to 50% or less 

before the end of the recapture period. If this occurs, the 

corporation must provide the following information.

1. Your share of the depreciation allowed or allowable 

(not including the section 179 expense deduction).

2. Your share of the section 179 expense deduction (if 

any) passed through for the property and the corporation'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 M. Section 453(l)(3) information. The 

corporation 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. Report the interest on Schedule 2 

(Form 1040), line 14. See section 453(l)(3) for details on 

how to figure the interest.

Code N. Section 453A(c) information. The corporation 

will report any information you need to figure the interest 

charge under section 453A(c) with respect to certain 

installment sales. See Pub. 537, Installment Sales. This 

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.

• Payments received in prior years, not including interest 

whether stated or unstated.

• Installment sale income.

• Character of the income—capital or ordinary.

See section 453A(c) for information on how to compute 

the interest charge on the deferred tax liability. The section 

453A interest charge is reported on the Other taxes line of 

your tax returns. See Interest on Deferred Tax in Pub. 537 

for additional details on how to compute the section 

453A(c) interest.

Code O. Section 1260(b) information. The corporation 

will report any information you need to figure the interest 

due under section 1260(b). If the corporation 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 on how 

to figure the interest.

Code P. Interest allocable to production expenditures. The corporation will report any information you 

need relating to interest you are required to capitalize 

under section 263A for production expenditures. See 

Regulations sections 1.263A-8 through 1.263A-15 for 

details.

Code Q. Capital construction fund (CCF) nonqualified withdrawals. The corporation 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 21. In the space 

to the left of line 21, enter the amount of tax and interest 

and “CCF.” See Pub. 595 for details.

Code R. Depletion information—Oil and gas. This is 

your share of gross income from the property, share of 

production for the tax year, and other information needed 

to figure your depletion deduction for oil and gas wells. 

The corporation should also allocate to you a 

proportionate share of the adjusted basis of each 

corporate oil or gas property.

Reduce the basis of your stock by the amount of this 

deduction up to the extent of your adjusted basis in the 

property.

Codes S and T. Reserved for future use.

16 Instructions for Schedule K-1 (Form 1120-S) (2023)
Code U. Net investment income. The corporation may 

use code U to report information you may need to 

determine your net investment income tax under section 

1411, including information regarding income from 

controlled foreign corporations (CFCs) and passive 

foreign investment companies (PFICs), the stock of which 

is owned by the corporation. Any information not provided 

elsewhere on Schedule K-3 (or an attachment to 

Schedule K-3) is provided using code U. For CFCs and 

PFICs that you treat as qualified electing funds (QEFs), 

the information that is relevant to you will depend on 

whether you, the corporation, or a subsidiary 

pass-through entity has made an election under 

Regulations section 1.1411-10(g) with respect to the CFC 

or QEF. For example, if the corporation made an election 

under Regulations section 1.1411-10(g) for a CFC, the 

stock of which is owned by the corporation, and the 

relevant income and deduction items derived from that 

CFC are reported elsewhere on Schedule K-1, you will not 

need the information provided using code U to complete 

your Form 8960.

Follow the Instructions for Form 8960 to figure and 

report your net investment income and adjusted gross 

income or modified adjusted gross income. See 

Regulations sections 1.1411-1 through 1.1411-10 for 

more details.

Code V. 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 publicly traded partnership (PTP) income from 

your S corporation. The S corporation will provide the 

information you need to figure your deduction. You will use 

one of these two forms to figure your QBI deduction.

1. Use Form 8995, Qualified Business Income 

Deduction Simplified Computation, if:

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); and

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 these 

requirements.

QBI pass-through entity reporting information. Use 

the information provided to you by your S corporation to 

complete the appropriate form identified above.

QBI or qualified PTP items subject to 

shareholder-specific determinations. The amounts 

reported to you reflect your pro rata share of items from 

the S corporation’s trade(s) or 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 Form 8995-A.

W-2 wages. The amounts reported reflect your pro rata 

share of the S corporation’s W-2 wages allocable to the 

QBI of each qualified trade or business, or aggregation. 

See the instructions for Form 8995 or Form 8995-A.

Unadjusted basis immediately after acquisition 

(UBIA) of qualified property. The amounts reported 

reflect your pro rata share of the S corporation’s UBIA of 

qualified property of each qualified trade or business, or 

aggregation. See the instructions for Form 8995 or Form 

8995-A.

Section 199A dividends. The amount reported 

reflects your pro rata share of the S corporation’s net 

section 199A dividends. See the instructions for Form 

8995 or Form 8995-A.

Patrons of specified agricultural and horticultural 

cooperatives. If the S corporation was a patron of an 

agricultural or horticultural cooperative (specified 

cooperative), you must use Form 8995-A to figure your 

QBI deduction. In addition, you must 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 

shareholder-specific determinations. The amounts 

reported to you reflect your pro rata share of items from 

the S corporation’s trade(s) or 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 pro rata share of the S corporation’s W-2 wages 

allocable to qualified payments of each qualified trade or 

business, or aggregation. See the Instructions for Form 

8995-A.

Section 199A(g) deduction from specified 

cooperatives. The amount reported reflects your pro rata 

share of the S corporation’s net section 199A(g) 

deduction. See the Instructions for Form 8995-A.

Codes W through Z. Reserved for future use.

Code AA. Excess taxable income. If the S corporation 

is required to file Form 8990, Limitation on Business 

Interest Expense Under Section 163(j), it may determine it 

has excess taxable income. Report this amount of excess 

taxable income on Form 8990, Schedule B, line 45(c), if 

you are required to file Form 8990. See the Instructions for 

Form 8990 for details.

Code AB. Excess business interest income. If the S 

corporation is required to file Form 8990, it may determine 

it has excess business interest income. Report this 

amount of excess business interest income on Form 8990, 

Schedule B, line 45(d), if you are required to file Form 

8990. See the Instructions for Form 8990 for details.

Instructions for Schedule K-1 (Form 1120-S) (2023) 17
Code AC. Gross receipts for section 448(c). Use the 

gross receipts amount to figure the business interest 

expense you can deduct, if applicable. See section 163(j) 

and the Instructions for Form 8990 for details.

Codes AD through AI. Reserved for future use.

Code AJ. Excess business loss limitation. If the 

corporation has deductions attributable to a business 

activity, it will provide a statement showing the aggregate 

gross income or gain and the aggregate deductions from 

the business activity that you need to figure any excess 

business loss limitation. See section 461(l) and the 

Instructions for Form 461 for details.

Codes AK through AM. Reserved for future use.

Code AN. Farming and fishing income. If you are an 

individual shareholder, report this income, as an item of 

information, on Schedule E (Form 1040), Part V, line 42. 

Don't report this income elsewhere on Form 1040 or 

1040-SR.

For a shareholder that is an estate or trust, report this 

income to the beneficiaries, as an item of information, on 

Schedule K-1 (Form 1041), Beneficiary’s Share of 

Income, Deductions, Credits, etc. Don't report it elsewhere 

on Form 1041.

Code AO. Reserved for future use.

Code AP. Inversion gain. The corporation will provide a 

statement showing the amounts of each type of income or 

gain that is included in inversion gain. The corporation 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, 

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.

Codes AQ and AR. Reserved for future use.

Code AS. Qualifying advanced coal project property 

and qualifying gasification project property. 

• For qualified investment in qualifying advanced coal 

project property, use the amounts the corporation 

provides you to figure the amounts to report on Form 

3468, Part II, Section A, lines 1a, 2a, and 3a.

• For qualified investment in qualifying gasification, use 

the amounts the corporation provides you to figure the 

amounts to report on Form 3468, Part II, Section B, lines 

4a and 5a.

Code AT. Qualifying advanced energy project property. Use the amounts the corporation provides you to 

figure the amounts to report on Form 3468, Part III, line 1a.

Code AU. Advanced manufacturing investment property. Use the amounts the corporation provides you to 

figure the amount to report on Form 3468, Part IV, line 1b.

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 corporation 

participates. If the corporation participates in a transaction 

that must be disclosed on Form 8886, Reportable 

Transaction Disclosure Statement, both you and the 

corporation may be required to file Form 8886 for the 

transaction. The determination of whether you are 

required to disclose a transaction of the corporation is 

based on the category(ies) under which the transaction 

qualifies for disclosure and is determined by you and the 

corporation. You may have to pay a penalty if you are 

required to file Form 8886 and don't do so. See the 

Instructions for Form 8886 for details.

Codes AX through BD. Reserved for future use.

Code ZZ. Other information. Any other information you 

may need to file your return not shown elsewhere on 

Schedule K-1 or Schedule K-3.

The corporation should give you a description and the 

amount of your share for each of these items.

Box 18. More Than One Activity for At-Risk 

Purposes

When the corporation has more than one activity for 

at-risk purposes, it will check this box and attach a 

statement. Use the information in the attached statement 

to correctly determine your at-risk limitations. For more 

information, see At-Risk Limitations, earlier.

Box 19. More Than One Activity for Passive 

Activity Purposes

When the corporation has more than one activity for 

passive activity purposes, it will check this box and attach 

a statement. Use the information in the attached 

statement to correctly determine your passive activity 

limitations. For more information, see Passive Activity 

Limitations, earlier.

18 Instructions for Schedule K-1 (Form 1120-S) (2023)
List of Codes

This list identifies the codes used on 

Schedule K-1 for all shareholders. 

For detailed reporting and filing 

information, see the specific line 

instructions, earlier, and the 

instructions for your income tax 

return.

Box 10. Other income (loss)

Code

A Other portfolio income (loss)

B Involuntary conversions

C Section 1256 contracts and 

straddles

D Mining exploration costs 

recapture

E Section 951A(a) income 

inclusions 

F Inclusions of subpart F income

G Section 951(a)(1)(B) 

inclusions

H Reserved for future use

I Gain (loss) from disposition of 

oil, gas, geothermal, or other 

mineral properties

J Recoveries of tax benefit items

K Gambling gains and losses

L Reserved for future use

M Gain eligible for section 1045 

rollover (replacement stock 

purchased by the corporation)

N Gain eligible for section 1045 

rollover (replacement stock 

not purchased by the 

corporation)

O Sale or exchange of QSB 

stock with section 1202 

exclusion

P – R Reserved for future use

S Non-portfolio capital gain 

(loss)

T – X Reserved for future use

ZZ Other income (loss)

Box 12. Other deductions

A Cash contributions (60%)

B Cash contributions (30%)

C Noncash contributions (50%)

D Noncash contributions (30%)

E Capital gain property to a 50% 

limit organization (30%)

F Capital gain property (20%)

G Contributions (100%)

H Investment interest expense

I Deductions—Royalty income

J Section 59(e)(2) expenditures

K Reserved for future use

L Deductions—Portfolio income 

(other)

M Preproductive period 

expenses

N Reserved for future use

O Reforestation expense 

deduction

P – V Reserved for future use

W Soil and water conservation

X Film, television, and theatrical 

production expenditures

Y Expenditures for removal of 

barriers

Z Itemized deductions

AA Contributions to a capital 

construction fund (CCF)

AB Penalty on early withdrawal of 

savings

AC Interest expense allocated to 

debt financed distributions

AD – AJ Reserved for future use

ZZ Other deductions

Box 13. Credits

A Zero-emission nuclear power 

production credit

B Production from advanced 

nuclear power facilities credit

C Low-income housing credit 

(section 42(j)(5)) from 

post-2007 buildings

D Low-income housing credit 

(other) from post-2007 

buildings

E Qualified rehabilitation 

expenditures (rental real 

estate)

F Other rental real estate credits

G Other rental credits

H Undistributed capital gains 

credit

I Biofuel producer credit

J Work opportunity credit

K Disabled access credit

L Empowerment zone 

employment credit

M Credit for increasing research 

activities

N Credit for employer social 

security and Medicare taxes

O Backup withholding

P Unused investment credit from 

the qualifying advanced coal 

project credit or qualifying 

gasification project credit 

allocated from cooperatives 

Q Unused investment credit from 

the qualifying advanced 

energy project credit allocated 

from cooperatives 

R Unused investment credit from 

the advanced manufacturing 

investment credit allocated 

from cooperatives 

S Reserved for future use

T Unused investment credit from 

the energy credit allocated 

from cooperatives 

U Unused investment credit from 

the rehabilitation credit 

allocated from cooperatives 

V Advanced manufacturing 

production credit 

W – X Reserved for future use 

Y Clean hydrogen production 

credit 

Z Orphan drug credit 

AA Enhanced oil recovery credit 

AB Renewable electricity 

production credit 

AC Biodiesel, renewable diesel, 

or sustainable aviation fuels 

credit 

AD New markets credit

AE Credit for small employer 

pension plan startup costs 

AF Credit for small employer 

auto-enrollment 

AG Credit for military spouse 

participation

AH Credit for employer-provided 

childcare facilities and services 

AI Low sulfur diesel fuel 

production credit

AJ Qualified railroad track 

maintenance credit 

AK Credit for oil and gas 

production from marginal wells 

AL Distilled spirits credit

AM Energy efficient home credit

AN Alternative motor vehicle credit

AO Alternative fuel vehicle 

refueling property credit

AP Clean renewable energy bond 

credit

AQ New clean renewable energy 

bond credit 

AR Qualified energy conservation 

bond credit 

AS Qualified zone academy bond 

credit

AT Qualified school construction 

bond credit 

AU Build America bond credit

19
AV Credit for employer differential 

wage payments 

AW Carbon oxide sequestration 

credit 

AX Carbon oxide sequestration 

credit recapture 

AY New clean vehicle credit

AZ Qualified commercial clean 

vehicle credit 

BA Credit for small employer 

health insurance premiums 

BB Employer credit for paid family 

and medical leave 

BC Eligible credits from 

transferor(s) under section 

6418

BD – BG Reserved for future use 

ZZ Other credits

Box 15. Alternative minimum tax 

(AMT) items

A Post-1986 depreciation 

adjustment

B Adjusted gain or loss

C Depletion (other than oil & gas)

D Oil, gas, & geothermal—Gross 

income

E Oil, gas, & 

geothermal—Deductions

F Other AMT items

Box 16. Items affecting shareholder basis

A Tax-exempt interest income

B Other tax-exempt income

C Nondeductible expenses

D Distributions

E Repayment of loans from 

shareholders

F Foreign taxes paid or accrued

Box 17. Other information

A Investment income

B Investment expenses 

C Qualified rehabilitation 

expenditures (other than 

rental real estate) 

D Basis of energy property 

E Recapture of low-income 

housing credit (section 42(j)

(5)) 

F Recapture of low-income 

housing credit (other) 

G Recapture of investment credit 

H Recapture of other credits 

I Look-back 

interest—Completed 

long-term contracts

J Look-back interest—Income 

forecast method

K Dispositions of property with 

section 179 deductions

L Recapture of section 179 

deduction

M Section 453(l)(3) information

N Section 453A(c) information

O Section 1260(b) information

P Interest allocable to 

production expenditures

Q Capital construction fund 

(CCF) nonqualified 

withdrawals

R Depletion information—Oil 

and gas

S – T Reserved for future use

U Net investment income

V Section 199A information

W – Z Reserved for future use

AA Excess taxable income

AB Excess business interest 

income

AC Gross receipts for section 

448(c)

AD – AI Reserved for future use

AJ Excess business loss limitation 

AK – AM Reserved for future use

AN Farming and fishing income

AO Reserved for future use

AP Inversion gain 

AQ – AR Reserved for future use

AS Qualifying advanced coal 

project property and qualifying 

gasification project property 

AT Qualifying advanced energy 

project property 

AU Advanced manufacturing 

investment property

AV Reserved for future use

AW Reportable transactions 

AX – BD Reserved for future use

ZZ Other information

20