2024

Instructions for Form 1065

U.S. Return of Partnership Income
Section references are to the Internal Revenue Code unless Contents Page
otherwise noted. Schedule M-1. Reconciliation of Income
Contents Page (Loss) per Books With Analysis of Net
How To Get Forms and Publications . . . . . . . . . . . .. 2 Income (Loss) per Return . . . . . . . . . . . . . . . 64
General Instructions . . . . . . . . . . . . . . . . . . . . . . . .. 2 Schedule M-2. Analysis of Partners' Capital
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Purpose of Form . . . . . . . . . . . . . . . . . . . . . . . .. 2
Codes for Principal Business Activity and Principal
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2
Product or Service . . . . . . . . . . . . . . . . . . . . . . 68
Who Must File . . . . . . . . . . . . . . . . . . . . . . . . .. 4
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Termination of the Partnership . . . . . . . . . . . . . .. 5
Electronic Filing . . . . . . . . . . . . . . . . . . . . . . . .. 5
Future Developments
When To File . . . . . . . . . . . . . . . . . . . . . . . . . .. 5
For the latest information about developments related to Form
Where To File . . . . . . . . . . . . . . . . . . . . . . . . .. 6
1065 and its instructions, such as legislation enacted after they
Who Must Sign . . . . . . . . . . . . . . . . . . . . . . . .. 6 were published, go to [Link]/Form1065.
Penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 7
Accounting Methods . . . . . . . . . . . . . . . . . . . .. 7 What’s New
Accounting Periods . . . . . . . . . . . . . . . . . . . . .. 8
Schedule B. New question 32 has been added regarding
Rounding Off to Whole Dollars . . . . . . . . . . . . .. 9 entities that elect out of subchapter K under section 761(a).
Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . .. 9 Previous question 31 has been renumbered to 33.
Administrative Adjustment Request (AAR) . . . . .. 9 Schedules K and K-1, line 13, Contributions. Additional
Amended Return . . . . . . . . . . . . . . . . . . . . . . .. 9 information under Contributions of property is being provided as
Assembling the Return . . . . . . . . . . . . . . . . . . . 12 it relates to Treasury Decision (T.D.) 9999 and section 170(h)(7).
Entity Classification Election . . . . . . . . . . . . . . . 12 Schedules K and K-1, line 15, Credits. Three codes have
been activated for line 15: code S, Unused investment credit
Elections Made by the Partnership . . . . . . . . . . 13
from the clean electricity investment credit allocated from
Elections Made by Each Partner . . . . . . . . . . . . 13 cooperatives; code W, Clean electricity production credit; and
Partner’s Dealings With Partnership . . . . . . . . . . 14 code X, Clean fuel production credit. Code AN was set to
Contributions to the Partnership . . . . . . . . . . . . . 14 Reserved for future use.
Dispositions of Contributed Property . . . . . . . . . 14 Schedules K and K-1, line 15, Credits, code ZZ. If the
Recognition of Precontribution Gain on partnership has made an election under section 6418 to transfer
Certain Partnership Distributions . . . . . . . . . . 14 a portion or all of the section 48, 48C, or 48E credits, see Other
(code ZZ) under Line 15f. Other Credits, later.
Unrealized Receivables and Inventory Items . . . . 14
Schedules K and K-1, line 19, code C, Other property.
At-Risk Limitations . . . . . . . . . . . . . . . . . . . . . . 14
Updated to clarify information partners may need when filing
Passive Activity Limitations . . . . . . . . . . . . . . . . 15 Form 7217, Partner’s Report of Property Distributed by a
Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . . 20 Partnership.
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Schedules K and K-1, line 20, Other information. Two codes
Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 have been activated for line 20: code AV, Clean electricity
Schedule B. Other Information . . . . . . . . . . . . . . 27 investment property; and code AX, Corporate alternative
minimum tax (CAMT). Titles to codes AC and AD have been
Schedules K and K-1. Partners' Distributive updated to better reflect the cited code sections.
Share Items . . . . . . . . . . . . . . . . . . . . . . . . . 32
Specific Instructions (Schedule K-1 Only) . . . . . . 33 Reminders
Part I. Information About the Partnership . . . . . . . 34 Electronically filed returns. Beginning January 1, 2024,
Part II. Information About the Partner . . . . . . . . . 34 partnerships were required to file Form 1065 and related forms
Specific Instructions (Schedules K and K-1, and schedules electronically if they file 10 or more returns of any
Part III, Except as Noted) . . . . . . . . . . . . . . . . 37 type during the tax year, including information, income tax,
employment tax, and excise tax returns. Certain exceptions
Flowchart To Help Determine if Items Are apply. See Electronic Filing, later.
Qualified Business Income . . . . . . . . . . . . . . 58
Analysis of Net Income (Loss) per Return . . . . . . 62 Photographs of Missing Children
Schedule L. Balance Sheets per Books . . . . . . . 63 The Internal Revenue Service is a proud partner with the
National Center for Missing & Exploited Children® (NCMEC).
Photographs of missing children selected by the Center may

Instructions for Form 1065 (2024) Catalog Number 11392V

Jan 16, 2025 Department of the Treasury Internal Revenue Service [Link]
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What Is the Taxpayer Advocate Service?

The Taxpayer Advocate Service (TAS) is an independent General Instructions

organization within the Internal Revenue Service (IRS). TAS
helps taxpayers resolve problems with the IRS, makes
administrative and legislative recommendations to prevent or
Purpose of Form
correct the problems, and protects taxpayer rights. We work to Form 1065 is an information return used to report the income,
ensure that every taxpayer is treated fairly and that you know and gains, losses, deductions, credits, and other information from the
understand your rights under the Taxpayer Bill of Rights. We are operation of a partnership. Generally, a partnership doesn't pay
Your Voice at the IRS. tax on its income but passes through any profits or losses to its
partners. Partners must include partnership items on their tax or
information returns.
How Can TAS Help Me?
Definitions
TAS can help you resolve problems that you haven’t been able to
resolve with the IRS on your own. Always try to resolve your Centralized Partnership Audit Regime
problem with the IRS first, but if you can’t, then come to TAS. Our The Bipartisan Budget Act of 2015 (BBA) created a new
services are free. centralized partnership audit regime effective for partnership tax
• TAS helps all taxpayers (and their representatives), including years beginning after 2017. The new audit regime replaces the
individuals, businesses, and exempt organizations. You may be consolidated audit proceedings under the Tax Equity and Fiscal
eligible for TAS help if your IRS problem is causing financial Responsibility Act (TEFRA). The new audit regime applies to all
difficulty, if you’ve tried and been unable to resolve your issue partnerships unless the partnership is an eligible partnership and
with the IRS, or if you believe an IRS system, process, or elects out by making a valid election using Schedule B-2 (Form
procedure just isn't working as it should. 1065).
• To get help any time with general tax topics, visit Electing out of the centralized partnership audit regime.
[Link]. The site can help you with
See Electing Out of the Centralized Partnership Audit Regime,
common tax issues and situations, such as what to do if you
later.
make a mistake on your return or if you get a notice from the IRS.
• TAS works to resolve large-scale (systemic) problems that Adjustment year. An adjustment year is a tax year in which:
affect many taxpayers. You can report systemic issues at • In the case of an adjustment pursuant to the decision of a
[Link]/SAMS. (Be sure not to include any personal court in a proceeding brought under section 6234, such decision
identifiable information.) becomes final;

2 Instructions for Form 1065 (2024)

• In the case of an administrative adjustment request (AAR) spouse credit for social security earnings on which retirement
under section 6227, such AAR is filed; or benefits are based, provided neither spouse exceeds the social
• In any other case, a notice of final partnership adjustment is security wage base limitation.
mailed under section 6231 or, if the partnership waives the Once made, the election can't be revoked without IRS
restrictions under section 6232(b) (regarding limitations on consent. If you and your spouse filed a Form 1065 for the year
assessments), the waiver is executed by the IRS. prior to the election, you don't need to amend that return or file a
Reviewed year. A reviewed year is a partnership’s tax year to final Form 1065 for the year the election takes effect.
which a partnership adjustment relates. For more information on QJVs, go to [Link]/QJV.

Partnership Foreign Partnership

A partnership is the relationship between two or more persons A foreign partnership is a partnership that isn't created or
who join to carry on a trade or business, with each person organized in the United States or under the law of the United
contributing money, property, labor, or skill and each expecting to States or of any state. In certain instances, a partnership created
share in the profits and losses of the business whether or not a or organized in the United States can be treated as a foreign
formal partnership agreement is made. partnership. See, for example, Regulations section 1.958-1(d)
(1).
The term “partnership” includes a limited partnership,
syndicate, group, pool, joint venture, or other unincorporated In addition, if a domestic section 721(c) partnership is formed
organization, through or by which any business, financial after January 17, 2017, and the gain deferral method is applied,
operation, or venture is carried on, that isn't, within the meaning then a U.S. transferor must treat the section 721(c) partnership
of regulations under section 7701, a corporation, trust, estate, or as a foreign partnership and file a Form 8865, Return of U.S.
sole proprietorship. Persons With Respect to Certain Foreign Partnerships, with
respect to the partnership. See Form 8865 and its instructions.
A joint undertaking merely to share expenses isn't a See also Regulations section 1.721(c)-6(b)(4).
partnership. Mere co-ownership of property that is maintained
and leased or rented isn't a partnership. However, if the General Partner
co-owners provide services to the tenants, a partnership exists.
A general partner is a partner who is personally liable for
Business owned and operated by spouses. Generally, if you partnership debts.
and your spouse jointly own and operate an unincorporated
business and share in the profits and losses, you're partners in a General Partnership
partnership and you must file Form 1065. A general partnership is composed only of general partners.
Exception—qualified joint venture (QJV). If you and your
spouse materially participate as the only members of a jointly Limited Partner
owned and operated business, and you file a joint return for the
A limited partner is a partner in a partnership formed under a
tax year, you can make an election to be treated as a QJV
state limited partnership law, whose personal liability for
instead of a partnership. By making the election, you won't be
partnership debts is limited to the amount of money or other
required to file Form 1065 for any year the election is in effect
property that the partner contributed or is required to contribute
and will instead report the income and deductions directly on
to the partnership. Some members of other entities, such as
your joint return.
domestic or foreign business trusts or LLCs that are classified as
A QJV conducts a trade or business where the only members partnerships, may be treated as limited partners for certain
of the joint venture are a married couple who file a joint return, purposes.
both spouses materially participate in the trade or business
(because mere joint ownership of property isn’t enough), both However, whether a partner qualifies as a limited partner for
spouses elect not to be treated as a partnership, and the purposes of self-employment tax depends on whether the
business is co-owned by both spouses and isn't held in the partner is considered a limited partner under section 1402(a)
name of a state law entity such as a partnership or limited liability (13). See Self-Employment, later.
company (LLC).
To make this election, you must divide all items of income, Limited Partnership
gain, loss, deduction, and credit between you and your spouse in A limited partnership is formed under a state limited partnership
accordance with your respective interests in the venture. Each of law and composed of at least one general partner and one or
you must file a separate Schedule C (Form 1040), Profit or Loss more limited partners.
From Business; or Schedule F (Form 1040), Profit or Loss From
Farming. On each line of your separate Schedule C or F (Form Limited Liability Partnership (LLP)
1040), you must enter your share of the applicable income, An LLP is formed under a state limited liability partnership law.
deduction, or loss. Each of you must also file a separate Generally, a partner in an LLP isn't personally liable for the debts
Schedule SE (Form 1040), Self-Employment Tax, to pay of the LLP or any other partner, nor is a partner liable for the acts
self-employment tax, as applicable. or omissions of any other partner solely by reason of being a
If you and your spouse make the election for your rental real partner.
estate business, you each must report your share of income and
deductions on Schedule E (Form 1040), Supplemental Income Limited Liability Company (LLC)
and Loss. Rental real estate income isn’t generally included in An LLC is an entity formed under state law by filing articles of
net earnings from self-employment subject to self-employment organization as an LLC. Unlike a partnership, none of the
tax and is generally subject to the passive loss limitation rules. members of an LLC are personally liable for its debts. An LLC
Electing QJV status doesn't alter the application of the may be classified for federal income tax purposes as a
self-employment tax or the passive loss limitation rules. partnership, a corporation, or an entity disregarded as an entity
To make the QJV election for 2024, jointly file the 2024 Form separate from its owner by applying the rules in Regulations
1040 or 1040-SR with the required schedules. This generally section 301.7701-3. See Form 8832, Entity Classification
doesn't increase the total tax on the return, but it does give each Election, for more details.

Instructions for Form 1065 (2024) 3

 A domestic LLC with at least two members that doesn't Schedule K, line 6a, and each member's distributive share in
TIP file Form 8832 is classified as a partnership for federal box 6a of Schedule K-1 (Form 1065). Net operating losses aren't
income tax purposes. deductible by the members but may be carried back or forward
by the organization under the rules of section 172. The religious
Nonrecourse Loans or apostolic organization must also make its annual information
return available for public inspection. For this purpose, an annual
Nonrecourse loans are those liabilities of the partnership for information return includes an exact copy of Form 1065 and all
which no partner or related person bears the economic risk of accompanying schedules and attached statements, except
loss. Schedules K-1. For more details, see Regulations section
301.6104(d)-1.
Section 721(c) Partnership
A partnership (domestic or foreign) is a section 721(c) A qualifying syndicate, pool, joint venture, or similar
partnership if there is a contribution of section 721(c) property to organization may elect under section 761(a) not to be treated as
the partnership and, after the contribution (and all transactions a partnership for federal income tax purposes and won't be
related to the contribution), (a) a related foreign person with required to file Form 1065 except for the year of election. For
respect to the U.S. transferor is a direct or indirect partner in the details, see section 761(a) and Regulations section 1.761-2.
partnership; and (b) the U.S. transferor and related persons own Real estate mortgage investment conduits (REMICs) must file
80% or more of the interests in partnership capital, profits, Form 1066, U.S. Real Estate Mortgage Investment Conduit
deductions, or losses. See Regulations section 1.721(c)-1(b) (REMIC) Income Tax Return.
(14).
Certain publicly traded partnerships (PTPs) treated as
U.S. Transferor corporations under section 7704 must file Form 1120.
A U.S. transferor is a U.S. person other than a domestic Note. Notwithstanding the preceding, a partnership that is, or
partnership. See Regulations section 1.721(c)-1(b)(18). has a branch that is, a qualified derivatives dealer (QDD) must
file Form 1065. See Qualified derivatives dealers (QDDs), later.
Section 721(c) Property
Section 721(c) property is property (other than excluded Foreign Partnerships
property) with built-in gain that is contributed to a partnership by Generally, a foreign partnership that has gross income that is (or
a U.S. transferor, including pursuant to a contribution described is treated as) effectively connected with the conduct of a trade or
in Regulations section 1.721(c)-2(d) (partnership look-through business within the United States (effectively connected income)
rule). See Regulations section 1.721(c)-1(b)(15). or has gross income derived from sources in the United States
(U.S. source income) must file Form 1065, even if its principal
Gain Deferral Contribution place of business is outside the United States or all its members
A gain deferral contribution is a contribution of section 721(c) are foreign persons. A foreign partnership required to file a return
property to a section 721(c) partnership with respect to which must generally report all of its foreign and U.S. partnership items.
the recognition of gain is deferred under the gain deferral
A foreign partnership with U.S. source income isn't required to
method. See Regulations section 1.721(c)-1(b)(7).
file Form 1065 if it qualifies for either of the following two
exceptions.
Gain Deferral Method
The gain deferral method is the method described in Regulations Note. Notwithstanding the preceding, a partnership that is, or
section 1.721(c)-3(b) applied to avoid the immediate recognition has a branch that is, a QDD must file Form 1065. See Qualified
of gain on a contribution of section 721(c) property to a section derivatives dealers (QDDs), later.
721(c) partnership under Regulations section 1.721(c)-2(b).
Exception for foreign partnerships with U.S. partners. A
Who Must File return isn't required if:
• The partnership had no effectively connected income during
Domestic Partnerships its tax year;
• The partnership had U.S. source income of $20,000 or less
Except as provided below, every domestic partnership must file during its tax year;
Form 1065, unless it neither receives income nor incurs any • Less than 1% of any partnership item of income, gain, loss,
expenditures treated as deductions or credits for federal income deduction, or credit was allocable in the aggregate to direct U.S.
tax purposes. partners at any time during its tax year; and
Note. To be certified as a qualified opportunity fund (QOF), the
• The partnership isn't a withholding foreign partnership as
defined in Regulations section 1.1441-5(c)(2)(i).
partnership must file Form 1065 and attach Form 8996, Qualified
Opportunity Fund, even if the partnership had no income or Exception for foreign partnerships with no U.S. partners
expenses to report. See Schedule B, question 25, and the and no effectively connected income. A foreign partnership
Instructions for Form 8996. with U.S. source income isn't required to file a return if it meets
the following requirements.
Entities formed as LLCs that are classified as partnerships for
federal income tax purposes have the same filing requirements
• The partnership had no effectively connected income during
its tax year.
as domestic partnerships.
• The partnership had no U.S. partners at any time during its tax
A religious or apostolic organization exempt from income tax year.
under section 501(d) must file Form 1065 to report its taxable • The partnership isn't a withholding foreign partnership as
income, which must be allocated to its members as a dividend, defined in Regulations section 1.1441-5(c)(2)(i).
whether distributed or not. Such an organization must figure its • All required Forms 1042, Annual Withholding Tax Return for
taxable income on an attached statement to Form 1065 in the U.S. Source Income of Foreign Persons, and 1042-S, Foreign
same manner as a corporation. The organization may use Form Person's U.S. Source Income Subject to Withholding, were filed
1120, U.S. Corporation Income Tax Return, for this purpose. by the partnership or another withholding agent as required by
Enter the organization's taxable income, if any, on Form 1065, Regulations sections 1.1461-1(b) and (c).

4 Instructions for Form 1065 (2024)

• The tax liability of each partner for amounts reportable under Internal Revenue Service
Regulations sections 1.1461-1(b) and (c) has been fully satisfied Ogden Submission Processing Center
by the withholding of tax at the source. Attn: Form 1065 e-file Waiver Request, Stop 1056
A foreign partnership filing Form 1065 solely to make an 1973 N. Rulon White Blvd.
election (such as an election to amortize organization expenses) Ogden, UT 84404
need only provide its name, address, and employer identification
number (EIN) on page 1 of Form 1065 and attach a statement Waiver requests can also be faxed to 877-477-0575.
citing “Regulations section 1.6031(a)-1(b)(5)” and identifying the
Contact the e-Help Desk at 866-255-0654 for questions
election being made. A foreign partnership filing Form 1065
regarding the waiver procedures or process. For more
solely to make an election must obtain an EIN if it doesn't
information, go to [Link]/e-file-providers/guidance-on-waivers-
already have one.
for-partnerships-unable-to-meet-e-file-requirements.
Qualified derivatives dealers (QDDs) A partnership that is, or Religious. If using the technology required to file
has a branch that is, a QDD (QDD partnership) must file Form electronically conflicts with the religious beliefs of the partners,
1065 even if it wouldn't be required to file otherwise. A QDD the partnership is exempt from the requirement and may file
partnership must attach a statement (QDD statement) to its using paper forms. Enter “Religious Exemption” at the top of
Form 1065 with certain required information as provided in page 1 of Form 1065 filed in paper form. Also, most filers
section 7.01(C) of the qualified intermediary agreement in Rev. claiming the religious exemption who file information returns
Proc. 2022-43, 2022-52 I.R.B. 570. If the only reason the subject to the general electronic filing requirements prescribed
partnership is filing Form 1065 is because it's a QDD by Regulations section 301.6011-2 (for example, Forms 1099
partnership, then the only information it must provide on Form and Forms W-2) have the option to notify the IRS that they
1065 in addition to the QDD statement is its tax year, name, qualify for a religious exemption in advance of filing returns and
address, and EIN; and it must check item G on page 1 of Form other documents. Filers are encouraged to notify the IRS in
1065. While a partnership is generally required to use an EIN, if advance that they're claiming a religious exemption by filing
the only reason the partnership is filing Form 1065 is because it's Form 8508, Application for a Waiver from Electronic Filing of
a QDD partnership and it doesn't have an EIN, it may use its Information Returns, in accordance with the form's instructions.
QI-EIN instead. For additional information, see Notice 2024-18, 2024-5 I.R.B.
625, available at [Link]/irb/2024-05_IRB#NOT-2024-18.
Termination of the Partnership
A partnership terminates when all its operations are discontinued The requirement to file electronically doesn't apply to certain
and no part of any business, financial operation, or venture is returns, including:
continued by any of its partners in a partnership. • Bankruptcy returns, and
• Returns with pre-computed penalty and interest.
The partnership’s tax year ends on the date of termination
which is the date the partnership winds up its affairs. Special See Rev. Proc. 2012-17, available at [Link]/pub/irs-irbs/
rules apply in the case of a merger, consolidation, or division of a [Link], for the requirements for furnishing substitute
partnership. See Regulations sections 1.708-1(c) and (d) for Schedule K-1 in electronic format.
details. Also see [Link]/newsroom/questions-and-answers- For more details on electronic filing using the Modernized
about-technical-terminations-internal-revenue-code-irc-sec-708. e-file system, see:
• Pub. 3112, IRS e-file Application & Participation;
Electronic Filing • Pub. 4163, Modernized e-File (MeF) Information for
Beginning January 1, 2024, partnerships were required to file Authorized IRS e-File Providers for Business Returns;
Form 1065 and related forms and schedules electronically if they • Pub. 4164, Modernized e-File (MeF) Guide for Software
file 10 or more returns of any type during the tax year, including Developers and Transmitters;
information, income tax, employment tax, and excise tax returns. • Form 8453-PE, E-file Declaration for Form 1065; and
See Regulations section 301.6011-3, updated by T.D. 9972. • Form 8879-PE, E-file Authorization for Form 1065.
Partnerships with more than 100 partners are required to file
For More Information on Filing Electronically
Form 1065, Schedules K-1, and other related forms and
schedules electronically. • Call the e-Help Desk at 866-255-0654.
• Go to [Link]/Filing.
Exclusions From Electronic Filing
The IRS may waive the electronic filing rules if the partnership
When To File
demonstrates that a hardship would result if it were required to Generally, a domestic partnership must file Form 1065 by the
file its return electronically. A partnership interested in requesting 15th day of the 3rd month following the date its tax year ended
a waiver of the mandatory electronic filing requirement must file as shown at the top of Form 1065. For calendar year
a written request, and request one in the manner prescribed by partnerships, the due date is March 15.
the Ogden Submission Processing Center. If the due date falls on a Saturday, Sunday, or legal holiday in
All written requests for waivers should be mailed to: the District of Columbia or the state in which you file your return,
a return filed by the next day that isn't a Saturday, Sunday, or
Internal Revenue Service legal holiday will be treated as timely. Calendar year partnerships
Ogden Submission Processing Center may therefore timely file their returns for the 2024 partnership
Attn: Form 1065 e-file Waiver Request, Stop 1057 year by March 17, 2025.
Ogden, UT 84201
Private Delivery Services (PDSs)
Use the following address if using an overnight delivery Partnerships can use certain PDSs designated by the IRS to
service. meet the “timely mailing as timely filing/paying” rule for tax
returns. Go to [Link]/PDS for the current list of designated
services. The PDS can tell you how to get written proof of the
mail date.

Instructions for Form 1065 (2024) 5

Where To File
File Form 1065 at the applicable IRS address listed below. If Schedule M-3 is filed, Form 1065 must be filed at the Ogden Internal
Revenue Service Center as shown below.

If the partnership's principal business, And the total assets at the end of the tax Use the following address:
office, or agency is located in: year (Form 1065, page 1, item F) are:

Connecticut, Delaware, District of Columbia,

Georgia, Illinois, Indiana, Kentucky, Maine,
Maryland, Massachusetts, Michigan, New Department of the Treasury
Less than $10 million and Schedule M-3
Hampshire, New Jersey, New York, North Internal Revenue Service Center
isn't filed
Carolina, Ohio, Pennsylvania, Rhode Island, Kansas City, MO 64999-0011
South Carolina, Tennessee, Vermont, Virginia,
West Virginia, Wisconsin
Connecticut, Delaware, District of Columbia,
Georgia, Illinois, Indiana, Kentucky, Maine,
Maryland, Massachusetts, Michigan, New $10 million or more or Department of the Treasury
Hampshire, New Jersey, New York, North less than $10 million and Internal Revenue Service Center
Carolina, Ohio, Pennsylvania, Rhode Island, Schedule M-3 is filed Ogden, UT 84201-0011
South Carolina, Tennessee, Vermont, Virginia,
West Virginia, Wisconsin
Alabama, Alaska, Arizona, Arkansas, California,
Colorado, Florida, Hawaii, Idaho, Iowa, Kansas,
Department of the Treasury
Louisiana, Minnesota, Mississippi, Missouri,
Any amount Internal Revenue Service Center
Montana, Nebraska, Nevada, New Mexico,
Ogden, UT 84201-0011
North Dakota, Oklahoma, Oregon, South
Dakota, Texas, Utah, Washington, Wyoming
A foreign country or U.S. territory Internal Revenue Service
Any amount P.O. Box 409101
Ogden, UT 84409

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

to [Link]/PDSStreetAddresses.
Who Must Sign
A PDS can’t deliver items to P.O. boxes. You must use Any Partner or LLC Member
! the U.S. Postal Service to mail any item to an IRS P.O. Form 1065 isn't considered to be a return unless it's signed by a
CAUTION box address. partner or LLC member. When a return is made for a partnership
by a receiver, trustee, or assignee, the fiduciary must sign the
Extension of Time To File return, instead of the partner or LLC member. Returns and forms
File Form 7004, Application for Automatic Extension of Time To signed by a receiver or trustee in bankruptcy on behalf of a
File Certain Business Income Tax, Information, and Other partnership must be accompanied by a copy of the order or
Returns, to request an extension of time to file. File Form 7004 instructions of the court authorizing signing of the return or form.
by the regular due date of the partnership return. Form 7004 can In the case of an entity partner, an individual who is authorized
be electronically filed. See the Instructions for Form 7004. under state law to act for the entity partner must sign the
partnership return.
Period Covered Signatures required when filing an AAR. When filing an
The 2024 Form 1065 is an information return for calendar year AAR, Form 1065 must be signed by the partnership
2024 and fiscal years that begin in 2024 and end in 2025. For a representative (PR) (or the designated individual (DI) if the PR is
fiscal year or a short tax year, fill in the tax year space at the top an entity) for the reviewed year.
of Form 1065 and each Schedule K-1 and Schedules K-2 and
K-3, if applicable.
Paid Preparer’s Information
If a partner, member, or employee of the partnership completes
The 2024 Form 1065 may also be used if: Form 1065, the paid preparer's space should remain blank. Only
• The partnership has a tax year of less than 12 months that paid preparers with a valid preparer tax identification number
begins and ends in 2025, and (PTIN) should complete this section.
• The 2025 Form 1065 isn't available by the time the
partnership is required to file its return. Generally, anyone who is paid to prepare the partnership
return must do the following.
However, the partnership must show its 2025 tax year on the
2024 Form 1065 and incorporate any tax law changes that are • Sign the return in the space provided for the preparer's
signature.
effective for tax years beginning after 2024.
• Fill in the other blanks in the “Paid Preparer Use Only” area of
the return. A paid preparer can't use a social security number
(SSN) in the “Paid Preparer Use Only” box. The paid preparer
must use a PTIN.
• Give the partnership a copy of the return in addition to the
copy to be filed with the IRS.

6 Instructions for Form 1065 (2024)

 A paid preparer may sign original or amended returns by • Form 720, Quarterly Federal Excise Tax Return;
TIP rubber stamp, mechanical device, or computer software • Form 941, Employer's QUARTERLY Federal Tax Return;
program. • Form 943, Employer's Annual Federal Tax Return for
Agricultural Employees;
Paid Preparer Authorization • Form 944, Employer's ANNUAL Federal Tax Return; and
• Form 945, Annual Return of Withheld Federal Income Tax.
If the partnership wants to allow the paid preparer to discuss its
2024 Form 1065 with the IRS, check “Yes” in the signature area The trust fund recovery penalty may be imposed on all
of the return. The authorization applies only to the individual persons who are determined by the IRS to have been
whose signature appears in the “Paid Preparer Use Only” responsible for collecting, accounting for, or paying over these
section of its return. It doesn't apply to the firm, if any, shown in taxes, and who acted willfully in not doing so. The penalty is
the section. equal to the unpaid trust fund tax. See the Instructions for Form
720; Pub. 15 (Circular E), Employer's Tax Guide; or Pub. 15-T,
If “Yes” is checked, the partnership is authorizing the IRS to Federal Income Tax Withholding Methods, for more details,
call the paid preparer to answer any questions that may arise including the definition of a responsible person.
during the processing of its return. The partnership is also
authorizing the paid preparer to: Accounting Methods
• Give the IRS any information that is missing from its return, An accounting method is a set of rules used to determine when
• Call the IRS for information about the processing of its return, and how income and expenditures are reported. The method of
and
accounting used must be reconcilable with the partnership's
• Respond to certain IRS notices about math errors and return books and records. In all cases, the method used must clearly
preparation.
reflect income. Generally, the following rules apply. For more
The partnership isn't authorizing the paid preparer to bind the information, see Pub. 538, Accounting Periods and Methods.
partnership to anything or otherwise represent the partnership
Permissible overall methods of accounting include:
before the IRS. If the partnership wants to expand the paid
preparer's authorization, see Pub. 947, Practice Before the IRS • Cash,
and Power of Attorney. • Accrual, or
• Any other method authorized by the Internal Revenue Code
The authorization can't be revoked. However, the (the Code).
authorization will automatically end no later than the due date
Generally, a partnership may use the cash method of
(excluding extensions) for filing the 2025 return.
accounting unless it’s required to maintain inventories, has a C
Penalties corporation as a partner, or is a tax shelter (as defined in section
448(d)(3)). However, for tax years beginning after 2017, any
partnership qualifying as a small business taxpayer (defined
Late Filing of Return below) may use the cash method.
A penalty is assessed against the partnership if it's required to
file a partnership return and it (a) fails to file the return by the due Tax shelter election. A taxpayer that is a tax shelter, as defined
date, including extensions; or (b) files a return that fails to show in section 448(d)(3), isn't permitted to use the cash method
all the information required, unless such failure is due to pursuant to section 448(a)(3), and is also not permitted to use
reasonable cause. The penalty is $245 for each month or part of the small business taxpayer exemptions contained in sections
a month (for a maximum of 12 months) the failure continues, 163(j)(3) (limitation on business interest), 263A(i) (uniform
multiplied by the total number of persons who were partners in capitalization), 460(e)(1)(B) (percentage of completion method),
the partnership during any part of the partnership's tax year for and 471(c) (general inventory method). Under section 448(d)(3),
which the return is due. If the partnership receives a notice about a taxpayer that is a syndicate is considered a tax shelter. For
a penalty after it files the return, the partnership may send the purposes of section 448(d)(3), a syndicate is a partnership or
IRS an explanation and the IRS will determine if the explanation other entity (other than a C corporation) if more than 35% of the
meets reasonable-cause criteria. Don’t attach an explanation losses of such entity during the tax year are allocated to limited
when filing the return. partners or limited entrepreneurs.
The final regulations under section 448 permit a taxpayer to
Failure To Furnish Information Timely make an annual election to use its allocations made in the
For each failure to furnish Schedule K-1 (and K-3, if applicable) immediately preceding tax year, instead of using the current tax
to a partner when due and each failure to include on year's allocation, to determine whether the taxpayer is a
Schedule K-1 (and K-3, if applicable) all the information required syndicate under section 448(d)(3) for the current tax year. The
to be shown (or the inclusion of incorrect information), a $330 election is made on the timely filed original return (including
penalty may be imposed for each Schedule K-1 (and K-3, if extensions) for the tax year for which it's made. The election is
applicable) for which a failure occurs. For all such failures during valid only for the tax year for which it's made and, once made,
a calendar year, the maximum penalty for entities with gross can't be revoked. See Regulations section 1.448-2(b)(2)(iii)(B)
receipts over $5,000,000 is $3,987,000; and $1,329,000 for (2) for guidance on the time and manner of making the annual
entities with gross receipts at or below $5,000,000. If the election and effective dates.
requirement to report correct information is intentionally Small business taxpayer. For tax years beginning after 2017,
disregarded, each $330 penalty is increased to $660 or, if a small business taxpayer (defined below) can adopt or change
greater, 10% of the aggregate amount of items required to be its accounting method to account for inventories (a) in the same
reported. There's no limit to the amount of the penalty in the case manner as materials and supplies that are nonincidental; or (b)
of intentional disregard. to conform to the taxpayer's treatment of inventories in an
applicable financial statement (as defined in section 451(b)(3)),
Trust Fund Recovery Penalty or, if the taxpayer doesn't have an applicable financial statement,
This penalty may apply if certain excise, income, social security, the method of accounting used in the taxpayer's books and
and Medicare taxes that must be collected or withheld aren't records prepared in accordance with the taxpayer's accounting
collected or withheld, or these taxes aren't paid. These taxes are procedures. See section 471(c)(1), and Change in accounting
generally reported on: method, later.

Instructions for Form 1065 (2024) 7

 For tax years beginning after 2017, a small business taxpayer into account is generally treated as ordinary gain or loss. For
can adopt or change its accounting method to not capitalize details, including exceptions, see section 475, the related
costs to property produced or acquired for resale under section regulations, and Rev. Rul. 97-39, 1997-39 I.R.B. 4.
263A. See section 263A(i), and Change in accounting method Dealers in commodities and traders in securities and
and Limitations on Deductions, later. commodities can elect to use the mark-to-market accounting
Small business taxpayer defined. For 2024, a small method. To make the election, the partnership must file a
business taxpayer is a taxpayer that (a) has average annual statement describing the election, the first tax year the election is
gross receipts of $30 million or less for the prior 3 tax years, and to be effective, and, in the case of an election for traders in
(b) isn't a tax shelter (as defined in section 448(d)(3)). securities or commodities, the trade or business for which the
election is made. Except for new taxpayers, the statement must
Accrual method. Generally, under the accrual method, an
be filed by the due date (not including extensions) of the return
amount is includible in income when:
for the tax year immediately preceding the election year and
1. All the events have occurred that fix the right to receive attached to that return or, if applicable, to a request for an
income, which is the earliest date: extension of time to file that return. For more details, see Rev.
a. Payment is earned through the required performance, Proc. 99-17, 1999-7 I.R.B. 52, as superseded in part by Rev.
b. Payment is due to the taxpayer, Proc. 99-49; and sections 475(e) and (f).
c. Payment is received by the taxpayer, Change in accounting method. Generally, the partnership
must get IRS consent to change its method of accounting used
d. When title passes, or
to report income or expense (for income or expense as a whole
e. When the income is reported as revenue in an applicable or for any material item). To do so, the partnership must
financial statement (AFS); and generally file Form 3115, Application for Change in Accounting
2. When the amount can be determined with reasonable Method, during the tax year for which the change is requested.
accuracy. See the Instructions for Form 3115 and Pub. 538 for more
information and exceptions.
See Regulations sections 1.451-1(a) and 1.451-3(c) for
Section 481(a) adjustment. The partnership may have to
details.
make an adjustment to prevent amounts of income or expenses
Generally, an accrual basis taxpayer can deduct accrued from being omitted or duplicated. This is called a section 481(a)
expenses in the tax year in which: adjustment. The section 481(a) adjustment period is generally 1
• All events that establish the liability have occurred, year for a net negative adjustment and 4 years for a net positive
• The amount of the liability can be figured with reasonable adjustment. However, in some instances, a partnership can elect
accuracy, and to modify the section 481(a) adjustment period. The partnership
• Economic performance takes place with respect to the must complete the appropriate lines of Form 3115 to make the
expense. election. See the Instructions for Form 3115.
For property and service liabilities, for example, economic Include any net positive section 481(a) adjustment on page 1
performance occurs as the property or service is provided. of Form 1065, line 7. If the net section 481(a) adjustment is
There are special economic performance rules for certain items, negative, report it on page 1, line 21.
including recurring expenses. See section 461(h) and the related
There are some instances when the partnership can obtain
regulations for the rules for determining when economic
automatic consent from the IRS to change to certain accounting
performance takes place.
methods. See the Instructions for Form 3115.
Nonaccrual-experience method. Accrual method
partnerships aren't required to accrue certain amounts to be Accounting Periods
received from the performance of services that, on the basis of A partnership is generally required to have one of the following
their experience, won't be collected if: tax years.
• The services are in the field of health, law, engineering, 1. The tax year of a majority of its partners (majority tax
architecture, accounting, actuarial science, performing arts, or year).
consulting; or
• The partnership's average annual gross receipts don’t exceed 2. If there's no majority tax year, then the tax year common
$30 million for all prior tax years. For more details, see section to all of the partnership's principal partners (partners with an
448(d)(5). interest of 5% or more in the partnership profits or capital).
This provision doesn't apply to any amount if interest is 3. If there's neither a majority tax year nor a tax year
required to be paid on the amount or if there's any penalty for common to all principal partners, then the tax year that results in
failure to timely pay the amount. For information, see section the least aggregate deferral of income.
448(d)(5) and Regulations section 1.448-2. For reporting Note. In determining the tax year of a partnership under (1), (2),
requirements, see the instructions for line 1a, later. or (3) above, the tax years of certain tax-exempt and foreign
partners are disregarded. See Regulations section 1.706-1(b) for
Percentage of completion method. Long-term contracts
more details.
(except for certain real property construction contracts) must
generally be accounted for using the percentage of completion 4. Some other tax year if one of the following applies.
method described in section 460. See section 460 and the a. The partnership can establish that there's a business
underlying regulations for rules on long-term contracts. purpose for the tax year.
Mark-to-market accounting method. Dealers in securities b. The partnership elects under section 444 to have a tax
must use the mark-to-market accounting method described in year other than a required tax year by filing Form 8716, Election
section 475. Under this method, any security that is inventory to To Have a Tax Year Other Than a Required Tax Year. For a
the dealer must be included in inventory at its fair market value partnership to have this election in effect, it must make the
(FMV). Any security that isn't inventory and that is held at the payments required by section 7519 and file Form 8752,
close of the tax year is treated as sold at its FMV on the last Required Payment or Refund Under Section 7519.
business day of the tax year, and any gain or loss must be taken A section 444 election ends if a partnership changes its
into account in determining gross income. The gain or loss taken accounting period to its required tax year or some other

8 Instructions for Form 1065 (2024)

permitted year or it's penalized for willfully failing to comply with have its partners take adjustments into account, and that has
the requirements of section 7519. If the termination results in a adjustments that result in an imputed underpayment (IU), should
short tax year, enter at the top of the first page of Form 1065 for report the IU and any interest and penalties on Form 1065,
the short tax year, “SECTION 444 ELECTION TERMINATED.” page 1, line 26. See the Instructions for Form 8082 for
c. The partnership elects to use a 52–53-week tax year that information on how to figure a BBA IU and what to do when an
ends with reference to either its required tax year or a tax year adjustment requested by an AAR doesn't result in an IU. See
elected under section 444. section 6233 for information about interest and penalties on the
IU. Include the following information on your payment.
Change of tax year. To change its tax year or to adopt or • Name of partnership.
retain a tax year other than its required tax year, the partnership • Form 1065.
must file Form 1128, Application To Adopt, Change, or Retain a • Taxpayer identification number (TIN).
Tax Year, unless the partnership is making an election under • Tax year.
section 444. • BBA AAR Imputed Underpayment.
The tax year of a common trust fund must be the • Checks must be made payable to “United States Treasury.”
TIP calendar year. Mail payment to:

Ogden Service Center

Rounding Off to Whole Dollars Ogden, UT 84201-0011
The partnership may enter decimal points and cents when
completing its return. However, it should round off cents to whole Payments can be made by check or electronically. If making an
dollars on its return, forms, and schedules to make completing electronic payment, choose the payment description “BBA AAR
its return easier. The partnership must either round off all Imputed Underpayment” from the list of payment types.
amounts on the return to whole dollars, or use cents for all If the partnership has an IU, the partnership may elect to have
amounts. To round, drop amounts under 50 cents and increase its partners take the adjustments into account instead of paying
amounts from 50 to 99 cents to the next dollar. For example, the IU. See the Instructions for Form 8082 for information on how
$8.40 rounds to $8 and $8.50 rounds to $9. to make the election.
If two or more amounts are added to figure the amount to Amended Return
enter on a line, include cents when adding the amounts and
round off only the total. The procedures to follow when filing an amended partnership
return depend on whether the amended return is filed
Recordkeeping electronically or on paper. The rules for determining when a
return must be filed electronically (see Electronic Filing, earlier)
The partnership must keep its records as long as they may be also apply to amended returns.
needed for the administration of any provision of the Code. The
partnership must usually keep records that support an item of Electronically filed amended returns. If the amended return
income, deduction, or credit on the partnership return for 3 years will be filed electronically, complete Form 1065 and check box
from the date the return is due or is filed, whichever is later. G(5) to indicate that you're filing an amended return. Attach a
These records must usually be kept for 3 years from the date statement that identifies the line number of each amended item,
each partner's return is due or is filed, whichever is later. It must the corrected amount or other treatment of the item, and an
also keep records that verify the partnership's basis in property explanation of the reason(s) for each change. If the income,
for as long as they are needed to figure the basis of the original deductions, credits, or other information provided to any partner
or replacement property. on Schedule K-1 or K-3, as applicable, is incorrect, file an
amended Schedule K-1 or K-3 for that partner with the amended
The partnership should also keep copies of all returns it has Form 1065. Also give a copy of the amended Schedule K-1 or
filed. They help in preparing future returns and in making K-3 to that partner. Check the “Amended K-1” or “Amended K-3”
computations when filing an amended return. box at the top of the Schedule K-1 or K-3 to indicate that it's an
amended Schedule K-1 or K-3.
Administrative Adjustment Request
Partner amended return filed as part of modification of the
(AAR) IU during a BBA examination. Section 6225(c)(2) allows a
A partnership that is subject to the BBA centralized partnership BBA partnership under examination to request specific types of
audit regime must file an AAR to request an administrative modifications of any IU proposed by the IRS. One type of
adjustment in the amount or other treatment of one or more modification that may be requested is when one or more
partnership-related items. partners, including partnership-partners, file amended returns for
the tax years of the partners which include the end of the
A BBA partnership filing an AAR shouldn't file an amended reviewed year of the BBA partnership under examination and for
tax return or amended Schedules K-1 and/or K-3. For an any tax year with respect to which tax attributes are affected. Go
exception where a BBA partnership is itself a partner in a BBA to [Link]/bbaaar.
partnership and is filing an amended return, see Partner
amended return filed as part of modification of the IU during a A modification amended return filing must meet a number of
BBA examination, later. requirements. Therefore, a partnership-partner filing a
modification amended return must refer to Form 8982, Affidavit
Electronically filed AARs. If the AAR will be filed electronically, for Partner Modification Amended Return Under IRC 6225(c)(2)
complete Form 1065 with the corrected amounts and check box (A) or Partner Alternative Procedure Under IRC 6225(c)(2)(B).
G(5). In addition, complete Form 8082, Notice of Inconsistent The instructions for Form 8982, Section A, explain the
Treatment or Administrative Adjustment Request (AAR). See the modification of amended returns, requirements for payment and
Instructions for Form 8082 for detailed instructions. For AARs submission, and the requirement to provide Form 8982,
filed on paper, see Paper-filed amended returns and AARs, later. Section A, to the PR of the BBA partnership. See Filing
AARs for which payment is made. A partnership that hasn't Instructions for Partner Modification Amended Returns and
made a valid election out of the BBA centralized partnership Paying the Amount You Owe in the instructions for Form 8982.
audit regime, which is filing an AAR and that doesn't elect to

Instructions for Form 1065 (2024) 9

 Partnership-partners who are filing amended returns When a partnership's federal return is amended or
electronically as part of the modification will report the applicable TIP changed for any reason, it may affect the partnership's
payment of tax and interest and any penalties on Form 1065, state tax return. For more information, contact the state
page 1, line 26. A payment made with an amended Form 1065 tax agency for the state in which the partnership return was filed.
should detail the amount of the payment to be applied separately
to tax, interest, and penalties. The partnership should consider What if You Can’t Pay Now?
all guidance issued by the IRS when figuring the amount due. In
general, the partnership should figure its amount due in Go to [Link]/Payments for more information about your
accordance with Regulations sections 301.6225-2(d)(2)(vi)(A) options.
and 301.6226-3(e)(4)(iii). • Apply for an online payment agreement ([Link]/OPA) to
meet your tax obligation in monthly installments if you can’t pay
Paper-filed amended returns and AARs. If the amended your taxes in full today. Once you complete the online process,
return or AAR won't be filed electronically, complete Form you will receive immediate notification of whether your
1065-X, Amended Return or Administrative Adjustment Request agreement has been approved.
(AAR), to file the amended return or AAR. See Form 1065-X and • Use the Offer in Compromise Pre-Qualifier ([Link]/OIC) to
its separate instructions for information on completing and filing see if you can settle your tax debt for less than the full amount
the form. you owe.

Other Forms, Returns, and Statements That May Be Required

Form, Return, or Statement Use this to—

W-2 and W-3—Wage and Tax Statement; and Transmittal of Report wages, tips, other compensation, and withheld income, social security, and Medicare
Wage and Tax Statements taxes for employees.
720—Quarterly Federal Excise Tax Return Report and pay environmental excise taxes, communications and air transportation taxes, fuel
taxes, manufacturers taxes, ship passenger tax, and certain other excise taxes. Also see Trust
Fund Recovery Penalty, earlier.
940—Employer's Annual Federal Unemployment (FUTA) Tax Report and pay FUTA tax.
Return
941—Employer's QUARTERLY Federal Tax Return Report quarterly income tax withheld on wages and employer and employee social security and
Medicare taxes. Also see Trust Fund Recovery Penalty, earlier.
943—Employer's Annual Federal Tax Return for Agricultural Report income tax withheld and employer and employee social security and Medicare taxes on
Employees farmworkers. Also see Trust Fund Recovery Penalty, earlier.
944—Employer's ANNUAL Federal Tax Return File annual Form 944 instead of filing quarterly Forms 941 if the IRS notified you in writing.
945—Annual Return of Withheld Federal Income Tax Report income tax withheld from nonpayroll payments, including pensions, annuities, individual
retirement accounts (IRAs), gambling winnings, and backup withholding. Also see Trust Fund
Recovery Penalty, earlier.
1042 and 1042-S—Annual Withholding Tax Return for U.S. Report tax withheld on payments or distributions made to nonresident alien individuals, foreign
Source Income of Foreign Persons; and Foreign Person's U.S. partnerships, or foreign corporations to the extent these payments or distributions constitute
Source Income Subject to Withholding gross income from sources within the United States that isn't effectively connected with a U.S.
trade or business. A domestic partnership must also withhold tax on a foreign partner's
distributive share of such income, including amounts that aren't actually distributed. Withholding
on amounts not previously distributed to a foreign partner must generally be made and paid over
by the earlier of:
• The date on which Schedules K-1 and K-3 are sent to that partner, or
• The 15th day of the 3rd month after the end of the partnership's tax year.
These forms are also used to report tax withheld on distributions of effectively connected taxable
income (ECTI) made by PTPs and certain transfers of interests in PTPs. For more details, see the
instructions for Forms 1042 and 1042-S and Pub. 515, Withholding of Tax on Nonresident Aliens
and Foreign Entities.
1042-T—Annual Summary and Transmittal of Forms 1042-S Transmit paper Forms 1042-S to the IRS.
1065-X—Amended Return or Administrative Adjustment Request Use Form 1065-X to correct a previously filed partnership return or to make an AAR for a
(AAR) previously filed return.
1095-B and 1094-B—Health Coverage; and Transmittal of Health Required to be filed by certain health insurance issuers and others who provide minimum
Coverage Information Returns essential coverage to report information on the primary insured and other individuals covered
under the plan.
1095-C and 1094-C—Employer-Provided Health Insurance Offer Used by certain employers to report information about the health care coverage the employer
and Coverage; and Transmittal of Employer-Provided Health offered with regard to each full-time employee.
Insurance Offer and Coverage Information Returns
1096—Annual Summary and Transmittal of U.S. Information Transmit paper Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G to the IRS.
Returns
1097-BTC—Bond Tax Credit Report tax credits to bond holders and tax credits passed to another person.
1098—Mortgage Interest Statement Report the receipt from any individual of $600 or more of mortgage interest (including certain
points) in the course of the partnership's trade or business.

10 Instructions for Form 1065 (2024)

Form, Return, or Statement Use this to—
1099-A, B, C, INT, K, LS, LTC, MISC, NEC, OID, R, S, and SA. Report the following.
• Acquisitions or abandonments of secured property.
Important. Every partnership must file Forms 1099-MISC or • Proceeds from broker and barter exchange transactions.
1099-NEC if, in the course of its trade or business, it makes • Cancellation of debts.
payments of rents, commissions, or other fixed or determinable • Interest income.
income (see section 6041) totaling $600 or more to any one • Payment card and third-party network transactions.
person during the calendar year. • Acquisition of a life insurance contract, or interest therein, in a reportable policy sale.
• Payments of long-term care and accelerated death benefits.
• Miscellaneous income.
• Nonemployee compensation
• Original issue discount.
• Distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance
contracts, etc.
• Proceeds from real estate transactions.
• Distributions from an HSA, Archer MSA, or Medicare Advantage MSA.
5471—Information Return of U.S. Persons With Respect to A partnership may have to file Form 5471 if it:
Certain Foreign Corporations • Controls a foreign corporation,
• Acquires or owns 10% or more of the total combined voting power or value of shares of all
classes of stock, or
• Disposes of sufficient stock to reduce its interest to less than 10% of the total combined
voting power or value of shares of all classes of stock.
5713—International Boycott Report Report operations in, or related to, a boycotting country, company, or national of a country and to
figure the loss of certain tax benefits. The partnership must give each partner a copy of the Form
5713 filed by the partnership if there has been participation in, or cooperation with, an
international boycott.
8275—Disclosure Statement Disclose items or positions, except those contrary to a regulation, that aren't otherwise
adequately disclosed on a tax return. The disclosure is made to avoid the parts of the
accuracy-related penalty imposed for disregard of rules or substantial understatement of tax.
Also use Form 8275 for disclosures relating to preparer penalties for understatements due to
unrealistic positions or disregard of rules.
8275-R—Regulation Disclosure Statement Disclose any item on a tax return for which a position has been taken that is contrary to Treasury
regulations.
8288, 8288-A, and 8288-C—U.S. Withholding Tax Return for Report and send withheld tax on the sale of U.S. real property or the transfer of certain
Certain Dispositions by Foreign Persons; Statement of partnership interests by a foreign person. See sections 1445 and 1446(f), and the related
Withholding on Certain Dispositions by Foreign Persons; and regulations, for additional information.
Statement of Withholding Under Section 1446(f)(4) on
Dispositions by Foreign Persons of Partnership Interests
8300—Report of Cash Payments Over $10,000 Received in a Report the receipt of more than $10,000 in cash or foreign currency in one transaction or a series
Trade or Business of related transactions.
8308—Report of a Sale or Exchange of Certain Partnership Report the sale or exchange by a partner of all or part of a partnership interest where any money
Interests or other property received in exchange for the interest is attributable to unrealized receivables or
inventory items.
8594—Asset Acquisition Statement Under Section 1060 Report a sale of assets if goodwill or going concern value attaches, or could attach, to such
assets. Both the seller and buyer of a group of assets that makes up a trade or business must
use this form.
8621—Information Return by a Shareholder of a Passive Foreign Report an ownership interest in, make elections for, and compute inclusions with respect to
Investment Company or Qualified Electing Fund passive foreign investment companies and qualified electing funds.
8697—Interest Computation Under the Look-Back Method for Figure the interest due or to be refunded under the look-back method of section 460(b)(2) on
Completed Long-Term Contracts certain long-term contracts that are accounted for under either the percentage of
completion-capitalized cost method or the percentage of completion method. Partnerships that
aren't closely held use this form. Closely held partnerships should see Line 20c. Other Items and
Amounts and Look-back interest completed long-term contracts (code J) under Specific
Instructions (Schedules K and K-1, Part III, Except as Noted), later, for details on the Form 8697
information they must provide to their partners.
8804, 8805, and 8813—Annual Return for Partnership Use Forms 8804 and 8805 to figure and report the withholding tax on foreign partners' allocable
Withholding Tax (Section 1446); Foreign Partner's Information shares of ECTI. Form 8804 must also be filed to report effectively connected gross income
Statement of Section 1446 Withholding Tax; and Partnership allocable to foreign partners even if the partnership has no ECTI on which to withhold. Use Form
Withholding Tax Payment Voucher (Section 1446) 8813 to send installment payments of withheld tax based on ECTI allocable to foreign partners.
Exception. PTPs don't file these forms. They must instead withhold tax on distributions to foreign
partners and report and send payments using Forms 1042 and 1042-S. See Regulations section
1.1446-4 for more information.
8832—Entity Classification Election See Entity Classification Election, later.
8865—Return of U.S. Persons With Respect to Certain Foreign Report the information required under section 6038 (reporting with respect to controlled foreign
Partnerships partnerships), section 6038B (reporting of transfers to foreign partnerships), section 6046A
(reporting of acquisitions, dispositions, and changes in foreign partnership interests), or section
721(c) (reporting related to the application of the gain deferral method). See Form 8865 and its
instructions for more details.

Instructions for Form 1065 (2024) 11

 Form, Return, or Statement Use this to—
8866—Interest Computation Under the Look-Back Method for Figure the interest due or to be refunded under the look-back method of section 167(g)(2) for
Property Depreciated Under the Income Forecast Method certain property placed in service after September 13, 1995, depreciated under the income
forecast method. Partnerships that aren't closely held use this form. Closely held partnerships
should see Look-back interest income forecast method (code K) under Specific Instructions
(Schedules K and K-1, Part III, Except as Noted), later, for details on the Form 8866 information
they must provide to their partners.
8876—Excise Tax on Structured Settlement Factoring Report and pay the 40% excise tax imposed under section 5891.
Transactions
8886—Reportable Transaction Disclosure Statement Disclose information for each reportable transaction in which the partnership participated. Form
8886 must be filed for each tax year the partnership participated in the reportable transaction.
The partnership may have to pay a penalty if it's required to file Form 8886 and doesn't do so.
The following are reportable transactions.
• Any listed transaction, which is a transaction that is the same as or substantially similar to one
of the types of transactions that the IRS has determined to be a tax avoidance transaction and
identified by notice, regulation, or other published guidance as a listed transaction.
• Any transaction offered under conditions of confidentiality for which the partnership (or a
related party) paid an adviser a fee of at least $50,000 ($250,000 for partnerships if all partners
are corporations).
• Certain transactions for which the partnership (or a related party) has contractual protection
against disallowance of the tax benefits.
• Certain transactions resulting in a loss of at least $2 million in any single year or $4 million in
any combination of years.
• Any transaction of interest, which is a transaction that is the same as, or substantially similar
to, one of the types of transactions identified by the IRS by notice, regulation, or other published
guidance. See Notice 2009-55, 2009-31 I.R.B. 170.
See Regulations section 1.6011-4; the Instructions for Form 8886; and Line 20c. Other Items and
Amounts and Reportable transactions (code AW) under Specific Instructions (Schedules K and
K-1, Part III, Except as Noted), later, for more information.
8918—Material Advisor Disclosure Statement Material advisors to any reportable transaction must disclose certain information about the
reportable transaction by filing a Form 8918 with the IRS. See Form 8918 and its instructions for
more details.
8925—Report of Employer-Owned Life Insurance Contracts Report the number of employees covered by employer-owned life insurance contracts issued
after August 17, 2006, and the total amount of employer-owned life insurance in force on those
employees at the end of the tax year.
8990—Limitation on Business Interest Expense Under Section Business interest expense may be limited. See section 163(j) and Form 8990 and its instructions.
163(j) Also see Schedule B, questions 23 and 24, and the related instructions.
8994—Employer Credit for Paid Family and Medical Leave Report if the partnership has a credit for paid family and medical leave. See the Instructions for
Form 8994 for more information.
8996—Qualified Opportunity Fund Certify that the requirements to be a QOF investing in qualified opportunity zone property, as
defined in section 1400Z-2, have been fulfilled. Entities attaching Form 8996 must also complete
Form 1065, Schedule B, question 25. For more information, see the Instructions for Form 8996.

Assembling the Return • Schedule K-1 (Form 1065), Partner’s Share of Income,
Deductions, Credits, etc.
When submitting Form 1065, organize the pages of the return in • Form 8938, Statement of Specified Foreign Financial Assets
the following order. (if required).
• Pages 1–6. • Any other schedules in alphabetical order, including
• Schedule F (Form 1040), Profit or Loss From Farming (if Schedules K-2 and K-3.
required). • Any other forms in numerical order.
• Form 8825, Rental Real Estate Income and Expenses of a
Partnership or an S Corporation (if required). Complete every applicable entry space on Form 1065 and
• Schedule D (Form 1065), Capital Gains and Losses (if Schedule K-1. Don't enter “See attached” instead of completing
required). the entry spaces. Penalties may be assessed if the partnership
• Form 4797, Sales of Business Property (if required). files an incomplete return. If you need more space on the forms
• Form 8949, Sales and Other Dispositions of Capital Assets (if or schedules, attach separate sheets and place them at the end
required). of the return using the same size and format as on the printed
• Form 8996, Qualified Opportunity Fund (if required). forms. Show the totals on the printed forms. Also be sure to put
• Form 1125-A, Cost of Goods Sold (if required). the partnership's name and EIN on each supporting statement.
• Form 8941, Credit for Small Employer Health Insurance
Premiums (if required). Entity Classification Election
• Form 3800, General Business Credit (if required). Use Form 8832 to make a change in classification. Except for
• Form 6252, Installment Sale Income (if required). certain business entities always classified as corporations, a
• Form 8997, Initial and Annual Statement of Qualified business entity with at least two members may choose to be
Opportunity Fund (QOF) Investments (if required). classified either as a partnership or an association taxable as a
• Schedule A (Form 8936), Clean Vehicle Credit Amount (if corporation. A domestic eligible entity with at least two members
required). that doesn't file Form 8832 is classified under the default rules as
• Form 4255, Certain Credit Recapture, Excessive Payments, a partnership. However, a foreign eligible entity with at least two
and Penalties. members is classified under the default rules as a partnership
only if the entity doesn't provide limited liability to at least one

12 Instructions for Form 1065 (2024)

member. File Form 8832 only if the entity doesn't want to be a. Includes an amount in gross income for chapter 1
classified under these default rules or if it wants to change its purposes under section 951(a) or section 1293(a)(1)(A) for the
classification. CFC or QEF, and
Attach a copy of Form 8832 to the partnership's Form b. Has a direct or indirect owner that is subject to tax under
1065 for the tax year of the election. section 1411 or would have been if the election were made.
!
This election must be made on an entity-by-entity basis, and
CAUTION

Elections Made by the Partnership applies only to the particular CFCs and QEFs for which an
election is made. In general, for purposes of section 1411, if an
Generally, the partnership decides how to figure income from its election is in effect for a CFC or QEF, the amounts included in
operations. For example, it chooses the accounting method and income under section 951 and section 1293 derived from the
depreciation methods it will use. The partnership also makes CFC or QEF are included in net investment income, and
elections under the following sections. distributions described in section 959(d) or section 1293(c) are
1. Section 179 (election to expense certain property). excluded from net investment income. An election that is made
2. Section 614 (definition of property—mines, wells, and under Regulations section 1.1411-10(g) can't be revoked. For
other natural deposits). This election must be made before the more information regarding this election, see Regulations
partners figure their individual depletion allowances under section 1.1411-10(g).
section 613A(c)(7)(D). The election must be made in a statement that is filed with the
3. Section 1033 (involuntary conversions). partnership’s original or amended return for the tax year in which
the election is made. An election can be made on an amended
4. Section 754 (manner of electing optional adjustment to return only if the tax year for which the election is made, and all
basis of partnership property). tax years affected by the election, aren't closed by the period of
Under section 754, a partnership may elect to adjust the limitations on assessments under section 6501. The statement
basis of partnership property when property is distributed or must include:
when a partnership interest is transferred. If the election is made a. The name and EIN of the partnership making the election;
regarding a transfer of a partnership interest (section 743(b)) and
the assets of the partnership constitute a trade or business for b. A declaration that the partnership elects under
purposes of section 1060(c), then the value of any goodwill Regulations section 1.1411-10(g) to apply the rules in
transferred must be determined in the manner provided in Regulations section 1.1411-10(g) to the CFCs and QEFs
Regulations section 1.1060-1. Once an election is made under identified in the statement; and
section 754, it applies both to all distributions and to all transfers c. The following information for each CFC and QEF for
made during the tax year and in all subsequent tax years unless which an election is made: (a) the name of the CFC or QEF; and
the election is revoked. (b) either the EIN of the CFC or QEF, or, if an EIN isn’t available,
This election must be made in a statement that is filed with the reference ID number of the CFC or QEF.
the partnership's timely filed return (including any extension) for 7. Section 41(h) (payroll tax credit election).
the tax year during which the distribution or transfer occurs. See
Regulations section 1.754-1(b)(1). The statement must include: Effect of Section 743(b) Basis Adjustment on
a. The name and address of the partnership, and Partnership Items
b. A declaration that the partnership elects under section If the basis of partnership property has been adjusted for a
754 to apply the provisions of section 734(b) and section 743(b). transferee partner under section 743(b), the partnership must
adjust the transferee's distributive share of the items of
The partnership can get an automatic 12-month extension to partnership income, deduction, gain, or loss in accordance with
make the section 754 election, provided corrective action is Regulations sections 1.743-1(j)(3) and (4). These adjustments
taken within 12 months of the original deadline for making the (other than adjustments to depletable oil and gas property
election. For details, see Regulations section 301.9100-2. allocable to the partner under section 613A(c)(7)(D)) must be
See section 754 and the related regulations for more reported on Schedule K and the transferee partner's
information. Schedule K-1. Report the adjustments on an attached statement
If there's a distribution of property consisting of an interest in to Schedule K, line 20c, code U. See the instructions for
another partnership, see section 734(b). Schedule K, line 20. Identify the partnership item being adjusted
and the amount of the adjustment. If the adjustments are to
The partnership is required to attach a statement for any partnership items from more than one trade or business, report
section 743(b) basis adjustments. See below for details. the adjustments separately for each activity.
To revoke a section 754 election, the partnership must file the
revocation request using Form 15254, Request for Section 754 Electing Out of the Centralized Partnership
Revocation. See the instructions for Form 15254 for more Audit Regime
information.
A partnership can elect out of the centralized partnership audit
5. Section 743(e) (electing investment partnership). regime for a tax year if the partnership is an eligible partnership
6. Regulations section 1.1411-10(g) (section 1411 election that year. See Question 33 under Schedule B, later.
regarding controlled foreign corporations (CFCs) and qualified
electing fund (QEF)). Elections Made by Each Partner
A domestic partnership that directly or indirectly owns stock Elections under the following sections are made by each partner
of a CFC (within the meaning of section 953(c)(1)(B) or section separately on the partner's tax return.
957(a)) or a passive foreign investment company (PFIC) (within • Section 59(e) (election to deduct ratably certain qualified
the meaning of section 1297(a)) that the domestic partnership expenditures such as intangible drilling costs, mining exploration
treats as a QEF under section 1293 may make the election expenses, or research and experimental (R&E) expenditures).
provided in Regulations section 1.1411-10(g). The election must • Section 108 (income from discharge of indebtedness).
be made no later than the first tax year beginning after 2013 • Section 617 (deduction and recapture of certain mining
during which the partnership: exploration expenditures paid or incurred).

Instructions for Form 1065 (2024) 13

• Section 901 (foreign tax credit). adjusted basis of the partner’s partnership interest just before
the distribution. Precontribution gain is the net gain, if any, that
Partner’s Dealings With Partnership would have been recognized under section 704(c)(1)(B) if the
If a partner engages in a transaction with the partnership, other partnership had distributed to another partner all the property
than in the capacity as a partner, the partner is treated as not that had been contributed to the partnership by the distributee
being a member of the partnership for that transaction. Special partner within 7 years of the distribution and that was held by the
rules apply to sales or exchanges of property between partnership just before the distribution.
partnerships and certain persons, as explained in Pub. 541.
Appropriate basis adjustments are to be made to the adjusted
Contributions to the Partnership basis of the distributee partner's interest in the partnership and
the partnership's basis in the contributed property to reflect the
Generally, no gain (loss) is recognized to the partnership or any
gain recognized by the partner.
of the partners when property is contributed to the partnership in
exchange for an interest in the partnership. This rule doesn't For more details and exceptions, see Pub. 541.
apply to any gain realized on a transfer of property to a
partnership that would be treated as an investment company Unrealized Receivables and Inventory
(within the meaning of section 351(e)) if the partnership were
incorporated. If, as a result of a transfer of property to a Items
partnership, there's a direct or indirect transfer of money or other Generally, if a partner sells or exchanges a partnership interest
property to the transferring partner, the partner may have to where unrealized receivables or inventory items are involved, the
recognize gain on the exchange. transferor partner must notify the partnership, in writing, within 30
The basis to the partnership of property contributed by a days of the exchange. The partnership must then file Form 8308,
partner is the adjusted basis in the hands of the partner at the Report of a Sale or Exchange of Certain Partnership Interests.
time it was contributed, plus any gain recognized (under section
If a partnership distributes unrealized receivables or
721(b)) by the partner at that time. See section 723 for more
substantially appreciated inventory items in exchange for all or
information.
part of a partner's interest in other partnership property
See Regulations sections 1.721(c)-1(b)(7) and 1.721(c)-3(b) (including money), treat the transaction as a sale or exchange
for more information on a gain deferral contribution of section between the partner and the partnership. Treat the partnership
721(c) property to a section 721(c) partnership. Also see Section gain (loss) as ordinary business income (loss). The income
721(c) Partnership, Section 721(c) Property, and Gain Deferral (loss) is specially allocated only to partners other than the
Method under Definitions, earlier. distributee partner.

Dispositions of Contributed Property If a partnership gives other property (including money) for all
or part of that partner's interest in the partnership's unrealized
Generally, if the partnership disposes of property contributed to
receivables or substantially appreciated inventory items, treat the
the partnership by a partner, income, gain, loss, and deductions
transaction as a sale or exchange of the property.
from that property must be allocated among the partners to take
into account the difference between the property's basis and its See Rev. Rul. 84-102, 1984-2 C.B. 119, for information on the
FMV at the time of the contribution. However, if the adjusted tax consequences that result when a new partner joins a
basis of the contributed property exceeds its FMV at the time of partnership that has liabilities and unrealized receivables. Also
the contribution, the built-in loss can only be taken into account see Pub. 541 for more information on unrealized receivables and
by the contributing partner. For all other partners, the basis of the inventory items.
property in the hands of the partnership is treated as equal to its
FMV at the time of the contribution (see section 704(c)(1)(C)). At-Risk Limitations
For property contributed to the partnership, the contributing In general, section 465 limits the amount of deductible losses
partner must recognize gain or loss on a distribution of the partners can claim from certain activities. The at-risk limitations
property to another partner within 7 years of being contributed. don't apply to the partnership, but instead apply to each partner's
The gain or loss is equal to the amount that the contributing share of net losses attributable to each activity. Because the
partner should have recognized if the property had been sold for treatment of each partner's share of partnership losses depends
its FMV when distributed, because of the difference between the on the nature of the activity that generated it, the partnership
property's basis and its FMV at the time of contribution. must report the items of income, loss, and deduction separately
for each activity. The at-risk limitation applies to individuals,
See section 704(c) for details and other rules on dispositions estates, trusts, and certain closely held C corporations. See Pub.
of contributed property. See section 724 for the character of any 925, Passive Activity and At-Risk Rules, for additional
gain or loss recognized on the disposition of unrealized information.
receivables, inventory items, or capital loss property contributed
to the partnership by a partner. Activities covered by the at-risk rules. If the partnership is
involved in one of the following activities as a trade or business
See Regulations sections 1.721(c)-4 and 1.721(c)-5 for more or for the production of income, the partner may be subject to the
information on certain dispositions of contributed 721(c) property at-risk rules.
to which the gain deferral method applies. Also see Section
721(c) Partnership, Section 721(c) Property, and Gain Deferral 1. Holding, producing, or distributing motion picture films or
Method under Definitions, earlier. videotapes.
2. Farming.
Recognition of Precontribution Gain 3. Leasing section 1245 property, including personal
on Certain Partnership Distributions property and certain other tangible property that's depreciable or
amortizable.
A partner who contributes appreciated property to the
partnership must include in income any precontribution gain to 4. Exploring for, or exploiting, oil and gas.
the extent the FMV of other property (other than money) 5. Exploring for, or exploiting, geothermal deposits (for wells
distributed to the partner by the partnership exceeds the started after September 1978).

14 Instructions for Form 1065 (2024)

 6. Any other activity not included in items 1 through 5, To allow each partner to correctly apply the passive activity
above, that's carried on as a trade or business or for the limitations, the partnership must report income or loss and
production of income. credits separately by activity for each of the following.
• Trade or business activities.
Aggregation of activities. Activities described in item 6 above • Rental real estate activities.
that constitute a trade or business are treated as one activity if: • Rental activities other than real estate.
• You actively participate in the management of the trade or • Portfolio income.
business, or
• The trade or business is carried on by a partnership or S Activities That Aren’t Passive Activities
corporation and 65% or more of its losses for the tax year are The following aren't passive activities.
allocable to persons who actively participate in the management
of the trade or business. 1. Trade or business activities in which the partner materially
Similar rules apply to activities described in items 1 through 5 participated for the tax year.
above. For more information, see Pub. 925. 2. Any rental real estate activity in which the partner
If you aggregate your activities under these rules for section materially participated if the partner met both of the following
465 purposes, check the appropriate box in item K below the conditions for the tax year.
name and address block on page 1 of Form 1065. a. More than half of the personal services the partner
performed in trades or businesses were performed in real
At-risk activity reporting requirements. If the partnership
property trades or businesses in which the partner materially
items of income, loss, or deduction reported on Schedule K-1
participated.
are from more than one activity covered by the at-risk rules, the
partnership should report on an attachment to Schedule K-1 b. The partner performed more than 750 hours of services in
information relating to each activity as is required by Item K1. real property trades or businesses in which the partner materially
Partner's Share of Liabilities, later. See the Instructions for Form participated.
6198 and Pub. 925 for additional information needed to help the
partner compute the profit or loss from each at-risk activity and Note. For a partner that is a closely held C corporation (defined
the amount at risk that may be required to be separately in section 465(a)(1)(B)), the above conditions are treated as met
reported. if more than 50% of the corporation's gross receipts are from real
property trades or businesses in which the corporation materially
Passive Activity Limitations participated.
In general, section 469 limits the amount of losses, deductions, For purposes of this rule, each interest in rental real estate is
and credits that partners can claim from passive activities. The a separate activity, unless the partner elects to treat all interests
passive activity limitations don't apply to the partnership. in rental real estate as one activity.
Instead, they apply to each partner's share of any income or loss If the partner is married filing jointly, either the partner or the
and credit attributable to a passive activity. Because the partner’s spouse must separately meet both of the above
treatment of each partner's share of partnership income or loss conditions, without taking into account services performed by
and credit depends on the nature of the activity that generated it, the other spouse.
the partnership must report income or loss and credits A real property trade or business is any real property
separately for each activity. development, redevelopment, construction, reconstruction,
acquisition, conversion, rental, operation, management, leasing,
The following instructions and the instructions for Schedules
or brokerage trade or business. Services the partner performed
K and K-1, later, explain the applicable passive activity limitation
as an employee aren't treated as performed in a real property
rules and specify the type of information the partnership must
trade or business unless the partner owned more than 5% of the
provide to its partners for each activity. If the partnership had
stock (or more than 5% of the capital or profits interest) in the
more than one activity, it must report information for each activity
employer.
on an attached statement to Schedules K and K-1.
3. An interest in an oil or gas well drilled or operated under a
Generally, passive activities include (a) activities that involve working interest if at any time during the tax year the partner held
the conduct of a trade or business if the partner doesn't the working interest directly or through an entity that didn't limit
materially participate in the activity, and (b) all rental activities the partner's liability (for example, an interest as a general
(defined later) regardless of the partner's participation. For partner). This exception applies regardless of whether the
exceptions, see Activities That Aren’t Passive Activities, later. partner materially participated for the tax year.
The level of each partner's participation in an activity must be 4. The rental of a dwelling unit used by a partner for
determined by the partner. personal purposes during the year for more than the greater of
14 days or 10% of the number of days that the residence was
The passive activity rules provide that losses and credits from rented at fair rental value.
passive activities can generally be applied only against income
and tax from passive activities. Thus, passive losses and credits 5. An activity of trading personal property for the account of
can't be applied against income from salaries, wages, owners of interests in the activity. For purposes of this rule,
professional fees, or a business in which the partner materially personal property means property that is actively traded, such as
participates; against portfolio income (defined later); or against stocks, bonds, and other securities. See Temporary Regulations
the tax related to any of these types of income. section 1.469-1T(e)(6).

Special provisions apply to certain activities. First, the passive Trade or Business Activities
activity limitations must be applied separately for a net loss from A trade or business activity is an activity (other than a rental
passive activities held through a PTP. Second, special rules activity or an activity treated as incidental to an activity of holding
require that net income from certain activities that would property for investment) that:
otherwise be treated as passive income must be recharacterized • Involves the conduct of a trade or business (within the
as nonpassive income for purposes of the passive activity meaning of section 162),
limitations. • Is conducted in anticipation of starting a trade or business, or

Instructions for Form 1065 (2024) 15

• Involves research or experimental expenditures deductible • The type and amount of labor required to perform the
under section 174 (or that would be if you chose to deduct rather services, and
than capitalize them). • The value of the services in relation to the amount charged for
use of the property.
If the partner doesn't materially participate in the activity, a
trade or business activity conducted through a partnership is The following services aren't considered in determining
generally a passive activity of the partner. whether personal services are significant.
• Services necessary to permit the lawful use of the rental
Each partner must determine if the partner materially property.
participated in an activity. As a result, while the partnership's • Services performed in connection with improvements or
ordinary business income (loss) is reported on page 1 of Form repairs to the rental property that extend the useful life of the
1065, the specific income and deductions from each separate property substantially beyond the average rental period.
trade or business activity must be reported on attached • Services provided in connection with the use of any improved
statements to Form 1065. Similarly, while each partner's real property that are similar to those commonly provided in
distributive share of the partnership's ordinary business income connection with long-term rentals of high-grade commercial or
(loss) is reported in box 1 of Schedule K-1, each partner's residential property. Examples include cleaning and
distributive share of the income and deductions from each trade maintenance of common areas, routine repairs, trash collection,
or business activity must be reported on attached statements to elevator service, and security at entrances.
each Schedule K-1. See Passive Activity Reporting
Requirements, later, for more information. Extraordinary personal services. Services provided in
connection with making rental property available for customer
Rental Activities use are extraordinary personal services only if the services are
Generally, except as noted below, if the gross income from an performed by individuals and the customers' use of the rental
activity consists of amounts paid principally for the use of real or property is incidental to their receipt of the services.
personal tangible property held by the partnership, the activity is For example, a patient's use of a hospital room is generally
a rental activity. incidental to the care received from the hospital's medical staff.
Similarly, a student's use of a dormitory room in a boarding
There are several exceptions to this general rule. Under these school is incidental to the personal services provided by the
exceptions, an activity involving the use of real or personal school's teaching staff.
tangible property isn't a rental activity if any of the following
apply. Rental activity incidental to a nonrental activity. An activity
• The average period of customer use (defined below) for such isn't a rental activity if the rental of the property is incidental to a
property is 7 days or less. nonrental activity, such as the activity of holding property for
• The average period of customer use for such property is 30 investment, a trade or business activity, or the activity of dealing
days or less and significant personal services (defined below) in property.
are provided by or on behalf of the partnership. Rental of property is incidental to an activity of holding
• Extraordinary personal services (defined below) are provided property for investment if both of the following apply.
by or on behalf of the partnership. • The main purpose for holding the property is to realize a gain
• The rental of such property is treated as incidental to a from the appreciation of the property.
nonrental activity of the partnership under Temporary • The gross rental income from such property for the tax year is
Regulations section 1.469-1T(e)(3)(vi) and Regulations section less than 2% of the smaller of the property's unadjusted basis or
1.469-1(e)(3)(vi)(D). its FMV.
• The partnership customarily makes the property available Rental of property is incidental to a trade or business activity
during defined business hours for nonexclusive use by various
if all of the following apply.
customers.
• The partnership provides property for use in a nonrental • The partnership owns an interest in the trade or business at all
times during the year.
activity of a partnership or joint venture in its capacity as an
owner of an interest in such partnership or joint venture. Whether
• The rental property was mainly used in the trade or business
activity during the tax year or during at least 2 of the 5 preceding
the partnership provides property used in an activity of another
tax years.
partnership or of a joint venture in the partnership's capacity as
an owner of an interest in the partnership or joint venture is
• The gross rental income from the property for the tax year is
less than 2% of the smaller of the property's unadjusted basis or
determined on the basis of all the facts and circumstances.
its FMV.
In addition, a guaranteed payment described in section The sale or exchange of property that is also rented during
707(c) is never income from a rental activity. the tax year (in which the gain or loss is recognized) is treated as
Average period of customer use. Figure the average period incidental to the activity of dealing in property if, at the time of the
of customer use for a class of property by dividing the total sale or exchange, the property was held primarily for sale to
number of days in all rental periods by the number of rentals customers in the ordinary course of the partnership's trade or
during the tax year. If the activity involves renting more than one business.
class of property, multiply the average period of customer use of See Temporary Regulations section 1.469-1T(e)(3) and
each class by the ratio of the gross rental income from that class Regulations section 1.469-1(e)(3) for more information on the
to the activity's total gross rental income. The activity's average definition of rental activities for purposes of the passive activity
period of customer use equals the sum of these class-by-class limitations.
average periods weighted by gross income. See Regulations
section 1.469-1(e)(3)(iii). Reporting of rental activities. In reporting the partnership's
income or losses and credits from rental activities, the
Significant personal services. Personal services include only partnership must separately report rental real estate activities
services performed by individuals. To determine if personal and rental activities other than rental real estate activities.
services are significant personal services, consider all the Partners who actively participate in a rental real estate activity
relevant facts and circumstances. Relevant facts and may be able to deduct part or all of their rental real estate losses
circumstances include: (and the deduction equivalent of rental real estate credits)
• How often the services are provided,
16 Instructions for Form 1065 (2024)
against income (or tax) from nonpassive activities. The each owner in the borrowing entity has the same proportional
combined amount of rental real estate losses and the deduction ownership interest in the lending entity.
equivalent of rental real estate credits from all sources (including
rental real estate activities not held through the partnership) that The self-charged interest rules don't apply to a partner's
may be claimed is limited to $25,000. This $25,000 amount is interest in a partnership if the partnership makes an election
generally reduced for high-income partners. under Regulations section 1.469-7(g) to avoid the application of
Report rental real estate activity income (loss) on Form 8825 these rules. To make the election, the partnership must attach to
and Schedule K, line 2, and in box 2 of Schedule K-1, rather than its original or amended partnership return a statement that
on page 1 of Form 1065. Report credits related to rental real includes the name, address, and EIN of the partnership and a
estate activities on Schedule K, lines 15c and 15d (box 15, declaration that the election is being made under Regulations
codes E and F, of Schedule K-1), and low-income housing section 1.469-7(g). The election will apply to the tax year in
credits on Schedule K, lines 15a and 15b (box 15, codes C and which it was made and all subsequent tax years. Once made,
D, of Schedule K-1). the election may only be revoked with the consent of the IRS.
See Line 3. Other Net Rental Income (Loss), later, for For more details on the self-charged interest rules, see
reporting other net rental income (loss) other than rental real Regulations section 1.469-7.
estate.
Grouping Activities
Portfolio Income
Generally, one or more trade or business or rental activities may
Generally, portfolio income includes all gross income, other than be treated as a single activity if the activities make up an
income derived in the ordinary course of a trade or business, appropriate economic unit for measurement of gain or loss under
that is attributable to interest; dividends; royalties; income from a the passive activity rules. Whether activities make up an
real estate investment trust (REIT), a regulated investment appropriate economic unit depends on all the relevant facts and
company (RIC), a REMIC, a common trust fund, a CFC, a QEF, circumstances. The factors given the greatest weight in
or a cooperative; income from the disposition of property that determining whether activities make up an appropriate economic
produces income of a type defined as portfolio income; and unit are:
income from the disposition of property held for investment. See • Similarities and differences in types of trades or businesses,
Self-Charged Interest, later, for an exception. • The extent of common control,
Solely for purposes of the preceding paragraph, gross • The extent of common ownership,
income derived in the ordinary course of a trade or business • Geographical location, and
includes (and portfolio income, therefore, doesn't include) the • Reliance between or among the activities.
following types of income. Example. The partnership has a significant ownership
• Interest income on loans and investments made in the interest in a bakery and a movie theater in Baltimore and a
ordinary course of a trade or business of lending money. bakery and a movie theater in Philadelphia. Depending on the
• Interest on accounts receivable arising from the performance relevant facts and circumstances, there may be more than one
of services or the sale of property in the ordinary course of a reasonable method for grouping the partnership's activities. For
trade or business of performing such services or selling such instance, the following groupings may or may not be permissible.
property, but only if credit is customarily offered to customers of • A single activity.
the business. • A movie theater activity and a bakery activity.
• Income from investments made in the ordinary course of a • A Baltimore activity and a Philadelphia activity.
trade or business of furnishing insurance or annuity contracts or • Four separate activities.
reinsuring risks underwritten by insurance companies. Once the partnership chooses a grouping under these rules,
• Income or gain derived in the ordinary course of an activity of it must continue using that grouping in later tax years unless a
trading or dealing in any property if such activity constitutes a material change in the facts and circumstances makes it clearly
trade or business (unless the dealer held the property for inappropriate.
investment at any time before such income or gain is
recognized). The IRS may regroup the partnership's activities if the
• Royalties derived by the taxpayer in the ordinary course of a partnership's grouping fails to reflect one or more appropriate
trade or business of licensing intangible property. economic units and one of the primary purposes of the grouping
• Amounts included in the gross income of a patron of a is to avoid the passive activity limitations.
cooperative by reason of any payment or allocation to the patron Limitation on grouping certain activities. The following
based on patronage as a result of a trade or business of the activities may not be grouped together.
patron.
1. A rental activity with a trade or business activity unless
• Other income identified by the IRS as income derived by the the activities being grouped together make up an appropriate
taxpayer in the ordinary course of a trade or business.
economic unit and:
See Temporary Regulations section 1.469-2T(c)(3) for more a. The rental activity is insubstantial relative to the trade or
information on portfolio income. business activity or vice versa, or
Report portfolio income and related deductions on b. Each owner of the trade or business activity has the same
Schedule K rather than on page 1 of Form 1065. proportionate ownership interest in the rental activity. If so, the
portion of the rental activity involving the rental of property to be
used in the trade or business activity can be grouped with the
Self-Charged Interest trade or business activity.
Certain self-charged interest income and deductions may be 2. An activity involving the rental of real property with an
treated as passive activity gross income and passive activity activity involving the rental of personal property (except personal
deductions if the loan proceeds are used in a passive activity. property provided in connection with the real property or vice
Generally, self-charged interest income and deductions result versa).
from loans between the partnership and its partners and also 3. Any activity with another activity in a different type of
include loans between the partnership and another partnership if business and in which the partnership holds an interest as a

Instructions for Form 1065 (2024) 17

limited partner or as a limited entrepreneur (as defined in section • The partnership recognizes gain from the sale, exchange, or
461(k)(4)) if that other activity engages in holding, producing, or other disposition of the rental property during the tax year.
distributing motion picture films or videotapes; farming; leasing • The use of the item of property in the rental activity started
section 1245 property; or exploring for or exploiting oil and gas less than 12 months before the date of disposition. The use of an
resources or geothermal deposits. item of rental property begins on the first day that (a) the
partnership owns an interest in the property, (b) substantially all
Activities conducted through other partnerships. Once a of the property is either rented or held out for rent and ready to
partnership determines its activities under these rules, the be rented, and (c) no significant value-enhancing services
partnership as a partner can use these rules to group those remain to be performed.
activities with: • The partner materially or significantly participated for any tax
• Each other, year in an activity that involved performing services to enhance
• Activities conducted directly by the partnership, or the value of the property (or any other item of property if the
• Activities conducted through other partnerships. basis of the property disposed of is determined in whole or in
A partner can't treat as separate activities those activities part by reference to the basis of that item of property).
grouped together by a partnership. Because the partnership can't determine a partner's level of
If you group your activities under these rules for section 469 participation, the partnership must identify net income from
purposes, check the appropriate box in item K below the name property described earlier under Rental Activities (without regard
and address block on page 1 of Form 1065. to the partner's level of participation) as income that may be
subject to recharacterization.
Recharacterization of Passive Income Rental of property to a nonpassive activity. If a taxpayer
Under Temporary Regulations section 1.469-2T(f) and rents property to a trade or business activity in which the
Regulations section 1.469-2(f), net passive income from certain taxpayer materially participates, the taxpayer's net rental activity
passive activities must be treated as nonpassive income. Net income from the property is nonpassive income.
passive income is the excess of an activity's passive activity
Acquisition of an interest in a pass-through entity that li-
gross income over its passive activity deductions (current year
censes intangible property. Generally, net royalty income
deductions and prior year unallowed losses).
from intangible property is nonpassive income if the taxpayer
Any net passive income recharacterized as nonpassive acquired an interest in the pass-through entity after the
income is treated as investment income for purposes of figuring pass-through entity created the intangible property or performed
investment interest expense limitations if it's from (a) an activity substantial services or incurred substantial costs in developing
of renting substantially nondepreciable property from an or marketing the intangible property. Net royalty income is the
equity-financed lending activity, or (b) an activity related to an excess of passive activity gross income from licensing or
interest in a pass-through entity that licenses intangible property. transferring any right in intangible property over passive activity
The amount of income from the activities in the first three deductions (current year deductions and prior year unallowed
paragraphs, below, that any partner will be required to losses) that are reasonably allocable to the intangible property.
recharacterize as nonpassive income may be limited under See Temporary Regulations section 1.469-2T(f)(7)(iii) for
Temporary Regulations section 1.469-2T(f)(8). Because the exceptions to this rule.
partnership won't have information regarding all of a partner's
activities, it must identify all partnership activities meeting the Passive Activity Reporting Requirements
definitions under Certain nondepreciable rental property To allow partners to correctly apply the passive activity loss and
activities and Passive equity-financed lending activities below as credit limitation rules, the partnership must do the following.
activities that may be subject to recharacterization.
1. If the partnership carries on more than one activity,
Income from the following six sources is subject to provide an attached statement for each activity conducted
recharacterization. through the partnership that identifies the type of activity
conducted (trade or business, rental real estate, or rental activity
Significant participation passive activities. A significant
other than rental real estate). See Grouping Activities, earlier.
participation passive activity is any trade or business activity in
which the partner participated for more than 100 hours during 2. On the attached statement for each activity, provide a
the tax year but didn't materially participate. Because each statement, using the same box numbers as shown on
partner must determine the partner's level of participation, the Schedule K-1, detailing the net income (loss), credits, and all
partnership won't be able to identify significant participation items required to be separately stated under section 702(a) from
passive activities. each trade or business activity, from each rental real estate
activity, from each rental activity other than a rental real estate
Certain nondepreciable rental property activities. Net activity, and from investments. If the partnership grouped
passive income from a rental activity is nonpassive income if less separate activities, the attachments must identify each group.
than 30% of the unadjusted basis of the property used or held for The attached group activity description must be sufficient for a
use by customers in the activity is subject to depreciation under partner to determine if its other activities qualify to be grouped
section 167. with any groups provided by the partnership.
Passive equity-financed lending activities. If the partnership 3. Identify the net income (loss) and credits from each oil or
has net income from a passive equity-financed lending activity, gas well drilled or operated under a working interest that any
the smaller of the net passive income or the equity-financed partner (other than a partner whose only interest in the
interest income from the activity is nonpassive income. partnership during the year is as a limited partner) holds through
Rental of property incidental to a development activity. Net the partnership. Further, if any partner had an interest as a
rental activity income is the excess of passive activity gross general partner in the partnership during less than the entire
income from renting or disposing of property over passive year, the partnership must identify both the disqualified
activity deductions (current year deductions and prior year deductions from each well that the partner must treat as passive
unallowed losses) that are reasonably allocable to the rented activity deductions, and the ratable portion of the gross income
property. Net rental activity income is nonpassive income for a from each well that the partner must treat as passive activity
partner if all of the following apply. gross income.

18 Instructions for Form 1065 (2024)

 4. Identify the net income (loss) and the partner's share of gain represented more than 10% of the partner's total gain from
partnership interest expense from each activity of renting a the disposition).
dwelling unit that any partner uses for personal purposes during 14. Identify the following items from activities that may be
the year for more than the greater of 14 days or 10% of the subject to the recharacterization rules. See Recharacterization of
number of days that the residence is rented at fair rental value. Passive Income, earlier.
5. Identify the net income (loss) and the partner's share of a. Net income from an activity of renting substantially
partnership interest expense from each activity of trading nondepreciable property.
personal property conducted through the partnership.
b. The smaller of equity-financed interest income or net
6. For any gain (loss) from the disposition of an interest in an passive income from an equity-financed lending activity.
activity or of an interest in property used in an activity (including
dispositions before 1987 from which gain is being recognized c. Net rental activity income from property developed (by the
after 1986): partner or the partnership), rented, and sold within 12 months
after the rental of the property commenced.
a. Identify the activity in which the property was used at the
time of disposition; d. Net rental activity income from the rental of property by
the partnership to a trade or business activity in which the
b. If the property was used in more than one activity during partner had an interest (either directly or indirectly).
the 12 months preceding the disposition, identify the activities in
which the property was used and the adjusted basis allocated to e. Net royalty income from intangible property if the partner
each activity; and acquired the partner's interest in the partnership after the
partnership created the intangible property or performed
c. For gains only, if the property was substantially substantial services, or incurred substantial costs in developing
appreciated at the time of the disposition and the applicable or marketing the intangible property.
holding period specified in Regulations section 1.469-2(c)(2)(iii)
(A) wasn't satisfied, identify the amount of the nonpassive gain 15. Identify separately the credits from each activity
and indicate whether the gain is investment income under conducted by or through the partnership.
Regulations section 1.469-2(c)(2)(iii)(F). 16. Identify the partner's distributive share of the partnership's
7. Specify the amount of gross portfolio income, the interest self-charged interest income or expense (see Self-Charged
expense properly allocable to portfolio income, and expenses Interest, earlier).
other than interest expense that are clearly and directly allocable a. Loans between a partner and the partnership. Identify the
to portfolio income. lending or borrowing partner's share of the self-charged interest
8. Identify separately any of the following types of payments income or expense. If the partner made the loan to the
to partners. partnership, also identify the activity in which the loan proceeds
were used. If the proceeds were used in more than one activity,
a. Payments to a partner for services other than in the allocate the interest to each activity based on the amount of the
partner's capacity as a partner under section 707(a). proceeds used in each activity.
b. Guaranteed payments to a partner for services under b. Loans between the partnership and another partnership
section 707(c). or S corporation. If the partnership's partners have the same
c. Guaranteed payments for use of capital. proportional ownership interest in the partnership and the other
d. If section 736(a)(2) payments are made for unrealized partnership or S corporation, identify each partner's share of the
receivables or for goodwill, the amount of the payments and the interest income or expense from the loan. If the partnership was
activities to which the payments are attributable. the borrower, also identify the activity in which the loan proceeds
were used. If the loan proceeds were used in more than one
e. If section 736(b) payments are made, the amount of the activity, allocate the interest to each activity based on the
payments and the activities to which the payments are amount of the proceeds used in each activity.
attributable.
9. Identify the ratable portion of any section 481 adjustment Net Investment Income Tax Reporting
(whether a net positive or a net negative adjustment) allocable to Requirements
each partnership activity.
The information described in this section should be given directly
10. Identify the amount of gross income from each oil or gas to the partner and shouldn't be reported by the partnership to the
property of the partnership. IRS.
11. Identify any gross income from sources specifically
excluded from passive activity gross income, including: To allow partners to correctly figure the net investment
a. Income from intangible property if the partner is an income tax (NIIT) where a partner disposes of an interest in the
individual whose personal efforts significantly contributed to the partnership during the tax year, the partnership may be required
creation of the property; to provide the partner with certain information. The NIIT is a tax
imposed on an individual’s, trust’s, or estate’s net investment
b. Income from state, local, or foreign income tax refunds; income. Net investment income includes the net gains or losses
and from the sale of an interest in the partnership. A partner who is
c. Income from a covenant not to compete if the partner is actively involved in one or more of the partnership’s or lower-tier
an individual who contributed the covenant to the partnership. pass-through entities’ trades or businesses (other than trading in
12. Identify any deductions that aren't passive activity financial instruments or commodities) can reduce the amount of
deductions. the gain or loss from the sale of the partnership or lower-tier
pass-through entity interest included in its net investment
13. If the partnership makes a full or partial disposition of its income. However, to figure its net investment income, the active
interest in another entity, identify the gain (loss) allocable to each partner needs certain information from the partnership.
activity conducted through the entity, and the gain allocable to a
passive activity that would have been recharacterized as Generally, the partnership must provide certain information to
nonpassive gain had the partnership disposed of its interest in the partner if the partnership knows, or has reason to know, the
property used in the activity (because the property was following.
substantially appreciated at the time of the disposition, and the • The partner disposed of an interest in the partnership.
Instructions for Form 1065 (2024) 19
 • The partner materially participates (within the meaning of the following order: city, province or state, and the foreign country.
passive activity loss rules (section 469)) in one or more of the Follow the foreign country's practice in placing the postal code in
trades or businesses (within the meaning of section 162) of the the address. Don't abbreviate the country name.
partnership or a lower-tier pass-through entity (other than trading If the partnership has changed its address since it last filed a
in financial instruments or commodities). return (including a change to an “in care of” address), check box
• The partner doesn't qualify for the optional simplified reporting G(4) for “Address change.”
method for figuring its net investment income associated with the
disposition of the interest. For more information, see the If the partnership changes its mailing address or the
instructions for Form 8960, line 5c. TIP responsible party after filing its return, it can notify the
IRS by filing Form 8822-B, Change of Address or
Information to be provided to partner. Generally, the Responsible Party—Business.
partnership must provide the partner with its distributive share of
the net gain and loss from the deemed sale for FMV of the
partnership’s property, other than property that relates to the Partnerships With Adjustments in the Current
trades or businesses in which the partner materially participates, Year That Didn’t Result in an IU
as determined under the passive activity loss rules applicable to If a partnership has an adjustment from a BBA audit which
the transfer of an interest in a pass-through entity. For more doesn't result in an IU, the partnership shouldn't take the
information, see the instructions for Form 8960, line 5c. adjustment into account until the adjustment year (see
If a partner who qualifies for the optional simplified reporting Definitions, earlier). With its Form 1065 for the adjustment year,
method prefers to determine net gain or loss under the general the partnership should provide a statement describing the
calculation, the partnership may, but isn't obligated to, provide adjustments, including the line numbers to which the
the information to the partner at that partner’s request. adjustments relate, and incorporate those adjustments into its
adjustment year return. If there's a reallocation adjustment being

Specific Instructions reported on the adjustment year return, ensure the statement
identifies the partner receiving the reallocation adjustment. If
there's an adjustment to a separately stated item or to a credit,
These instructions follow the line numbers on the first page of the partnership must adjust that item or that credit in the
Form 1065. The accompanying schedules are discussed adjustment year. See Examples 1 and 2 in Regulations section
separately. Specific instructions for most of the lines are 301.6225-3.
provided. Lines that aren't discussed are self-explanatory.
Items A and C
Fill in all applicable lines and schedules.
Enter the applicable activity name and the code number from the
Enter any items specially allocated to the partners in the list, Codes for Principal Business Activity and Principal Product
appropriate box of the applicable partner's Schedule K-1. Enter or Service, near the end of these instructions.
the total amount on the appropriate line of Schedule K. Don't For example, if, as its principal business activity, the
enter separately stated amounts on the numbered lines on Form partnership (a) purchases raw materials, (b) subcontracts out for
1065; Form 1125-A, page 1; or Schedule D (Form 1065). labor to make a finished product from the raw materials, and (c)
File all six pages of Form 1065. However, if the answer to retains title to the goods, the partnership is considered to be a
Schedule B, question 4, is “Yes,” Schedules L, M-1, and M-2 on manufacturer and must enter “Manufacturer” in item A and enter
page 6 are optional. Also attach a Schedule K-1 to Form 1065 in item C one of the codes (311110 through 339900) listed under
for each partner. “Manufacturing” on the list, Codes for Principal Business Activity
and Principal Product or Service, near the end of these
File only one Form 1065 for each partnership. Mark instructions. For nonstore retailers, select the Principal Business
“Duplicate Copy” on any copy you give to a partner. Activity (PBA) code by the primary product that your
If a syndicate, pool, joint venture, or similar group files Form establishment sells. For example, establishments primarily
1065, it must attach a copy of the agreement and all selling prescription and non-prescription drugs, select PBA code
amendments to the return, unless a copy has previously been 456110 Pharmacies & Drug Retailers.
filed.
Item D. Employer Identification Number (EIN)
A foreign partnership required to file a return must Show the correct EIN in item D. If the partnership doesn't have
TIP generally report all of its foreign and U.S. partnership an EIN, it must apply for one in one of the following ways.
items. For rules regarding whether a foreign partnership • Online—Go to [Link]/EIN. The EIN is issued immediately
must file Form 1065, see Who Must File, earlier. once the application information is validated.
• By mailing or faxing Form SS-4, Application for Employer
Name and Address Identification Number.
Enter the legal name of the partnership, address, and EIN on the An LLC must determine which type of federal tax entity it will
appropriate lines. If the partnership has changed its name, check be (partnership, corporation, or disregarded entity (DE)) before
box G(3). Include the suite, room, or other unit number after the applying for an EIN (see Form 8832 for details). If the partnership
street address. If the post office doesn't deliver mail to the street hasn't received its EIN by the time the return is due, enter
address and the partnership has a P.O. box, show the box “Applied for” and the application date in the space for the EIN.
number instead. For more details, see the Instructions for Form SS-4.
If the partnership receives its mail in care of a third party Note. The online application process isn't yet available for
(such as an accountant or an attorney), enter “C/O” on the street partnerships with addresses in foreign countries. If you're
address line, followed by the third party’s name and street located outside the United States, call 267-941-1099.
address or P.O. box.
If the partnership's address is outside the United States or Item F. Total Assets
U.S. territories, enter the information on the line for “City or town, You aren't required to complete item F if the answer to
state or province, country, and ZIP or foreign postal code” in the Schedule B, question 4, is “Yes.”

20 Instructions for Form 1065 (2024)

 If you're required to complete this item, enter the partnership's through 7. If a cost offset method under section 451(b) or (c) is
total assets at the end of the tax year, as determined by the used, the resulting gross income is reported on line 1a.
accounting method regularly used in keeping the partnership's
books and records. If there were no assets at the end of the tax Special rules apply to certain income, as discussed below.
year, enter zero. For example, don't include gross receipts from farming on
line 1a. Instead, show the net profit (loss) from farming on line 5.
Item J. Schedule C and Schedule M-3 Also, don't include on line 1a rental activity income or portfolio
A partnership must file Schedule M-3, Net Income (Loss) income.
Reconciliation for Certain Partnerships, instead of Schedule M-1, In general, advance payments are reported in the year of
if any of the following apply. receipt. For exceptions to this general rule for partnerships that
• The amount of total assets at the end of the tax year reported use the accrual method of accounting, see the following.
on Schedule L, line 14, column (d), is $10 million or more. • To report income from long-term contracts, see section 460.
• The amount of adjusted total assets for the tax year is $10 • For permissible methods that allow a limited deferral of
million or more. Adjusted total assets is defined in the advance payments beyond the current tax year, see section
Instructions for Schedule M-3. 451(c) and Regulations section 1.451-8.
• The amount of total receipts (as defined later in the • For information on adopting or changing to a permissible
instructions for Schedule B, question 4) for the tax year is $35 method for reporting advance payment for goods and services
million or more. by an accrual method partnership, see the Instructions for Form
• An entity that is a reportable entity partner of the partnership 3115.
owns or is deemed to own, directly or indirectly, an interest of
50% or more in the partnership's capital, profit, or loss on any Installment sales. Generally, the installment method can't be
day during the tax year of the partnership. Reportable entity used for dealer dispositions of property. A dealer disposition is
partner is defined in the Instructions for Schedule M-3. any disposition of:
A partnership filing Form 1065 that isn't required to file
• Personal property by a person who regularly sells or otherwise
disposes of personal property of the same type on the
Schedule M-3 may voluntarily file Schedule M-3 instead of
installment plan, or
Schedule M-1.
• Real property held for sale to customers in the ordinary
Any partnership that files Schedule M-3 must also complete course of the taxpayer's trade or business.
and file Schedule C (Form 1065), Additional Information for Exception. These restrictions on using the installment
Schedule M-3 Filers. See Eased requirements next. method don't apply to dispositions of property used or produced
Eased requirements. Partnerships that (a) are required to in a farming business or sales of timeshares and residential lots.
file Schedule M-3 and have less than $50 million in total assets However, if the partnership elects to report dealer dispositions of
at tax-year-end, or (b) aren't required to file Schedule M-3 and timeshares and residential lots on the installment method, each
voluntarily file Schedule M-3, must either (i) complete partner's tax liability must be increased by the partner's
Schedule M-3 entirely, or (ii) complete Schedule M-3 through distributive share of the interest payable under section 453(l)(3).
Part I and complete Schedule M-1 instead of completing Parts II Include on line 1a the gross profit on collections from
and III of Schedule M-3. installment sales for any of the following.
In addition, partnerships that meet the requirements of (a) • Dealer dispositions of property before March 1, 1986.
and (b) above aren't required to file Schedule C (Form 1065) or • Dispositions of property used or produced in the trade or
Form 8916-A. business of farming.
See the instructions for Schedule C and Schedule M-3 for • Certain dispositions of timeshares and residential lots
more information. reported under the installment method.
Attach a statement showing the following information for the
Income current year and the 3 preceding years.
Report only trade or business activity income on lines 1a
• Gross sales.
through 8. Don't report rental activity income or portfolio
• Cost of goods sold.
!
CAUTION income on these lines. See Passive Activity Limitations,
• Gross profits.
earlier, for definitions of rental activity income and portfolio
• Percentage of gross profits to gross sales.
income. Rental activity income and portfolio income are reported
• Amount collected.
on Schedules K and K-1. Rental real estate activities are also
• Gross profit on the amount collected.
reported on Form 8825. Nonaccrual-experience method. Partnerships that qualify to
use the nonaccrual-experience method (described earlier)
Tax-exempt income. Don’t include any tax-exempt income on should attach a statement showing total gross receipts, the
lines 1a through 8. A partnership that receives any tax-exempt amount not accrued as a result of the application of section
income other than interest, or holds any property or engages in 448(d)(5), and the net amount accrued. Include the net amount
any activity that produces tax-exempt income, reports this on line 1a.
income on Schedule K, line 18b, and in box 18 of Schedule K-1
using code B. Line 2. Cost of Goods Sold
Report tax-exempt interest income, including exempt-interest If the partnership has a cost of goods sold deduction, complete
dividends received as a shareholder in a mutual fund or other and attach Form 1125-A. Enter on Form 1065, page 1, line 2, the
RIC, on Schedule K, line 18a, and in box 18 of Schedule K-1 amount from Form 1125-A, line 8. See Form 1125-A and its
using code A. instructions.
See Deductions, later, for information on how to report
expenses related to tax-exempt income. Line 4. Ordinary Income (Loss) From Other
Partnerships, Estates, and Trusts
Line 1a. Gross Receipts or Sales Enter the ordinary income (loss) shown on Schedule K-1 (Form
Enter on line 1a gross receipts or sales from all trade or business 1065) or Schedule K-1 (Form 1041), or other ordinary income
operations, except for amounts that must be reported on lines 4 (loss) from a foreign partnership, estate, or trust. Show the

Instructions for Form 1065 (2024) 21

partnership's, estate's, or trust's name, address, and EIN on a Line 7. Other Income (Loss)
separate statement attached to this return. If the amount entered
Enter any other trade or business income (loss) not included on
is from more than one source, identify the amount from each
lines 1a through 6. List the type and amount of income on an
source.
attached statement. Examples of other income include the
Don't include portfolio income or rental activity income (loss) following.
from other partnerships, estates, or trusts on this line. Instead, • Interest income derived in the ordinary course of the
report these amounts on Schedules K and K-1, or on Form 8825, partnership's trade or business, such as interest charged on
line 20a, if the amount is from a rental real estate activity. receivable balances.
• Recoveries of bad debts deducted in prior years under the
Ordinary income (loss) from another partnership that is a PTP specific charge-off method.
isn't reported on this line. Instead, report the amount separately • Taxable income from insurance proceeds.
on Schedule K, line 11, and in box 11 of Schedule K-1 using • Any amount included in income from Form 6478, Biofuel
code ZZ. Producer Credit, line 2, if applicable.
• Any amount included in income from Form 8864, line 9, if
Treat shares of other items separately reported on applicable.
Schedule K-1 issued by the other entity as if the items were • The recapture amount under section 280F if the business use
realized or incurred by this partnership. of listed property drops to 50% or less. To figure the recapture
amount, complete Form 4797, Part IV.
If there's a loss from another partnership, the amount of the
loss that may be claimed is subject to the basis limitations as
• All section 481 income adjustments resulting from changes in
accounting methods. Show the computation of the section 481
appropriate.
adjustments on an attached statement.
If the tax year of your partnership doesn't coincide with the tax • Part or all of the proceeds received from certain
year of the other partnership, estate, or trust, include the ordinary employer-owned life insurance contracts issued after August 17,
income (loss) from the other entity in the tax year in which the 2006. Partnerships that own one or more employer-owned life
other entity's tax year ends. insurance contracts issued after that date must file Form 8925,
Report of Employer-Owned Life Insurance Contracts. See
Line 5. Net Farm Profit (Loss) section 101(j) for details.
Enter the partnership's net farm profit (loss) from Schedule F Don't include items requiring separate computations that
(Form 1040). Attach Schedule F (Form 1040) to Form 1065. must be reported on Schedules K and K-1. See the instructions
Don't include on this line any farm profit (loss) from other for Schedules K and K-1, later.
partnerships. Report those amounts on line 4. In figuring the
partnership's net farm profit (loss), don't include any section 179 Don't report portfolio or rental activity income (loss) on this
expense deduction; this amount must be separately stated. line.

Also report the partnership's fishing income on this line. Deductions

For a special rule concerning the method of accounting for a Report only trade or business activity deductions on
farming partnership with a corporate partner and for other tax ! lines 9 through 21.
information on farms, see Pub. 225, Farmer's Tax Guide. CAUTION

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

Because the partner, and not the partnership, makes the
• Rental activity expenses. Report these expenses on Form
TIP election to deduct the expenses of raising any plant with 8825 or Schedule K, line 3b.
a preproductive period of more than 2 years, farm
• Deductions allocable to portfolio income. Report these
partnerships that aren't required to use an accrual method deductions on Schedule K, line 13e, and in box 13 of
shouldn't capitalize such expenses. Instead, state them Schedule K-1 using code I or L.
separately on an attached statement to Schedule K, line 13e,
• Nondeductible expenses (for example, expenses connected
and in box 13 of Schedule K-1 using code P. See section with the production of tax-exempt income). Report
263A(d) for more information. nondeductible expenses on Schedule K, line 18c, and in box 18
of Schedule K-1 using code C.
Line 6. Net Gain (Loss) From Form 4797 • Qualified expenditures to which an election under section
59(e) may apply. The instructions for Schedule K, line 13d, and
Include only ordinary gains or losses from the sale, for box 13, code J, of Schedule K-1 explain how to report these
! exchange, or involuntary conversion of assets used in a amounts.
CAUTION trade or business activity. Ordinary gains or losses from

the sale, exchange, or involuntary conversion of rental activity

• Items the partnership must state separately that require
separate computations by the partners. Examples include
assets are reported separately on Form 8825, line 19, or expenses incurred for the production of income instead of in a
Schedule K, line 3c, and in box 3 of Schedule K-1, generally as a trade or business, charitable contributions, foreign taxes paid or
part of the net income (loss) from the rental activity. accrued, intangible drilling and development costs, soil and
A partnership that is a partner in another partnership must water conservation expenditures, amortizable basis of
include on Form 4797 its share of ordinary gains (losses) from reforestation expenditures, and exploration expenditures. The
sales, exchanges, or involuntary conversions (other than distributive shares of these expenses are reported separately to
casualties or thefts) of the other partnership's trade or business each partner on Schedule K-1.
assets.
Limitations on Deductions
Partnerships shouldn't use Form 4797 to report the sale or
other disposition of property if a section 179 expense deduction Section 263A uniform capitalization rules. The uniform
was previously passed through to any of its partners for that capitalization rules of section 263A generally require
property. Instead, report it in box 20 of Schedule K-1 using code partnerships to capitalize certain costs incurred in connection
L. See Dispositions of property with section 179 deductions with the following.
(code L), later, for details.

22 Instructions for Form 1065 (2024)

 • The production of real property and tangible personal property Business startup and organizational costs. Generally, a
held in inventory or held for sale in the ordinary course of partnership can elect to deduct a limited amount of startup or
business. organizational costs paid or incurred. Any costs not deducted
• Real property or personal property (tangible and intangible) must be amortized as explained below. See sections 195(b) and
acquired for resale. 709(b).
• The production of real property and tangible personal property Time for making an election. The partnership generally
by a partnership for use in its trade or business or in an activity elects to deduct startup or organizational costs by claiming the
engaged in for profit. deduction on its return filed by the due date (including
Tangible personal property produced by a partnership extensions) for the tax year in which the active trade or business
includes a film, sound recording, videotape, book, or similar begins.
property. If the partnership timely filed its return for the year without
The costs required to be capitalized under section 263A making an election, it can still make an election by filing an
aren't deductible until the property to which the costs relate is amended return within 6 months of the due date of the return
sold, used, or otherwise disposed of by the partnership. (excluding extensions). Clearly indicate the election on the
Exceptions. For tax years beginning after 2017, a small amended return and enter “Filed pursuant to section
business taxpayer, defined earlier, can adopt or change its 301.9100-2” at the top of the amended return. File the amended
method of accounting to not capitalize costs under section 263A. return at the same address the partnership filed its original
See section 263A(i) and Accounting Methods, earlier. return. The election applies when figuring income for the current
Section 263A doesn't apply to the following. tax year and all subsequent years.
• Timber. The partnership can choose to forgo the above elections by
• Most property produced under a long-term contract. clearly electing to capitalize its startup or organizational costs on
• Certain property produced in a farming business. See the its return filed by the due date (including extensions) for the tax
note at the end of the instructions for line 5, earlier. year in which the active trade or business begins.
• Geological and geophysical costs amortized under section The election to either amortize or capitalize startup or
167(h). organizational costs is irrevocable and applies to all startup and
• Certain plants bearing fruits and nuts under section 168(k)(5). organizational costs that are related to the trade or business.
The partnership must report the following costs separately to Amortization. Any costs not deducted under the above rules
the partners for purposes of determinations under section 59(e). must be amortized ratably over a 180-month period, beginning
• R&E costs under section 174. with the month the partnership begins business. See the
• Intangible drilling costs for oil, gas, and geothermal property. Instructions for Form 4562 for details.
• Mining exploration and development costs. Report the deductible amount of these costs and any
Indirect costs. Partnerships subject to the uniform amortization on line 21. For amortization that began during the
capitalization rules are required to capitalize not only direct costs tax year, complete and attach Form 4562, Depreciation and
but an allocable part of most indirect costs (including taxes) that Amortization.
benefit the assets produced or acquired for resale, or are
Syndication costs. Costs for issuing and marketing interests in
incurred because of the performance of production or resale
the partnership, such as commissions, professional fees, and
activities.
printing costs, must be capitalized. They can't be depreciated or
For inventory, indirect costs that must be capitalized include amortized. See the instructions for line 10, later, for the treatment
the following. of syndication fees paid to a partner.
• Administration expenses.
• Taxes. Reducing certain expenses for which credits are allowable.
• Depreciation. The partnership may need to reduce the otherwise allowable
• Insurance. deductions for expenses used to figure certain credits. The
• Compensation paid to officers attributable to services. following are examples of such credits. (Don't reduce the amount
• Rework labor. of the allowable deduction for any portion of the credit that was
• Contributions to pension, stock bonus, and certain passed through to the partnership from another pass-through
profit-sharing, annuity, or deferred compensation plans. entity.)
• Work opportunity credit.
Regulations section 1.263A-1(e)(3) specifies other indirect • Credit for increasing research activities.
costs that relate to production or resale activities that must be • Disabled access credit.
capitalized and those that may be currently deductible. • Empowerment zone employment credit, if applicable.
Interest expense paid or incurred during the production • Credit for employer social security and Medicare taxes paid
period of designated property must be capitalized and is on certain employee tips.
governed by special rules. For more details, see Regulations • Orphan drug credit.
sections 1.263A-8 through -15. • Credit for small employer pension plan startup costs
For more details on the uniform capitalization rules, see (including employer contributions).
Regulations sections 1.263A-1 through -3. • Credit for employer-provided childcare facilities and services.
• Low sulfur diesel fuel production credit.
Transactions between related taxpayers. Generally, an • Credit for employer differential wage payments.
accrual basis partnership can deduct business expenses and • Credit for small employer health insurance premiums.
interest owed to a related party (including any partner) only in the • Employer credit for paid family and medical leave (Form
tax year of the partnership that includes the day on which the 8994).
payment is includible in the income of the related party. See
section 267 for details. Note. Wages taken into account in determining the credit for
Business interest. Business interest expense (BIE) is limited qualified sick and family leave on Form 941 can't be taken into
for tax years beginning after 2017. See section 163(j) for account in determining the employer credit for paid family and
limitations on deductions for business interest, and section medical leave on Form 8994. See the Instructions for Form 8994.
163(j)(4) for rules specific to partnerships.

Instructions for Form 1065 (2024) 23

 If the partnership has any of the credits listed above, figure Partnerships can't take a bad debt deduction unless the
each current year credit before figuring the deductions for ! amount was previously included in income.
expenses on which the credit is based. CAUTION

Line 9. Salaries and Wages Line 13. Rent

Enter the salaries and wages paid or incurred for the tax year, Enter rent paid on business property used in a trade or business
reduced by the amount of the following credit(s). activity. Don't deduct rent for a dwelling unit occupied by any
• Work Opportunity Credit (Form 5884). partner for personal use.
• Empowerment Zone Employment Credit (Form 8844), if If the partnership rented or leased a vehicle, enter the total
applicable.
annual rent or lease expense paid or incurred in the trade or
• Credit for Employer Differential Wage Payments (Form 8932). business activities of the partnership. Also complete Form 4562,
Don't reduce the amount of the allowable deduction for any Part V. If the partnership leased a vehicle for a term of 30 days or
portion of the credit that was passed through to the partnership more, the deduction for vehicle lease expense may have to be
from another pass-through entity. See the instructions for the reduced by an amount called the inclusion amount. The
credit form for more information. partnership may have an inclusion amount if:
Don't include salaries and wages reported elsewhere on the The lease term began: And the vehicle's FMV on the first day of
return, such as amounts included in cost of goods sold, elective the lease exceeded:
contributions to a section 401(k) cash or deferred arrangement,
Automobiles other than trucks and vans
or amounts contributed under a salary reduction SEP agreement
or a SIMPLE IRA plan. During calendar year 2024 . . . . . . . . . . . . . . . . . . $62,000
During calendar year 2023 . . . . . . . . . . . . . . . . . . $60,000
Line 10. Guaranteed Payments to Partners During calendar year 2022 . . . . . . . . . . . . . . . . . . $56,000
Deduct payments or credits to a partner for services or for the During calendar year 2021 . . . . . . . . . . . . . . . . . . $51,000
use of capital if the payments or credits are determined without
After 12/31/2017 but before 1/1/2021 . . . . . . . . . . . . $50,000
regard to partnership income and are allocable to a trade or
business activity. Also include on line 10 amounts paid during After 12/31/12 and before 1/1/18 . . . . . . . . . . . . . . $19,000
the tax year for insurance that constitutes medical care for a After 12/31/09 but before 1/1/13 . . . . . . . . . . . . . . . $18,500
partner, a partner's spouse, a partner's dependents, or a
Trucks and vans
partner's children under age 27 who aren't dependents.
During calendar year 2024 . . . . . . . . . . . . . . . . . . $62,000
For information on how to treat the partnership's contribution During calendar year 2023 . . . . . . . . . . . . . . . . . . $60,000
to a partner's health savings account (HSA), see Notice 2005-8,
2005-4 I.R.B. 368. During calendar year 2022 . . . . . . . . . . . . . . . . . . $56,000
During calendar year 2021 . . . . . . . . . . . . . . . . . . $51,000
Don't include any payments and credits that should be
capitalized. For example, although payments or credits to a After 12/31/2017 but before 1/1/2021 . . . . . . . . . . . . $50,000
partner for services rendered in syndicating a partnership may After 12/31/13 and before 1/1/18 . . . . . . . . . . . . . . $19,500
be guaranteed payments, they aren't deductible on line 10. They After 12/31/09 and before 1/1/14 . . . . . . . . . . . . . . $19,000
are capital expenditures. However, they should be reported as The inclusion amount for lease terms beginning in 2025 will be published in the
guaranteed payments on the applicable line of Schedule K, Internal Revenue Bulletin in early 2025.
line 4b, and in box 4b of Schedule K-1.
Don't include distributive shares of partnership profits.
See Pub. 463, Travel, Gift, and Car Expenses, for instructions
Report the guaranteed payments to the appropriate partners on figuring the inclusion amount.
using the applicable box 4 of Schedule K-1.
Line 14. Taxes and Licenses
Line 11. Repairs and Maintenance
Enter taxes and licenses paid or incurred in the trade or business
Enter the cost of repairs and maintenance not claimed activities of the partnership if not reflected elsewhere on the
elsewhere on the return, such as labor and supplies, that aren't return. Federal import duties and federal excise and stamp taxes
payments for improvements to the partnership’s property. are deductible only if paid or incurred in carrying on the trade or
Amounts are paid for improvements if they’re for betterments to business of the partnership. Foreign taxes are included on
the property or for restorations of the property (such as the line 14 only if they are taxes not creditable but deductible under
replacements of major components or substantial structural sections 901 and 903. See Schedule K-2, Part II, Section 2,
parts), or if they adapt the property to a new or different use. line 45, column (g).
Improvements must be capitalized. See Regulations section
1.263(a)-3. Don't deduct the following taxes on line 14.
• Taxes not imposed on the partnership.
The partnership can deduct repair and maintenance • Federal income taxes or taxes reported elsewhere on the
expenses only to the extent they relate to a trade or business return.
activity. See Regulations section 1.162-4. The partnership may • Creditable foreign taxes under sections 901 and 903. Report
elect to capitalize certain repair and maintenance costs these taxes separately on Schedule K, line 21, and in box 21 of
consistent with its books and records. See Regulations section Schedule K-1.
1.263(a)-3(n) for information on how to make the election. • Taxes allocable to a rental activity. Report taxes allocable to
rental real estate activity on Form 8825. Report taxes allocable
Line 12. Bad Debts to a rental activity other than a rental real estate activity on
Enter the total debts that became worthless in whole or in part Schedule K, line 3b.
during the year, but only to the extent such debts relate to a trade • Taxes paid or incurred for the production or collection of
or business activity. Report deductible nonbusiness bad debts income, or for the management, conservation, or maintenance of
as a short-term capital loss on Form 8949. property held to produce income. Report these taxes separately

24 Instructions for Form 1065 (2024)

on Schedule K, line 13e, and in box 13 of Schedule K-1 using • Interest paid by a partnership to a partner for the use of
code ZZ. capital, which should be entered on line 10 as guaranteed
payments.
See section 263A(a) for rules on capitalization of allocable • Prepaid interest, which can generally only be deducted over
costs (including taxes) for any property. the term of the debt. See section 461(g) and Regulations
sections 1.163-7, 1.446-2, and 1.1273-2(g) for details.
• Taxes, including state or local sales taxes, that are paid or • Interest that is allocable to unborrowed policy cash values of
incurred in connection with an acquisition or disposition of
life insurance, endowment, or annuity contracts issued after
property (these taxes must be treated as a part of the cost of the
June 8, 1997, when the partnership is a policyholder or
acquired property or, in the case of a disposition, as a reduction
beneficiary. See section 264(f). Attach a statement showing the
in the amount realized on the disposition).
computation of the deduction.
• Taxes assessed against local benefits that increase the value
of the property assessed (such as for paving, etc.). Limitation on deduction. Business interest expense deduction
is generally limited to the sum of business interest income, 30%
See section 164(d) for information on apportionment of taxes of the adjusted taxable income (ATI), and floor plan financing
on real property between seller and purchaser. interest. This limitation generally applies at the partnership level.
See section 163(j)(4) for additional information about the
Line 15. Interest application of the business interest expense limitation to
Include only interest incurred in the trade or business activities of partnerships. See Form 8990, Limitation on Business Interest
the partnership that isn't claimed elsewhere on the return. Expense Under Section 163(j), and its instructions for more
information. BIE includes any interest expense properly allocable
Don't include interest expense on the following. to a trade or business. A small business taxpayer that isn't a tax
• Debt used to purchase rental property or debt used in a rental shelter (as defined in section 448(d)(3)) and that meets the
activity. Interest allocable to a rental real estate activity is gross receipts test isn't required to limit BIE under section 163(j).
reported on Form 8825 and is used in arriving at net income A taxpayer meets the gross receipts test if the taxpayer has
(loss) from rental real estate activities on Schedule K, line 2, and average annual gross receipts of $30 million or less for the 3
in box 2 of Schedule K-1. Interest allocable to a rental activity prior tax years under the gross receipts test of section 448(c).
other than a rental real estate activity is included on Schedule K, Gross receipts include the aggregate gross receipts from all
line 3b, and is used in arriving at net income (loss) from a rental persons treated as a single employer such as a controlled group
activity (other than a rental real estate activity). This net amount of corporations, commonly controlled partnerships or
is reported on Schedule K, line 3c, and in box 3 of Schedule K-1. proprietorships, and affiliated service groups. If the partnership
• Debt used to buy property held for investment. Interest that is fails to meet the gross receipts test, Form 8990 is generally
clearly and directly allocable to interest, dividend, royalty, or required. Also see Schedule B, questions 23 and 24.
annuity income not derived in the ordinary course of a trade or
business is reported on Schedule K, line 13c, and in box 13 of Line 16. Depreciation
Schedule K-1 using code H. See the instructions for Schedule K, On line 16a, enter only the depreciation claimed on assets used
line 13c; box 13, code H, of Schedule K-1; and Form 4952, in a trade or business activity. Enter on line 16b the depreciation
Investment Interest Expense Deduction, for more information on included elsewhere on the return (for example, on page 1, line 2)
investment property. that is attributable to assets used in trade or business activities.
• Debt proceeds allocated to distributions made to partners See the Instructions for Form 4562, or Pub. 946, How To
during the tax year. Instead, report such interest on Schedule K, Depreciate Property, to figure the amount of depreciation to
line 13e, and in box 13 of Schedule K-1 using code AC. enter on this line.
• Debt required to be allocated to the production of designated
property. Designated property includes real property, personal Complete and attach Form 4562 only if the partnership
property that has a class life of 20 years or more, and other placed property in service during the tax year or claims
tangible property requiring more than 2 years (1 year in the case depreciation on any car or other listed property.
of property with a cost of more than $1 million) to produce or
construct. Interest allocable to designated property produced by Don't include any section 179 expense deduction on this line.
a partnership for its own use or for sale must be capitalized. In This amount isn't deducted by the partnership. Instead, it's
addition, a partnership must also capitalize to the basis of the passed through to the partners in box 12 of Schedule K-1.
designated property any interest on debt allocable to an asset Generally, the basis of a partnership's section 179 property must
used to produce designated property. A partner may have to be reduced to reflect the amount of section 179 expense elected
capitalize interest that the partner incurs during the tax year for by the partnership. This reduction must be made in the basis of
the partnership's production expenditures. Similarly, interest partnership property even if the limitations of section 179(b) and
incurred by a partnership may have to be capitalized by a partner Regulations section 1.179-2 prevent a partner from deducting all
for the partner's own production expenditures. The information or a portion of the amount of the section 179 expense allocated
required by the partner to properly capitalize interest for this by the partnership.
purpose must be provided by the partnership on an attached
statement for box 20 of Schedule K-1 using code R. See section Line 17. Depletion
263A(f) and Regulations sections 1.263A-8 through -15. If the partnership claims a deduction for timber depletion,
complete and attach Form T (Timber), Forest Activities
Special rules apply to the following. Schedule.
• Allocating interest expense among activities so that the Don't deduct depletion for oil and gas properties. Each
limitations on passive activity losses, investment interest, and
personal interest can be properly figured. Generally, interest ! partner figures depletion on oil and gas properties. See
CAUTION the instructions for Schedule K-1, box 20, Depletion
expense is allocated in the same manner as debt is allocated.
Debt is allocated by tracing disbursements of the debt proceeds information oil and gas (code T), for the information on oil and
to specific expenditures. Temporary Regulations section gas depletion that must be supplied to the partners by the
1.163-8T gives rules for tracing debt proceeds to expenditures. partnership.
Also see Proposed Regulations 1.163-14 for a special rule for
allocating interest expense with respect to pass-through entities.

Instructions for Form 1065 (2024) 25

Line 18. Retirement Plans, etc. • Amortization. See the Instructions for Form 4562 for more
information. Complete and attach Form 4562 if the partnership is
Don't deduct payments for partners to retirement or deferred
claiming amortization of costs that began during the tax year.
compensation plans including IRAs, qualified plans, and
simplified employee pension (SEP) and SIMPLE IRA plans on • Insurance premiums.
this line. These amounts are reported in box 13 of Schedule K-1 • Legal and professional fees.
using code R and are deducted by the partners on their own • Supplies used and consumed in the business.
returns. • Utilities.
• Certain business startup and organizational costs. See
Enter the deductible contributions not claimed elsewhere on Limitations on Deductions, earlier, for more details.
the return made by the partnership for its common-law • Any net negative section 481(a) adjustment.
employees under a qualified pension, profit-sharing, annuity, or Also see Special Rules, below.
SEP or SIMPLE IRA plan, and under any other deferred
compensation plan. Don't deduct the following on line 21.
• Items that must be reported separately on Schedules K and
If the partnership contributes to an IRA for employees, include K-1.
the contribution in salaries and wages on page 1, line 9, or Form • Fines or similar penalties. Generally, no deduction is allowed
1125-A, line 3, and not on line 18. for fines or similar penalties paid or incurred to or at the direction
of a government or governmental entity for violating any law
Employers who maintain a pension, profit-sharing, or other except amounts that constitute restitution (including remediation
funded deferred compensation plan (other than a SEP or of property), amounts paid or incurred to come into compliance
SIMPLE IRA), whether or not the plan is qualified under the with the law, amounts paid or incurred as the result of orders or
Code and whether or not a deduction is claimed for the current agreements in which no government or governmental entity is a
year, must generally file the applicable form listed below. party, and amounts paid or incurred for taxes due to the extent
• Form 5500, Annual Return/Report of Employee Benefit Plan. the amount would have been allowed as a deduction if timely
• Form 5500-SF, Short Form Annual Return/Report of Small paid. No deduction is allowed unless the amounts are
Employee Benefit Plan (generally filed instead of Form 5500 if specifically identified in the order or agreement and the taxpayer
there are under 100 participants at the beginning of the plan establishes that the amounts were paid for that purpose. Also,
year). any amount paid or incurred as reimbursement to the
government for the costs of any investigation or litigation aren't
Form 5500 and Form 5500-SF must be filed eligible for the exceptions and are nondeductible. See section
TIP electronically under the computerized ERISA Filing 162(f). Report nondeductible amounts on Schedule K, line 18c.
Acceptance System (EFAST2). For more information, • Expenses allocable to tax-exempt income. Report these
see the EFAST2 website at [Link]. expenses on Schedule K, line 18c.
• Form 5500-EZ, Annual Return of A One-Participant (Owners/ • Net operating losses. Only individuals and corporations may
Partners and Their Spouses) Retirement Plan or A Foreign Plan. claim a net operating loss deduction.
File this form for a plan that only covers one or more partners (or • Amounts paid or incurred to participate or intervene in any
partners and their spouses) or a foreign plan that is required to political campaign on behalf of a candidate for public office, or to
file an annual return and doesn't file the annual return influence the general public regarding legislative matters,
electronically on Form 5500-SF. elections, or referendums. Report these expenses on
Schedule K, line 18c.
Line 19. Employee Benefit Programs • Lobbying expenses. Generally, lobbying expenses aren't
Enter the partnership's contributions to employee benefit deductible. These expenses include amounts paid or incurred in
programs not claimed elsewhere on the return (for example, connection with influencing federal, state, or local legislation; or
insurance, health, and welfare programs) that aren't part of a amounts paid or incurred in connection with any communication
pension, profit-sharing, etc., plan included on line 18. with certain federal executive branch officials in an attempt to
influence the official actions or positions of the officials. See
Don't include amounts paid during the tax year for insurance Regulations section 1.162-29 for the definition of “influencing
that constitutes medical care for a partner, a partner's spouse, a legislation.” Dues and other similar amounts paid to certain
partner's dependents, or a partner's children under age 27 who tax-exempt organizations may not be deductible. If certain
aren't dependents. Instead, include these amounts on line 10 as in-house lobbying expenditures don't exceed $2,000, the general
guaranteed payments on the applicable line of Schedule K, rule denying deductions for lobbying expenses doesn’t apply to
line 4, and the applicable line of box 4 of Schedule K-1, of each these amounts. See section 162(e)(4)(B).
partner on whose behalf the amounts were paid. Also report • Amounts paid or incurred for any settlement or payout related
these amounts on Schedule K, line 13e, and in box 13 of to sexual harassment or sexual abuse that is subject to a
Schedule K-1, using code M, of each partner on whose behalf nondisclosure agreement, as well as any attorney’s fees related
the amounts were paid. to the settlement or payout. See section 162(q).

Line 20. Energy Efficient Commercial Building Special Rules

Deduction
Travel, meals, and entertainment. Subject to limitations and
Deduction for certain energy efficient commercial building restrictions discussed below, a partnership can deduct ordinary
property. See the Instructions for Form 7205 and section 179D and necessary travel and non-entertainment-related meal
for more information. Complete and attach Form 7205 if claiming expenses paid or incurred in its trade or business. Generally,
this deduction. entertainment expenses, membership dues, and facilities used
in connection with these activities can't be deducted. Also,
Line 21. Other Deductions special rules apply to deductions for gifts, luxury water travel,
Enter the total allowable trade or business deductions that aren't and convention expenses. See section 274 and Pub. 463 for
deductible elsewhere on page 1 of Form 1065. Attach a details.
statement listing by type and amount each deduction included Travel. The partnership can't deduct travel expenses of any
on this line. Examples of other deductions include the following. individual accompanying a partner or partnership employee,

26 Instructions for Form 1065 (2024)

including a spouse or dependent of the partner or employee, to “United States Treasury” and mailed to Ogden Service Center,
unless: Ogden, UT 84201-0011. Payments can be made by check or
• That individual is an employee of the partnership, and electronically. If making an electronic payment, choose the
• The travel is for a bona fide business purpose and would payment description “BBA AAR Imputed Underpayment” from
otherwise be deductible by that individual. the list of payment types.
Meals. Generally, the partnership can deduct only 50% of the Line 27. Other taxes. In a few instances, payments other than
amount otherwise allowable for non-entertainment meal those listed above may have to be made with Form 1065. Enter
expenses paid or incurred in its trade or business. the amount on this line and attach a statement identifying the
Entertainment-related meals are generally disallowed. In purpose of the payment.
addition (subject to exceptions under section 274(k)(2)):
• Meals must not be lavish or extravagant, and Line 29. Elective payment election amount from Form 3800.
• A partner or employee of the partnership must be present at Report the gross elective payment election amount from Form
the meal. 3800, Part III, line 6, column (h).
See section 274(n)(3) for a special rule that applies to Line 30. Payment. Enter any prepayments related to lines 24
expenses for meals consumed by individuals subject to the through 27 above.
hours of service limits of the Department of Transportation.
Membership dues. The partnership may deduct amounts
paid or incurred for membership dues in civic or public service
Schedule B. Other Information
organizations, professional organizations (such as bar and
medical associations), business leagues, trade associations, Question 1
chambers of commerce, boards of trade, and real estate boards.
Check box 1f for any other type of entity and state the type.
However, no deduction is allowed if a principal purpose of the
organization is to entertain, or provide entertainment facilities for,
members or their guests. In addition, the partnership may not
Maximum Percentage Owned for Purposes of
deduct membership dues in any club organized for business, Questions 2 and 3
pleasure, recreation, or other social purpose. This includes To determine the maximum percentage owned in the
country clubs, golf and athletic clubs, airline and hotel clubs, and partnership's profit, loss, or capital for the purposes of questions
clubs operated to provide meals under conditions favorable to 2a, 2b, and 3b, determine separately the partner's percentage of
business discussion. interest in profit, loss, and capital at the end of the partnership's
Entertainment facilities. The partnership can't deduct an tax year. This determination must be based on the partnership
expense paid or incurred for a facility (such as a yacht or hunting agreement and it must be made using the constructive
lodge) used for an activity usually considered entertainment, ownership rules described below. The maximum percentage is
amusement, or recreation. the highest of these three percentages (determined at the end of
Amounts treated as compensation. Generally, the the tax year).
partnership may be able to deduct otherwise nondeductible See Item J. Partner's Profit, Loss, and Capital, later, for more
entertainment, amusement, or recreation expenses if the information on ownership percentages.
amounts are treated as compensation to the recipient and
reported on Form W-2 for an employee or on Form 1099-NEC for Questions 2 and 3
an independent contractor.
Constructive ownership of the partnership. For purposes of
Reforestation expenditures. If the partnership made an question 2, except for foreign governments within the meaning of
election to deduct a portion of its reforestation expenditures on section 892, in determining an ownership interest in the profit,
Schedule K, line 13e, it must amortize over an 84-month period loss, or capital of the partnership, the constructive ownership
the portion of these expenditures in excess of the amount rules of section 267(c) (excluding section 267(c)(3)) apply to
deducted on Schedule K (see section 194). Deduct on line 21 ownership of interests in the partnership as well as corporate
only the amortization of these excess reforestation expenditures. stock. An interest in the partnership that is owned directly or
See Reforestation expense deduction (code S), later. indirectly by or for another entity (corporation, partnership,
estate, trust, or tax-exempt organization) is considered to be
Tax and Payment owned proportionately by the owners (shareholders, partners, or
Line 24. Interest due under the look-back method for com- beneficiaries) of the owning entity.
pleted long-term contracts. For partnerships that aren't Also, under section 267(c), an individual is considered to own
closely held, attach Form 8697 and a check or money order for an interest owned directly or indirectly by or for the individual’s
the full amount made payable to “United States Treasury.” Enter family. The family of an individual includes only that individual's
the partnership's EIN, daytime phone number, and “Form 8697 spouse, brothers, sisters, ancestors, and lineal descendants. An
Interest” on the check or money order. interest will be attributed from an individual under the family
Line 25. Interest due under the look-back method for prop- attribution rules only if the person to whom the interest is
erty depreciated under the income forecast method. For attributed owns a direct interest in the partnership or an indirect
partnerships that aren’t closely held, attach Form 8866 and a interest under section 267(c)(1) or (5). For purposes of these
check or money order for the full amount, made payable to instructions, an individual won't be considered to own, under
“United States Treasury.” Enter the partnership’s EIN, daytime section 267(c)(2), an interest in the partnership owned, directly
phone number, and “Form 8866 Interest” on the check or money or indirectly, by a family member of the individual unless the
order. individual also owns an interest in the partnership either directly
or indirectly through a corporation, partnership, or trust.
Line 26. BBA AAR imputed underpayment. Use this line if For purposes of question 2, the term “foreign government”
the partnership is filing an AAR electronically and chooses to has the same meaning as it does under section 892. In
pay the IU. For instructions on how to figure the IU, see the determining a foreign government's ownership interest in the
Instructions for Form 8082. Enter the name of the partnership, profit, loss, or capital of the partnership, the constructive
TIN, tax year, “Form 1065,” and “BBA AAR Imputed ownership rules of Temporary Regulations section 1.892-5T(c)
Underpayment” on the payment. Checks must be made payable (1)(i) apply to ownership of interests in the partnership as well as

Instructions for Form 1065 (2024) 27

corporate stock. An interest in the partnership that is owned interests owned, directly or indirectly, in the profit, loss, or capital
directly or indirectly by an integral part or controlled entity of a of the partnership at the end of the partnership's tax year. If the
foreign sovereign (within the meaning of Temporary Regulations entity is a trust, enter in column (v) the percentage of the
section 1.892-2T(a)) is considered to be owned proportionately partnership's beneficial interest in the trust owned, directly or
by such foreign sovereign. indirectly, at the end of the tax year. List a partnership or trust
Constructive ownership examples for questions 2 and 3 are owned through a DE rather than the DE.
included below. For the purposes of questions 2 and 3, add an
owner's direct percentage ownership and indirect percentage Question 4
ownership in an entity to determine if the owner owns, directly or Answer “Yes” if the partnership meets all four of the requirements
indirectly, 50% or more of the entity. shown on the form. “Total receipts” is defined as the sum of
Example for question 2a. Corporation A owns, directly, an gross receipts or sales (page 1, line 1a); all other income
interest of 50% in the profit, loss, or capital of Partnership B. (page 1, lines 4 through 7); income reported on Schedule K,
Corporation A also owns, directly, an interest of 15% in the profit, lines 3a, 5, 6a, and 7; income or net gain reported on
loss, or capital of Partnership C. Partnership B owns, directly, an Schedule K, lines 8, 9a, 10, and 11; and income or net gain
interest of 70% in the profit, loss, or capital of Partnership C. reported on Form 8825, lines 2, 19, and 20a. “Total assets” is
Therefore, Corporation A owns, directly or indirectly, an interest defined as the amount that would be reported in item F on
of 50% in the profit, loss, or capital of Partnership C (15% page 1 of Form 1065.
directly and 35% indirectly through Partnership B). On
Partnership C's Form 1065, it must answer “Yes” to question 2a Question 5
of Schedule B. See Example 1 in the instructions for Answer “Yes” if interests in the partnership are traded on an
Schedule B-1 (Form 1065) for guidance on providing the rest of established securities market or are readily tradable on a
the information required of entities answering “Yes” to this secondary market (or its substantial equivalent).
question.
Example for question 2b. A owns, directly, 50% of the profit, Question 6
loss, or capital of Partnership X. B, the daughter of A, doesn't Generally, the partnership will have income if debt is canceled or
own, directly, any interest in Partnership X and doesn't own, forgiven. Amounts related to forgiven Paycheck Protection
indirectly, any interest in Partnership X through any entity Program (PPP) loans are disregarded for purposes of this
(corporation, partnership, trust, or estate). Because family question. The determination of the existence and amount of
attribution rules apply only when an individual (in this example, cancellation of debt income is determined at the partnership
B) owns a direct interest in the partnership or an indirect interest level. Partnership cancellation of indebtedness income is
through another entity, A's interest in Partnership X isn't separately stated on Schedule K and Schedule K-1. The extent
attributable to B. On Partnership X's Form 1065, it must answer to which such income is taxable is usually determined by each
“Yes” to question 2b of Schedule B. See Example 2 in the individual partner under rules found in section 108. For more
instructions for Schedule B-1 (Form 1065) for guidance on information, see Pub. 334, Tax Guide for Small Business.
providing the rest of the information required of entities
answering “Yes” to this question. Question 7
Constructive ownership of other entities by the partner- Answer “Yes” if the partnership filed, or is required to file, a return
ship. For purposes of determining the partnership's constructive under section 6111 to provide information on any reportable
ownership of other entities, the constructive ownership rules of transaction by a material advisor. Use Form 8918, Material
section 267(c) (excluding section 267(c)(3)) apply to ownership Advisor Disclosure Statement, to provide the information. For
of interests in partnerships and trusts as well as corporate stock. details, see the Instructions for Form 8918.
Generally, if an entity (a corporation, partnership, or trust) is
owned, directly or indirectly, by or for another entity (corporation, Question 8
partnership, estate, or trust), the owned entity is considered to Answer “Yes” if either (1) or (2) below applies to the partnership.
be owned proportionally by or for the owners (shareholders, Otherwise, answer “No.”
partners, or beneficiaries) of the owning entity.
1. At any time during calendar year 2024, the partnership
Question 3a. List each corporation in which the partnership,
had an interest in or signature or other authority over a bank
at the end of the tax year, owns, directly, 20% or more, or owns,
account, securities account, or other financial account in a
directly or indirectly, 50% or more, of the total voting power of all
foreign country (see FinCEN Form 114, Report of Foreign Bank
classes of stock entitled to vote. Indicate the name, EIN, country
and Financial Accounts (FBAR)); and
of incorporation, and percentage interest owned, directly or
indirectly, in the total voting power. List the parent corporation of a. The combined value of the accounts was more than
an affiliated group filing a consolidated tax return rather than the $10,000 at any time during the calendar year; and
subsidiary members except for subsidiary members in which an b. The accounts were not with a U.S. military banking facility
interest is owned, directly or indirectly, independent of the operated by a U.S. financial institution.
interest owned, directly or indirectly, in the parent corporation. If 2. The partnership owns more than 50% of the stock in any
a corporation is owned through a DE, list the information for the corporation that would answer “Yes” based on item (1) above.
corporation rather than the DE.
Question 3b. List each partnership in which the partnership, If “Yes,” do the following.
at the end of the tax year, owns, directly, an interest of 20% or • Enter the name of the foreign country or countries. Attach a
more, or owns, directly or indirectly, an interest of 50% or more in separate sheet if more space is needed.
the profit, loss, or capital of the partnership. List each trust in • File FinCEN Form 114 electronically at the FinCEN website,
which the partnership, at the end of the tax year, owns, directly, [Link]/[Link].
an interest of 20% or more, or owns, directly or indirectly, an
interest of 50% or more, in the trust beneficial interest. For each Question 9
partnership or trust listed, indicate the name, EIN, type of entity The partnership may be required to file Form 3520, Annual
(partnership or trust), and country of origin. If the listed entity is a Return To Report Transactions With Foreign Trusts and Receipt
partnership, enter in column (v) the maximum of percentage of Certain Foreign Gifts, if any of the following apply.

28 Instructions for Form 1065 (2024)

• It directly or indirectly transferred property or money to a negative amount from all section 734(b) adjustments” means the
foreign trust. For this purpose, any U.S. person who created a decrease in basis of partnership property from all section 734(b)
foreign trust is considered a transferor. adjustments.
• It's treated as the owner of any part of the assets of a foreign Section 734(b) basis adjustment. For a section 734(b)
trust under the grantor trust rules. basis adjustment, attach a statement that includes:
• It received a distribution, a loan of cash or other marketable • The computation of the adjustment,
securities, or uncompensated use of trust property from a foreign • The class of property distributed (ordinary income property or
trust, or a foreign trust holds an outstanding qualified obligation capital gain property), and
of the partnership. • The partnership properties to which the adjustment has been
allocated.
For more information, see the Instructions for Form 3520.
Question 10d. Answer “Yes” if the partnership had to make a
An owner of a foreign trust must ensure that the trust files an basis reduction under section 743(b) because of a substantial
annual information return on Form 3520-A, Annual Information built-in loss (as defined in section 743(d)) or under section
Return of Foreign Trust With a U.S. Owner. 734(b) because of a substantial basis reduction (as defined in
section 734(d)).
Questions 10a, 10b, 10c, and 10d
Enter the total aggregate amount of such section 743(b)
You must answer “Yes” or “No” for each question. adjustments and/or section 734(b) adjustments for all partners
TIP and/or partnership property made in the tax year in the space
provided as a positive number.
Question 10a. Answer “Yes” if the partnership is making, or has Section 743(d)(1) provides that, for purposes of section 743,
made (and hasn't revoked), a section 754 election. For a partnership has a substantial built-in loss resulting from a
information about the election, see item 4 under Elections Made transfer of a partnership interest if the partnership's adjusted
by the Partnership, earlier. basis in the partnership's property exceeds by more than
$250,000 the FMV of the property or the transferee partner
Question 10b. Answer “Yes” if either of the following has would be allocated a loss of more than $250,000 if the
occurred. partnership assets were sold for cash equal to their FMV
• The partnership made an optional basis adjustment under immediately after such transfer. Under section 734(d), there's a
section 743(b) or 734(b) for the tax year. substantial basis reduction resulting from a distribution if the sum
• The partnership has made a section 754 election (and it of the following amounts exceeds $250,000.
hasn't been revoked) and a basis adjustment under section • The amount of loss recognized by the distributee partner on a
743(b) is made on a sale or exchange of a partnership interest or distribution in liquidation of the partner's interest in the
a transfer of a partnership interest on the death of a partner. See partnership (see section 731(a)(2)).
question 10c if the partnership has a substantial built-in loss • The excess of the basis of the distributed property to the
immediately after such a transfer. distributee partner (determined under section 732) over the
For partnerships other than PTPs, enter the total aggregate adjusted basis of the distributed property to the partnership
positive amount (in the appropriate space provided) resulting immediately before the distribution (as adjusted by section
from all section 743(b) adjustments. “Aggregate positive amount 732(d)).
from all section 743(b) adjustments” means the increase in the Section 734(b) basis adjustment. For a section 734(b)
partners' shares of basis in partnership property from all section basis adjustment, for partnerships other than PTPs, attach a
743(b) adjustments allocated to all the partners. Enter the total statement that includes:
aggregate negative amount (in the appropriate space provided) • The computation of the adjustment,
resulting from all section 743(b) adjustments. “Aggregate • The class of property distributed (ordinary income property or
negative amount from all section 743(b) adjustments” means the capital gain property), and
decrease in the partners' shares of basis in partnership property • The partnership properties to which the adjustment has been
from all section 743(b) adjustments allocated to all the partners. allocated.
Section 743(b) basis adjustment. The basis adjustment
affects only the transferee's basis in partnership property. The Question 11
partnership must attach a statement to the return for the tax year Check the box if the partnership engaged in a like-kind exchange
in which the transfer occurred. The statement must include: during the current or immediately preceding tax year and
• The name of the transferee partner, received replacement property that it distributed during the
• The EIN or SSN of the transferee partner, current tax year. For purposes of this question, the partnership is
• The computation of the adjustment, and considered to have distributed replacement property if the
• The identity of the partnership properties to which the partnership contributed such property to any entity other than a
adjustment has been allocated. DE. The distribution of its ownership interest in a DE is
For details, see section 743 and Regulations section 1.743-1. considered a distribution of the underlying property.
For details on allocating the basis adjustment to partnership
properties, see section 755 and Regulations section 1.755-1. Question 12
Question 10c. Answer “Yes” if the partnership made an optional If a partnership distributed property to its partners to be jointly
basis adjustment under section 734(b) for the tax year. If the owned, whether such distribution is direct or through the
partnership has made a section 754 election (and it hasn't been formation of an intermediate entity, the question must be
revoked), the partnership must make a basis adjustment under answered “Yes.” For purposes of question 12, an “undivided
section 734(b). Enter the total aggregate positive amount and interest in partnership property” means property that was owned
the total aggregate negative amount in the appropriate space by the partnership either directly or through a DE and which was
provided. “Aggregate positive amount from all section 734(b) distributed to partners as fractional ownership interests. A
adjustments” means the increase in the basis of partnership tenancy-in-common interest is a type of undivided ownership
property from all section 734(b) adjustments. Enter the total interest in property which provides each owner the right to
aggregate negative amount (in the appropriate space provided) transfer property to a third party without destroying the tenancy
resulting from all section 734(b) adjustments. “Aggregate in common. Partners may agree to partition property held as

Instructions for Form 1065 (2024) 29

tenants in common or may seek a court order to partition the businesses/partnerships/FAQs-for-Form-1065-Schedule-B-
property (usually dividing the property into fractional interests in Other-Information-Question-22.
accordance with each partner's ownership interest in the
partnership). Question 23
Example. Partnership P is a partnership that files Form The limitation on BIE applies to every taxpayer with a trade or
1065. Partnership P holds title to land held for investment. business, unless the taxpayer meets certain specified
Partnership P converts its title to the land to fractional interests in exceptions. A partnership may elect out of the limitation for
the name of the partners and distributes such interests to its certain businesses otherwise subject to the BIE limitation.
partners. Partnership P must answer “Yes” to question 12.
Certain real property trades or businesses and farming
businesses qualify to make an election not to limit BIE. This is an
Question 13 irrevocable election. If you make this election, you're required to
Enter the number of Forms 8858, Information Return of U.S. use the alternative depreciation system to depreciate certain
Persons With Respect To Foreign Disregarded Entities (FDEs) property. Also, you aren’t entitled to the special depreciation
and Foreign Branches (FBs), that are attached to the return. allowance for that property. For a partnership with more than one
Form 8858 and its schedules are used by certain U.S. persons qualifying business, the election is made with respect to each
(including domestic partnerships) that own an FDE or FB directly business. Answer “Yes” if the partnership has an election in
(or, in certain cases, indirectly or constructively) to satisfy the effect to exclude a real property trade or business or a farming
reporting requirements of sections 6011, 6012, 6031, and 6038, business from section 163(j). For more information, see section
and the related regulations. See Form 8858 (and its separate 163(j) and the Instructions for Form 8990.
instructions) for information on completing the form and the
information that the partnership may need to provide to certain Question 24
partners for them to complete their Forms 8858 relating to that
Generally, a taxpayer with a trade or business must file Form
FDE or FB.
8990 to claim a deduction for business interest. BIE is interest
that is properly allocable to a non-excepted trade or business or
Question 14 that is floor plan financing interest. In addition, Form 8990 must
Answer “Yes” if the partnership had any foreign partners (for be filed by any taxpayer that owns an interest in a partnership
purposes of section 1446(a)) at any time during the tax year. with current year, or prior year carryover, excess business
Otherwise, answer “No.” interest expense (EBIE) allocated from the partnership. A
pass-through entity allocating excess taxable income or excess
If the partnership had gross income effectively connected
business interest income to its owners (that is, a pass-through
with a trade or business in the United States and foreign
entity that isn't a small business taxpayer) must file Form 8990,
partners, it may be required to withhold tax under section
regardless of whether it has any interest expense.
1446(a) on income allocable to foreign partners (without regard
to distributions) and file Forms 8804, 8805, and 8813. See Exclusions from filing. A taxpayer isn't required to file Form
Regulations sections 1.1446-1 through -7 for more information. 8990 if the taxpayer is a small business taxpayer and doesn't
have EBIE from a partnership. A taxpayer is also not required to
Questions 16a and 16b file Form 8990 if the taxpayer only has BIE from the following
If the partnership made any payment in 2024 that would require excepted trades or businesses.
the partnership to file any Form(s) 1099, answer “Yes” for • The trade or business of providing services as an employee.
question 16a and answer question 16b. Otherwise, answer “No” • An electing real property trade or business.
for question 16a and skip question 16b. See Am I Required to • An electing farming business.
File a Form 1099 or Other Information Return for more • Certain utility businesses.
information. Small business taxpayer. A small business taxpayer isn't
subject to the BIE limitation and isn't required to file Form 8990.
Question 20 A small business taxpayer is a taxpayer that (a) isn't a tax shelter
For tax years beginning after 2015, domestic partnerships that (as defined in section 448(d)(3)); and (b) meets the gross
are formed or availed of to hold specified foreign financial assets receipts test of section 448(c), discussed next.
(specified domestic entities) must file Form 8938, Statement of Gross receipts test. A taxpayer meets the gross receipts
Specified Foreign Financial Assets, with its Form 1065 for the tax test if the taxpayer has average annual gross receipts of $30
year. Form 8938 must be filed each year the value of the million or less for the 3 prior tax years. A taxpayer's average
partnership’s specified foreign financial assets meets or exceeds annual gross receipts for the 3 prior tax years is determined by
the reporting threshold. For more information on domestic adding the gross receipts for the 3 prior tax years and dividing
partnerships that are specified domestic entities and the types of the total by 3. Gross receipts include the aggregate gross
foreign financial assets that must be reported, see the receipts from all persons treated as a single employer, such as a
Instructions for Form 8938. controlled group of corporations, commonly controlled
partnerships, or proprietorships, and affiliated service groups.
A domestic partnership required to file Form 8938 with its See section 448(c) and the Instructions for Form 8990 for
Form 1065 for the tax year should answer “Yes” to this question. additional information.
Question 22 Question 25
Section 267A disallows a deduction for certain interest or royalty To be certified as a QOF, the partnership must file Form 1065
paid or accrued pursuant to a hybrid arrangement, to the extent and attach Form 8996, even if the partnership had no income or
that, under the foreign tax law, there isn't a corresponding expenses to report. If the partnership is attaching Form 8996,
income inclusion (including long-term deferral). On the entry line answer “Yes” to question 25. On the line following the dollar sign,
for question 22, report the total amount of interest and royalty enter the amount from Form 8996, Part III, line 15.
paid or accrued by the partnership for which the partnership
knows, or has reason to know, that one or more partners'
distributive shares of deductions is disallowed under section
267A. For additional information, see FAQs at [Link]/

30 Instructions for Form 1065 (2024)

Question 26 The information must be reported even if you conclude that
section 7874 doesn't apply.
Provide the number of foreign partners subject to section 864(c)
(8) as a result of transferring all or a portion of an interest in the Section 7874 generally applies when the following three
partnership if the partnership is engaged in a U.S. trade or requirements are met.
business. Section 864(c)(8) provides that gain or loss of a • Pursuant to a plan or series of related transactions, a foreign
foreign transferor from the transfer of a partnership interest is corporation must acquire directly or indirectly substantially all of
treated as effectively connected with the conduct of a trade or the properties constituting a trade or business of a domestic
business within the United States to the extent that the transferor partnership.
would have had effectively connected gain or loss if the • After the acquisition, the ownership percentage (by vote or
partnership sold all of its assets at FMV on the date of transfer. value) must be at least 60%.
For purposes of section 864(c)(8), a “transfer of a partnership • After the acquisition, the expanded affiliate that includes the
interest” means a sale, an exchange, or other disposition, and foreign acquiring corporation must not have substantial business
includes a distribution from a partnership to a partner to the activities in the foreign country in which the foreign acquiring
extent that gain or loss is recognized on the distribution, as well corporation is created or organized.
as a transfer treated as a sale or an exchange under section
707(a)(2)(B). Section 864(c)(8) applies to foreign partners that When section 7874 applies, the tax treatment of the
directly or indirectly transfer an interest in a partnership that is acquisition depends on the ownership percentage. If the
engaged in a U.S. trade or business. The partnership should ownership percentage is at least 80%, the foreign acquiring
include in its response any transfer for which it has received corporation is treated as a domestic corporation for all purposes
notification or otherwise knows about. If the partnership is a PTP of the Code. See section 7874(b). If the ownership percentage is
as defined in section 469(k)(2) and has properly answered “Yes” at least 60% but less than 80%, the foreign acquiring corporation
to question 5 on Form 1065, Schedule B, then it's not required to is considered a foreign corporation but the domestic partnership
answer the question. and certain other persons are subject to special rules that
reduce the tax benefits of the acquisition. See section 7874(a)
If a partnership had any foreign partners subject to section (1).
864(c)(8), the partnership must complete Schedule K-3 (Form
1065), Part XIII, for each foreign partner subject to section 864(c) The Tax Cuts and Jobs Act of 2017 provides additional
(8) on a transfer or distribution. The partnership may also be special rules for certain cases in which section 7874 applies.
required to withhold under section 1446(f)(4) on future See sections 59A(d)(4) and 965(l).
distributions that it makes to the transferee partner if that partner Ownership percentage. The ownership percentage is the
failed to withhold on the transfer under section 1446(f)(1). See percentage described in section 7874(a)(2)(B)(ii). See the
Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign regulations under section 7874 for rules regarding the
Entities, for more information. computation of the ownership percentage.
In general, the ownership percentage measures the
Question 27 percentage of stock of the foreign acquiring corporation that is
Answer “Yes” if at any time during the tax year there were held by partners of the domestic partnership by reason of
transfers between the partnership and its partners subject to the holding a capital or profits interest in the domestic partnership,
disclosure requirements of Regulations section 1.707-8. For with certain adjustments (for example, disregarding certain stock
certain transfers that are presumed to be sales, the partnership of the foreign acquiring corporation attributable to passive assets
or the partners must comply with the disclosure requirements in or assets of other domestic entities that were recently acquired
Regulations section 1.707-8. Generally, disclosure is required by the foreign acquiring corporation). The ownership percentage
when: is measured separately by vote and value.
1. Certain transfers to a partner are made within 2 years of a Multiple reportable acquisitions. If there are multiple
transfer of property by the partner to the partnership; acquisitions that must be reported, list on the lines for question
2. Certain debt is incurred by a partner within 2 years of the 28 the ownership percentage by vote and value for the most
earlier of (a) a written agreement to transfer, or (b) a transfer of recent acquisition. Attach a statement reporting the ownership
the property that secures the debt, if the debt is treated as a percentage by vote and value for the other acquisitions.
qualified liability; or
3. Transfers from a partnership to a partner occur which are Question 29
the equivalent to those listed in (1) or (2) above. Under section 4501, the partnership may be required to file Form
7208, Excise Tax on Repurchase of Corporate Stock, and pay
The disclosure must be made on the transferor partner's the stock repurchase excise tax if, during the partnership's tax
return using Form 8275, Disclosure Statement, or on an attached year, (a) the partnership is a specified affiliate of an applicable
statement providing the same information. When more than one foreign corporation, or (b) the partnership is an expatriated entity
partner transfers property to a partnership under a plan, the with respect to a covered surrogate foreign corporation. See the
disclosure may be made by the partnership rather than by each Instructions for Form 7208. For additional information, see
partner. section 4501.
Question 28 Question 30
Section 7874 applies in certain cases in which a foreign Digital assets are any digital representations of value that are
corporation directly or indirectly acquires substantially all of the recorded on a cryptographically secured distributed ledger or
properties constituting a trade or business of a domestic any similar technology. For example, digital assets include
partnership. Answer “Yes” if, since December 22, 2017, a foreign non-fungible tokens (NFTs) and virtual currencies, such as
corporation directly or indirectly acquired substantially all of the cryptocurrencies and stablecoins. If a particular asset has the
properties constituting a trade or business of your partnership characteristics of a digital asset, it will be treated as a digital
(and you're a domestic partnership), and the ownership with asset for federal income tax purposes.
respect to the acquisition was greater than 50% (by vote or
value). If “Yes,” list the ownership percentage by both vote and Answer “Yes” if at any time during 2024, the partnership (a)
value. received (as a reward, award, or payment for property or

Instructions for Form 1065 (2024) 31

services); or (b) sold, exchanged, or otherwise disposed of a partners in that year. Eligible partners are individuals, C
digital asset (or any financial interest in any digital asset). corporations, S corporations, foreign entities that would be C
corporations if they were domestic entities, and estates of
For example, answer “Yes” if at any time during 2024 the deceased partners. The determination as to whether the
partnership: partnership has 100 or fewer partners is made by adding the
• Received digital assets as payment for property or services number of Schedules K-1 required to be issued by the
provided; partnership for the tax year to the number of Schedules K-1
• Received digital assets as a result of a reward or award; required to be issued by any partner that is an S corporation to
• Received new digital assets as a result of mining, staking, and its shareholders for the tax year of the S corporation ending with
similar activities; or within the partnership tax year. A partnership isn't eligible to
• Received digital assets as a result of a hard fork; elect out of the centralized partnership audit regime if it's
• Disposed of digital assets in exchange for property or required to issue a Schedule K-1 to any of the following partners.
services; • A partnership.
• Disposed of a digital asset in exchange or trade for another • A trust.
digital asset; • A foreign entity that would not be treated as a C corporation if
• Sold a digital asset; or it were a domestic entity.
• Otherwise disposed of any other financial interest in a digital • A DE described in Regulations section 301.7701-2(c)(2)(i).
asset. • An estate of an individual other than a deceased partner.
The partnership has a financial interest in a digital asset if it’s the • Any person that holds an interest in the partnership on behalf
owner of record of a digital asset, or has an ownership stake in of another person.
an account that holds one or more digital assets, including the
rights and obligations to acquire a financial interest, or it owns a Designated Partnership Representative (PR)
wallet that holds digital assets.
Section 6223 provides that unless the partnership has made a
The following actions or transactions in 2024, alone, generally valid election out of the centralized partnership audit regime,
don’t require the partnership to answer “Yes.” each partnership must designate, in the manner prescribed by
• Holding a digital asset in a wallet or account. the Secretary, a partner or other person with a substantial
• Transferring a digital asset from one wallet or account it owns presence in the United States as the PR who shall have the sole
or controls to another wallet or account that it owns or controls. authority to act on behalf of the partnership. On Form 1065,
• Purchasing digital assets using U.S. or other real currency, provide the name, address, and phone number of the PR. If an
including through the use of electronic platforms such as PayPal entity is designated as the PR, the partnership must also appoint
and Venmo. an individual to act on the entity's behalf (a DI). To be a DI, the
appointed person must also have a substantial presence in the
Don’t leave the question unanswered. You must answer “Yes” United States.
or “No” by checking the appropriate box. For more information,
go to [Link]/VirtualCurrencyFAQs. How to designate. A designation of a PR must be made for
each respective year on the partnership’s Form 1065. The
Question 32 partnership can revoke a designation of a PR or DI, and the PR
or DI can resign, by submitting Form 8979, Partnership
A qualifying syndicate, pool, joint venture, or similar organization
Representative Revocation, Designation, and Resignation Form.
may elect under section 761(a) not to be treated as a partnership
for federal income tax purposes and won't be required to file See the Instructions for Form 8979 for information
Form 1065 except for the year of election. If an election out of ! concerning how and when Form 8979 can be submitted
subchapter K is being made for the tax year, answer “Yes” and CAUTION to the IRS.
attach a statement that contains:
• The names, addresses, and identification numbers of all the PR authority. Under section 6223, the partnership and all its
members of the organization, partners (and any other person whose tax liability is determined
• A statement that the organization qualifies under Regulations in whole or in part by taking into account directly or indirectly
section 1.761-2(a), paragraph (1), and either paragraph (2) or adjustments determined under the centralized partnership audit
(3), regime) are bound by the actions of the PR in dealings with the
• A statement that all members of the organization elect to IRS. A designation for a partnership tax year remains in effect
exclude the organization from all of subchapter K, and until the designation is terminated by (a) a valid resignation of
• A statement indicating the availability of the agreement under the PR or DI, (b) a valid revocation of the PR (with designation of
which the organization operates (or for an oral agreement, from successor PR), or (c) a determination by the IRS that the
whom the provisions of the agreement may be obtained). designation isn't in effect.
For calendar-year organizations, Form 1065 must be filed by Substantial presence. In order for either a PR or a DI to have
March 15 following the close of the first calendar year for which substantial presence, they must make themselves available to
the section 761(a) election is being made. The filing date for meet in person with the IRS in the United States at a reasonable
fiscal-year organizations is the 15th day of the 3rd month time and place as determined by the IRS, and must have a street
following the close of the 1st fiscal year. These dates are subject address in the United States, a U.S. TIN, and a telephone
to filing extensions. See Regulations section 1.761-2 for more number with a U.S. area code.
information concerning making the election out of subchapter K.

Question 33
Schedules K and K-1. Partners'
Answer “Yes” if an eligible partnership chooses to elect out of the Distributive Share Items
centralized partnership audit regime for the tax year and enter
the total from Schedule B-2, Part III, line 3. If making the election,
attach a completed Schedule B-2 to Form 1065. An election out
Purpose of Schedules
of the centralized partnership audit regime can only be made on Although the partnership isn't subject to income tax, the partners
a timely filed return (including extensions). A partnership is an are liable for tax on their shares of the partnership income,
eligible partnership for the tax year if it has 100 or fewer eligible

32 Instructions for Form 1065 (2024)

whether or not distributed, and must include their shares on their If a partner's interest changed during the year (such as the
tax returns. entrance of a new partner, the exit of a partner, an increase to a
partner's interest through an additional capital contribution, or a
Schedule K. Schedule K is a summary schedule of all the
decrease in a partner's interest through a distribution), see
partners' shares of the partnership's income, credits, deductions,
section 706(d) and Regulations section 1.706-4 before
etc. All partnerships must complete Schedule K. Rental activity
determining each partner's distributive share of any item of
income (loss) and portfolio income aren't reported on page 1 of
income, gain, loss, and deduction, and other items. Partnership
Form 1065. These amounts aren't combined with the trade or
items are allocated to a partner only for the part of the year in
business activity income (loss) reported on page 1. Schedule K
which that person is a member of the partnership. Generally, for
is used to report the totals of these and other amounts reported
each change in a partner’s interest, the partnership will either
on page 1.
allocate its items using a proration method or a
Schedule K-1. Schedule K-1 shows each partner's separate closing-of-the-books method. Special rules apply to certain
share. Attach a copy of each Schedule K-1 to the Form 1065 partnerships, certain variations, and certain items. See
filed with the IRS. Keep a copy with a copy of the partnership Regulations section 1.706-4 for additional rules and procedures
return as a part of the partnership's records and furnish a copy to for making elections. In addition, special rules in section 706(d)
each partner. If the partner is a DE, furnish the Schedule K-1 to (2) apply to certain items of partnerships that report their income
the DE partner. If a partnership interest is held by a nominee on on the cash basis, and special rules in section 706(d)(3) apply to
behalf of another person, the partnership may be required to tiered partnerships.
furnish Schedule K-1 to the nominee. See Temporary
Regulations sections 1.6031(b)-1T and 1.6031(c)-1T for more Special rules on the allocation of income, gain, loss, and
information. deductions generally apply if a partner contributes property to
Give each partner a copy of either the Partner's Instructions the partnership and the FMV of that property at the time of
for Schedule K-1 (Form 1065) or specific instructions for each contribution differs from the contributing partner's adjusted tax
item reported on the partner's Schedule K-1. basis. Under these rules, the partnership must use a reasonable
method of making allocations of income, gain, loss, and
Substitute Forms deductions from the property so that the contributing partner
receives the tax burdens and benefits of any built-in gain or loss
The partnership doesn't need IRS approval to use a substitute (that is, precontribution appreciation or diminution of value of the
Schedule K-1 if it's an exact copy of the IRS schedule. The contributed property). See Regulations section 1.704-3 for
boxes must use the same numbers and titles and must be in the details on how to make these allocations, including a description
same order and format as on the comparable IRS Schedule K-1. of specific allocation methods that are generally reasonable.
The substitute schedule must include the OMB number. The
partnership must provide each partner with the Partner's See Dispositions of Contributed Property, earlier, for special
Instructions for Schedule K-1 (Form 1065) or other prepared rules on the allocation of income, gain, loss, and deductions on
specific instructions for each item reported on the partner's the disposition of property contributed to the partnership by a
Schedule K-1. partner.
The partnership must request IRS approval to use other
If the partnership agreement doesn't provide for the partner's
substitute Schedules K-1. To request approval, write to:
share of income, gain, loss, deduction, or credit, or if the
Internal Revenue Service allocation under the agreement doesn't have substantial
Attention: Substitute Forms Program economic effect, the partner's share is determined according to
[Link]TS:CAR:MP:P:TP:TP the partner's interest in the partnership. See Regulations section
ATSC 1.704-1 for more information.
4800 Buford Highway
Mail Stop 061-N Specific Instructions (Schedule K-1
Chamblee, GA 30341
substituteforms@[Link] Only)
Each partner's information must be on a separate sheet of General Information
paper. Therefore, separate all continuously printed substitutes
before you file them with the IRS. Generally, the partnership is required to prepare and give a
Schedule K-1 to each person who was a partner in the
The partnership may be subject to a penalty if it files partnership at any time during the year. Schedule K-1 must be
Schedules K-1 that don't conform to the specifications discussed provided to each partner on or before the day on which the
in Pub. 1167, General Rules and Specifications for Substitute partnership return is required to be filed.
Forms and Schedules.
However, a foreign partnership that has one or more U.S.
How Income Is Shared Among Partners partners must file Form 1065. But if it meets each of the following
Allocate shares of income, gain, loss, deduction, or credit among four requirements, it isn't required to file or provide Schedules
the partners according to the partnership agreement for sharing K-1 for foreign partners (unless the foreign partner is a
income or loss generally. Partners may agree to allocate specific pass-through entity through which a U.S. person holds an
items in a ratio different from the ratio for sharing income or loss. interest in the foreign partnership).
For instance, if the net income exclusive of specially allocated • The partnership had no gross income effectively connected
items is divided evenly among three partners but some special with the conduct of a trade or business within the United States
items are allocated 50% to one, 30% to another, and 20% to the during its tax year.
third partner, report the specially allocated items on the • The partnership isn't a withholding foreign partnership as
appropriate line of the applicable partner's Schedule K-1 and the defined in Regulations section 1.1441-5(c)(2)(i).
total on the appropriate line of Schedule K, instead of on the • All required Forms 1042 and 1042-S were filed by the
numbered lines on page 1 of Form 1065, Form 1125-A, or partnership or another withholding agent as required by
Schedule D. Regulations sections 1.1461-1(b) and (c).

Instructions for Form 1065 (2024) 33

• The tax liability for each foreign partner for amounts Part I. Information About the
reportable under Regulations sections 1.1461-1(b) and (c) has
been fully satisfied by the withholding of tax at the source. Partnership
Generally, any person who holds an interest in a partnership On each Schedule K-1, enter the name, address, and identifying
as a nominee for another person must furnish to the partnership number of the partnership.
the name, address, etc., of the other person. Item C. If the partnership is filing its return electronically, enter
If a married couple each had an interest in the partnership, “e-file.” Otherwise, enter the name of the IRS Service Center
prepare a separate Schedule K-1 for each of them. where the partnership will file its return. See Where To File,
earlier.
How To Complete Schedule K-1 Part II. Information About the Partner
In order to enable accurate scanning and processing of Complete a Schedule K-1 for each partner. On each
! Schedule(s) K-1, use a 10-point Helvetica Light Schedule K-1, enter the partner's name, address, identifying
CAUTION Standard font for all entries on Schedules K-1 if the number, and distributive share items. See special rules below for
entries are typed or made using a computer. partners that are DEs.

If the return is for a fiscal year or a short tax year, fill in the tax Items E and F
year space at the top of each Schedule K-1. On each For an individual partner, enter the partner's SSN or individual
Schedule K-1, enter the information about the partnership and taxpayer identification number (ITIN) rather than the TIN of the
the partner in Parts I and II (items A through N). In Part III, enter DE partner. For all other partners, enter the partner's EIN.
the partner's distributive share of each item of income,
deduction, and credit and any other information the partner However, if a partner is an IRA, enter the identifying number
needs to file the partner's tax return, including information of the custodian of the IRA. Don't enter the identification number
needed to prepare state and local tax returns. of the person for whom the IRA is maintained. If the partnership
reports unrelated business taxable income (UBTI) to such IRA
Codes. In box 11 and boxes 13 through 15, and 17 through 20, partner, include the IRA partner's unique EIN in box 20, code
identify each item by entering a code in the column to the left of AR, along with the amount of such income.
the entry space for the dollar amount. These codes are identified
in these instructions and on the List of Codes in the Partner’s Note. For tax year 2024, PTPs aren't required to include the IRA
Instructions for Schedule K-1 (Form 1065). partner’s unique EIN in box 20, code AR.
Attached statements. When attaching statements to Don’t include dashes when entering the EIN in box 20.
Schedule K-1 to report additional information to the partner, !
indicate there's a statement for the following. CAUTION

• If an amount can be input on Schedule K-1 but additional

information is required, enter an asterisk (*) after the code in the Foreign partners without a U.S. identifying number should be
column to the left of the entry space. notified by the partnership of the necessity of obtaining a U.S.
• For items that can't be reported as a single dollar amount, identifying number. Certain aliens who aren't eligible to obtain
enter the code and an asterisk (*) in the column to the left and SSNs can apply for an ITIN on Form W-7, Application for IRS
enter “STMT” in the right column to indicate that the information Individual Taxpayer Identification Number.
is provided on an attached statement.
If the partner in the partnership is an entity, such as a
• If the partnership has more coded items than the number of single-member LLC, that is a DE for federal income tax
entry boxes (for example, box 11, boxes 13 through 15, or boxes
purposes, enter the TIN of the beneficial owner of the DE partner
17 through 20), don't enter a code or dollar amount in the last
in item E rather than the TIN of the DE partner. The beneficial
entry box. Instead, enter an asterisk (*) in the left column and
owner is the taxpayer who owns the DE partner. In item F, enter
enter “STMT” in the entry space to the right.
the name and address of the beneficial owner of the DE partner.
More than one attached statement can be placed on the See the instructions for item H2 below.
same sheet of paper. The information included in the statement
should be identified in alphanumeric order by box number Note. If the partner is an LLC or a trust, the partnership should
followed by the letter code (if any), description, and dollar inquire as to whether the LLC is a DE for federal income tax
amount for each item. For example: “Box 13, code J—Section purposes. If the LLC or trust is a DE, the partnership must verify
59(e)(2) expenditures—$1,000.” This can be followed with any that the partner's TIN is the TIN used by the partner's beneficial
additional information the partner needs to determine the proper owner in filing its federal income tax return.
tax treatment of the item.
Truncating recipient’s TIN on Schedule K-1. The partnership
Section 721(c) partnerships. When the gain deferral method, can truncate a partner's identifying number on the Schedule K-1
as described in Regulations section 1.721(c)-3, is being applied, the partnership sends to the partner. Truncation isn't allowed on
a partnership that is a section 721(c) partnership will attach to the Schedule K-1 the partnership files with the IRS. Also, the
the Schedule K-1 provided to a U.S. transferor the information partnership can't truncate its own identification number on any
required under Regulations sections 1.721(c)-6(b)(2) and (3). A form.
partnership that is a section 721(c) partnership will also attach to To truncate, where allowed, replace the first five digits of the
its Form 1065 a Schedule K-1 for each partner that is a related nine-digit number with asterisks (*) or Xs (for example, an SSN
foreign person with respect to the U.S. transferor. For an indirect xxx-xx-xxxx would appear as ***-**-xxxx or XXX-XX-xxxx). For
partner that is a related foreign person with respect to the U.S. more information, see Regulations section 301.6109-4.
transferor, the Schedule K-1 will only include relevant information
with respect to section 721(c) property. See Regulations section Foreign address. If the partner has a foreign address, enter the
1.721(c)-1 for definitions. information in the following order: city or town, state or province,
country, and ZIP or foreign postal code. Follow the country's
practice for entering the postal code. Don't abbreviate the
country name.

34 Instructions for Form 1065 (2024)

Item G percentages, the partnership may use a reasonable method in
arriving at each percentage for purposes of completing the items
Complete item G on all Schedules K-1. If a partner holds
required by item J, as long as such method is consistent with the
interests as both a general and limited partner, check both boxes
partnership agreement and is applied consistently from year to
and attach a statement for each activity that shows the amounts
year. Maintain records to support the share of profits, share of
allocable to the partner's interest as a limited partner.
losses, and share of capital reported for each partner.
Item H1. Domestic/Foreign Partner If there is a decrease in the partner's share of profits, losses,
Check the Foreign partner box if the partner is a nonresident or capital, indicate whether it was due to a sale or an exchange.
alien individual, foreign partnership, foreign corporation, foreign Sale box. Check the Sale box in this item if there was a
estate, foreign trust, or foreign government. Otherwise, check the taxable sale of all or part of a partnership interest to a new or
Domestic partner box. pre-existing partner during the year, regardless of whether the
partner recognized gain or loss on the transaction(s). “Sale,” for
Item H2. Disregarded Entity (DE) the purposes of this checkbox, means a taxable transaction
If the partner is a DE, check the box and provide the name and involving the transfer of a partnership interest. This will exclude
TIN of the DE partner. The partnership should make reasonable transfers subject to gain recognition under section 721(b). This
attempts to obtain the DE’s TIN. If after making reasonable will also exclude transactions where a new partnership interest is
attempts to obtain the DE’s TIN such TIN is unavailable or issued to a partner in exchange for property contributed to the
unknown to the partnership, the partnership may report the DE’s partnership, even if some gain is recognized by the contributing
TIN as unknown. If the DE doesn't have a TIN, enter “None” in partner.
the space for the DE’s TIN. For more information about DE Exchange box. Check the Exchange box in this item if there
reporting, go to [Link]/forms-pubs/clarifications-for- was a nontaxable exchange of all or part of a partnership interest
disregarded-entity-reporting-and-section-743b-reporting. to a new or pre-existing partner during the year. “Exchange,” for
purposes of this checkbox, means a nontaxable transaction
Item I1. What Type of Entity Is This Partner? involving the transfer of a partnership interest excluding a
State whether the partner is an individual, a corporation, an transfer on the death of a partner. Exchange also includes a
estate, a trust, a partnership, a DE, an exempt organization, a transaction under section 721(a) regardless of whether gain
foreign government, or a nominee (custodian). If the partner is recognition took place.
an LLC and has elected to be treated as other than a DE under
Regulations section 301.7701-3 for federal income tax purposes,
Item K1. Partner's Share of Liabilities
the partnership must enter the LLC's classification for federal Enter each partner's share of nonrecourse liabilities,
income tax purposes (that is, a corporation or partnership). If any partnership-level qualified nonrecourse financing, and other
legal owner of the partnership is a DE for federal income tax recourse liabilities at the end of the year.
purposes, report the beneficial owner’s entity type in item I1. If Nonrecourse liabilities are those liabilities of the partnership
the partner is a nominee, use one of the following codes after the for which no partner (or related person) bears the economic risk
word “nominee” to indicate the type of entity the nominee of loss. The extent to which a partner bears the economic risk of
represents: I—Individual; C—Corporation; F—Estate or Trust; loss is determined under the rules of Regulations section
P—Partnership; DE—Disregarded Entity; E—Exempt 1.752-2. Don't include partnership-level qualified nonrecourse
Organization; IRA—Individual Retirement Arrangement; or financing (defined below) on the line for nonrecourse liabilities.
FGOV—Foreign Government. If the partner is a nominee that
acts on behalf of more than one person, use code M—Multiple. If the partner terminated their interest in the partnership
during the year, enter the share that existed immediately before
Item J. Partner’s Profit, Loss, and Capital the total disposition. In all other cases, enter it as of the end of
On each line, enter the partner's percentage share of the the year.
partnership's profit, loss, and capital as of the beginning and end If the partnership is engaged in two or more different types of
of the partnership's tax year, as determined under the at-risk activities, or a combination of at-risk activities and any
partnership agreement. If a partner's interest commences after other activity, attach a statement showing the partner's share of
the beginning of the partnership's tax year, enter in the nonrecourse liabilities, partnership-level qualified nonrecourse
Beginning column the percentages that existed for the partner financing, and other recourse liabilities for each activity. See
immediately after admission. If a partner's interest terminates Pub. 925 to determine if the partnership is engaged in more than
before the end of the partnership's tax year, enter in the Ending one at-risk activity.
column the percentages that existed immediately before
termination. The at-risk rules of section 465 generally apply to any activity
carried on by the partnership as a trade or business or for the
On the line for Capital, enter the percentage share of the production of income. These rules generally limit the amount of
capital that the partner would receive if the partnership was loss and other deductions a partner can claim from any
liquidated by the distribution of undivided interests in partnership partnership activity to the amount for which that partner is
assets and liabilities. If the partner's capital account is negative considered at risk. However, for partners who acquired their
or zero, express the percentage ownership of capital as zero. partnership interests before 1987, the at-risk rules don't apply to
losses from an activity of holding real property the partnership
The partner's percentage share of each category must be placed in service before 1987. The activity of holding mineral
expressed as a percentage. The percentage must not be property doesn't qualify for this exception. Identify on an
negative. The total percentage interest in each category must attached statement to Schedule K-1 the amount of any losses
total 100% for all partners. To determine whether the total that aren't subject to the at-risk rules.
beginning and ending percentages are 100%, don't include the
beginning percentage for a partner that wasn't a partner at the If a partnership is engaged in an activity subject to the
beginning of the partnership's tax year or the ending percentage limitations of section 465(c)(1) (such as films or videotapes,
for a partner that left the partnership before the end of the leasing section 1245 property, farming, or oil and gas property),
partnership's tax year. If the partnership agreement doesn't give each partner their share of the total pre-1976 losses from
express the partner's share of profit, loss, and capital as fixed that activity for which there existed a corresponding amount of

Instructions for Form 1065 (2024) 35

nonrecourse liability at the end of each year in which the losses in its partnership interest (without regard to partnership
occurred. See Form 6198, At-Risk Limitations, and related liabilities), taking into account the rules and principles of sections
instructions for more information. 705, 722, 733, and 742 and by reporting the amount on the line
for other increase (decrease). The partner's ending capital
Qualified nonrecourse financing secured by real property account as reported using the tax-basis method in item L might
used in an activity of holding real property that is subject to the not equal the partner's adjusted tax basis in its partnership
at-risk rules is treated as an amount at risk. Qualified interest. Generally, this is because a partner's adjusted tax basis
nonrecourse financing generally includes financing for which no in its partnership interest includes the partner's share of
one is personally liable for repayment that is borrowed for use in partnership liabilities, as well as partner-specific adjustments.
an activity of holding real property and that is loaned or Each partner is responsible for maintaining a record of the
guaranteed by a federal, state, or local government or that is adjusted tax basis in its partnership interest.
borrowed from a qualified person. Qualified persons include any
Beginning capital account. Enter the partner's ending
person actively and regularly engaged in the business of lending
capital account as determined for last year on the line for
money, such as a bank or savings and loan association.
beginning capital account. If a partner joined the partnership
Qualified persons generally don't include related parties (unless
through a contribution to the partnership this year, enter zero as
the nonrecourse financing is commercially reasonable and on
the partner's beginning capital account.
substantially the same terms as loans involving unrelated
persons), the seller of the property, or a person who receives a Capital contributed during the year. On the line for capital
fee for the partnership's investment in the real property. See contributed during the year, enter the amount of cash plus the
section 465(b)(6) for more information on qualified nonrecourse adjusted tax basis of all property contributed by the partner to
financing. the partnership during the year. The amount you enter on this
line should be reduced by any liabilities assumed by the
The partner as well as the partnership must meet the qualified partnership in connection with, or liabilities to which the property
nonrecourse rules. Therefore, the partnership must enter on an is subject immediately before, the contribution. This amount
attached statement any other information the partner needs to might be negative.
determine if the qualified nonrecourse rules are also met at the Current year net income (loss). On the line for current year
partner level. net income (loss), enter the partner's distributive share of
partnership income and gain (including tax-exempt income) as
Item K2 figured for tax purposes for the year, minus the partner's
If a partnership (upper-tier) owns a direct interest in other distributive share of partnership loss and deductions (including
partnerships (lower-tier), then Regulations section 1.752-4(a) nondeductible, noncapital expenditures) as figured for tax
requires that the upper-tier partnership allocate to its partners its purposes for the year.
share of the lower-tier partnership's liabilities (except for any Other increase (decrease). On the line for other increase
liability of the lower-tier partnership that is owed to the upper-tier (decrease), enter the sum of all other increases or decreases
partnership). Allocate those lower-tier partnership liabilities to that affected the partner's capital account for tax purposes
each partner based on whether that liability is a recourse or during the year and attach a statement explaining each
nonrecourse liability to the partner under the regulations under adjustment. For example, if a new partner acquired its interest in
section 752. The characterization of a liability may change as it the partnership from another partner in a purchase, exchange,
moves from a lower-tier partnership to an upper-tier partnership. gift, or inheritance, enter an amount for the transferee under
If Schedule K-1 (Form 1065) includes lower-tier partnership other increase that is equal to the transferor partner's ending
liabilities, check the box in item K2. If the total liabilities on all capital account with respect to the interest transferred
Schedules K-1 (Form 1065) don't equal the total liabilities on immediately before the transfer figured using the tax-basis
Schedule L, attach a reconciliation. method. Other examples of increases include the following.
• The partner's distributive share of the excess of the tax
Item K3. Payment Obligations Including deductions for depletion (other than oil and gas depletion) over
Guarantees and Deficit Restoration Obligations the adjusted tax basis of the property subject to depletion.
• The partner's share of any increase to the adjusted tax basis
(DROs) of partnership property under section 734(b).
Check the box in item K3 if the partner or a related person has If a transferor partner disposed of its interest in the
certain payment obligations, including guarantees or DROs, with partnership by sale, exchange, or gift, or as the result of death,
respect to any liability in item K1. See the instructions for enter the transferor partner's ending capital account with respect
line 20c, code X, for additional information. For purposes of item to the interest transferred immediately before the transfer figured
K3, a payment obligation is defined as an obligation under using the tax-basis method. Other examples of decreases
Regulations section 1.752-2(b)(1) that is recognized under include the following.
Regulations sections 1.752-2(b)(3)(i)(A) and (B) (such as a
recognized guarantee or an obligation to restore a deficit capital
• The partner's distributive share of tax deductions for depletion
of any partnership oil and gas property, but not exceeding the
account upon liquidation), and a related person is defined as a partner's share of the adjusted tax basis of that property.
related person as defined in Regulations section 1.752-4(b).
• The partner's share of any decrease to the adjusted tax basis
of partnership property under section 734(b).
Item L. Partner's Capital Account Analysis
You aren’t required to complete item L if the answer to question 4 Note. Section 743(b) basis adjustments aren't taken into
of Schedule B is “Yes.” If you're required to complete this item, account in calculating a partner's capital account under the
also see the instructions for Schedule M-2, later. tax-basis method.
Tax-basis method. Figure each partner's capital account for Withdrawals and distributions. On the line for withdrawals
the partnership's tax year using the transactional approach, and distributions, enter the amount of cash plus the adjusted tax
discussed below, for the tax-basis method. basis of all property distributed by the partnership to the partner
How to report partnership events or transactions. If during the year. The amount you enter on this line should be
you're uncertain how to report a partnership event or transaction, reduced by any liabilities assumed by the partner in connection
you should account for the event or transaction in a manner with, or liabilities to which the property is subject immediately
generally consistent with figuring the partner's adjusted tax basis before, the distribution. This amount might be negative.

36 Instructions for Form 1065 (2024)

 Ending capital account. The sum of the amounts shown on all unrecognized section 704(c) gain or loss in partnership
the lines in item L above the line for ending capital account must property, including section 704(c) gain or loss arising from
equal the amount reported on the line for ending capital account. revaluations of partnership property. See Notice 2019-66 for
A partner's ending capital account determined under the more information.
tax-basis method may be negative if the sum of a partner's
losses and distributions exceeds the sum of the partner's
contributions and share of income.
Specific Instructions (Schedules K
Publicly traded partnerships (PTPs). In the case of a sale or and K-1, Part III, Except as Noted)
exchange of an interest in a PTP, you may determine a transferee These instructions refer to the lines on Schedule K and the
partner's beginning capital account by adjusting the partner's boxes on Schedule K-1.
beginning capital account to reflect the transferee partner's
purchase price of the interest rather than entering the transferor
partner's ending capital account. In making the adjustments, you
Special Allocations
may use information required to be reported to you under An item is specially allocated if it's allocated to a partner in a ratio
Temporary Regulations section 1.6031(c)-1T, and publicly different from the ratio for sharing income or loss generally.
available trading price information.
Report specially allocated ordinary gain (loss) on Schedule K,
Item M. Did the Partner Contribute Property line 11, and in box 11 of Schedule K-1. Report other specially
allocated items in the applicable boxes of the partner's
With a Built-in Gain or Loss? Schedule K-1, with the total amount on the applicable line of
Check the appropriate box to indicate whether the partner Schedule K. See How Income Is Shared Among Partners,
contributed property with a built-in gain or loss during the tax earlier.
year. If “Yes,” attach a statement that contains the following Example. A partnership has a long-term capital gain that is
information. specially allocated to a partner and a net long-term capital gain
• A description of each property the partner contributed. reported on Schedule D (Form 1065), line 15, that must be
• The date the property was contributed. reported on Schedule K, line 9a. Because specially allocated
• The amount of the property's built-in gain or loss. gains or losses aren't reported on Schedule D, the partnership
Exception. If a partner contributes more than 10 properties must report both the net long-term capital gain from Schedule D
with either a built-in gain or built-in loss on any date during the and the specially allocated gain on Schedule K, line 9a. Box 9a
tax year, the partnership isn't required to provide the required of Schedule K-1 for the partner must include both the specially
information separately for each property contributed for that allocated gain and the partner's distributive share of the net
date. Instead, the partnership can report the (a) number of long-term capital gain from Schedule D.
properties contributed on that date, (b) total amount of built-in
gain, and (c) total amount of built-in loss. Don't net the built-in Income (Loss)
gains and built-in losses; instead, show the total built-in gain and
total built-in loss for all properties contributed on that date. Line 1. Ordinary Business Income (Loss)
A property's built-in gain is the amount by which the FMV of
Enter the amount from page 1, line 23. Enter the income (loss)
the property exceeds its adjusted tax basis at the time the
without reference to (a) the bases of the partners' interests in the
property is contributed to the partnership. A property's built-in
partnership, (b) the partners' at-risk limitations, or (c) the passive
loss is the amount by which the FMV of the property is less than
activity limitations. These limitations, if applicable, are
its adjusted tax basis at the time the property is contributed to
determined at the partner level.
the partnership. Partnerships are required to keep track of this
information; see Regulations section 1.704-3. This information is
also needed for purposes of allocating partnership items to Line 1 shouldn't include rental activity income (loss) or
partners because income, gain, loss, and deductions related to portfolio income (loss).
property contributed to the partnership by a partner must be Schedule K-1. Enter each partner's distributive share of
shared among the partners so as to take account of the variation ordinary business income (loss) in box 1 of Schedule K-1.
between the basis of the property to the partnership and its FMV Identify on statements attached to Schedule K-1 any additional
at the time of contribution. If the partnership distributes any information the partner needs to correctly apply the passive
property (other than built-in gain property) to a partner that has activity limitations. For example, if the partnership has more than
contributed built-in gain property to the partnership within the one trade or business activity, identify on an attached statement
last 7 years, it will need this information for the attached to Schedule K-1 the amount from each separate activity. See
statement required in the instructions for Schedule K, line 19b, Passive Activity Reporting Requirements, earlier.
for distributions subject to section 737 (code B). If the
partnership distributes contributed property with a built-in gain or
loss to any partner other than the partner that contributed the
Line 2. Net Rental Real Estate Income (Loss)
property and the date of the distribution is within 7 years of the
date the property was contributed to the partnership, it will need Enter the net income (loss) from rental real estate activities of the
this information for the attached statement required by the partnership from Form 8825. Attach this form to Form 1065.
instructions for line 20c of Schedule K for the precontribution Schedule K-1. Enter each partner's distributive share of net
gain (loss) (code W). rental real estate income (loss) in box 2 of Schedule K-1. Identify
on statements attached to Schedule K-1 any additional
Item N. Partner's Share of Net Unrecognized information the partner needs to correctly apply the passive
Section 704(c) Gain or (Loss) activity limitations. For example, if the partnership has more than
For item N, the partnership should report the partner's share of one rental real estate activity, identify the amount attributable to
net unrecognized section 704(c) gains or losses, both at the each activity. Also, for example, identify certain items from any
beginning and at the end of the partnership's tax year. Solely for rental real estate activities that may be subject to the
purposes of completing item N, the section 704(c) gain or loss is recharacterization rules. See Passive Activity Reporting
the partner's share of the net (net means aggregate or sum) of Requirements, earlier.

Instructions for Form 1065 (2024) 37

Line 3. Other Net Rental Income (Loss) Interest expense allocable to portfolio income is generally
investment interest expense reported on Schedule K, line 13c.
Enter on line 3a gross income from rental activities other than Report each partner's distributive share of interest expense
those reported on Form 8825. Include on line 3a gain (loss) from allocable to portfolio income in box 13 of Schedule K-1 using
Form 4797, line 17, that is attributable to the sale, exchange, or code H.
involuntary conversion of an asset used in a rental activity other
than a rental real estate activity. Line 5. Interest Income
Enter on line 3b the deductible expenses of the activity. Enter only taxable portfolio interest on this line. Taxable interest
Attach a statement of these expenses to Form 1065. is interest from all sources except interest exempt from tax and
interest on tax-free covenant bonds. Include interest income
Enter on line 3c the net income (loss). from the credit to holders of tax credit bonds. See the
instructions for codes AP through AU under Line 15f. Other
See Rental Activities, earlier, and Pub. 925 for more Credits, later, and the Instructions for Form 8912, Credit to
information on rental activities. Holders of Tax Credit Bonds, for details.
Schedule K-1. Enter each partner's distributive share of net Schedule K-1. Enter each partner's distributive share of interest
income (loss) from rental activities other than rental real estate income in box 5 of Schedule K-1. If the partnership is reporting
activities in box 3 of Schedule K-1. Identify on statements interest income from clean renewable energy bonds, attach a
attached to Schedule K-1 any additional information the partner statement to Schedule K-1 that shows each partner's distributive
needs to correctly apply the passive activity limitations. For share of interest income from this credit. Partners need this
example, if the partnership has more than one rental activity information to properly adjust the bases of their interests in the
reported in box 3, identify on an attached statement to partnership.
Schedule K-1 the amount from each activity. See Passive
Activity Reporting Requirements, earlier.
Line 6a. Ordinary Dividends
Line 4. Guaranteed Payments to Partners
Enter only taxable ordinary dividends on line 6a, including any
qualified dividends reported on line 6b. Don't include any
Guaranteed payments are payments made by a partnership to a
dividend equivalents reported on line 6c, or, to the extent
partner that are determined without regard to the partnership's
attributable to previously taxed earnings and profits (PTEP) in
income. Some examples of guaranteed payments to partners
annual PTEP accounts of the partnership, any distributions
include:
received by the partnership from foreign corporations.
• Payments for salaries, health insurance, and interest
deducted by the partnership and reported on Form 1065, Note. The amount determined by the partnership based on its
page 1, line 10; Form 8825; or Schedule K, line 3b; annual PTEP accounts in determining the amount on line 6a
• Compensation deferred under a section 409A nonqualified doesn't include the amount by which distributions are attributable
deferred compensation plan that doesn't meet the requirements to PTEP in annual PTEP accounts of a direct or indirect partner.
of section 409A reported on Schedule K, line 20c, code AI; and
• Payments the partnership must capitalize. See the Schedule K-1. Enter each partner's distributive share of
instructions for Form 1065, line 10. ordinary dividends in box 6a of Schedule K-1.

Generally, amounts reported on line 4a as guaranteed Line 6b. Qualified Dividends

payment for services and line 4b as guaranteed payment for the
use of capital aren't considered to be related to a passive
Enter qualified dividends on line 6b. Except as provided below,
activity. For example, guaranteed payments for personal
qualified dividends are dividends received from domestic
services paid to a partner would not be passive activity income.
corporations and qualified foreign corporations. Don't include
Likewise, guaranteed payments for capital are treated as interest
any distributions received by the partnership from foreign
for purposes of section 469 and are generally not passive activity
corporations to the extent that they are attributable to PTEP in
income.
annual PTEP accounts of the partnership.
A partnership must treat and report a transfer of
TIP partnership property to a partner in satisfaction of a Note. The amount determined by the partnership based on its
guaranteed payment as a sale or exchange, and not a annual PTEP accounts in determining the amount on line 6b
distribution. See Rev. Rul. 2007-40, 2007-25 I.R.B. 1426, for doesn't include the amount by which distributions are attributable
more details. to PTEP in annual PTEP accounts of a direct or indirect partner.
Exceptions. The following dividends aren't qualified dividends.
Schedule K-1. Enter each partner's guaranteed payments for
services in box 4a and guaranteed payments for use of capital in
• Dividends the partnership received on any share of stock held
for less than 61 days during the 121-day period that began 60
box 4b of Schedule K-1. Report each partner's total guaranteed
days before the ex-dividend date. When determining the number
payments in box 4c of Schedule K-1.
of days the partnership held the stock, don't count certain days
during which the partnership's risk of loss was diminished. The
Portfolio Income ex-dividend date is the first date following the declaration of a
dividend on which the purchaser of a stock isn't entitled to
See Portfolio Income, earlier, for a definition of portfolio income. receive the next dividend payment. When counting the number
of days the partnership held the stock, include the day the
Don't reduce portfolio income by deductions allocated to it. partnership disposed of the stock but not the day the partnership
Report such deductions (other than interest expense) on acquired it.
Schedule K, line 13e. Report each partner's distributive share of • Dividends attributable to periods totaling more than 366 days
deductions (other than interest) allocable to portfolio income in that the partnership received on any share of preferred stock
box 13 of Schedule K-1 using code I or L. held for less than 91 days during the 181-day period that began

38 Instructions for Form 1065 (2024)

90 days before the ex-dividend date. When determining the Schedule K-1. Enter each partner's distributive share of
number of days the partnership held the stock, don't count royalties in box 7 of Schedule K-1.
certain days during which the partnership's risk of loss was
diminished. Preferred dividends attributable to periods totaling
less than 367 days are subject to the 61-day holding period rule Line 8. Net Short-Term Capital Gain (Loss)
above.
• Dividends that relate to payments that the partnership is Enter the gain (loss) that is portfolio income (loss) from
obligated to make because of short sales or positions in Schedule D (Form 1065), line 7.
substantially similar or related property. Schedule K-1. Enter each partner's distributive share of net
• Dividends paid by a RIC that aren't treated as qualified short-term capital gain (loss) in box 8 of Schedule K-1.
dividend income under section 854.
• Dividends paid by a REIT that aren't treated as qualified
dividend income under section 857(c). Line 9a. Net Long-Term Capital Gain (Loss)
• Dividends from a corporation which first became a surrogate
foreign corporation (as defined in section 7874(a)(2)(B) after Enter the gain or loss that is portfolio income (loss) from
December 22, 2017) other than a foreign corporation that is Schedule D (Form 1065), line 15.
treated as a domestic corporation under section 7874(b). See Schedule K-1. Enter each partner's distributive share of net
section 1(h)(11)(C)(iii)(II). long-term capital gain (loss) in box 9a of Schedule K-1.
See Pub. 550 for more details. If any gain or loss from Schedule D, line 7 or 15, is from
Qualified foreign corporation. A foreign corporation is a ! the disposition of nondepreciable personal property
qualified foreign corporation if it's: CAUTION used in a trade or business, it may not be treated as

1. Incorporated in a territory of the United States, or portfolio income. Instead, report it on Schedule K, line 11, and
report each partner's distributive share in box 11 of
2. Eligible for benefits of a comprehensive income tax treaty Schedule K-1 using code ZZ.
with the United States that the Secretary determines is
satisfactory for this purpose and that includes an exchange of The information reported in boxes 9b and 9c relate to
information program. See Notice 2011-64, 2011-37 I.R.B. 231, collectibles (28%) gain (loss) and unrecaptured section
for details. !
CAUTION 1250 gain flowing through the partnership. If one or more

If the foreign corporation doesn't meet either (1) or (2) above, partners sold an interest in the partnership, report separate
then it may be treated as a qualified foreign corporation for any amounts of collectibles (28%) gain and unrecaptured section
dividend paid by the corporation if the stock associated with the 1250 gain related to the sale in box 20c, under codes AC and
dividend paid is readily tradable on an established securities AD.
market in the United States.
However, qualified dividends don't include dividends paid by Line 9b. Collectibles (28%) Gain (Loss)
an entity that was a PFIC (defined in section 1297) in either the
tax year of the distribution or the preceding tax year. Figure the amount attributable to collectibles from the amount
See Notice 2004-71, 2004-45 I.R.B. 793, for more details. reported on Schedule D (Form 1065), line 15. A collectibles gain
(loss) is any long-term gain or deductible long-term loss from the
Schedule K-1. Enter each partner's distributive share of
sale or exchange of a collectible that is a capital asset.
qualified dividends in box 6b of Schedule K-1.
Attach a statement to the Schedule K-1 identifying the Collectibles include works of art, rugs, antiques, metal (such
dividends included in box 6a or 6b that are eligible for the as gold, silver, or platinum bullion), gems, stamps, coins,
deduction for dividends received under section 243(a), (b), or alcoholic beverages, and certain other tangible property.
(c); section 245; or section 245A; or are hybrid dividends as
defined in section 245A(e)(4). Also, include gain (but not loss) from the sale or exchange of
If any amounts from line 6b are from foreign sources, see an interest in a partnership or trust held for more than 1 year and
the Partnership Instructions for Schedules K-2 and K-3 attributable to unrealized appreciation of collectibles. For details,
!
CAUTION for additional information. see Regulations section 1.1(h)-1. Also attach the statement
required under Regulations section 1.1(h)-1(e).
Schedule K-1. Report each partner's distributive share of the
Line 6c. Dividend Equivalents collectibles (28%) gain (loss) in box 9b of Schedule K-1.
Information on dividend equivalents, as described in section
871(m), is provided for persons that aren't U.S. persons, who are Line 9c. Unrecaptured Section 1250 Gain
generally required to treat dividend equivalents as U.S. source
dividends, and domestic partnerships with partners who may The three types of unrecaptured section 1250 gain must be
need this information. Enter the amount of dividend equivalents reported separately on an attached statement to Form 1065.
as defined in section 871(m). See Regulations section 1.871-15
From the sale or exchange of the partnership's business
for additional information. For purposes of line 6c, include all
assets. Figure this amount in Form 4797, Part III, for each
amounts that would be included as a dividend equivalent if the
section 1250 property (except property for which gain is reported
amount were paid to a person subject to tax under section 871
using the installment method on Form 6252) for which you had
or 881, even if the partner is a U.S. person.
an entry in Form 4797, Part I. Subtract Form 4797, Part III,
line 26g, from the smaller of Form 4797, line 22 or line 24. Figure
Line 7. Royalties the total of these amounts for all section 1250 properties.
Generally, the result is the partnership's unrecaptured section
Enter the royalties received by the partnership. 1250 gain. However, if the partnership is reporting gain on the
installment method for a section 1250 property held more than 1
year, see the next paragraph.

Instructions for Form 1065 (2024) 39

 The total unrecaptured section 1250 gain for an installment section 1231 gain (loss) from each separate activity. See
sale of section 1250 property held more than 1 year is figured in Passive Activity Reporting Requirements, earlier.
a manner similar to that used in the preceding paragraph.
If any amounts from line 10 are from foreign sources, see
However, the total unrecaptured section 1250 gain must be
! the Partnership Instructions for Schedules K-2 and K-3
allocated to the installment payments received from the sale. To
for additional information.
do so, the partnership must generally treat the gain allocable to
CAUTION

each installment payment as unrecaptured section 1250 gain

until all such gain has been used in full. Figure the unrecaptured Line 11. Other Income (Loss)
section 1250 gain for installment payments received during the
tax year as the smaller of (a) the amount from Form 6252, Part II, Enter any other item of income or loss not included on lines 1
line 26, or Part III, line 37 (whichever applies); or (b) the total through 10. Determine other income (loss) without regard to any
unrecaptured section 1250 gain for the sale reduced by all gain amount reported on line 6c. On the line to the left of the entry
reported in prior years (excluding section 1250 ordinary income space for line 11, identify the type of income. If there's more than
recapture). one type of income, attach a statement to Form 1065 that
If the partnership chose not to treat all of the gain from separately identifies each type and amount of income for each of
payments received after May 6, 1997, and before August the following categories. The codes needed for Schedule K-1
!
CAUTION 24, 1999, as unrecaptured section 1250 gain, use only reporting are provided in the heading for each category below.
the amount the partnership chose to treat as unrecaptured Other portfolio income (loss) (code A). Portfolio income not
section 1250 gain for those payments to reduce the total reported on lines 5 through 10.
unrecaptured section 1250 gain remaining to be reported for the
sale. See Regulations section 1.453-12. Report and identify other portfolio income or loss on an
attached statement for line 11.
From the sale or exchange of an interest in a partnership. For example, income reported to the partnership from a
Also report as a separate amount any gain from the sale or REMIC, in which the partnership is a residual interest holder,
exchange of an interest in a partnership attributable to would be reported on an attached statement for line 11. If the
unrecaptured section 1250 gain. See Regulations section partnership holds a residual interest in a REMIC, report on the
1.1(h)-1 and attach the statement required under Regulations attached statement for box 11 of Schedule K-1 the partner's
section 1.1(h)-1(e). share of the following.
From an estate, trust, REIT, or RIC. If the partnership received
• Taxable income (net loss) from the REMIC (Schedules Q
(Form 1066), line 1b).
a Schedule K-1 or Form 1099-DIV from an estate, a trust, a REIT,
or a RIC reporting unrecaptured section 1250 gain, don't add it
• Excess inclusion (Schedules Q (Form 1066), line 2c).
to the partnership's own unrecaptured section 1250 gain.
• Section 212 expenses (Schedules Q (Form 1066), line 3b).
Don't report these section 212 expense deductions related to
Instead, report it as a separate amount. For example, if the portfolio income on Schedules K and K-1.
partnership received a Form 1099-DIV from a REIT with
unrecaptured section 1250 gain, report it as “Unrecaptured Because Schedule Q (Form 1066) is a quarterly statement,
section 1250 gain from a REIT.” the partnership must follow the Schedule Q instructions to figure
the amounts to report to partners for the partnership's tax year.
Schedule K-1. Report each partner's distributive share of
unrecaptured section 1250 gain from the sale or exchange of the Involuntary conversions (code B). Net gain (loss) from
business assets in box 9c of Schedule K-1. If the partnership is involuntary conversions due to casualty or theft. The amount for
reporting unrecaptured section 1250 gain from an estate, a trust, this line is shown on Form 4684, Casualties and Thefts,
a REIT, or a RIC, or from the partnership's sale or exchange of Section B, Part II, line 38a, 38b, or 39.
an interest in another partnership (as explained above), enter Each partner's share must be entered on Schedule K-1. Give
“STMT” in box 9c and an asterisk (*) in the left column of the box, each partner a schedule that shows the amounts to be reported
and attach a statement that separately identifies the amount of on the partner's Form 4684, Section B, Part II, line 34, columns
unrecaptured section 1250 gain from the following. (b)(i), (b)(ii), and (c).
• The sale or exchange of the partnership's business assets. If there was a gain (loss) from a casualty or theft to property
• The sale or exchange of an interest in another partnership. not used in a trade or business or for income-producing
• An estate, a trust, a REIT, or a RIC. purposes, notify the partner. The partnership shouldn't complete
If any amounts from line 9c are from foreign sources, see Form 4684 for this type of casualty or theft. Instead, each partner
the Partnership Instructions for Schedules K-2 and K-3 will complete their own Form 4684.
! for additional information.
CAUTION
Section 1256 contracts and straddles (code C). Report any
net gain or loss from section 1256 contracts from Form 6781,
Gains and Losses From Section 1256 Contracts and Straddles.
Line 10. Net Section 1231 Gain (Loss)
Mining exploration costs recapture (code D). Provide the
Enter the net section 1231 gain (loss) from Form 4797, Part I, information partners need to recapture certain mining exploration
line 7. expenditures. See Regulations section 1.617-3.
Cancellation of debt (code E). If cancellation of debt is
Don't include net gain or loss from involuntary conversions reported to the partnership on Form 1099-C, report each
due to casualty or theft. Report net gain or loss from involuntary partner's distributive share in box 11 using code E. Amounts
conversions due to casualty or theft on Schedule K, line 11 related to forgiven PPP loans are disregarded for purposes of
(box 11, code B, of Schedule K-1). See the instructions for this question.
line 11 on how to report net gain (loss) due to a casualty or theft.
Schedule K-1. Report each partner's distributive share of net
section 1231 gain (loss) in box 10 of Schedule K-1. If the
partnership has more than one rental, trade, or business activity,
identify on an attached statement to Schedule K-1 the amount of

40 Instructions for Form 1065 (2024)

 Include the amount of income the partnership must Gambling gains and losses (code K). Gambling gains and
TIP recognize for a transfer of a partnership interest in losses subject to the limitations in section 165(d). Indicate on an
satisfaction of a partnership debt when the debt relieved attached statement whether or not the partnership is in the trade
exceeds the FMV of the partnership interest. See section 108(e) or business of gambling.
(8) for more information.
Any income, gain, or loss to the partnership from a distri-
Section 743(b) positive income adjustments (code F). For bution under section 751(b) (code L). When a partnership
partnerships other than PTPs, report the partner's share of net makes a distribution and the partnership holds section 751
positive income resulting from all section 743(b) adjustments. property, if any partner has any gain or loss under section
For purposes of code F, “net positive income from all section 751(b), the partnership must report the net of all such gains or
743(b) adjustments” means the excess of all section 743(b) losses.
adjustments allocated to the partner that increase the partner's Gain eligible for section 1045 rollover (replacement stock
taxable income over all section 743(b) adjustments that purchased by partnership) (code M). Include only gain from
decrease the partner's taxable income. Attach a statement to the sale or exchange of qualified small business (QSB) stock (as
line 20, code U, showing each section 743(b) basis adjustment defined in the Instructions for Schedule D) that was deferred by
making up the total and identify the assets to which it relates. the partnership under section 1045 and reported on Form 8949
The partnership may group these section 743(b) basis and/or Schedule D. See the Instructions for Schedule D, and the
adjustments by asset category or description in cases where Instructions for Form 8949 for more details. The partnership
multiple assets are affected. See the instructions for line 20, makes the election for the section 1045 rollover on a timely filed
code U. (including extensions) return for the year in which the sale
Code G. Reserved for future use. occurred. Corporate partners aren't eligible for the section 1045
rollover. Additional limitations apply at the partner level. Each
Section 951(a) income inclusions (code H). If the partner will determine if they qualify for the rollover. Report on an
partnership is a domestic partnership, enter any section 951(a) attached statement to Schedule K-1 for each sale or exchange
income inclusions of the domestic partnership. A domestic (a) the name of the corporation that issued the QSB stock, (b)
partnership may only have section 951(a) income inclusions with the partner's share of the partnership's adjusted basis and sales
respect to a foreign corporation and a tax year of the foreign price of the QSB stock, (c) the dates the QSB stock was bought
corporation that begins before January 25, 2022, if the domestic and sold, (d) the partner's distributive share of gain from the sale
partnership (a) doesn't apply Regulations sections 1.958-1(d)(1) of the QSB stock, and (e) the partner's distributive share of the
through (3) to such tax year to be treated as not owning stock of gain that was deferred by the partnership under section 1045.
the foreign corporation within the meaning of section 958(a) for Only report these amounts on Schedule K-1; don’t include them
purposes of section 951, and (b) is a U.S. shareholder of the on Schedule K, line 11.
foreign corporation during such tax year. A domestic partnership
doesn't have section 951(a) income inclusions with respect to a Gain eligible for section 1045 rollover (replacement stock
foreign corporation for tax years of the foreign corporation that not purchased by the partnership) (code N). Include only
begin on or after January 25, 2022, under Regulations section gain from the sale or exchange of QSB stock (as defined in the
1.958-1(d)(1). Additionally, if the partnership, domestic or Instructions for Schedule D) the partnership held for more than 6
foreign, has a distributive share of section 951(a) income months but that wasn't deferred by the partnership under section
inclusions of a lower-tier partnership, enter the partnership's 1045. See the Instructions for Schedule D for more details. A
distributive share of the section 951(a) income inclusions. If the partner (other than a corporation) may be eligible to defer their
partnership doesn't have a section 951(a) income inclusion with distributive share of this gain under section 1045 if the partner
respect to a foreign corporation stock of which it owns within the purchases other QSB stock during the 60-day period that began
meaning of section 958(a) and without regard to Regulations on the date the QSB stock was sold by the partnership.
section 1.958-1(d), see Schedule K-2, Part VI, for reporting of Additional limitations apply at the partner level. Report on an
information with respect to section 951(a) income inclusions of attached statement to Schedule K-1 for each sale or exchange
certain partners with respect to the foreign corporation. Attach a (a) the name of the corporation that issued the QSB stock, (b)
statement to the Schedule K-1 identifying the section 951(a) the partner's share of the partnership's adjusted basis and sales
income inclusions attributable to the sale or exchange by a CFC price of the QSB stock, (c) the dates the QSB stock was bought
of stock in another foreign corporation described in section and sold, and (d) the partner's distributive share of gain from the
964(e)(4) or attributable to hybrid dividends of tiered sale of the QSB stock.
corporations under section 245A(e)(2). Gain from sale or exchange of QSB stock with section 1202
Gain (loss) from disposition of oil, gas, geothermal, or oth- exclusion (code O). The section 1202 exclusion applies only to
er mineral properties (section 59(e)) (code I). Disposition of QSB stock held by the partnership for more than 5 years.
an interest in oil, gas, geothermal, or other mineral properties. Corporate partners aren't eligible for the section 1202 exclusion.
Report the following information on an attached statement to Additional limitations apply at the partner level. Report each
Schedule K-1. partner's share of section 1202 gain on Schedule K-1. Each
• Description of the property. partner will determine if they qualify for the section 1202
• The partner's share of the amount realized on the sale, exclusion. Report on an attached statement to Schedule K-1 for
exchange, or involuntary conversion of each property (FMV of each sale or exchange (a) the name of the corporation that
the property for any other disposition, such as a distribution). issued the QSB stock, (b) the partner's share of the partnership's
• The partner's share of the partnership's adjusted basis in the adjusted basis and sales price of the QSB stock, and (c) the
property (except for oil or gas properties). dates the QSB stock was bought and sold.
• Total intangible drilling costs, development costs, and mining Gain or loss on disposition of farm recapture property and
exploration costs (section 59(e) expenditures) passed through to other items to which section 1252 applies (code P). Gains
the partner for the property. from the disposition of farm recapture property (see Form 4797)
See Regulations section 1.1254-5 for more information. and other items to which section 1252 applies.
Recoveries of tax benefit items (code J). See section 111. Gain or loss on Fannie Mae or Freddie Mac qualified prefer-
red stock (code Q). The partner's distributive share of the

Instructions for Form 1065 (2024) 41

partnership's gain or loss attributable to the sale or exchange of on an attached statement to Schedule K-1 the amount of section
qualified preferred stock of the Federal National Mortgage 179 deduction from each separate activity. See Passive Activity
Association (Fannie Mae) and the Federal Home Loan Mortgage Reporting Requirements, earlier.
Corporation (Freddie Mac). On an attached statement, show (a) Don't complete box 12 of Schedule K-1 for any partner that is
the gain or loss attributable to the sale or exchange of the an estate or a trust; estates and trusts aren't eligible for the
qualified preferred stock, (b) the date the stock was acquired by section 179 expense deduction.
the partnership, and (c) the date the stock was sold or
exchanged by the partnership. See Rev. Proc. 2008-64, 2008-47
I.R.B. 1195, for more information. Line 13a. Cash Contributions
Specially allocated ordinary gain (loss) (code R). No deduction is allowed for any contribution of $250 or more
Non-portfolio capital gain (loss) (code S). Any gain or loss unless the partnership obtains a written acknowledgment from
from Schedule D (Form 1065), line 7 or 15, that isn't portfolio the charitable organization that shows the amount of cash
income (for example, gain or loss from the disposition of contributed and gives an estimate of the value of any goods or
nondepreciable personal property used in a trade or business). services provided in return for the contribution. The
acknowledgment must be obtained by the due date (including
Codes T through X. Reserved for future use. extensions) of the partnership return or, if earlier, the date the
Other (code ZZ). Any other information the partners need to partnership files its return. Don't attach the acknowledgment to
prepare their tax returns. the partnership return, but keep it with the partnership's records.
Schedule K-1. Enter each partner's distributive share of the Cash contributions of any amount must be supported by a
other income categories listed earlier in box 11 of Schedule K-1. dated bank record or a written communication from the donee
Enter the applicable code provided. showing the name of the donee organization, the date of the
If the partnership has more than one trade or business or contribution, and the amount of the contribution, for example, a
rental activity, identify on an attached statement to Schedule K-1 receipt.
the amount from each separate activity. See Passive Activity
Reporting Requirements, earlier. Enter charitable cash contributions made during the tax year.
Attach a statement to Form 1065 that separately identifies the
Deductions partnership's contributions for each applicable code below. See
Limits on Deductions in Pub. 526, Charitable Contributions, for
Line 12. Section 179 Deduction information on adjusted gross income (AGI) limitations on
deductions for charitable contributions.
A partnership can elect to expense part or all of the cost of
certain property the partnership purchased during the tax year Cash contributions (60%) (code A). Enter cash contributions
for use in its trade or business (including certain rental activities, subject to the 60% AGI limitation. Don’t include in the amount
if the renting of the property is the partnership’s trade or reported using code A the cash contributions reported using
business). See Pub. 946 for a definition of what kind of property code G.
qualifies for the section 179 expense deduction and the Cash contributions (30%) (code B). Enter cash contributions
Instructions for Form 4562 for limitations on the amount of the subject to the 30% AGI limitation.
section 179 expense deduction.
Schedule K-1. Report each partner's distributive share of cash
Complete Part I of Form 4562 to figure the partnership's charitable contributions in box 13 of Schedule K-1 using code A
section 179 expense deduction. The partnership doesn't take or B, as applicable.
the deduction itself but instead passes it through to the partners.
Attach Form 4562 to Form 1065 and show the total section 179 Line 13b. Noncash Contributions
expense deduction on Schedule K, line 12.
No deduction is allowed for any contribution of $250 or more
The partnership must reduce the basis of the asset by the unless the partnership obtains a written acknowledgment from
amount of the section 179 expense elected by the partnership, the charitable organization that describes the property
even if a portion of that amount can't be passed through to its contributed and gives an estimate of the value of any goods or
partners that year and must be carried forward because of services provided in return for the contribution. The
limitations at the partnership level. Don't reduce the partnership's acknowledgment must be obtained by the due date (including
basis in section 179 property to reflect any portion of the section extensions) of the partnership return or, if earlier, the date the
179 expense that is allocable to a partner that is a trust or estate. partnership files its return. Don't attach the acknowledgment to
the partnership return but keep it with the partnership's records.
Identify on an attached statement to Schedules K and K-1 the These rules apply in addition to the filing requirements for Form
cost of section 179 property placed in service during the year 8283, Noncash Charitable Contributions, described below.
that is a qualified enterprise zone property. See the Partner’s
Instructions for Schedule K-1 (Form 1065) for more details. Attach a statement to Form 1065 that separately identifies the
partnership's contributions for each of applicable codes C
See, generally, the Instructions for Form 4562 for more details through F. See Limits on Deductions in Pub. 526 for information
on the section 179 expense deduction. on AGI limitations on deductions for charitable contributions.
Noncash contributions (50%) (code C). Enter noncash
See the instructions for Schedule K, line 20c, for sales or contributions subject to the 50% AGI limitation.
other dispositions of property for which a section 179 deduction
Qualified conservation contributions. The AGI limit for
has passed through to partners and for the recapture rules if the
qualified conservation contributions under section 170(h) is
business use of the property dropped to 50% or less.
50%. The carryover period is 15 years. See section 170(b) and
Schedule K-1. Report each partner's distributive share of the Notice 2007-50, 2007-25 I.R.B. 1430, for details. Report
section 179 expense deduction in box 12 of Schedule K-1. If the qualified conservation contributions with a 50% AGI limitation in
partnership has more than one trade or business activity, identify box 13 of Schedule K-1 using code C. Don't include in the

42 Instructions for Form 1065 (2024)

amount reported using code C the conservation contributions of 1.170A-14(j) through (n) for more details and information on the
property used in agriculture or livestock production reported on three exceptions.
Schedule K-1 using code G. See Qualified Conservation An “ultimate member” means, with respect to any partnership,
Contribution in Pub. 526 and Disallowance of deduction for any partner (that is not itself a partnership or S corporation) or S
certain qualified conservation contributions by pass-through corporation shareholder that receives a distributive share or pro
entities in the Instructions for Form 8283. rata share, directly or indirectly, of a qualified conservation
Charitable contributions of food inventory. Attach a contribution. Thus, a partnership's ultimate members will be
statement to Schedule K-1 that shows the following. partners holding a direct interest in the partnership, partners
• The partner's distributive share of the amount of the charitable holding an interest in an upper-tier partnership, or shareholders
contributions made under section 170(e)(3) for qualified in an upper-tier S corporation. An upper-tier partnership or
inventory that was donated to charitable organizations for the upper-tier S corporation is a partnership or S corporation that
care of the ill, needy, and infants. The food must meet all the doesn’t itself make the contribution, but instead receives an
quality and labeling standards imposed by federal, state, and allocated portion of a qualified conservation contribution from
local laws and regulations. The amount of the charitable another partnership.
contribution for donated food inventory is the lesser of (a) the
If the disallowance rule doesn’t apply to the contributing
basis of the donated food plus one-half of the appreciation (gain
partnership because the amount of the contributing partnership's
if the donated food was sold at FMV on the date of the gift), or
qualified conservation contribution is equal to or less than 2.5
(b) twice the amount of basis of the donated food. A partnership
times the sum of each ultimate member's relevant basis, then
that doesn't account for inventories and isn't required to
any upper-tier partnership must still determine whether the
capitalize indirect costs under section 263A may elect to treat
disallowance rule applies to its allocated portion of the qualified
the basis of the donated food as equal to 25% of the FMV of the
conservation contribution. Subject to the three exceptions, if an
food. See section 170(e)(3)(C) for more details.
upper-tier partnership's allocated portion exceeds 2.5 times the
• The partner's distributive share of the net income for the tax sum of each ultimate member's relevant basis, the contribution
year from the partnership's trades or businesses that made the
isn’t treated as a qualified conservation contribution with respect
contribution of food inventory.
to the upper-tier partnership, any subsequent upper-tier
Don’t include the amount of food inventory contributions partnership or upper-tier S corporation, or any ultimate member.
! in the amount reported in box 13 of Schedule K-1 using No one may claim a deduction for the allocated portion
CAUTION code C. These contributions must be reported attributable to that upper-tier partnership.
separately on an attached statement because partners must If an upper-tier partnership's allocated portion is equal to or
separately determine the limitations on the deduction. less than 2.5 times the sum of each ultimate member's relevant
basis, then any subsequent upper-tier partnership or upper-tier S
Noncash contributions (30%) (code D). Enter noncash corporation must still determine whether the disallowance rule
contributions subject to the 30% AGI limitation. applies to its allocated portion.
Capital gain property to a 50% limit organization (30%) In an attachment to each Schedule K-1 issued to a partner
(code E). Enter capital gain property contributions subject to that is an ultimate member, report the partner’s relevant basis. If
the 30% AGI limitation. the Schedule K-1 is being issued to a partner that’s an upper-tier
Capital gain property (20%) (code F). Enter capital gain partnership or upper-tier S corporation, the attachment should
property contributions subject to the 20% AGI limitation. include a list of the relevant basis of each ultimate member of the
upper-tier partnership or upper-tier S corporation. The
Contributions of property. See Contributions of Property in partnership should coordinate with each partner in calculating
Pub. 526, and Pub. 561, Determining the Value of Donated relevant basis. See Qualified Conservation Contribution in Pub.
Property, for information on noncash contributions and 526 and Disallowance of deduction for certain qualified
contributions of capital gain property. If the deduction claimed for conservation contributions by partnerships and S corporations in
noncash contributions exceeds $500, complete Form 8283 and the Instructions for Form 8283.
attach it to Form 1065.
Nondeductible contributions. Certain contributions made to
If the partnership made a qualified conservation contribution an organization conducting lobbying activities aren't deductible.
under section 170(h), also include the FMV of the underlying See section 170(f)(9) for more details. Also, see Contributions
property before and after the donation, as well as the type of You Can’t Deduct in Pub. 526 for more examples of
legal interest contributed, and describe the conservation nondeductible contributions.
purpose furthered by the donation. Give a copy of this
information to each partner. Contributions (100%) (code G). Use code G to report the
If the partnership made a qualified conservation contribution contributions below and, on an attached statement, provide the
for the preservation of a historic structure, there are additional following information.
requirements that may apply to obtain a charitable contribution Qualified conservation contributions of property used in
deduction. This deduction may be reduced if rehabilitation agriculture or livestock production. Enter qualified
credits were claimed for the historic structure. This deduction conservation contributions of property used in agriculture or
may be denied if the partnership doesn't comply with section livestock production. The contribution must be subject to a
170(f)(19). A $500 filing fee may apply to certain deductions over restriction that the property remain available for such production.
$10,000. See the Instructions for Form 8283 and Pub. 526 for See section 170(b)(1)(E)(iv) for details.
details. If the partnership is a qualified farmer or rancher (as defined
Subject to three exceptions, a charitable contribution by a in section 170(b)(1)(E)(v)), show each partner's distributive
partnership (whether made directly or reported as an allocated share of qualified conservation contributions of property used in
portion of a contribution of another partnership) isn't treated as a agriculture or livestock production. Partners will have to
qualified conservation contribution if the amount of such separately determine whether they qualify for the 50% or 100%
contribution exceeds 2.5 times the sum of each ultimate AGI limitation for these contributions. Don't include the amounts
member's relevant basis (disallowance rule). See the reported on the attached statement using code G in the amount
Instructions for Form 8283, Pub. 526, and Regulations sections reported on Schedule K-1 for qualified conservation
contributions using code C.

Instructions for Form 1065 (2024) 43

Schedule K-1. Report each partner's distributive share of On an attached statement, identify the property for which the
noncash charitable contributions in box 13 of Schedule K-1 expenditures were paid or incurred. If the expenditures were for
using codes C through F for each of the contribution categories intangible drilling costs or development costs for oil and gas
shown above. For code G items, report them by entering code G properties, identify the month(s) in which the expenditures were
with an asterisk (G*) and entering “STMT” in the dollar amount paid or incurred. If there's more than one type of expenditure or
entry space for box 13 and attach a statement that shows “Box more than one property, provide the amounts (and the months
13, Code G” and the dollar amount of each type of deduction. paid or incurred if required) for each type of expenditure
The partnership must attach a copy of its Form 8283 to the separately for each property.
Schedule K-1 of each partner receiving a distributive share of the Schedule K-1. Report each partner's distributive share of
contribution deduction shown in its Form 8283, Section A or section 59(e) expenditures in box 13 of Schedule K-1 using code
Section B. J. Identify the following on an attached statement: (a) the type of
expenditure; (b) the property for which the expenditures are paid
Line 13c. Investment Interest Expense (Code H) or incurred; and (c) for oil and gas properties only, the month in
which intangible drilling costs and development costs were paid
Include on this line the interest properly allocable to debt on or incurred. If there's more than one type of expenditure or the
property held for investment purposes. Property held for expenditures are for more than one property, provide each
investment includes property that produces income from partner's distributive share of the amounts (and the months paid
interest, dividends, annuities, or royalties not derived in the or incurred for oil and gas properties) for each type of
ordinary course of a trade or business. Property held for expenditure separately for each property.
investment also includes property that produces gains not
derived in the ordinary course of a trade or business from the Line 13e. Other Deductions
disposition of property that produces those types of income or is
held for investment. Enter deductions not included on lines 12, 13a, 13b, 13c, 13d(2),
and 21. On the line to the left of the entry space for this line,
Investment interest expense doesn't include interest expense identify the type of deduction. If there's more than one type of
allocable to a passive activity. deduction, attach a statement to Form 1065 that separately
identifies the type and amount of each deduction for the
following categories. The codes needed for Schedule K-1
Investment income and investment expenses other than
reporting are provided for each category.
interest are reported on lines 20a and 20b, respectively. This
information is needed by partners to determine the investment Deductions—royalty income (code I). Enter deductions
interest expense limitation (see Form 4952 for details). related to royalty income.
Schedule K-1. Report each partner's distributive share of Schedule K-1. Report each partner’s distributive share of
investment interest expense in box 13 of Schedule K-1 using deductions related to royalty income.
code H. Excess business interest expense (EBIE) (code K). If the
partnership is required to file Form 8990, it may determine it has
Lines 13d(1) and 13d(2). Section 59(e)(2) EBIE. If so, enter the amount from Form 8990, Part II, line 32, for
EBIE.
Expenditures (Code J)
Schedule K-1. Provide the information each partner needs to
figure EBIE. In box 13, report the partner’s distributive share of
Generally, section 59(e) allows each partner to make an election EBIE. If the partnership reports EBIE, the partner is required to
to deduct their distributive share of the partnership's otherwise file Form 8990. The partner will enter the amount in Form 8990,
deductible qualified expenditures ratably over 10 years (3 years Schedule A, line 43, column (c). See the Instructions for Form
for circulation expenditures). The deduction is taken beginning 8990 for additional information.
with the tax year in which the expenditures were made (or for
intangible drilling and development costs, over the 60-month Deductions—portfolio income (other) (code L). Enter any
period beginning with the month in which such costs were paid other deductions related to portfolio income.
or incurred). No deduction is allowed under section 212 for expenses
allocable to a convention, seminar, or similar meeting. Because
The term “qualified expenditures” includes only the following these expenses aren't deductible by partners, the partnership
types of expenditures paid or incurred during the tax year. doesn't report these expenses on Schedule K, line 13e. The
• Circulation expenditures. expenses are nondeductible and are reported as such on
• R&E expenditures. Schedule K, line 18c, and in box 18 of Schedule K-1 using code
• Intangible drilling and development costs. C.
• Mining exploration and development costs. Schedule K-1. In box 13, report the partner's distributive
share of deductions related to portfolio income that are reported
If a partner makes the election, these items aren't treated as on Schedule K, line 13e, using code I (for deductions related to
alternative minimum tax (AMT) tax preference items. Because royalty income) or L (for other deductions related to portfolio
the partners are generally allowed to make this election, the income).
partnership can't deduct these amounts or include them as AMT Amounts paid for medical insurance (code M). Enter
items on Schedule K-1. Instead, the partnership passes through amounts paid during the tax year for insurance that constitutes
the information the partners need to figure their separate medical care for the partner (including the partner's spouse,
deductions. On line 13d(1), enter the type of expenditures dependents, and children under age 27 who aren't dependents).
claimed on line 13d(2). Enter on line 13d(2) the qualified
expenditures paid or incurred during the tax year for which an Educational assistance benefits (code N). Enter amounts
election under section 59(e) may apply. Enter this amount for all paid during the tax year for educational assistance benefits paid
partners whether or not any partner makes an election under to a partner.
section 59(e).

44 Instructions for Form 1065 (2024)

Dependent care benefits (code O). Enter amounts paid shows each partner's distributive share of the qualified
during the tax year for dependent care benefits paid on behalf of expenditures separately for each production. The deduction is
each partner. subject to recapture under section 1245 if the election is
voluntarily revoked or the production fails to meet the
Preproductive period expenses (code P). If the partnership requirements for the deduction. See section 181 and the related
is required to use an accrual method of accounting under section regulations for details.
447 or is prohibited from using the cash method under section
448(a)(3), it must capitalize these expenses. If the partnership is Expenditures for removal of barriers (code Y). Enter
permitted to use the cash method, enter the amount of expenditures paid or incurred for the removal of architectural and
preproductive period expenses that qualify under section transportation barriers to the elderly and disabled that the
263A(d). An election not to capitalize these expenses must be partnership has elected to treat as a current expense. See
made at the partner level. See Uniform Capitalization Rules in section 190.
Pub. 225. Itemized deductions (code Z). Enter amounts paid by the
Code Q. Reserved for future use. partnership that would be allowed as itemized deductions on any
of the partners' income tax returns if they were paid directly by a
Pensions and IRAs (code R). Enter the payments for a partner partner for the same purpose. Don't enter expenses related to
to an IRA, a qualified plan, or a SEP or SIMPLE IRA plan. If a portfolio income or investment interest expense reported on
qualified plan is a defined benefit plan, a partner's distributive Schedule K, line 13c, on this line.
share of payments is determined in the same manner as the
partner’s distributive share of partnership taxable income. For a Contributions to a capital construction fund (CCF) (code
defined benefit plan, attach to the Schedule K-1 for each partner AA). Enter the amount of contributions made to a CCF. See
a statement showing the amount of benefit accrued for the tax Pub. 595.
year. Penalty on early withdrawal of savings (code AB). Enter
Reforestation expense deduction (code S). The partnership any penalty on early withdrawal of savings not reported on
can elect to deduct a limited amount of its reforestation Schedule K, line 13c, because the partnership withdrew its time
expenditures paid or incurred during the tax year. The amount savings deposit before its maturity.
the partnership can elect to deduct is limited to $10,000 for each Interest expense allocated to debt-financed distributions
qualified timber property. See section 194(c) for a definition of (code AC). See 2022 Pub. 535, Business Expenses, for more
reforestation expenditures and qualified timber property. The information.
partnership must amortize over 84 months any amount not
deducted. See the instructions for Form 1065, page 1, line 21, Interest expense on working interest in oil or gas (code
earlier. See Notice 2006-47, 2006-20 I.R.B. 892, for details on AD). Enter interest paid or accrued on debt properly allocable to
making the election. each general partner's share of a working interest in any oil or
Schedule K-1. Enter the partner's distributive share of the gas property (if the partner's liability isn't limited). General
allowable reforestation expenses in box 13 of Schedule K-1 partners that didn't materially participate in the oil or gas activity
using code S, and attach a statement that provides a description treat this interest as investment interest; for other general
of the qualified timber property. If the partnership is electing to partners, it's trade or business interest.
deduct amounts from more than one qualified timber property, Deductions—portfolio income (code AE). Enter the amount
provide a description and the amount for each property. of deductions related to portfolio income which were formerly
Codes T through U. Reserved for future use. deductible by individuals under section 67 subject to the 2% AGI
floor. For partners other than individuals, amounts that are
Section 743(b) negative income adjustments (code V). For clearly and directly allocable to portfolio income (other than
partnerships other than PTPs, report the partner’s share of net investment interest expense and section 212 expenses from a
negative income resulting from all section 743(b) adjustments. REMIC) can be deducted on those partners’ income tax returns.
For purposes of code V, “net negative income from all section
743(b) adjustments” means the excess of all section 743(b) Codes AF through AJ. Reserved for future use.
adjustments allocated to the partner that decrease partner Other (code ZZ). Any other information the partners need to
taxable income over all section 743(b) adjustments that increase prepare their tax returns.
partner taxable income. Attach a statement for line 20, code U,
showing each section 743(b) basis adjustment making up the Schedule K-1. Enter each partner's distributive share of the
total and identify the assets to which it relates. The partnership deduction categories listed earlier in box 13 of Schedule K-1 or
may group these section 743(b) basis adjustments by asset provide the information required on an attached statement for
category or description in cases where multiple assets are the deduction.
affected. See the instructions for line 20, code U. If the partnership has more than one trade or business
activity, identify on an attached statement to Schedule K-1 the
Soil and water conservation (code W). Enter amounts for soil amount for each separate activity. See Passive Activity Reporting
and water conservation expenditures, and endangered species Requirements, earlier.
recovery expenditures. See section 175.
Film, television, and theatrical production expenses (code Self-Employment
X). The partnership can elect to deduct certain costs of a If the partnership is an options dealer or a commodities
qualified film, television, or live theatrical production
TIP dealer, see section 1402(i) before completing lines 14a,
commencing before January 1, 2026 (after December 31, 2015, 14b, and 14c, to determine the amount of any
and before January 1, 2026, for a live theatrical production), adjustment that may have to be made to the amounts shown on
limited to $15 million of the aggregate production cost of the the Worksheet for Figuring Net Earnings (Loss) From
production. There's a higher dollar limitation for productions in Self-Employment, later. If the partnership is engaged solely in
certain areas. Provide a description of the film, television, or live the operation of a group investment program, earnings from the
theatrical production on an attached statement. If the partnership operation generally aren't self-employment earnings for either
makes the election for more than one film, television, or live general or limited partners.
theatrical production, attach a statement to Schedule K-1 that

Instructions for Form 1065 (2024) 45

General partners. General partners' net earnings (loss) from • Rentals of real estate held for sale to customers in the course
self-employment don't include the following. of a trade or business as a real estate dealer, or
• Dividends on any shares of stock and interest on any bonds, • Rentals for which services were rendered to the occupants
debentures, notes, etc., unless the dividends or interest are (other than services usually or customarily rendered for the
received in the course of a trade or business, such as a dealer in rental of space for occupancy only). The supplying of maid
stocks or securities or interest on notes or accounts receivable. service is such a service, but the furnishing of heat and light; the
• Rentals from real estate, except rentals of real estate held for cleaning of public entrances, exits, stairways, and lobbies; and
sale to customers in the course of a trade or business as a real trash collection, etc., aren't considered services rendered to the
estate dealer or payments for rooms or space when significant occupants.
services are provided. Line 3c. The distributive share of limited partners isn't earnings
• Royalty income, except royalty income received in the course from self-employment and isn't reported on this line.
of a trade or business.
Lines 3b and 4b. Allocate the amounts on these lines in the
See the Instructions for Schedule SE (Form 1040) for more same way Form 1065, page 1, line 23, is allocated to these
information. particular partners.
Limited partners. Generally, a limited partner's share of Line 4a. Include in the amount on line 4a any guaranteed
partnership income (loss) isn't included in net earnings (loss) payments to partners reported on Schedule K, line 4c, and in
from self-employment. Limited partners treat as self-employment box 4c of Schedule K-1, and derived from a trade or business as
earnings only guaranteed payments for services they actually defined in section 1402(c). Also include other ordinary business
rendered to, or on behalf of, the partnership to the extent that income and expense items (other than expense items subject to
those payments are payment for those services. separate limitations at the partner level, such as the section 179
However, whether a partner qualifies as a limited partner for expense deduction) reported on Schedules K and K-1 that are
purposes of self-employment tax depends on whether the used to figure self-employment earnings under section 1402.
partner is considered a limited partner under section 1402(a)
(13). Line 4c. Guaranteed payments to general partners and limited
partners for services provided to the partnership are net
earnings from self-employment and are reported on this line.
Line 14a. Net Earnings (Loss) From
Self-Employment (Code A) Credits
Use the Worksheet for Figuring Net Earnings (Loss) From Zero-Emission Nuclear Power Production Credit
Self-Employment in these instructions.
(Code A)
Schedule K. Enter on line 14a the amount from line 5 of the
worksheet. The Inflation Reduction Act of 2022 created section 45U, the
Schedule K-1. Don't complete this line for any partner that is an zero-emission nuclear power production credit, for electricity
estate, a trust, a corporation, an exempt organization, or an IRA. produced at a qualified nuclear power facility and sold by the
taxpayer to an unrelated person in tax years beginning after
Enter in box 14 of Schedule K-1 each individual general
December 31, 2023, and before January 1, 2033. For more
partner's share of the combined amounts shown on the
information about the zero-emission nuclear power production
worksheet, lines 3c and 4c; and each individual limited partner’s
credit, see Form 7213, Part II, and the Instructions for Form
share of the amount shown on the worksheet, line 4c, using code
7213.
A.
Schedule K-1. Report in box 15 of Schedule K-1 each partner's
Line 14b. Gross Farming or Fishing Income (Code distributive share of the zero-emission nuclear power production
credit reported on Schedule K, line 15f, using code A.
B)
Enter on line 14b the partnership's gross farming or fishing Credit for Production From Advanced Nuclear
income from self-employment. Individual partners need this Power Facilities (Code B)
amount to figure net earnings from self-employment under the
farm optional method on Schedule SE (Form 1040), Part II. Enter Section 45J was enacted by section 1306 of the Energy Policy
each individual partner's distributive share in box 14 of Act of 2005, P.L. 109-58, title XIII, section 1306. The credit is
Schedule K-1 using code B. allowed only for qualifying electricity that the taxpayer produces
and sells to an unrelated person. For more information about the
Line 14c. Gross Nonfarm Income (Code C) credit for electricity produced from advanced nuclear power
facilities, see Form 7213, Part I, and the Instructions for Form
Enter on line 14c the partnership's gross nonfarm income from 7213.
self-employment. Individual partners need this amount to figure Schedule K-1 Report in box 15 of Schedule K-1 each partner's
net earnings from self-employment under the nonfarm optional distributive share of the credit for electricity produced from
method on Schedule SE (Form 1040), Part II. Enter each advanced nuclear power facilities reported on Schedule K,
individual partner's share in box 14 of Schedule K-1 using code line 15f, using code B.
C.
Low-Income Housing Credit
Worksheet Instructions
Line 1b. Include on line 1b any part of the net income (loss) Section 42 provides a credit that can be claimed by owners of
from rental real estate activities from Schedule K, line 2, that is low-income residential rental buildings. To qualify for this credit,
from: the partnership must file Form 8609, Low-Income Housing Credit
Allocation and Certification, separately with the IRS. Don't attach
Form 8609 to Form 1065. Complete and attach Form 8609-A,

46 Instructions for Form 1065 (2024)

 Worksheet for Figuring Net Earnings (Loss) From Self-Employment
1a Ordinary business income (loss) (Schedule K, line 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1a
b Net income (loss) from certain rental real estate activities (see instructions) . . . . . . . . . . . . . . . 1b
c Other net rental income (loss) (Schedule K, line 3c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1c
d Net loss from Form 4797, Part II, line 17, included on line 1a, above. Enter as a positive amount . . . . 1d
e Combine lines 1a through 1d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1e
2 Net gain from Form 4797, Part II, line 17, included on line 1a, above . . . . . . . . . . . . . . . . . . . 2
3a Subtract line 2 from line 1e. If line 1e is a loss, increase the loss on line 1e by the amount on line 2 . . 3a
b Part of line 3a allocated to limited partners, estates, trusts, corporations, exempt organizations, 3b
and IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

c Subtract line 3b from line 3a. If line 3a is a loss, reduce the loss on line 3a by the amount on line 3b. Include each general partner's
share of line 3c in box 14 of Schedule K-1 using code A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3c
4a Guaranteed payments to partners (Schedule K, line 4c) derived from a trade or business as defined in
section 1402(c) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4a
b Part of line 4a allocated to limited partners for other than services and to estates, trusts, corporations,
exempt organizations, and IRAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4b
c Subtract line 4b from line 4a. Include each general partner's share and each limited partner's share of line 4c in box 14 of
Schedule K-1 using code A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4c
5 Net earnings (loss) from self-employment. Combine lines 3c and 4c. Enter here and on Schedule K, line 14a . . . . . . . . . . . 5

Annual Statement for Low-Income Housing Credit; and Form Line 15c. Qualified Rehabilitation Expenditures
8586, Low-Income Housing Credit, to Form 1065.
(Rental Real Estate) (Code E)
Line 15a. Low-Income Housing Credit (Section Enter on line 15c the total qualified rehabilitation expenditures
42(j)(5)) (Code C) related to rental real estate activities of the partnership. See the
Instructions for Form 3468 for details on qualified rehabilitation
Enter on line 15a the total low-income housing credit for property expenditures.
which a partnership is to be treated under section 42(j)(5) as the
Schedule K-1. Report each partner's distributive share of
taxpayer to which the low-income housing credit was allowed.
qualified rehabilitation expenditures related to rental real estate
If the partnership invested in another partnership to which the activities in box 15 of Schedule K-1 using code E. Attach a
provisions of section 42(j)(5) apply, report on line 15a the credit statement to Schedule K-1 that provides the information and the
reported to the partnership in box 15 of Schedule K-1 (Form partner's distributive share of the amounts the partner will need
1065), code C. to complete Form 3468, Part VII, lines 1d through 1k. See the
Instructions for Form 3468 for details. If the partnership has
Schedule K-1. Report in box 15 of Schedule K-1 each partner's expenditures from more than one rental real estate activity,
distributive share of the low-income housing credit reported on identify on an attached statement to Schedule K-1 the amount
line 15a of Schedule K. Use code C to report credits attributable for each separate activity. See Passive Activity Reporting
to buildings placed in service after 2007. If the partnership has Requirements, earlier.
credits from more than one rental activity, identify on an attached
statement to Schedule K-1 the amount for each separate activity. Qualified rehabilitation expenditures for property not
See Passive Activity Reporting Requirements, earlier. ! related to rental real estate activities must be reported in
CAUTION box 20 using code D.

Line 15b. Low-Income Housing Credit (Other)

(Code D) Line 15d. Other Rental Real Estate Credits (Code
F)
Enter on line 15b any low-income housing credit not reported on
line 15a. This includes any credit reported to the partnership in Enter on line 15d any other credit (other than credits reported on
box 15 of Schedule K-1 using code D. lines 15a through 15c) related to rental real estate activities. On
Schedule K-1. Report in box 15 of Schedule K-1 each partner's the dotted line to the left of the entry space for line 15d, identify
distributive share of the low-income housing credit reported on the type of credit. If there's more than one type of credit, attach a
Schedule K, line 15b. Use code D to report credits attributable to statement to Form 1065 that identifies the type and amount for
buildings placed in service after 2007. If the partnership has each credit. These credits may include any type of credit listed in
credits from more than one rental activity, identify on an attached the instructions for line 15f.
statement to Schedule K-1 the amount for each separate activity. Schedule K-1. Report in box 15 of Schedule K-1 each partner's
See Passive Activity Reporting Requirements, earlier. distributive share of other rental real estate credits using code F.
If you're reporting each partner's distributive share of only one
type of rental real estate credit under code F, enter the code with
an asterisk (F*) and the dollar amount in the entry space in
box 15 and attach a statement that shows “Box 15, Code F” and
the type of credit. If you're reporting multiple types of rental real
estate credits under code F, enter the code with an asterisk (F*)

Instructions for Form 1065 (2024) 47

and enter “STMT” in the entry space in box 15 and attach a small business under section 38(c)(5)(A). If the partner and the
statement that shows “Box 15, Code F” and the types and dollar partnership meet the requirements of section 38(c)(5)(A), the
amounts of the credits. If the partnership has credits from more research credit may be treated as a specified credit.
than one rental real estate activity, identify on the attached
Credit for employer social security and Medicare taxes
statement the amount of each type of credit for each separate
paid on certain employee tips (code N). Complete Form
activity. See Passive Activity Reporting Requirements, earlier.
8846 to figure the credit. Attach it to Form 1065.

Line 15e. Other Rental Credits (Code G) Backup withholding (code O). This credit is for backup
withholding on dividends, interest, and other types of income of
Enter on line 15e any other credit (other than credits reported on the partnership.
lines 15a through 15d) related to rental activities. On the dotted Unused investment credit from the qualifying advanced
line to the left of the entry space for line 15e, identify the type of coal project credit or qualifying gasification project credit
credit. If there's more than one type of credit, attach a statement allocated from cooperatives (code P). See Form 3468.
to Form 1065 that identifies the type and amount for each credit.
These credits may include any type of credit listed in the Unused investment credit from the qualifying advanced en-
instructions for line 15f. ergy project credit allocated from cooperatives (code Q).
See Form 3468.
Schedule K-1. Report in box 15 of Schedule K-1 each partner's
distributive share of other rental credits using code G. If you're Unused investment credit from the advanced manufactur-
reporting each partner's distributive share of only one type of ing investment credit allocated from cooperatives (code
rental credit under code G, enter the code with an asterisk (G*) R). See Form 3468.
and the dollar amount in the entry space in box 15 and attach a Unused investment credit from the clean electricity invest-
statement that shows “Box 15, Code G” and the type of credit. If ment credit allocated from cooperatives (code S). See
you're reporting multiple types of rental credits under code G, Form 3468.
enter the code with an asterisk (G*) and enter “STMT” in the
Unused investment credit from the energy credit allocated
entry space in box 15 and attach a statement that shows “Box
from cooperatives (code T). See Form 3468.
15, Code G” and the types and dollar amounts of the credits. If
the partnership has credits from more than one rental activity, Unused investment credit from the rehabilitation credit al-
identify on the attached statement the amount of each type of located from cooperatives (code U). See Form 3468.
credit for each separate activity. See Passive Activity Reporting
Advanced manufacturing production credit (code V). See
Requirements, earlier.
Form 7207.

Line 15f. Other Credits Clean electricity production credit (code W). See Form
7211.
Enter on line 15f any other credit, except credits or expenditures Clean fuel production credit (code X). See Form 7218.
shown or listed for lines 15a through 15e. If any of these credits
are attributable to rental activities, enter the amount on line 15d Clean hydrogen production credit (code Y). See Form 7210.
or 15e. On the dotted line to the left of the entry space for Orphan drug credit (code Z). Complete Form 8820 to figure
line 15f, identify the type of credit. If there's more than one type the credit, and attach it to Form 1065.
of credit or if there are any credits subject to recapture, attach a
statement to Form 1065 that separately identifies each type and Enhanced oil recovery credit (code AA). See Form 8830.
amount of credit and credit recapture information for the Renewable electricity production credit (code AB). See
following categories. The codes needed for box 15 of Rev. Proc. 2007-65, as modified by Announcement 2009-69 and
Schedule K-1 are provided in the headings of the following Announcement 2007-112, for a safe harbor method for allocating
categories. the credit for wind energy production. Complete Form 8835 to
Undistributed capital gains credit (code H). This credit figure the credit. Attach a statement to Form 1065 and
represents taxes paid on undistributed capital gains by a RIC or Schedule K-1 showing the allocation of the credit for production
a REIT. As a shareholder of a RIC or a REIT, the partnership will during the 4-year period beginning on the date the facility was
receive notice of the amount of tax paid on undistributed capital placed in service and for production after that period. Attach
gains on Form 2439, Notice to Shareholder of Undistributed Form 8835 to Form 1065.
Long-Term Capital Gains. Biodiesel, renewable diesel, or sustainable aviation fuels
Biofuel producer credit (code I). Complete Form 6478, if credit (code AC). Complete Form 8864, if applicable, to figure
applicable, to figure the credit. Attach it to Form 1065. Include the credit, and attach it to Form 1065. If this credit includes the
any amount shown on Form 6478, line 2, in the partnership's small agri-biodiesel producer credit, identify on a statement
income on line 7. See section 40(f) for an election the attached to Schedule K-1 (a) each partner's distributive share of
partnership can make to not have the credit apply. the small agri-biodiesel producer credit included in the total
credit allocated to the partner, (b) the number of gallons for
Work opportunity credit (code J). Complete Form 5884 to which the partnership claimed the small agri-biodiesel producer
figure the credit. Attach it to Form 1065. credit, and (c) the partnership's productive capacity for
Disabled access credit (code K). Complete Form 8826 to agri-biodiesel.
figure the credit. Attach it to Form 1065. New markets credit (code AD). Complete Form 8874 to figure
Empowerment zone employment credit (code L). Complete the credit. Attach it to Form 1065.
Form 8844 to figure the credit. Attach it to Form 1065. Credit for small employer pension plan startup costs (code
Credit for increasing research activities (code M). AE). Complete Form 8881, Part I, to figure the credit, and attach
Complete Form 6765 to figure the credit. Attach it to Form 1065. it to Form 1065.

Note. The partnership should provide the information necessary

for the partner to determine whether the partnership is an eligible

48 Instructions for Form 1065 (2024)

Credit for small employer auto-enrollment (code AF). Carbon oxide sequestration credit recapture (code AX).
Complete Form 8881, Part II, to figure the credit, and attach it to See Form 8933, Part III, line 7. Enter as a negative number.
Form 1065.
New clean vehicle credit (code AY). See Form 8936, Part II.
Credit for small employer military spouse retirement plan
Qualified commercial clean vehicle credit (code AZ). See
eligibility (code AG). Complete Form 8881, Part III, to figure
Form 8936, Part V.
the credit, and attach it to Form 1065.
Credit for small employer health insurance premiums
Credit for employer-provided childcare facilities and serv-
(code BA). See Form 8941.
ices (code AH). Complete Form 8882 to figure the credit, and
attach it to Form 1065. Employer credit for paid family and medical leave (code
BB). See Form 8994.
Low sulfur diesel fuel production credit (code AI).
Complete Form 8896 to figure the credit, and attach it to Form Eligible credits from transferor(s) under section 6418
1065. (code BC). Enter the total amount of eligible credits received
from transferor(s) included in column (f) of the partnership's
Qualified railroad track maintenance credit (code AJ).
Form 3800, Part III, line 6. Also, enter the total of the
Complete Form 8900 to figure the credit, and attach it to Form
partnership's distributive share of all eligible credits received
1065.
from transferor(s) that were received from another pass-through
Credit for oil and gas production from marginal wells (code entity. See required statement below.
AK). See Form 8904.
Partnership and S corporation pass-through entities that
Distilled spirits credit (code AL). See Form 8906. ! transferred eligible credits from an unrelated person for
CAUTION cash under section 6418 must use Form 3800, Part III
Energy efficient home credit (code AM). See Form 8908.
and Part V (if applicable) to report such credits. See the
Code AN. Reserved for future use. Instructions for Form 3800 for reporting and other requirements.
Alternative fuel vehicle refueling property credit (code AO). Schedule K-1. Report each partner's distributive share of all
See Form 8911. eligible credits transferred from one or more unrelated
Clean renewable energy bond credit (code AP). See Form transferors pursuant to a transfer election under section 6418 in
8912. The amount of this credit (excluding any credits from other box 15 of Schedule K-1 using code BC. This amount must
partnerships, estates, and trusts) must also be reported as include the partner’s distributive share of all eligible credits from
interest income on Schedule K, line 5. transferors that were received from another pass-through entity.
Enter code BC with an asterisk (BC*) and enter “STMT” in the
New clean renewable energy bond credit (code AQ). See dollar amount entry space for box 15. Attach a statement that
Form 8912. The amount of this credit (excluding any credits from contains the following information.
other partnerships, estates, and trusts) must also be reported as • The partner’s distributive share amount of the eligible credits
interest income on Schedule K, line 5. In addition, the amount of received from transferor(s) reported in column (f) of the
this credit must also be reported as a cash distribution on partnership's Form 3800, Part III or Part V (if applicable).
Schedule K, line 19a. • The name of the credit form of the applicable line of Part III or
Qualified energy conservation bond credit (code AR). See Part V (if applicable).
Form 8912. The amount of this credit (excluding any credits from • Source information for each eligible credit shown on Form
other partnerships, estates, and trusts) must also be reported as 3800, Part III or Part V (if applicable), including:
interest income on Schedule K, line 5. In addition, the amount of 1. The IRS-issued registration number for transfers in
this credit must also be reported as a cash distribution on column (b) of Part III or Part V, and
Schedule K, line 19a. 2. The transferor’s EIN in column (c) of Part III or Part V.
Qualified zone academy bond credit (code AS). See Form • If a partner’s distributive share includes an allocation of
8912. The amount of this credit (excluding any credits from other eligible credits purchased by a lower-tier pass-through entity and
partnerships, estates, and trusts) must also be reported as reported on Schedule K-1, you must provide the EIN of such
interest income on Schedule K, line 5. In addition, the amount of transferee partnership or S corporation and the source
this credit must also be reported as a cash distribution on information that was provided to you by such entity.
Schedule K, line 19a. See the Instructions for Form 3800 for additional details.

Qualified school construction bond credit (code AT). See Codes BD through BG. Reserved for future use.
Form 8912. The amount of this credit (excluding any credits from Other (code ZZ). Any other information the partners need to
other partnerships, estates, and trusts) must also be reported as prepare their tax returns.
interest income on Schedule K, line 5. In addition, the amount of Section 6418 transfers of credits under section 48. If the
this credit must also be reported as a cash distribution on partnership has made an election under section 6418 to transfer
Schedule K, line 19a. a portion of a general business credit determined under section
Build America bond credit (code AU). See Form 8912. The 48 to an unrelated transferee, use code ZZ to report to the
amount of this credit (excluding any credits from other partners their shares of the retained section 48 credit.
partnerships, estates, and trusts) must also be reported as Section 6418 transfers of credits under section 48C. If
interest income on Schedule K, line 5. In addition, the amount of the partnership has made an election under section 6418 to
this credit must also be reported as a cash distribution on transfer a portion of a general business credit determined under
Schedule K, line 19a. section 48C to an unrelated transferee, use code ZZ to report to
the partners their shares of the retained section 48C credit.
Credit for employer differential wage payments (code AV).
Section 6418 transfers of credits under section 48E. If
See Form 8932.
the partnership has made an election under section 6418 to
Carbon oxide sequestration credit (code AW). See Form transfer a portion of a general business credit determined under
8933, Part III, line 5. section 48E to an unrelated transferee, use code ZZ to report to
the partners their shares of the retained section 48E credit.

Instructions for Form 1065 (2024) 49

 If a portion of a section 48, 48C, or 48E credit had been For property placed in service before 1999, refigure
! transferred under section 6418, don’t use box 20, code depreciation for the AMT as follows (using the same convention
CAUTION E, to report the basis information for the partners’ shares used for the regular tax).
of the remaining credit(s). • For section 1250 property (generally, residential rental and
nonresidential real property), use the straight line method over
Schedule K-1. Enter in box 15 of Schedule K-1 each partner's 40 years.
distributive share of the credits listed above. See additional • For tangible property (other than section 1250 property)
Schedule K-1 reporting information provided in the instructions depreciated using the straight line method for the regular tax,
above. use the straight line method over the property's class life. Use 12
If the partnership has credits from more than one activity, years if the property has no class life.
identify on an attached statement to Schedule K-1 the amount of • For any other tangible property, use the 150% declining
each type of credit for each separate activity. See Passive balance method, switching to the straight line method the first tax
Activity Reporting Requirements, earlier. year it gives a larger deduction, over the property's AMT class
life. Use 12 years if the property has no class life.
International Transactions See Pub. 946 for a table of class lives.
Line 16. International Transactions TIP

If the partnership had items of international tax relevance, see

the instructions for Schedule K-2 (Form 1065) to determine if you For property (except section 1250 property) placed in service
need to attach Schedules K-2 and K-3. If you satisfy the after 1998, refigure depreciation for the AMT only for property
domestic filing exception to filing Schedule K-3, you must depreciated for the regular tax using the 200% declining balance
provide notification to the partner either through an attachment to method. For the AMT, use the 150% declining balance method,
the Schedule K-1, or separately prior to filing Form 1065. If you switching to the straight line method the first tax year it gives a
satisfy an exception to filing Schedule K-2, you may also attach a larger deduction, and the same convention and recovery period
statement to Form 1065 that states “Qualified for exception to used for the regular tax. For section 1250 property, refigure
filing Schedule K-2.” depreciation for the AMT using the straight line method, and the
same convention and recovery period used for regular tax.
Alternative Minimum Tax (AMT) Items
Figure the adjustment by subtracting the AMT deduction for
Lines 17a through 17f must be completed for all partners. depreciation from the regular tax deduction and enter the result
Enter items of income and deductions that are adjustments or on line 17a. If the AMT deduction is more than the regular tax
tax preference items for the AMT. See Form 6251, Alternative deduction, enter the difference as a negative amount.
Minimum Tax—Individuals; or Schedule I (Form 1041), Depreciation capitalized to inventory must also be refigured
Alternative Minimum Tax—Estates and Trusts, to determine the using the AMT rules. Include on this line the current year
amounts to enter and for other information. adjustment to income, if any, resulting from the difference.
Don't include as a tax preference item any qualified
expenditures to which an election under section 59(e) may apply. Line 17b. Adjusted Gain or Loss (Code B)
Instead, report these expenditures on Schedule K, line 13d(2).
Because these expenditures are subject to an election by each If the partnership disposed of any tangible property placed in
partner, the partnership can't figure the amount of any tax service after 1986 (or after July 31, 1986, if an election was
preference related to them. Instead, the partnership must pass made to use the General Depreciation System), or if it disposed
through to each partner in box 13, code J, of Schedule K-1 the of a certified pollution control facility placed in service after 1986,
information needed to figure the deduction. refigure the gain or loss from the disposition using the adjusted
basis for the AMT. The property's adjusted basis for the AMT is
Schedule K-1. Report each partner's distributive share of its cost or other basis minus all depreciation or amortization
amounts reported on lines 17a through 17f (concerning AMT) in deductions allowed or allowable for the AMT during the current
box 17 of Schedule K-1 using codes A through F, respectively. If tax year and previous tax years. Enter on this line the difference
the partnership is reporting items of income or deduction for oil, between the regular tax gain (loss) and the AMT gain (loss). If
gas, and geothermal properties, you may be required to identify the AMT gain is less than the regular tax gain, or the AMT loss is
these items on a statement attached to Schedule K-1 (see Oil, more than the regular tax loss, or there's an AMT loss and a
Gas, and Geothermal Properties Gross Income and Deductions, regular tax gain, enter the difference as a negative amount.
later, for details). Also see the requirement for an attached
statement in the instructions for line 17f. If any part of the adjustment is allocable to net short-term
capital gain (loss), net long-term capital gain (loss), or net
Line 17a. Post-1986 Depreciation Adjustment section 1231 gain (loss), attach a statement that identifies the
amount of the adjustment allocable to each type of gain or loss.
(Code A)
For a net long-term capital gain (loss), also identify the
Figure the adjustment for line 17a based only on tangible
amount of the adjustment that is collectibles (28%) gain (loss).
property placed in service after 1986 (and tangible property
placed in service after July 31, 1986, and before 1987 for which For a net section 1231 gain (loss), also identify the amount of
the partnership elected to use the General Depreciation adjustment that is unrecaptured section 1250 gain.
System). Don't make an adjustment for motion picture films,
videotapes, sound recordings, certain public utility property (as
defined in section 168(f)(2)), property depreciated under the Line 17c. Depletion (Other Than Oil and Gas)
unit-of-production method (or any other method not expressed in (Code C)
a term of years), qualified Indian reservation property, property
eligible for a special depreciation allowance, qualified Don't include any depletion on oil and gas wells. The partners
revitalization expenditures, or the section 179 expense must figure their oil and gas depletion deductions and
deduction. preference items separately under section 613A.

50 Instructions for Form 1065 (2024)

 Refigure the depletion deduction under section 611 for mines, • Long-term contracts entered into after February 28, 1986.
wells (other than oil and gas wells), and other natural deposits Except for certain home construction contracts, the taxable
for the AMT. Percentage depletion is limited to 50% of the income from these contracts must be figured using the
taxable income from the property as figured under section percentage of completion method of accounting for the AMT.
613(a), using only income and deductions for the AMT. Also, the • Losses from tax shelter farm activities. No loss from any tax
deduction is limited to the property's adjusted basis at the end of shelter farm activity is allowed for the AMT.
the year as figured for the AMT. Figure this limit separately for • Any information needed by certain corporate partners to figure
each property. When refiguring the property's adjusted basis, corporate AMT for tax years beginning after 2022, under section
take into account any AMT adjustments made this year or in 55.
previous years that affect basis (other than the current year's
Schedule K-1. If you're reporting each partner's distributive
depletion).
share of only one type of AMT item under code F, enter the code
with an asterisk (F*) and the dollar amount in the entry space in
Enter the difference between the regular tax and AMT
box 17 and attach a statement that shows the type of AMT item.
deduction. If the AMT deduction is greater, enter the difference
If you're reporting multiple types of AMT items under code F,
as a negative amount.
enter the code with an asterisk (F*) and enter “STMT” in the
entry space in box 17 and attach a statement that shows the
Oil, Gas, and Geothermal Properties—Gross dollar amount of each type of AMT item.
Income and Deductions
Other Information
Generally, the amounts to be entered on lines 17d and 17e are
only the income and deductions for oil, gas, and geothermal Line 18a. Tax-Exempt Interest Income
properties that are used to figure the partnership's ordinary
income (loss) (Form 1065, line 23).
Enter on line 18a tax-exempt interest income, including any
If there are any items of income or deductions for oil, gas, and exempt-interest dividends received from a mutual fund or other
geothermal properties included in the amounts that are required RIC.
to be passed through separately to the partners on Schedule K-1
(items not reported in box 1 of Schedule K-1), give each partner Line 18b. Other Tax-Exempt Income
a statement that shows, for the box in which the income or
deduction is included, the amount of income or deductions Enter on line 18b all income of the partnership exempt from tax
included in the total amount for that box. Don't include any of other than tax-exempt interest.
these direct pass-through amounts on line 17d or 17e.
Tax-exempt income from transfer election. Enter the total
Figure the amounts for lines 17d and 17e separately for oil consideration received by the transferor partnership as a result
and gas properties that aren't geothermal deposits and for all of a transfer election under section 6418. If the partnership is
properties that are geothermal deposits. allocated tax-exempt income from a pass-through entity (or
lower-tier pass-through entity) making a transfer election to
Give each partner a statement that shows the separate transfer its credits, include those amounts in code B as well.
amounts included in the computation of the amounts on lines Tax-exempt income from elective payment election. Enter
17d and 17e of Schedule K. the amount from Form 1065, page 1, line 29. This is the total
amount of credits determined by the partnership for which an
Line 17d. Oil, Gas, and Geothermal elective payment election is being made.
Properties—Gross Income (Code D) PPP loan forgiveness reporting. Report tax-exempt income
resulting from the forgiveness of a PPP loan on this line. Attach a
Enter the total amount of gross income (within the meaning of statement to Form 1065 for each tax year in which the
section 613(a)) from all oil, gas, and geothermal properties partnership is applying the provisions of Rev. Proc. 2021-48,
received or accrued during the tax year and included on page 1 section 3.01(1), (2), or (3). The statement should include the
of Form 1065. following information for each PPP loan.
• The partnership’s name, address, and EIN.
Line 17e. Oil, Gas, and Geothermal • Which section(s) of Rev. Proc. 2021-48 the partnership is
applying: 3.01(1), (2), and/or (3).
Properties—Deductions (Code E)
• The amount of tax-exempt income from forgiveness of the
PPP loan that the partnership is treating as received or accrued
Enter any deductions allowed for the AMT that are allocable to
during the year.
oil, gas, and geothermal properties.
• Whether forgiveness of the PPP loan has been granted as of
the date the return is filed.
Line 17f. Other AMT Items (Code F) A partnership that didn’t report tax-exempt income from a
PPP loan on its 2020 return may file an amended return or AAR
Attach a statement to Form 1065 and Schedule K-1 that shows to apply the applicable provisions of Rev. Proc. 2021-48. A
other items not shown on lines 17a through 17e that are partnership that reported tax-exempt income from a PPP loan on
adjustments or tax preference items or that the partner needs to its 2020 return, the timing of which corresponds to section
complete Form 6251 or Schedule I (Form 1041). See these 3.01(1), (2), or (3) of Rev. Proc. 2021-48, doesn't need to file an
forms and their instructions to determine the amount to enter. amended return or AAR solely to attach the statement that is
described in the preceding paragraph.
Other AMT items include the following.
• Accelerated depreciation of real property under pre-1987 As explained in section 3.03 of Rev. Proc. 2021-48, if a
rules. partnership treats tax-exempt income resulting from a PPP loan
• Accelerated depreciation of leased personal property under as received or accrued prior to when forgiveness of the PPP loan
pre-1987 rules. is granted, and the amount of forgiveness granted is less than

Instructions for Form 1065 (2024) 51

the amount of tax-exempt income that was previously treated as Line 19b. Distributions of Other Property
received or accrued, the partnership must make appropriate
required adjustments on an amended return or AAR, as
Enter on line 19b the total distributions to each partner of
applicable, for the tax year in which the partnership treated the
property not included on line 19a. In box 19 of Schedule K-1,
tax-exempt income as received or accrued. The partnership
distributions of section 737 property will be reported separately
should attach a statement to that amended return or AAR that
from other property. The codes used when reporting amounts
includes the following information.
from line 19b in box 19 of Schedule K-1 are provided in the
• The partnership’s name, address, and EIN. headings for the following categories.
• A statement that the partnership is making adjustments in
accordance with section 3.03 of Rev. Proc. 2021-48. Distributions subject to section 737 (code B). If a partner
• The tax year in which tax-exempt income was originally contributed section 704(c) built-in gain property within the last 7
reported, the amount of tax-exempt income that was originally years and the partnership made a distribution of property to that
reported in that tax year, and the amount of tax-exempt income partner other than the previously contributed built-in gain
being adjusted on the amended return or AAR, as applicable. property, attach a statement to the distributee partner's
Schedule K-1 that provides the following information.
Schedule K-1.
• The FMV of the distributed property (other than money).
Tax-exempt income from transfer election. Include the • The amount of money received in the distribution.
partner's distributive share of tax-exempt income allocated by • The net precontribution gain of the partner. This is the net gain
the transferor partnership related to proceeds received by the (if any) that would have been recognized by the distributee
partnership as a result of the partnership making a transfer partner under section 704(c)(1)(B) if all the following property
election to transfer its credits under section 6418. Also include had been distributed by the partnership to another partner. This
the partner's distributive share of allocations made to the property includes all property contributed by the distributee
transferor partnership from a pass-through entity for which it was partner during the 7 years prior to the distribution and that is still
a partner related to the pass-through entity (or lower-tier held by the partnership at the time of the distribution (see section
pass-through entity) making a transfer election to transfer its 737).
credits.
For more information, see Recognition of Precontribution
Tax-exempt income from elective payment election.
Gain on Certain Partnership Distributions, earlier.
Include the partner's distributive share of tax-exempt income as
a result of the partnership making an elective payment election Other property (code C). Include all distributions of property
under section 6417. Also include the partner's distributive share (other than money) not included on line 19a that aren't section
of allocations to the partnership from a pass-through entity (or 737 property. In figuring the amount of the distribution, use the
lower-tier pass-through entity) that made an elective payment adjusted basis of the property to the partnership immediately
election. before the distribution, taking into account any adjustments
under sections 732(d), 734(b), or 743(b), as applicable. In
Line 18c. Nondeductible Expenses addition, attach a statement showing the adjusted basis and
FMV of each property distributed.
Enter on line 18c nondeductible expenses paid or incurred by Schedule K-1. Report in box 19 each partner's distributive
the partnership. share of the amount of money or marketable securities each
partner received or was deemed to receive on line 19a using
Payments made by transferee partnerships to eligible code A. If a statement is attached, enter an asterisk after the
taxpayers for the purchase of eligible credits as a result of a code (A*) and “STMT” in the entry space, and attach the
transfer election under section 6418 are treated as required statement. For line 19b, report distributions subject to
nondeductible expenses and are reported on this line. Don't section 737 in box 19 using code B with an asterisk (B*) and
include separately stated deductions shown elsewhere on “STMT” in the entry space, and attach the required statement.
Schedules K and K-1, capital expenditures, or items the For distributions of other property (other than money), report
deduction for which is deferred to a later tax year. each partner's distributive share of the amount in box 19 using
Schedule K-1. Report in box 18 of Schedule K-1 each partner's code C with an asterisk (C*) and “STMT” in the entry space, and
distributive share of amounts reported on lines 18a, 18b, and attach the required statement. Use the partnership's basis in the
18c of Schedule K (concerning items affecting partners' bases) distributed property (other than money) immediately before the
using codes A through C, respectively. Attach a statement to distribution, taking into account any adjustments under sections
Schedule K-1 for the amounts included on line 18b that are 732(d), 734(b), or 743(b), as applicable.
exempt by reason of section 892, and describe the nature of the
income. Lines 20a and 20b. Investment Income and
Expenses (Codes A and B)
Line 19a. Distributions of Cash and Marketable
Securities (Code A) Enter on line 20a the investment income included on
Schedule K, lines 5, 6a, 7, and 11. Don't include other portfolio
If the amount on line 19a includes marketable securities treated gains or losses on this line.
as money, state separately on an attached statement to
Schedules K and K-1 (a) the partnership's adjusted basis of Investment income includes gross income from property held
those securities immediately before the distribution, and (b) the for investment, the excess of net gain attributable to the
FMV of those securities on the date of distribution (excluding the disposition of property held for investment over net capital gain
distributee partner's share of the gain on the securities from the disposition of property held for investment, any net
distributed to that partner). capital gain from the disposition of property held for investment
that each partner elects to include in investment income under
section 163(d)(4)(B)(iii), and any qualified dividend income that
the partner elects to include in investment income. Generally,
investment income and investment expenses don't include any

52 Instructions for Form 1065 (2024)

income or expenses from a passive activity. See Regulations This code and the partners’ distributive shares should
section 1.469-2(f)(10) for exceptions. ! not include any investment credits for which a transfer
CAUTION election was made by the partnership under section

Property subject to a net lease isn't treated as investment 6418. See Other (code ZZ) under Line 15f. Other Credits, earlier.
property because it's subject to the passive loss rules. Don't
reduce investment income by losses from passive activities. Recapture of low-income housing credit (codes F and G).
If recapture of part or all of the low-income housing credit is
Enter investment expenses on line 20b. Investment expenses required because (a) the prior year qualified basis of a building
are deductible expenses (other than interest) directly connected decreased, or (b) the partnership disposed of a building or part
with the production of investment income. See the instructions of its interest in a building, see Form 8611, Recapture of
for Form 4952 for more information. Low-Income Housing Credit. Complete Form 8611, lines 1
Schedule K-1. Report each partner's distributive share of through 7, to determine the amount of credit to recapture. Use
amounts reported on lines 20a and 20b (investment income and code F on Schedule K-1 to report recapture of the low-income
expenses) in box 20 of Schedule K-1 using codes A and B, housing credit from a section 42(j)(5) partnership. Use code G to
respectively. report recapture of any other low-income housing credit. See the
instructions for lines 15a and 15b, earlier, for more information.
If there are other items of investment income or expense
included in the amounts that are required to be passed through If a partner's ownership interest in a building decreased
separately to the partners on Schedule K-1, such as net TIP because of a transaction at the partner level, the
short-term capital gain or loss, net long-term capital gain or loss, partnership must provide the necessary information to
and other portfolio gains or losses, give each partner a the partner to enable the partner to figure the recapture.
statement identifying these amounts.
The disposal of a building or an interest therein will
! generate a credit recapture unless it's reasonably
Line 20c. Other Items and Amounts CAUTION expected that the building will continue to be operated

as a qualified low-income building for the remainder of the

Report the following information on a statement attached to Form
building's compliance period.
1065. On Schedule K-1, enter the appropriate code in box 20 for
each information item followed by an asterisk in the left-hand See Form 8586, Form 8611, and section 42 for more
column of the entry space (for example, C*). In the right-hand information.
column, enter “STMT.” The codes are provided in the headings
of the following information categories. Recapture of investment credit (code H). Complete and
attach Form 4255, Certain Credit Recapture, Excessive
Fuel tax credit information (code C). Report the number of Payments, and Penalties, when investment credit property is
gallons of each fuel sold or used during the tax year for a disposed of, or it no longer qualifies for the credit, before the end
nontaxable use qualifying for the credit for taxes paid on fuel, of the recapture period or the useful life applicable to the
type of use, and the applicable credit per gallon. See Form 4136, property. State the type of property at the top of Form 4255, and
Credit for Federal Tax Paid on Fuels, for details. complete Part II, lines 2, 3, 4, 10, and 11, whether or not any
Qualified rehabilitation expenditures (other than rental real partner is subject to recapture of the credit.
estate) (code D). Enter total qualified rehabilitation Attach to each Schedule K-1 a separate statement providing
expenditures from activities other than rental real estate the information the partnership is required to show on Form
activities. See the Instructions for Form 3468 for details on 4255, but list only the partner's distributive share of the cost of
qualified rehabilitation expenditures. the property subject to recapture. Also indicate the lines of Form
4255 on which the partners should report these amounts.
Note. Report qualified rehabilitation expenditures related to
rental real estate activities on Schedule K, line 15c. Recapture of other credits (code I). On an attached
statement to Schedule K-1, provide any information partners will
Schedule K-1. Report each partner's distributive share of
need to report recapture of credits (other than recapture of
qualified rehabilitation expenditures related to activities other
low-income housing and investment credits reported on
than rental real estate activities in box 20 of Schedule K-1 using
Schedule K-1 using codes F, G, and H). Examples of credits
code D. Attach a statement to Schedule K-1 that provides the
reported using code I when subject to recapture include the
information and the partner's distributive share of the amounts
following.
the partner will need to complete Form 3468, Part VII, lines 1d
through 1k. See the Instructions for Form 3468 for details. If the • The new markets credit. See Form 8874 and Form 8874-B,
Notice of Recapture Event for New Markets Credit, for details.
partnership has expenditures from more than one activity,
identify on a statement attached to Schedule K-1 the amount for • The credit for employer-provided childcare facilities and
services. See section 45F(d).
each separate activity. See Passive Activity Reporting
Requirements, earlier. • The alternative motor vehicle credit. See section 30B(h)(8).
• The alternative fuel vehicle refueling property credit. See
Basis of energy property (code E). See the Instructions for section 30C(e)(5).
Form 3468 for details on basis of energy property. In box 20 of • The clean vehicle credit. See section 30D(f)(5).
Schedule K-1, enter code E followed by an asterisk (E*) and
Look-back interest—completed long-term contracts (code
enter “STMT” in the entry space for the dollar amount. Attach a
J). If the partnership is closely held (defined in section 460(b)(4)
statement to Schedule K-1 that provides the information and the
(C)) and it entered into any long-term contracts after February
partner's distributive share of the amounts the partner will need
28, 1986, that are accounted for under either the percentage of
to figure the amounts to report on Form 3468, Part VI, lines 1a,
completion-capitalized cost method or the percentage of
3a, 3e, 5a, 5c, 5f, 5o, 7a, 7j, 9a, 9b, 11d, 11h, 13a, 15a, 17a,
completion method, it must attach a statement to Form 1065
17e, 19a, 21a, 23a, 23e, 25a, 25d, 25g, 25j, and 28a. See the
showing the information required in items (a) and (b) of Form
Instructions for Form 3468 for details.
8697, Part II, lines 1 and 3. It must also report the amounts for
Part II, lines 1 and 3, to its partners. See the Instructions for Form
8697 for more information.

Instructions for Form 1065 (2024) 53

Look-back interest—income forecast method (code K). If other lines of Schedule K-1 by line number. Don't include EBIE
the partnership is closely held (defined in section 460(b)(4)(C)) reported in box 13, code K.
and it depreciated certain property placed in service after Section 453(l)(3) information (code O). Supply any
September 13, 1995, under the income forecast method, it must information needed by a partner to figure the interest due under
attach to Form 1065 the information specified in the instructions section 453(l)(3). If the partnership elected to report the
for Form 8866, line 2, for the 3rd and 10th tax years beginning dispositions of certain timeshares and residential lots on the
after the tax year the property was placed in service. It must also installment method, each partner's tax liability must be increased
report the line 2 amounts to its partners. See the Instructions for by the partner's distributive share of the interest on tax
Form 8866 for more details. attributable to the installment payments received during the tax
Dispositions of property with section 179 deductions year.
(code L). This represents gain or loss on the sale, exchange, or Section 453A(c) information (code P). Supply any
other disposition of property for which a section 179 deduction information needed by a partner to figure the interest due under
has been passed through to partners. The partnership must section 453A(c); see Pub. 537, Installment Sales, for additional
provide all the following information related to such dispositions information. This information must include the following from
(see the instructions for page 1, line 6, earlier). each Form 6252 where the partner’s share of the selling price,
• Description of the property. including mortgages and other debts, is greater than $150,000.
• Date the property was acquired and placed in service. • Description of property.
• Date of the sale or other disposition of the property. • Date acquired.
• The partner's share of the gross sales price or amount • Date property sold.
realized.
• The partner's share of the cost or other basis plus expense of • Selling price, including mortgages and other debts, not
including interest, whether stated or unstated.
sale (reduced as explained in the instructions for Form 4797,
line 21).
• Mortgages, debts, and other liabilities the buyer assumed or
took the property subject to.
• The partner's share of the depreciation allowed or allowable, • Gross profit.
determined as described in the instructions for Form 4797,
line 22, but excluding the section 179 deduction.
• Contract price.
• The partner's share of the section 179 deduction (if any) • Gross profit percentage.
passed through for the property and the partnership's tax year(s)
• Current year payments and deemed payments received
during the year, not including interest whether stated or unstated.
in which the amount was passed through.
• If the disposition is due to a casualty or theft, a statement • Origination year payments and deemed payments received
during the year, not including interest whether stated or unstated.
indicating so, and any additional information needed by the
partner.
• Prior year payments, not including interest whether stated or
unstated.
• For an installment sale, any information the partner needs to • Installment sale income.
complete Form 6252. The partnership must also separately
report the partner's share of all payments received for the
• Character of the income—capital or ordinary.
property in future tax years. (Installment payments received for See section 453A(c) for information on how to compute the
sales made in prior tax years should be reported in the same interest charge on the deferred tax liability. The section 453A
manner used in prior tax years.) See the instructions for Form interest charge is reported on the Other taxes line of your tax
6252 for details. returns. See Interest on Deferred Tax in Pub. 537 for additional
details on how to compute the section 453A(c) interest.
Recapture of section 179 deduction (code M). This amount
represents recapture of the section 179 deduction if business Section 1260(b) information (code Q). Supply any
use of the property dropped to 50% or less before the end of the information needed by a partner to figure the interest due under
recapture period. If the business use of any property (placed in section 1260(b). If the partnership had gain from certain
service after 1986) for which a section 179 deduction was constructive ownership transactions, each partner's tax liability
passed through to partners dropped to 50% or less (for a reason must be increased by the partner's distributive share of interest
other than disposition), the partnership must provide all the due on any deferral of gain recognition. See section 1260(b) for
following information. details, including how to figure the interest.
• The partner's distributive share of the original basis and Interest allocable to production expenditures (code R).
depreciation allowed or allowable (not including the section 179 Supply any information needed by a partner to properly
deduction). capitalize interest as required by section 263A(f). See Section
• The partner's distributive share of the section 179 deduction 263A uniform capitalization rules, earlier, for more information.
(if any) passed through for the property and the partnership's tax
year(s) in which the amount was passed through. CCF nonqualified withdrawal (code S). Report nonqualified
withdrawals by the partnership from a CCF to partners. See Pub.
See Regulations section 1.179-1(e) for details.
595.
Business interest expense (BIE) (code N). The partnership
Depletion information—oil and gas (code T). Report gross
must determine the amount of deductible BIE included on other
income and other information relating to oil and gas well
lines of the Schedule K. Attach a statement to Schedule K
properties to partners to allow them to figure the depletion
providing the allocation of the deductible BIE included on other
deduction for oil and gas well properties. Allocate to each
lines of Schedule K. EBIE isn't deductible BIE; therefore, don't
partner a proportionate share of the adjusted basis of each
include it in this reported amount for tax years beginning after
partnership oil or gas property. See section 613A(c)(7)(D) for
November 12, 2020.
details.
Schedule K-1. For tax years beginning after November 12,
2020, enter the partner's amount of deductible BIE for inclusion The partnership can't deduct depletion on oil and gas wells.
in the separate loss class for computing any basis limitation Each partner must determine the allowable amount to report on
(defined in section 704(d) and Regulations section their return. See 2022 Pub. 535 for more information.
1.163(j)-6(h)). Also attach a statement to Schedule K-1 providing Section 743(b) basis adjustment (code U). Report the total
the allocation of the BIE already deducted by the partnership on section 743(b) adjustment net of any cost recovery as a single

54 Instructions for Form 1065 (2024)

amount for all asset categories for each partner. In addition, lends $200 to the partnership, and a person related to the
attach a statement to the Schedule K-1 for this code showing the partner guarantees payment of the entire amount of PS Liability
amount of each remaining section 743(b) basis, net of cost 2 of $1,000. The partnership enters $1,700 as the ending
recovery by asset category. A reasonable grouping by asset balance of the partner's share of recourse liabilities in item K1 of
category may be used, but such grouping shouldn't be less the Schedule K-1 for tax Year 1. For tax Year 1, the partnership
detailed than the asset categories listed on the Form 1065, would enter $1,500 in box 20 under code X as the aggregate
Schedule L, balance sheet. See [Link]/forms-pubs/ ending balance of the partner's or related person's payment
clarifications-for-disregarded-entity-reporting-and-section-743b- obligations. On the attached statement, the partnership would
reporting for more information. separately identify each of the partner's or related person's
payment obligations (for example, $500 with respect to the
Unrelated business taxable income (UBTI) (code V). Report
partner's guarantee of PS Liability 1 and $1,000 with respect to
any information a partner that is a tax-exempt organization may
the related person's guarantee of PS Liability 2).
need to figure its share of UBTI under section 512(a)(1) (but
excluding any modifications required by paragraphs (8) through Example 2. Assume the same facts as in Example 1, except
(15) of section 512(b)). Partners are required to notify the that, instead of loaning $200 to the partnership, the partner has a
partnership of their tax-exempt status. See Form 990-T, Exempt $100 DRO and a $20 negative tax capital account and the
Organization Business Income Tax Return; and Pub. 598, Tax on partnership enters $1,520 as the ending balance of the partner's
Unrelated Business Income of Exempt Organizations, for more share of recourse liabilities in item K1 of the Schedule K-1 for tax
information. Year 1. For tax Year 1, the partnership would enter $1,520 in
If the partner is an IRA, include the IRA partner's unique EIN box 20 under code X as the aggregate ending balance of the
on line 20, code AR. partner's or related person's payment obligations. On the
attached statement, the partnership would separately identify
Note. For tax year 2024, PTPs aren’t required to include the IRA each of the partner's or related person's payment obligations (for
partner’s unique EIN on line 20, code AR. example, $500 with respect to the partner's guarantee of PS
Liability 1, $1,000 with respect to the related person's guarantee
Precontribution gain (loss) (code W). If the partnership of PS Liability 2, and $20 with respect to the partner's DRO).
distributed any section 704(c) property to any partner other than
the contributing partner, and the date of the distribution was Net investment income (code Y). Use code Y to report any
within 7 years of the date the section 704(c) property was information that may be relevant for partners to figure their NIIT
contributed to the partnership, the distribution must be treated as when the information isn't otherwise identifiable elsewhere on
if it were a sale by the contributing partner taking place on the Schedule K-1. Attach a statement that shows a description and
date of the distribution. Section 704(c) property is property that dollar amount of each relevant item.
had an FMV that was either greater or less than the contributing Examples of items reported using code Y may include the
partner's adjusted basis at the time the property was contributed following.
to the partnership. See Dispositions of Contributed Property, • Net rental real estate income reported on Form 1065,
earlier, for more information. If the partnership made such a Schedule K, line 2, and other net rental income reported on
distribution during its tax year, attach a statement to the Form 1065, Schedule K, line 3c, derived from a section 212
contributing partner's Schedule K-1 that provides the following for-profit activity (and not from a section 162 trade or business).
information. • Gains and losses from dispositions of assets attributable to a
• The amount of the gain or loss that would have been allocated section 212 for-profit activity (and not from a section 162 trade or
to the contributing partner if the partnership had sold the section business).
704(c) property at its FMV at the time of the distribution. See • Gain reported on the installment sale basis (or attributable to
section 704(c)(1)(B) for details. a private annuity) that is attributable to the disposition of property
• The character of the gain or loss that would have resulted if held in a trade or business.
the partnership had sold the section 704(c) property to the • Gain or loss from the disposition of a partnership interest, but
distributee partner. only if such partnership was engaged, directly or indirectly, in
Enter code W in box 20 of Schedule K-1 with an asterisk (W*) one or more trades or businesses, and at least one of those
and enter “STMT,” and attach the required statement. trades or businesses wasn't trading in financial instruments or
commodities.
Payment obligations including guarantees and deficit re- • The partner’s distributive share of interest income, or interest
storation obligations (DROs) (code X). If the box in item K3 expense, which is attributable to a loan between the partnership
is checked, in box 20 of Schedule K-1, enter code X followed by and the partner (self-charged interest).
an asterisk (X*) and enter “STMT” in the entry for dollar amount. • If the partnership received a Schedule K-1 (Form 1065), the
On the attached statement, provide the aggregate ending detail and amounts reported to the partnership in box 20 using
balance of the partner's or related person's payment obligations code Y.
and identify the ending balance of each payment obligation that • If the partnership received a Schedule K-1 (Form 1041), the
is included in the aggregate amount. For purposes of box 20, amount of the adjustment reported.
code X, a payment obligation is defined as an obligation under • Guaranteed payments (reported on Form 1065, Schedule K,
Regulations section 1.752-2(b)(1) that is recognized under line 4b) unrelated to services, such as for the use of capital or
Regulations sections 1.752-2(b)(3)(i)(A) and (B) (such as a attributable to section 736(a)(2) payments for unrealized
recognized guarantee or an obligation to restore a deficit capital receivables or goodwill.
account upon liquidation), and a related person is defined as a • In the case of a common trust fund, any items of income or
related person as defined in Regulations section 1.752-4(b). loss that may be taken into account in figuring the participant’s
The following examples assume that the described net investment income (other than qualified dividends, and
partnership liabilities are properly allocable to the partner in the short-term and long-term capital gains).
examples under the rules of section 752. • Gain from a trade or business of trading in securities or
commodities for which the partnership has elected under section
Example 1. In Year 1, a partnership borrows $1,000 (PS
475(f) to mark to market the securities, the commodities, or both.
Liability 1) from Bank 1 and $1,000 (PS Liability 2) from Bank 2.
A partner guarantees payment of up to $500 of PS Liability 1 if In addition, Regulations section 1.1411-10 provides special
any amount of the full $1,000 isn't recovered by Bank 1 and rules for stock of CFCs and PFICs owned by the partnership. If

Instructions for Form 1065 (2024) 55

the partnership directly or indirectly owns stock of a CFC or • Excess distributions made by a PFIC for which a partner is
PFIC, then additional reporting may be required under code Y. subject to section 1291.
CFCs and QEFs. In the case of stock of CFCs and QEFs • Gains derived from the disposition of stock of a PFIC for which
directly or indirectly owned by the partnership, the partnership a partner is subject to section 1291.
must provide the name and EIN (if one has been issued) for Section 199A information (code Z). The qualified business
each CFC and QEF the stock of which is owned by the income (QBI) deduction may be taken by eligible taxpayers,
partnership for which an election under Regulations section including individuals and some trusts and estates. The
1.1411-10(g) isn’t in effect and for which the partnership isn't deduction is determined at the partner level. Partnerships are
engaged in a trade or business described in section 1411(c)(2). required to report information necessary for their partners to
For each of these entities, the partnership must provide the figure the deduction. Use code Z with an asterisk (Z*) on each
following information on an entity-by-entity basis (to the extent partner’s Schedule K-1 and enter “STMT” in the entry space to
such information isn't otherwise identifiable elsewhere on indicate that the information is provided on an attached
Schedule K-3). statement that separately identifies the partner’s distributive
• Section 951(a) inclusions. share of:
• Section 1293(a)(1)(A) inclusions. • Qualified items of income, gain, deduction, and loss;
• Section 1293(a)(1)(B) inclusions. • W-2 wages;
• Section 959(d) distributions subject to section 1411. • Unadjusted basis immediately after acquisition (UBIA) of
• Section 1293(c) distributions subject to section 1411. qualified property;
• Amount of gain or loss derived from dispositions of the stock • Qualified PTP items; and
of CFCs and QEFs that is taken into account for section 1411 • Qualified REIT dividends.
purposes.
• Amounts that are derived from the disposition of the stock of The partnership must make an initial determination of which
CFCs and QEFs and included in income as dividends under items are qualified items of income, gain, deduction, and loss at
section 1248 for section 1411 purposes. its level and report to each partner its distributive share of all
items that may be qualified items at the partner level. These
In the case of stock of CFCs and QEFs directly or indirectly items must be separately stated where necessary for the partner
owned by the partnership for which an election under to figure the deduction. See Determining the partnership’s QBI or
Regulations section 1.1411-10(g) is in effect, the partnership qualified PTP items, later. The partner must then determine
must provide the following information (to the extent such whether each item is includible in QBI.
information isn't otherwise identifiable elsewhere on
Schedule K-3) on either an aggregate basis or an entity-by-entity In addition, the partnership must also report whether any of its
basis. trades or businesses are specified service trades or businesses
• Section 951(a) inclusions. (SSTBs) and identify on the statement any trades or businesses
• Section 1293(a)(1)(A) inclusions. that are aggregated. The partnership must also report all QBI
• Section 1293(a)(1)(B) inclusions. information reported to it by any entity in which the partnership
has an ownership interest.
In the case of stock of CFCs and QEFs directly or indirectly
owned by the partnership with respect to which the partnership Note. The partnership must report each partner’s share of
is engaged in a trade or business described in section 1411(c) qualified items of income, gain, deduction, and loss from a PTP
(2), the partnership must provide the following information (to the so that partners can determine their qualified PTP income.
extent such information isn't otherwise identifiable elsewhere on However, the W-2 wages and UBIA of qualified property from the
Schedule K-3) on either an aggregate or an entity-by-entity PTP shouldn't be reported because partners can't use that
basis, or the partnership may aggregate this information with information in figuring their QBI deduction.
other income derived by the partnership that is net investment
income under section 1411(c)(1)(A)(ii). Partnerships should use Statement A—QBI Pass-Through
Entity Reporting, later, or a substantially similar statement, to
• Section 951(a) inclusions. report information for each partner’s distributive share from each
• Section 1293(a)(1)(A) inclusions. trade or business, including QBI items, W-2 wages, UBIA of
• Section 1293(a)(1)(B) inclusions. qualified property, qualified PTP items, and qualified REIT
Section 1296 mark-to-market PFICs. In the case of stock of
dividends by attaching the completed statement(s) to each
PFICs directly or indirectly owned by the partnership for which an
partner’s Schedule K-1. The partnership should also use
election under section 1296 is in effect, the partnership must
Statement A to report each partner’s distributive share of QBI
provide the following information (to the extent such information
items, W-2 wages, UBIA of qualified property, qualified PTP
isn't otherwise identifiable elsewhere on Schedule K-3) on either
items, and qualified REIT dividends reported to the partnership
an aggregate basis or an entity-by-entity basis (except as
by another entity.
provided below).
• Amounts included in income under section 1296(a)(1). Partnerships should use Statement B—QBI Pass-Through
• Amounts deducted from income under section 1296(a)(2). Entity Aggregation Election(s), later, or a substantially similar
statement, to report aggregated trades or businesses and
In the case of PFIC stock owned directly or indirectly by the
provide supporting information to partners on each
partnership for which an election under section 1296 is in effect
Schedule K-1.
and with respect to which the partnership is engaged in a trade
or business described in section 1411(c)(2), the partnership may Partnerships should use Statement C—QBI Pass-Through
aggregate this information with other income derived by the Entity Reporting—Patrons of Specified Agricultural and
partnership that is net investment income under section 1411(c) Horticultural Cooperatives, later, or a substantially similar
(1)(A)(ii). statement, to report the distributive share of QBI and W-2 wages
Section 1291 funds. In the case of stock of PFICs directly or allocable to qualified payments from a specified agricultural or
indirectly owned by the partnership with respect to which direct horticultural cooperative for each trade or business. This
or indirect partners are subject to section 1291, the partnership statement should also be used to report each partner’s share of
must provide the following information (to the extent such section 199A(g) deduction reported to the partnership by the
information isn't otherwise identifiable elsewhere on specified cooperative.
Schedule K-3) on an entity-by-entity basis. Determining the partnership’s qualified trades or
businesses. The partnership’s qualified trades or businesses

56 Instructions for Form 1065 (2024)

include its section 162 trades or businesses, except for SSTBs, b. They share facilities or share significant centralized
or the trade or business of providing services as an employee. A business elements, such as personnel, accounting, legal,
section 162 trade or business generally includes any activity if manufacturing, purchasing, human resources, or information
the partnership’s primary purpose for engaging in the activity is technology resources.
for income or profit and the partnership is involved in the activity c. They’re operated in coordination with, or reliance on, one
with continuity and regularity. For more information on what or more of the businesses in the aggregated group.
qualifies as a trade or business for purposes of section 199A,
see the Instructions for Form 8995, Qualified Business Income If the partnership chooses to aggregate multiple trades or
Deduction Simplified Computation; or the Instructions for Form businesses, it must report the aggregation on Statement B, or a
8995-A, Qualified Business Income Deduction. substantially similar statement, and attach it to each
Rental real estate. Rental real estate may constitute a trade Schedule K-1. The statement must provide the information
or business for purposes of the QBI deduction if the rental real necessary to identify each separate trade or business included
estate: in each aggregation, a description of the aggregated trades or
• Rises to the level of a trade or business under section 162, businesses, and an explanation of the factors met that allow the
• Satisfies the requirements for the rental real estate safe aggregation in accordance with Regulations section 1.199A-4.
harbor in Rev. Proc. 2019-38, or The aggregation statement must be completed each year to
• Meets the self-rental exception (that is, the rental or licensing show the partnership's trade or business aggregations. Failure to
of property to a commonly controlled trade or business disclose the aggregations may cause them to be disaggregated.
conducted by an individual or relevant pass-through entity) The partnership's aggregations must be reported consistently
described in Regulations section 1.199A-1(b)(14). for all subsequent years, unless there's a change in facts and
The determination of whether rental real estate constitutes a circumstances that changes or disqualifies the aggregation. The
trade or business for purposes of the QBI deduction is made by partnership must provide a written explanation for any changes
the partnership. The partnership must first make this to prior year aggregations that describes the change in facts and
determination and then only include the distributive share of circumstances.
rental real estate items of income, gain, loss, and deduction from If the partnership directly or indirectly owns an interest in
a trade or business on the statement provided to partners. another relevant pass-through entity (RPE) that aggregates
Rental real estate that doesn't meet any of the three conditions multiple trades or businesses, it must attach a copy of the RPE’s
noted above doesn't constitute a trade or business for purposes aggregation to each Schedule K-1. The partnership can't break
of the QBI deduction and must not be included in the QBI apart the aggregation of another RPE, but it may add trades or
information provided to partners. businesses to the aggregation, assuming the requirements
SSTBs excluded from qualified trades or businesses. above are satisfied.
SSTBs are generally excluded from the definition of a qualified Determining the partnership’s QBI or qualified PTP
trade or business. An SSTB is any trade or business providing items. The partnership’s items of QBI include qualified items of
services in the field of health, law, accounting, actuarial science, income, gain, deduction, and loss from the partnership’s trades
performing arts, consulting, athletics, financial services, or businesses that are effectively connected with the conduct of
brokerage services, investing and investment management, a trade or business within the United States. This may include,
trading or dealing in securities, partnership interests, or but isn't limited to, items such as ordinary business income or
commodities, or any other trade or business where the principal losses, section 1231 gains or (losses), section 179 deductions,
asset is the reputation or skill of one or more of its employees or and interest from debt-financed distributions.
owners. The term “any trade or business where the principal QBI may also include rental income/losses or royalty income,
asset is the reputation or skill of one or more of its employees or if the activity rises to the level of a trade or business; and
owners” means any trade or business that consists of (a) a trade gambling gains or losses, but only if the partnership is engaged
or business in which a person receives fees, compensation, or in the trade or business of gambling. Whether an activity rises to
other income from endorsing products or services; (b) a trade or the level of a trade or business must be determined at the entity
business in which a person licenses or receives fees, level and, once made, is binding on partners.
compensation, or other income for the use of an individual’s
image, likeness, name, signature, voice, or trademark, or any Qualified PTP items include the partnership’s share of
other symbols associated with the individual’s identity; or (c) qualified items of income, gain, deduction, and loss from an
receiving fees, compensation, or other income for appearing at interest in a PTP and may also include gain or loss recognized
an event or on radio, television, or another media format. on the disposition of the partner’s partnership interest that isn't
treated as a capital gain or loss. If the reporting partnership is
Partnerships must separately report QBI information for all itself a PTP, the PTP should report all qualified items of income,
trades or businesses engaged in by the partnership, including gain, deduction, and loss separately for each trade or business
SSTBs, but must identify which trades or businesses are SSTBs. engaged in by the PTP.
Aggregation of trades or businesses. A partnership
engaged in more than one trade or business may choose to QBI and qualified PTP items don’t include the following.
aggregate multiple trades or businesses into a single trade or • Items that aren’t properly includible in income.
business for purposes of section 199A if it meets the following • Items that are treated as capital gain or loss under any
requirements. provision of the Code.
• Dividends or dividend equivalents, including qualified REIT
1. The same person, or group of persons, either directly or dividends.
through attribution, owns 50% or more of each trade or business • Interest income (unless received in connection with the trade
for a majority of the tax year, including the last day of the tax or business).
year, and all trades or businesses use the same tax year-end. • Wage income.
2. None of the trades or businesses are SSTBs. • Income that isn't effectively connected with the conduct of
3. The trades or businesses to be aggregated meet at least business within the United States (go to [Link]/ECI for more
two of the following three factors. information).
• Commodities transactions, or foreign currency gains or losses
a. They provide products, property, or services that are the described in section 954(c)(1)(C) or (D).
same or that are customarily offered together.

Instructions for Form 1065 (2024) 57

• Income, loss, or deductions from notional principal contracts • Payments described in section 707(a) received by the entity
under section 954(c)(1)(F). for services rendered to a partnership.
• Annuities (unless received in connection with the trade or QBI flowchart. Partnerships may use this flowchart to
business). determine if an item of income, gain, deduction, or loss is
• Guaranteed payments described in section 707(c) received includible in QBI reportable to partners.
by the entity for services rendered to a partnership.

Flowchart To Help Determine if Items Are Qualified Business Income

Questions Yes No
1. Is the item effectively connected with the conduct of a trade or business within the United States? Continue to next question. Stop. This item isn't QBI.
2. Is the item attributable to a trade or business (this may include section 1231 gain/(loss), section 179 Continue to next question. Stop. This item isn't QBI.
deductions, interest from debt-financed distributions, etc.)? Examples of an item not considered
attributable to the trade or business at the entity level include gambling income/(loss) where the entity
isn't engaged in the trade or business of gambling, income/(loss) from vacation properties when the
entity isn't in that trade or business, activities not engaged in for profit, etc.
3. Is the item treated as a capital gain or loss under any provision of the Code or is it a dividend or Stop. This item isn't QBI. Continue to next question.
dividend equivalent?
4. Is the item interest income other than interest income properly allocable to a trade or business? Stop. This item isn't QBI. Continue to next question.
(Note that interest income attributable to an investment of working capital, reserves, or similar accounts
isn't properly allocable to a trade or business.)
5. Is the item an annuity, other than an annuity received in connection with the trade or business? Stop. This item isn't QBI. Continue to next question.
6. Is the item gain or loss from a commodities transaction or foreign currency gain or loss described in Stop. This item isn't QBI. Continue to next question.
section 954(c)(1)(C) or (D)?
7. Is the item gain or loss from a notional principal contract under section 954(c)(1)(F)? Stop. This item isn't QBI. Continue to next question.
8. Is the item of income or loss from a qualified PTP? This item is a qualified PTP This item is QBI. Report this
item. Report this item as item as QBI subject to
qualified PTP income or partner-specific
loss, subject to determinations.
partner-specific
determinations, and
check the PTP box.

Specific instructions for Statement A—QBI Pass-Through qualified property properly allocable to QBI for each qualified
Entity Reporting. trade or business and report the distributive share to each
QBI or qualified PTP items. The partnership (including partner on Statement A, or a substantially similar statement,
PTPs) must first determine if it's engaged in one or more trades attached to Schedule K-1. This includes the pro rata share of
or businesses. It must then determine if any of its trades or W-2 wages and UBIA of qualified property reported to the
businesses are SSTBs. It must also determine whether it has partnership from any qualified trades or businesses of an RPE
qualified PTP items from an interest in a PTP. It must indicate the the partnership owns directly or indirectly. However, partnerships
status in the appropriate checkboxes for each trade or business that own a direct or indirect interest in a PTP may not include any
(or aggregated trade or business) reported. amounts for W-2 wages or UBIA of qualified property from the
PTP, as the W-2 wages and UBIA of qualified property from a
Note. SSTBs and PTPs can't be aggregated with any other PTP aren't allowed in figuring the W-2 wage and UBIA
trade or business. So, if the Aggregation box is checked, the limitations.
SSTB and PTP boxes for that specific aggregated trade or The W-2 wages are amounts paid to employees described in
business shouldn't be checked. sections 6051(a)(3) and (8). If the partnership conducts more
Next, the partnership must report to each partner their than one trade or business, it must allocate the W-2 wages
distributive share of all items that are QBI or qualified PTP items among its trades or businesses. See Rev. Proc. 2019-11,
for each trade or business the partnership owns directly or 2019-09 I.R.B. 742, for more information.
indirectly. Use the QBI flowchart above to determine if an item is The unadjusted basis of qualified property is figured by
reportable as a QBI item or qualified PTP item subject to adding the unadjusted basis of all qualified assets immediately
partner-specific determinations. after acquisition. Qualified property includes all tangible property
The descriptions on the statement generally match the subject to depreciation under section 167, for which the
descriptions reported on Schedule K-1. So, the amounts should depreciable period hasn’t ended, that is held and used by the
reflect each trade’s or business’s portion of the qualified items of trade or business during the tax year and held on the last day of
income, gain, deduction, or loss reported in the applicable box of the tax year. The depreciable period ends on the later of 10
the partner’s Schedule K-1. For example, the amount reported years after the property is placed in service or the last day of the
on the “Ordinary business income (loss)” line of this statement full year for the applicable recovery period under section 168.
should reflect the attributable portion of qualified items of Qualified REIT dividends. The partnership must report the
income, gain, deduction, and loss for each trade or business distributive share of any qualified REIT dividends to each partner
included in the “Ordinary business income (loss)” reported in on Statement A, or a substantially similar statement, attached to
box 1 of the partner’s Schedule K-1. Each item included under Schedule K-1. Qualified REIT dividends don’t have to be
“Other income (loss)” and “Other deductions” must be stated separately reported by trades or businesses and can be
separately, identifying the nature and amount of each item. reported as a single amount to partners. Qualified REIT
W-2 wages and UBIA of qualified property. The dividends include any dividend the partnership receives on REIT
partnership must determine the W-2 wages and UBIA of stock held for more than 45 days (taking into account the

58 Instructions for Form 1065 (2024)

principles of sections 246(c)(3) and (4)) during the 91-day period aggregate amount of qualified REIT dividends, fiscal year-end
beginning on the date that is 45 days before the date on which partnerships include all items from the tax (fiscal) year.
such stock becomes ex-dividend with respect to such dividend, For purposes of determining W-2 wages, fiscal year-end
for which the payment isn't obligated to someone else, isn't a partnerships include amounts paid to employees under sections
capital gain dividend under section 857(b)(3), and isn't a 6051(a)(3) and (8) for the calendar year ended with or within the
qualified dividend under section 1(h)(11), plus any section 199A partnership’s tax year. If the partnership conducts more than one
dividends received from a RIC that are permitted to be treated as trade or business, it must allocate W-2 wages among its trades
qualified REIT dividends under Regulations section 1.199A-3(d). or businesses. See Rev. Proc. 2019-11 for more information.
Fiscal year partnerships. For purposes of determining the
QBI or qualified PTP items, UBIA of qualified property, and the

Statement A—QBI Pass-Through Entity Reporting

Partnership’s name: Partnership’s EIN:
Partner’s name: Partner’s identifying number:

Trade or Business 1 Trade or Business 2 Trade or Business 3

Partner’s share of: PTP PTP PTP

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

Rental income (loss) . . . . . . . . . . . . . . . . . . . . .

Royalty income (loss) . . . . . . . . . . . . . . . . . . . .

Section 1231 gain (loss) . . . . . . . . . . . . . . . . . . .

Other income (loss) . . . . . . . . . . . . . . . . . . . . .

Section 179 deduction . . . . . . . . . . . . . . . . . . . .

Other deductions . . . . . . . . . . . . . . . . . . . . . . .

W-2 wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

UBIA of qualified property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Qualified REIT dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specific instructions for Statement B—QBI Pass-Through The partnership’s aggregations must be reported consistently for
Entity Aggregation Election(s). If the partnership elects to all subsequent years, unless there's a change in facts and
aggregate more than one trade or business that meets all the circumstances that changes or disqualifies the aggregation. The
requirements to aggregate, the partnership must report the partnership must provide a written explanation for any changes
aggregation to partners on Statement B, or a substantially similar to prior year aggregations that describes the change in facts and
statement, and attach it to each Schedule K-1. The partnership circumstances.
must indicate trades or businesses that were aggregated by If the partnership holds a direct or indirect interest in an RPE
checking the appropriate box on Statement A for each that aggregates multiple trades or businesses, the partnership
aggregated trade or business. The partnership must also provide must also include a copy of the RPE’s aggregations with each
a description of the aggregated trade or business and an partner’s Schedule K-1. The partnership can't break apart the
explanation of the factors met that allow the aggregation. aggregation of another RPE, but it may add trades or businesses
The aggregation statement must be completed each year to to the aggregation, assuming the aggregation requirements are
show the partnership’s trade or business aggregations. Failure to satisfied.
disclose the aggregations may cause them to be disaggregated.

Instructions for Form 1065 (2024) 59

 Statement B—QBI Pass-Through Entity Aggregation Election(s)
Partnership’s name: Partnership’s EIN:
Trade or business aggregation 1*
Provide a description of the aggregated trades or businesses and an explanation of the factors met that allow the aggregation in accordance with
Regulations section 1.199A-4. In addition, if the partnership holds a direct or indirect interest in a relevant pass-through entity (RPE) that aggregates multiple
trades or businesses, attach a copy of the RPE's aggregations.

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

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

Specific instructions for Statement C—QBI Pass-Through QBI items and W-2 wages allocable to qualified payments
Entity Reporting—Patrons of Specified Agricultural and include QBI items included on Statement A that are allocable to
Horticultural Cooperatives. the qualified payments reported to the partnership on Form
QBI items and W-2 wages allocable to qualified 1099-PATR from the cooperative.
payments. If the partnership is a patron of a specified Section 199A(g) deduction. The partnership must report to
agricultural or horticultural cooperative, the partnership must its partners their share of any section 199A(g) deduction passed
provide the share of QBI items and W-2 wages allocable to through from the cooperative, as reported on Form 1099-PATR.
qualified payments from each trade or business to each of its Section 199A(g) deductions don't have to be reported separately
partners on Statement C, or a substantially similar statement, by trades or businesses and can be reported as a single amount
and attach it to each Schedule K-1 so each partner can figure to partners.
their patron reduction under section 199A(b)(7).

Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural

Cooperatives
Partnership’s name: Partnership’s EIN:
Partner’s name: Partner’s identifying number:

Trade or Business Trade or Business Trade or Business

Partner’s share of: PTP PTP PTP

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

Rental income (loss) . . . . . . . . . . . . . . . . . . . . . .

Royalty income (loss) . . . . . . . . . . . . . . . . . . . . .

Section 1231 gain (loss) . . . . . . . . . . . . . . . . . . . .

Other income (loss) . . . . . . . . . . . . . . . . . . . . . .

Section 179 deduction . . . . . . . . . . . . . . . . . . . . .

Other deductions . . . . . . . . . . . . . . . . . . . . . . . .

W-2 wages allocable to qualified payments . . . . . . . . . . . . . . . . . . . .

Section 199A(g) deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Section 704(c) information (code AA). For partnerships other Example 1—single section 704(c) allocation. Partnership
than PTPs, if a partner’s taxable income or loss on any line item P has two partners, A and B. A and B share all items of income,
on Schedule K-1 (Form 1065) includes an allocation of any loss, and deduction equally, except for items required to be
income or deduction item determined by applying section allocated under section 704(c). A contributes property X with an
704(c), include the sum of such income and deduction items FMV of $100 and a tax basis of $60. X is depreciable over 10
here. years. B contributes $100. The traditional method is used to

60 Instructions for Form 1065 (2024)

allocate section 704(c) items pertaining to X. In the first year, the Form 8990, Schedule A, line 43, column (g), if the partner is
partnership has $10 of section 704(b) book depreciation, which required to file Form 8990.
is allocated equally to A and B for book purposes ($5 each).
Gross receipts for section 448(c) (code AG). Regulations
However, P only has $6 of tax depreciation. The partnership has
section 1.163(j)-2(d)(2)(iii) requires that partners in a partnership
no other income or deductions during the tax year. Under the
include a share of partnership gross receipts in proportion to
traditional method, P allocates $1 to A and $5 to B for tax
their share of gross income under section 703 (unless the
purposes. Assuming this is the only item where taxable income
partnership is treated as one person under the aggregation rules
is affected by section 704(c) allocations during the current year,
of section 448(c)). Partnerships with current year gross receipts
the partnership would report deductions of $1 for A and $5 for B
(defined in Temporary Regulations section 1.448-1T(f)(2)(iv))
in box 20, code AA, of Schedule K-1.
greater than $5 million are required to report to partners their
Example 2—multiple section 704(c) allocations. The distributive shares of their current year gross receipts, as well as
facts are the same as in Example 1, except in addition to the their distributive shares of gross receipts for the 3 immediately
facts in that example, A also contributes property Y with an FMV preceding tax years. If a partnership and a partner are treated as
of $100 and a remaining tax basis of $0. If Y were newly placed a single employer under the section 448(c) aggregation rules,
in service, its depreciable life would be 10 years straight line. and the partnership has current year gross receipts greater than
The partnership adopts the remedial method with respect to $5 million, then the partnership should also report its current
property Y. In the first year, P has $10 of section 704(b) book year total gross receipts, as well as its total gross receipts for the
depreciation, which is allocated equally to A and B for book 3 immediately preceding tax years, to that partner. See [Link]/
purposes ($5 each). However, P has $0 of tax depreciation with newsroom/faqs-regarding-the-aggregation-rules-under-
respect to property Y. Under the remedial method, for tax section-448c2-that-apply-to-the-section-163j-small-business-
purposes, P allocates $5 of remedial income to A and $5 of a exemption. Partnerships whose current year gross receipts are
remedial depreciation deduction to B with respect to property Y. less than or equal to $5 million may also use this code to report
In this case, the partnership would report in box 20, code AA, of gross receipts.
Schedule K-1 that A has $4 of taxable income, determined by
applying section 704(c) ($1 of depreciation deductions from Noncash charitable contributions (code AH). If the
property X and $5 of remedial income from property Y) and that partnership made a noncash charitable contribution, report the
B has $10 of deductions for tax purposes, determined by partner’s share of the partnership’s adjusted basis of the
applying section 704(c) (consisting of $5 depreciation from property for basis limitation purposes.
property X and $5 remedial depreciation from property Y). Interest and tax on deferred compensation to partners
Required reporting for the sale or exchange of an interest (code AI). Interest and additional tax on deferred compensation
in a partnership (codes AB, AC, and AD). When a sale or under a section 409A nonqualified deferred compensation plan
exchange of a partnership interest occurs and the partnership that doesn't meet the requirements of section 409A. Include in
holds section 751 property such as unrealized receivables this amount any earnings on these deferrals. This amount must
defined in section 751(c), property subject to unrecaptured also be included on Schedule K, line 4. For details, see the
section 1250 gain, inventory items defined in section 751(d), or regulations under section 409A. These regulations don't provide
collectibles, the partnership must report to the transferor partner guidance on the application of section 409A to arrangements
their share of the gain or loss figured for the following categories between partnerships and partners. For interim guidance on
of assets. If there was an exchange described in section 751(a), such arrangements, see Q&A-7 in Notice 2005-1, 2005-2 I.R.B.
this information must also be reported on Form 8308. 274, and the information provided in T.D. 9321. Also see Notice
2006-79, 2006-43 I.R.B. 763; Notice 2007-86, 2007-46 I.R.B.
Section 751 gain (loss) (code AB). Section 751 “hot
990; and Notice 2008-113, 2008-51 I.R.B. 1305, for additional
assets” (unrealized receivables and inventory items).
information on transitional and relief rules.
In addition to the information reported in box 20c for
Excess business loss limitation (code AJ). To enable
! codes AC and AD, you may separately need to report in
CAUTION boxes 9b and 9c the amount of collectibles (28%) gain
partners to figure their excess business loss limitation under
section 461(l), attach a statement to each partner's
(loss) and unrecaptured section 1250 gain flowing through the
Schedule K-1 showing the partner's distributive share of the
partnership.
aggregate business activity gross income or gain, and the
Section 1(h)(5) collectibles gain (code AC). Section 1(h) aggregate business activity deductions, from all of the
(5) collectible assets. partnership's trades or businesses.
Section 1(h)(6) unrecaptured section 1250 gain (code Gain from mark-to-market election (code AK). If a
AD). Section 1(h)(6) unrecaptured section 1250 gain assets partnership is a trader in securities, commodities, or both, and
(depreciable real property) are section 751 property per has properly elected under section 475(f) to mark to market the
Regulations section 1.751-1(c)(4)(v). securities, the commodities, or both, the partnership should
Excess taxable income (code AE). If the partnership is report ordinary gain or loss from the securities or commodities
required to file Form 8990, it may determine it has excess (or both securities and commodities) trading activities separately
taxable income. If so, enter the amount from Form 8990, Part II, from any other ordinary gain or loss. Gain from the
line 36, for excess taxable income. mark-to-market election is relevant for partners to figure the NIIT.
Schedule K-1. Enter the partner’s amount of excess taxable See the instructions regarding net investment income (code Y),
income. The partner will enter the amount in Form 8990, earlier.
Schedule A, line 43, column (f), if the partner is required to file Section 721(c) partnership (code AL). If the partnership is a
Form 8990. section 721(c) partnership, line 20c must include the amounts
Excess business interest income (code AF). If the relating to any remedial items made under the remedial
partnership is required to file Form 8990, it may determine it has allocation method (described in Regulations sections 1.704-3(d)
excess business interest income. If so, enter the amount from and 1.704-3(d)(5)(iii)) with respect to section 721(c) property.
Form 8990, Part II, line 37, for excess business interest income. Enter a separate code AL in box 20 of Schedule K-1 for each
Schedule K-1. Enter the partner’s amount of excess amount for items allocated to the partner. For the U.S. transferor,
business interest income. The partner will enter the amount in enter a separate code AL, if any, for the total remedial income
allocated to the U.S. transferor, total gain recognized due to an

Instructions for Form 1065 (2024) 61

acceleration event, and/or total gain recognized due to a section file Form 8886. The partnership must determine if any of its
367 transfer reflected in Schedule G (Form 8865), Part II, partners are required to disclose the transaction and provide
columns (c), (d), and (e), respectively. For all other partners of those partners with information they will need to file Form 8886.
the section 721(c) partnership, enter a separate code AL for the This determination is based on the category(ies) under which a
total amount of remedial items allocated to such partner relating transaction qualified for disclosures. See Form 8886 and its
to section 721(c) property. See Regulations sections 1.721(c)-3 instructions for details.
and -6.
Corporate alternative minimum tax (CAMT) (code AX). If
Section 1061 information (code AM). The partnership will the partnership is furnishing information needed for a partner to
furnish to the partners any information needed to figure their determine its distributive share of the partnership's adjusted
capital gains with respect to an applicable partnership interest. financial statement income, use code AX.
Go to [Link]/businesses/partnerships/section-1061-reporting-
Foreign partners, Form 8990, Schedule A (code AY). Form
guidance-faqs.
8990, Schedule A, requires certain foreign partners to report
Farming and fishing business (code AN). If the partnership their allocable share of EBIE, excess taxable income, and
is involved in a farming or fishing business, report the gross excess business interest income, if any, that is attributable to
income and gains as well as the losses and deductions income effectively connected with a U.S. trade or business.
attributable to such business activities. See section 1301. Provide on Schedule K-1 the information needed to complete
Form 8990, Schedule A, for a partner that is a foreign
PTP information (code AO). Any information a partner that is a
corporation or nonresident alien or is a partnership (domestic or
PTP may need to determine if it meets the 90% qualifying
foreign) in which you know, or have reason to know, that one or
income test of section 7704(c)(2). A partner is required to notify
more of the partners is a foreign corporation or nonresident alien.
the partnership of their status as a PTP.
Codes AZ through BD. Reserved for future use.
Inversion gain (code AP). Any income or gain reported on
Schedule K, lines 1 through 11, that qualifies as inversion gain, if Other (code ZZ). Any other information the partners need to
the partnership is an expatriated entity or is a partner in an prepare their tax returns, including information needed to
expatriated entity. For details, see section 7874. Attach a prepare state and local tax returns.
statement to Form 1065 that shows the amount of each type of
income or gain included in the inversion gain. The partnership Line 21. Total Foreign Taxes Paid or Accrued
must report each partner's distributive share of the inversion gain
in box 20 of Schedule K-1 using code AP. Attach a statement to
Enter in U.S. dollars the total creditable foreign taxes (described
Schedule K-1 that shows the partner's distributive share of the
in section 901 or 903) that were paid or accrued by the
amount of each type of income or gain included in the inversion
partnership (according to its method of accounting for such
gain.
taxes). Enter the amount paid or accrued on line 21. Translate
Conservation reserve program payments (code AQ). The these amounts into U.S. dollars by using the applicable
partner's distributive share of any conservation reserve program exchange rate (see Pub. 514, Foreign Tax Credit for Individuals).
payments made to the partnership.
IRA disclosure (code AR). For IRA partners with an amount The information on line 21 is solely for purposes of computing
reported in box 20, code V, include code AR with the IRA basis. A partnership must complete Schedules K-2 and K-3 to
partner's unique EIN (not the custodian's EIN). provide the information necessary for the partner to claim a
foreign tax credit.
Enter the EIN without any dashes.
!
CAUTION
Line 22. More Than One At-Risk Activity

Qualifying advanced coal project property and qualifying If the partnership conducted more than one at-risk activity, the
gasification project property (code AS). Attach a statement partnership is required to provide certain information separately
to Schedule K-1 showing the partner's distributive share of the for each at-risk activity to its partners. This information is
amounts that the partner will use to figure the amounts to report reported on an attached statement to Schedule K-1. Check the
on their Form 3468, Part II. See the Instructions for Form 3468 box to indicate there's more than one at-risk activity for which a
for details. statement is attached. See At-risk activity reporting
Qualifying advanced energy project property (code AT). requirements, earlier, for details. Also see Notice 2019-66 for
Attach a statement to Schedule K-1 showing the partner's certain at-risk reporting.
distributive share of the amounts that the partner will use to
figure the amounts to report on their Form 3468, Part III. See the Line 23. More Than One Passive Activity
Instructions for Form 3468 for details.
Advanced manufacturing investment property (code AU). If the partnership conducted more than one activity (determined
Attach a statement to Schedule K-1 showing the partner's for purposes of the passive activity loss and credit limitations),
distributive share of the amounts that the partner will use to the partnership is required to provide information separately for
figure the amount to report on their Form 3468, Part IV. See the each activity to its partners. This information is reported on an
Instructions for Form 3468 for details. attached statement to Schedule K-1. Check the box to indicate
there's more than one passive activity for which a statement is
Clean electricity investment property (code AV). Attach a attached. See Passive Activity Reporting Requirements, earlier,
statement to Schedule K-1 showing the partner's distributive for details.
share of the amounts that the partner will use to figure the
amount to report on their Form 3468, Part V. See the Instructions
for Form 3468 for details. Analysis of Net Income (Loss) per
Reportable transactions (code AW). If the partnership Return
participates in a transaction that must be disclosed on Form For each type of partner shown on line 2, enter the portion of the
8886, both the partnership and its partners may be required to amount shown on line 1 that was allocated to that type of

62 Instructions for Form 1065 (2024)

partner. Foreign government partners are treated as corporate Partnerships Required To File Schedule M-3
partners pursuant to section 892(a)(3). Report all amounts for
For partnerships required to file Schedule M-3, the amounts
LLC members on the line for limited partners. The sum of the
reported on Schedule L must be amounts from financial
amounts shown on line 2 must equal the amount shown on
statements used to complete Schedule M-3. If the partnership
line 1. In addition, the amount on Analysis of Net Income (Loss)
prepares non-tax-basis financial statements, Schedule M-3 and
per Return, line 1, must equal the amount on Schedule M-1,
Schedule L must report non-tax-basis financial statement
line 9 (if the partnership is required to complete Schedule M-1). If
amounts. If the partnership doesn't prepare non-tax-basis
the partnership files Schedule M-3, the amount on Analysis of
financial statements, Schedule L must be based on the
Net Income (Loss) per Return, line 1, must equal the amount in
partnership's books and records and may show tax-basis
column (d) of Schedule M-3, Part II, line 26.
balance sheet amounts if the partnership's books and records
In classifying partners who are individuals as active or reflect only tax-basis amounts.
passive, the partnership should apply the rules below. In
applying these rules, a partnership should classify each partner Line 5. Tax-Exempt Securities
to the best of its knowledge and belief. It's assumed that in most Include on this line:
cases the level of a particular partner's participation in an activity • State and local government obligations, the interest on which
will be apparent. is excludable from gross income under section 103(a); and
• If the partnership's principal activity is a trade or business, • Stock in a mutual fund or other RIC that distributed
classify a general partner as active if the partner materially exempt-interest dividends during the tax year of the partnership.
participated in all partnership trade or business activities;
otherwise, classify a general partner as passive. Line 7a. Loans to Partners (or Persons Related
• If the partnership's principal activity consists of a working to Partners)
interest in an oil or gas well, classify a general partner as active.
• If the partnership's principal activity is a rental real estate Include on this line loans to partners or persons related to
activity, classify a general partner as active if the partner actively partners. Persons are related if they have a relationship specified
participated in all of the partnership's rental real estate activities; in section 267(b) or 707(b). Amounts included here shouldn't be
otherwise, classify a general partner as passive. included elsewhere on lines 1 through 13.
• Classify as passive all partners in a partnership whose
principal activity is a rental activity other than a rental real estate Line 14. Total Assets
activity. Generally, total assets at the beginning of the year (Schedule L,
• If the partnership's principal activity is a portfolio activity, line 14, column (b)) must equal total assets at the close of the
classify all partners as active. prior tax year (Schedule L, line 14, column (d)). If total assets at
• Classify as passive all limited partners in a partnership whose the beginning of the year don't equal total assets at the close of
principal activity is a trade or business or rental activity. the prior year, attach a statement explaining the difference.
For purposes of measuring total assets at the end of the year,
Schedule L. Balance Sheets per the partnership's assets may not be netted against or reduced by
partnership liabilities. In addition, asset amounts may not be
Books reported as a negative number. If the partnership has an interest
Schedules L, M-1, and M-2 aren't required to be in another partnership and uses a tax-basis method for
Schedule L, it must show as an asset the adjusted basis of its
TIP completed if the partnership answered “Yes” to question
4 of Schedule B. interest in the other partnership and separately show as a liability
its share of the other partnership's liabilities (which are included
The balance sheets should agree with the partnership's in the computation of its adjusted basis). See the Partner's
books and records. Attach a statement explaining any Instructions for Schedule K-1 for details on how to figure the
differences. There are additional requirements for completing adjusted basis of a partnership interest. If Schedule L is
Schedule L for partnerships that are required to file non-tax-basis, investment in a partnership may be shown as
Schedule M-3 (see the Instructions for Schedule M-3 (Form appropriate under the non-tax-basis accounting method of the
1065) for details). partnership including, if required by the non-tax-basis
accounting method of the partnership, the equity method of
Partnerships reporting to the Interstate Commerce
accounting for investments, but must be shown as a
Commission (ICC) or to any national, state, municipal, or other
non-negative amount.
public officer may send copies of their balance sheets
prescribed by the ICC or national, state, or municipal authorities, Example. Partnership A prepares a tax-basis Schedule L
as of the beginning and end of the tax year, instead of and is a general partner in Partnership B, a general partnership.
completing Schedule L. However, statements filed under this Partnership A's adjusted basis in Partnership B at the end of the
procedure must contain sufficient information to enable the IRS year is $16 million. Partnership A's share of Partnership B's
to reconstruct a balance sheet similar to that contained on Form liabilities is $20 million, which is included in the $16 million
1065 without contacting the partnership during processing. adjusted basis amount. On its Schedule L, Partnership A must
report $16 million on line 8 as the amount of its investment asset
All amounts on the balance sheet should be reported in U.S. in Partnership B and report on line 20 its $20 million share of
dollars. If the partnership's books and records are kept in a Partnership B's liabilities. These amounts can't be netted on
foreign currency, the balance sheet should be translated in Schedule L.
accordance with U.S. generally accepted accounting principles
(GAAP). Line 18. All Nonrecourse Loans
Exception. If the partnership or any qualified business unit of Nonrecourse loans are those liabilities of the partnership for
the partnership uses the U.S. dollar approximate separate which no partner bears the economic risk of loss. If the
transactions method, Schedule L should reflect the tax balance partnership's nonrecourse liabilities include its share of the
sheet prepared and translated into U.S. dollars according to liabilities of another partnership, the partnership's share of those
Regulations section 1.985-3(d), and not a U.S. GAAP balance liabilities must be reflected on line 18.
sheet.

Instructions for Form 1065 (2024) 63

Line 19a. Loans From Partners (or Persons income this year. Describe each such item of deduction. Attach a
statement if necessary.
Related to Partners)
Include on this line loans from partners or persons related to Line 9
partners. Persons are related if they have a relationship specified
This line 9 should reconcile to the Analysis of Net Income (Loss)
in section 267(b) or 707(b). Amounts included here shouldn't be
per Return, line 1.
included elsewhere on lines 15 through 21.

Line 20. Other Liabilities Schedule M-2. Analysis of Partners'

A partnership that is a partner in a tiered partnership must
include as a liability on line 20 the partner's share of the tiered
Capital Accounts
partnership's liabilities to the extent they are recourse liabilities to Show what caused changes during the tax year in the partners'
the partner. tax-basis capital accounts.

Line 1. Balance at Beginning of Year

Schedule M-1. Reconciliation of The balance at the beginning of the year should equal the total of
Income (Loss) per Books With the amounts reported as the partners’ beginning tax-basis
capital accounts in item L of all the partners’ Schedules K-1. If
Analysis of Net Income (Loss) per not, the partnership should attach an explanation of the
Return difference. Generally, the balance at the beginning of the year
should equal the adjusted tax basis of the partnership’s assets at
Schedule M-3 may be required instead of Schedule M-1. the beginning of the year reduced by the partnership’s liabilities
TIP See Item J. Schedule C and Schedule M-3, earlier. See at the beginning of the year. If the partnership’s balance sheet
the Instructions for Schedule M-3 for more information. (Schedule L) is reported on the tax basis and if the aggregate of
the partners’ beginning and ending capital accounts differs from
the amounts reported on Schedule L, attach a statement
Line 2 reconciling any differences. No such reconciliation is required if
Schedule L isn't reported on the tax basis.
Report on this line income included on Schedule K, lines 1, 2,
3c, 5, 6a, 7, 8, 9a, 10, and 11, not recorded on the partnership's
books this year. Describe each such item of income. Attach a
Line 2. Capital Contributed During Year
statement if necessary. Include on line 2a the amount of money contributed by each
partner to the partnership, as reflected on the partnership's
Line 3. Guaranteed Payments books and records. Include on line 2b the adjusted tax basis of
property net of liabilities contributed by each partner to the
Include on this line guaranteed payments shown on Schedule K,
partnership, as reflected on the partnership’s books and records.
lines 4a and 4b (other than amounts paid for insurance that
constitutes medical care for a partner, a partner's spouse, a
partner's dependents, and a partner's children under age 27 who
Line 3. Net Income (Loss)
aren't dependents). Enter on Schedule M-2, line 3, the amount from the Analysis of
Net Income (Loss) per Return, line 1. Generally, this is the same
Line 4b. Travel and Entertainment as the amount entered on Schedule M-1, line 9 (if the
partnership is required to complete Schedule M-1), or, if the
Include the following on this line.
partnership files Schedule M-3, the amount in column (d) of
• Entertainment expenses, including entertainment-related Schedule M-3, Part II, line 26. Because section 743(b) basis
meals and facilities, not deductible under section 274(a).
adjustments and income from guaranteed payments aren't
• Non-entertainment-related meal expenses not deductible included in the partners' tax-basis capital accounts, certain
under section 274(n).
adjustments may be necessary. If adjustments to income under
• The part of business gifts over $25. See section 274(b). section 743(b) are taken into account in calculating net income
• Expenses of an individual allocable to conventions on cruise (loss), remove the effects of those adjustments (for example, by
ships over $2,000. See section 274(h)(2).
adding or subtracting the income, gain, loss, or deduction
• Employee achievement awards of nontangible property or resulting from those adjustments on line 4 or line 7 in
tangible property over $400 ($1,600 if part of a qualified plan).
accordance with the instructions for those lines). If net income
See section 274(j).
includes income from guaranteed payments made to partners,
• The part of the cost of luxury water travel expenses not remove such income on line 7.
deductible under section 274(m). See section 274(m)(1)(A).
• Expenses for travel as a form of education. See section Line 4. Other Increases (Itemize)
274(m)(2).
• Nondeductible club dues. See section 274(a)(3). Enter on line 4 the sum of all other increases to the partners'
• Qualified transportation fringes under section 274(a)(4). tax-basis capital accounts during the year not reflected on lines 2
• Transportation and commuting expenses under section 274(l). and 3. Also, if the aggregate net negative income from all section
• Other nondeductible travel and entertainment expenses. 743(b) adjustments reported on Schedule K, line 13e, was
included as a decrease to income in arriving at net income (loss)
Line 6 on line 3, report those amounts as an increase on line 4. For
these purposes, “net negative income from all section 743(b)
Include tax-exempt income from forgiven PPP loans on line 6 if it
adjustments” means the excess of all section 743(b)
was included on line 1 of Schedule M-1.
adjustments to income allocated to the partner that decrease
Line 7 partner taxable income over all section 743(b) adjustments to
income that increase partner taxable income.
Report on this line deductions included on Schedule K, lines 1
through 13e, and 21, not charged against the partnership's book

64 Instructions for Form 1065 (2024)

Line 6. Distributions adjustments reported on Schedule K, line 11, was included as
an increase to income in arriving at net income (loss) on line 3,
Line 6a. Cash. Enter the amount of money distributed to each report that amount as a decrease on line 7. For these purposes,
partner by the partnership. For purposes of line 6a, money “net positive income from all section 743(b) adjustments” means
includes marketable securities, as described in section 731(c). the excess of all section 743(b) adjustments to income allocated
Line 6b. Property. Enter the sum of the adjusted tax bases of to the partner that increase the partner's taxable income over all
property net of liabilities distributed to each partner by the section 743(b) adjustments to income that decrease the
partnership as reflected on the partnership's books and records. partner's taxable income. Likewise, if line 3 includes income from
Include withdrawals from inventory for the personal use of a guaranteed payments reported on Schedule K, line 4c, include
partner. that amount as a decrease on line 7.

Line 7. Other Decreases (Itemize) Line 9. Balance at End of Year

Enter on line 7 the sum of all other decreases to the partners' The balance at the end of the year should equal the total of the
tax-basis capital accounts during the year not reflected on line 6. amounts reported as the partners’ ending capital accounts in
Also, if the aggregate net positive income from all section 743(b) item L of all the partners’ Schedules K-1.

Instructions for Form 1065 (2024) 65

Paperwork Reduction Act Notice. We ask for the information on these forms to carry out the Internal Revenue laws of the United
States. You're required to give us the information. We need it to ensure that you're complying with these laws and to allow us to figure
and collect the right amount of tax.

You aren’t required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential,
as required by section 6103.

Estimates of taxpayer burden. The following tables show burden estimates based on current statutory requirements as of
December 2024, for taxpayers filing 2024 Forms 1065, 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-S, 1120-SF, 1120-FSC,
1120-L, 1120-PC, 1066, 1120-REIT, 1120-RIC, 1120-POL, and related attachments. Time spent and out-of-pocket costs are
presented separately. Time burden is broken out by taxpayer activity, with reporting representing the largest component. Out-of-pocket
costs include any expenses incurred by taxpayers to prepare and submit their tax returns. Examples include tax return preparation and
submission fees, postage and photocopying costs, and tax preparation software costs. While these estimates don't include burden
associated with post-filing activities, IRS operational data indicate that electronically prepared and filed returns have fewer arithmetic
errors, implying lower post-filing burden.

Reported time and cost burdens are national averages and don't necessarily reflect a “typical” case. Most taxpayers experience
lower-than-average burden, with taxpayer burden varying considerably by taxpayer type.

The average burden for partnerships filing Forms 1065 and related attachments is about 60 hours and $5,000; the average burden
for corporations filing Forms 1120 and associated forms is about 100 hours and $7,400; and the average burden for Forms 1120-REIT,
1120-RIC, and 1120-S, and all related attachments is 60 hours and $4,500. Within each of these estimates, there's significant variation
in taxpayer activity. Tax preparation fees and other out-of-pocket costs vary extensively depending on the tax situation of the taxpayer,
the type of software or professional preparer used, and the geographic location. Third-party burden hours aren't included in these
estimates.

Table 1—Taxpayer Burden for Partnerships

Forms 1065, 1066, and all attachments
Primary Form Filed or Type of Total Number of Returns Average Time (hours) Average Cost Average Monetized
Taxpayer (millions) Burden
All Partnerships 5.4 60 $5,000 $8,500
Small 5.0 50 $3,100 $5,100
Large* 0.4 190 $28,200 $50,000
* A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn't meet the definition of a large business.

Table 2—Taxpayer Burden for Taxable Corporations

Forms 1120, 1120-C, 1120-F, 1120-H, 1120-ND, 1120-SF, 1120-FSC, 1120-L, 1120-PC, and 1120-POL, and all attachments
Primary Form Filed or Type of Total Number of Returns Average Time (hours) Average Cost Average Monetized
Taxpayer (millions) Burden
All Taxable Corporations 2.3 100 $7,400 $15,400
Small 2.1 50 $3,500 $6,000
Large* 0.2 690 $59,200 $139,600
* A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn't meet the definition of a large business.

Table 3—Taxpayer Burden for Pass-Through Corporations

Forms 1120-REIT, 1120-RIC, and 1120-S, and all attachments
Primary Form Filed or Type of Total Number of Returns Average Time (hours) Average Cost Average Monetized
Taxpayer (millions) Burden
All Pass-Through Corporations 6.2 60 $4,500 $8,500
Small 6.1 60 $3,900 $5,100
Large* 0.1 300 $40,600 $50,000
* A large business is defined as one having end-of-year assets greater than $10 million. A large business is defined the same way for partnerships, taxable corporations, and
pass-through corporations. A small business is any business that doesn't meet the definition of a large business.

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

66 Instructions for Form 1065 (2024)

 Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments
as we revise our tax forms, instructions, and publications. Don’t send the tax form to this address. Instead, see Where To File, earlier,
near the beginning of these instructions.

Instructions for Form 1065 (2024) 67

Codes for Principal Business Activity Using the list of activities and codes below, produce the finished product, but retains title to the
determine from which activity the business derives the product, the business is considered a manufacturer and
and Principal Product or Service largest percentage of its “total receipts.” Total receipts is
defined as the sum of gross receipts or sales (page 1,
must use one of the manufacturing codes (311110–
339900).
This list of Principal Business Activities and their line 1a); all other income (page 1, lines 4 through 7);
income reported on Schedule K, lines 3a, 5, 6a, and 7; Once the Principal Business Activity is determined,
associated codes is designed to classify an enterprise enter the six-digit code from the list below on page 1,
by the type of activity in which it's engaged to facilitate income or net gain reported on Schedule K, lines 8, 9a,
10, and 11; and income or net gain reported on Form item C. Also enter the business activity in item A and a
the administration of the Internal Revenue Code. These brief description of the principal product or service of the
Principal Business Activity Codes are based on the 8825, lines 2, 19, and 20a. If the business purchases
raw materials and supplies them to a subcontractor to business in item B.
North American Industry Classification System.

Agriculture, Forestry, Fishing 238290 Other Building Equipment Plastics and Rubber Products Furniture and Related Product
Contractors Manufacturing Manufacturing
and Hunting 238300 Building Finishing Contractors 326100 Plastics Product Mfg 337000 Furniture & Related Product
(including drywall, insulation, 326200 Rubber Product Mfg Manufacturing
Crop Production painting, wallcovering, flooring,
Nonmetallic Mineral Product Miscellaneous Manufacturing
111100 Oilseed & Grain Farming tile, & finish carpentry)
Manufacturing 339110 Medical Equipment & Supplies
111210 Vegetable & Melon Farming 238900 Other Specialty Trade Mfg
(including potatoes & yams) Contractors (including site 327100 Clay Product & Refractory Mfg
preparation) 327210 Glass & Glass Product Mfg 339900 Other Miscellaneous
111300 Fruit & Tree Nut Farming Manufacturing
327300 Cement & Concrete Product Mfg
111400 Greenhouse, Nursery, & Manufacturing
Floriculture Production 327400 Lime & Gypsum Product Mfg Wholesale Trade
111900 Other Crop Farming (including Food Manufacturing 327900 Other Nonmetallic Mineral Merchant Wholesalers, Durable Goods
tobacco, cotton, sugarcane, hay, 311110 Animal Food Mfg Product Mfg
peanut, sugar beet & all other 423100 Motor Vehicle & Motor Vehicle
311200 Grain & Oilseed Milling Primary Metal Manufacturing Parts & Supplies
crop farming)
311300 Sugar & Confectionery Product 331110 Iron & Steel Mills & Ferroalloy 423200 Furniture & Home Furnishings
Animal Production Mfg Mfg
112111 Beef Cattle Ranching & Farming 423300 Lumber & Other Construction
311400 Fruit & Vegetable Preserving & 331200 Steel Product Mfg from Materials
112112 Cattle Feedlots Specialty Food Mfg Purchased Steel
423400 Professional & Commercial
112120 Dairy Cattle & Milk Production 311500 Dairy Product Mfg 331310 Alumina & Aluminum Production Equipment & Supplies
112210 Hog & Pig Farming 311610 Animal Slaughtering & & Processing
423500 Metal & Mineral (except
112300 Poultry & Egg Production Processing 331400 Nonferrous Metal (except Petroleum)
311710 Seafood Product Preparation & Aluminum) Production &
112400 Sheep & Goat Farming Processing 423600 Household Appliances &
Packaging Electrical & Electronic Goods
112510 Aquaculture (including shellfish & 331500 Foundries
finfish farms & hatcheries) 311800 Bakeries, Tortilla & Dry Pasta Mfg 423700 Hardware, & Plumbing & Heating
311900 Other Food Mfg (including Fabricated Metal Product Equipment & Supplies
112900 Other Animal Production Manufacturing
coffee, tea, flavorings & 423800 Machinery, Equipment, &
Forestry and Logging seasonings) 332110 Forging & Stamping Supplies
113110 Timber Tract Operations Beverage and Tobacco Product 332210 Cutlery & Handtool Mfg 423910 Sporting & Recreational Goods &
113210 Forest Nurseries & Gathering of Manufacturing 332300 Architectural & Structural Metals Supplies
Forest Products 312110 Soft Drink & Ice Mfg Mfg 423920 Toy & Hobby Goods & Supplies
113310 Logging 312120 Breweries 332400 Boiler, Tank, & Shipping 423930 Recyclable Materials
Fishing, Hunting and Trapping 312130 Wineries Container Mfg
423940 Jewelry, Watch, Precious Stone,
114110 Fishing 312140 Distilleries 332510 Hardware Mfg & Precious Metals
114210 Hunting & Trapping 312200 Tobacco Manufacturing 332610 Spring & Wire Product Mfg 423990 Other Miscellaneous Durable
Support Activities for Agriculture and Textile Mills and Textile Product Mills 332700 Machine Shops; Turned Product; Goods
Forestry & Screw, Nut, & Bolt Mfg Merchant Wholesalers, Nondurable
313000 Textile Mills
115110 Support Activities for Crop 332810 Coating, Engraving, Heat Goods
Production (including cotton 314000 Textile Product Mills Treating, & Allied Activities 424100 Paper & Paper Products
ginning, soil preparation, Apparel Manufacturing 332900 Other Fabricated Metal Product
planting, & cultivating) 424210 Drugs & Druggists' Sundries
315100 Apparel Knitting Mills Mfg
115210 Support Activities for Animal 424300 Apparel, Piece Goods, & Notions
315210 Cut & Sew Apparel Contractors Machinery Manufacturing
Production (including farriers) 424400 Grocery & Related Products
315250 Cut & Sew Apparel Mfg (except 333100 Agriculture, Construction, &
115310 Support Activities For Forestry Contractors) Mining Machinery Mfg 424500 Farm Product Raw Materials
315990 Apparel Accessories & Other 424600 Chemical & Allied Products
Mining 333200 Industrial Machinery Mfg
Apparel Mfg 333310 Commercial & Service Industry 424700 Petroleum & Petroleum Products
211120 Crude Petroleum Extraction Leather and Allied Product Machinery Mfg 424800 Beer, Wine, & Distilled Alcoholic
211130 Natural Gas Extraction Manufacturing 333410 Ventilation, Heating, Beverages
212110 Coal Mining 316110 Leather & Hide Tanning & Air-Conditioning, & Commercial 424910 Farm Supplies
212200 Metal Ore Mining Finishing Refrigeration Equipment Mfg 424920 Book, Periodical, & Newspapers
212310 Stone Mining & Quarrying 316210 Footwear Mfg (including rubber & 333510 Metalworking Machinery Mfg 424930 Flower, Nursery Stock, & Florists'
plastics) 333610 Engine, Turbine & Power Supplies
212320 Sand, Gravel, Clay, & Ceramic &
Refractory Minerals Mining & 316990 Other Leather & Allied Product Transmission Equipment Mfg 424940 Tobacco Products & Electronic
Quarrying Mfg 333900 Other General Purpose Cigarettes
212390 Other Nonmetallic Mineral Wood Product Manufacturing Machinery Mfg 424950 Paint, Varnish, & Supplies
Mining & Quarrying 321110 Sawmills & Wood Preservation Computer and Electronic Product 424990 Other Miscellaneous Nondurable
213110 Support Activities for Mining 321210 Veneer, Plywood, & Engineered Manufacturing Goods
Wood Product Mfg 334110 Computer & Peripheral Wholesale Trade Agents & Brokers
Utilities 321900 Other Wood Product Mfg Equipment Mfg
425120 Wholesale Trade Agents &
221100 Electric Power Generation, Paper Manufacturing 334200 Communications Equipment Mfg Brokers
Transmission, & Distribution 322100 Pulp, Paper, & Paperboard Mills 334310 Audio & Video Equipment Mfg
221210 Natural Gas Distribution 334410 Semiconductor & Other
Retail Trade
322200 Converted Paper Product Mfg
221300 Water, Sewage & Other Systems Electronic Component Mfg Motor Vehicle and Parts Dealers
Printing and Related Support Activities
221500 Combination Gas & Electric 334500 Navigational, Measuring, 441110 New Car Dealers
323100 Printing & Related Support Electromedical, & Control
Activities 441120 Used Car Dealers
Construction Instruments Mfg
Petroleum and Coal Products 441210 Recreational Vehicle Dealers
Construction of Buildings 334610 Manufacturing & Reproducing
Manufacturing Magnetic & Optical Media 441222 Boat Dealers
236110 Residential Building Construction 324110 Petroleum Refineries (including 441227 Motorcycle, ATV, & All Other
Electrical Equipment, Appliance, and
236200 Nonresidential Building integrated) Component Manufacturing Motor Vehicle Dealers
Construction 324120 Asphalt Paving, Roofing, & 441300 Automotive Parts, Accessories, &
335100 Electric Lighting Equipment Mfg
Heavy and Civil Engineering Saturated Materials Mfg Tire Retailers
Construction 335200 Household Appliance Mfg
324190 Other Petroleum & Coal Products Building Material and Garden
237100 Utility System Construction Mfg 335310 Electrical Equipment Mfg Equipment and Supplies Dealers
237210 Land Subdivision Chemical Manufacturing 335900 Other Electrical Equipment & 444110 Home Centers
Component Mfg
237310 Highway, Street, & Bridge 325100 Basic Chemical Mfg 444120 Paint & Wallpaper Retailers
Construction Transportation Equipment
325200 Resin, Synthetic Rubber, & Manufacturing 444140 Hardware Retailers
237990 Other Heavy & Civil Engineering Artificial & Synthetic Fibers &
Filaments Mfg 336100 Motor Vehicle Mfg 444180 Other Building Material Dealers
Construction
325300 Pesticide, Fertilizer, & Other 336210 Motor Vehicle Body & Trailer Mfg 444200 Lawn & Garden Equipment &
Specialty Trade Contractors Supplies Retailers
238100 Foundation, Structure, & Building Agricultural Chemical Mfg 336300 Motor Vehicle Parts Mfg
325410 Pharmaceutical & Medicine Mfg Food and Beverage Retailers
Exterior Contractors (including 336410 Aerospace Product & Parts Mfg
framing carpentry, masonry, 325500 Paint, Coating, & Adhesive Mfg 445110 Supermarkets & Other Grocery
336510 Railroad Rolling Stock Mfg Retailers (except Convenience)
glass, roofing, & siding) 325600 Soap, Cleaning Compound, & 336610 Ship & Boat Building 445131 Convenience Retailers
238210 Electrical Contractors Toilet Preparation Mfg 336990 Other Transportation Equipment 445132 Vending Machine Operators
238220 Plumbing, Heating, & 325900 Other Chemical Product & Mfg
Air-Conditioning Contractors Preparation Mfg 445230 Fruit & Vegetable Retailers

68
Codes for Principal Business Activity and Principal Product or Service (Continued)
445240 Meat Retailers 485320 Limousine Service 523160 Commodity Contracts 541370 Surveying & Mapping (except
445250 Fish & Seafood Retailers 485410 School & Employee Bus Intermediation Geophysical) Services
445291 Baked Goods Retailers Transportation 523210 Securities & Commodity 541380 Testing Laboratories & Services
485510 Charter Bus Industry Exchanges Specialized Design Services
445292 Confectionery & Nut Retailers
485990 Other Transit & Ground 523900 Other Financial Investment 541400 Specialized Design Services
445298 All Other Specialty Food Activities (including portfolio
Retailers Passenger Transportation (including interior, industrial,
management & investment graphic, & fashion design)
445320 Beer, Wine, & Liquor Retailers Pipeline Transportation advice)
486000 Pipeline Transportation Computer Systems Design and Related
Furniture and Home Furnishings Insurance Carriers and Related Services
Retailers Scenic & Sightseeing Transportation Activities
541511 Custom Computer Programming
449110 Furniture Retailers 487000 Scenic & Sightseeing 524110 Direct Life, Health, & Medical Services
449121 Floor Covering Retailers Transportation Insurance Carriers
541512 Computer Systems Design
449122 Window Treatment Retailers Support Activities for Transportation 524120 Direct Insurance (except Life, Services
488100 Support Activities for Air Health, & Medical) Carriers
449129 All Other Home Furnishings 541513 Computer Facilities Management
Retailers Transportation 524210 Insurance Agencies & Services
488210 Support Activities for Rail Brokerages
Electronics and Appliance Retailers 541519 Other Computer Related
Transportation 524290 Other Insurance Related Services
449210 Electronics & Appliance Retailers Activities (including third-party
(including computers) 488300 Support Activities for Water Other Professional, Scientific, and
Transportation administration of insurance &
General Merchandise Retailers pension funds) Technical Services
488410 Motor Vehicle Towing 541600 Management, Scientific, &
455110 Department Stores Funds, Trusts, and Other Financial
488490 Other Support Activities for Road Vehicles Technical Consulting Services
455210 Warehouse Clubs, Supercenters, Transportation
& Other General Merch. Retailers 525100 Insurance & Employee Benefit 541700 Scientific Research &
488510 Freight Transportation Funds Development Services
Health and Personal Care Retailers Arrangement
525910 Open-End Investment Funds 541800 Advertising, Public Relations, &
456110 Pharmacies & Drug Retailers 488990 Other Support Activities for Related Services
(Form 1120-RIC)
456120 Cosmetics, Beauty Supplies, & Transportation 541910 Marketing Research & Public
Perfume Retailers 525920 Trusts, Estates, & Agency
Couriers and Messengers Accounts Opinion Polling
456130 Optical Goods Retailers 492110 Couriers & Express Delivery 541920 Photographic Services
525990 Other Financial Vehicles
456190 Other Health & Personal Care Services (including mortgage REITs & 541930 Translation & Interpretation
Retailers 492210 Local Messengers & Local closed-end investment funds) Services
Gasoline Stations & Fuel Dealers Delivery 541940 Veterinary Services
457100 Gasoline Stations (including Warehousing and Storage Real Estate and Rental and
541990 All Other Professional, Scientific,
convenience stores with gas) 493100 Warehousing & Storage (except Leasing & Technical Services
457210 Fuel Dealers (including Heating lessors of miniwarehouses &
oil & Liquefied Petroleum) self-storage units) Real Estate Management of Companies
Clothing and Accessories Retailers 531110 Lessors of Residential Buildings
Information & Dwellings (including equity (Holding Companies)
458110 Clothing & Clothing Accessories
Retailers Motion Picture and Sound Recording REITs) 551111 Offices of Bank Holding
458210 Shoe Retailers Industries 531120 Lessors of Nonresidential Companies
512100 Motion Picture & Video Industries Buildings (except 551112 Offices of Other Holding
458310 Jewelry Retailers Miniwarehouses) (including Companies
(except video rental)
458320 Luggage & Leather Goods equity REITs)
Retailers 512200 Sound Recording Industries Administrative and Support and
531130 Lessors of Miniwarehouses &
Sporting, Hobby, Book, Musical Publishing Industries Self-Storage Units (including
Instruments, & Miscellaneous Retailers 513110 Newspaper Publishers equity REITs) Waste Management and
459110 Sporting Goods Retailers 513120 Periodical Publishers 531190 Lessors of Other Real Estate Remediation Services
459120 Hobby, Toy, & Game Retailers 513130 Book Publishers Property (including equity REITs)
531210 Offices of Real Estate Agents & Administrative and Support Services
459130 Sewing, Needlework, & Piece 513140 Directory & Mailing List 561110 Office Administrative Services
Goods Retailers Publishers Brokers
513190 Other Publishers 531310 Real Estate Property Managers 561210 Facilities Support Services
459140 Musical Instrument & Supplies
Retailers 513210 Software Publishers 531320 Offices of Real Estate Appraisers 561300 Employment Services
459210 Book Retailers & News Dealers Broadcasting & Content Providers & 531390 Other Activities Related to Real 561410 Document Preparation Services
(including newsstands) Telecommunications Estate 561420 Telephone Call Centers
459310 Florists 516100 Radio & Television Broadcasting Rental and Leasing Services 561430 Business Service Centers
459410 Office Supplies & Stationery Stations 532100 Automotive Equipment Rental & (including private mail centers &
Retailers 516210 Media Streaming, Social Leasing copy shops)
459420 Gift, Novelty, & Souvenir Networks, & Other Content 532210 Consumer Electronics & 561440 Collection Agencies
Retailers Providers Appliances Rental 561450 Credit Bureaus
459510 Used Merchandise Retailers 517000 Telecommunications (including 532281 Formal Wear & Costume Rental 561490 Other Business Support
459910 Pet & Pet Supplies Retailers Wired, Wireless, Satellite, Cable 532282 Video Tape & Disc Rental Services (including repossession
& Other Program Distribution, services, court reporting, &
459920 Art Dealers Resellers, Agents, Other 532283 Home Health Equipment Rental
stenotype services)
459930 Manufactured (Mobile) Home Telecommunications, & Internet 532284 Recreational Goods Rental
561500 Travel Arrangement &
Dealers Service Providers) 532289 All Other Consumer Goods Reservation Services
459990 All Other Miscellaneous Retailers Data Processing, Web Search Portals, & Rental
561600 Investigation & Security Services
(including tobacco, candle, & Other Information Services 532310 General Rental Centers
trophy retailers) 561710 Exterminating & Pest Control
518210 Computing Infrastructure 532400 Commercial & Industrial Services
Nonstore Retailers Providers, Data Processing, Web Machinery & Equipment Rental &
Hosting, & Related Services Leasing 561720 Janitorial Services
Nonstore retailers sell all types of
merchandise using such 519200 Web Search Portals, Libraries, Lessors of Nonfinancial Intangible 561730 Landscaping Services
methods as Internet, mail-order Archives, & Other Info. Services Assets (except copyrighted works) 561740 Carpet & Upholstery Cleaning
catalogs, interactive television, or Services
direct sales. These types of Finance and Insurance 533110 Lessors of Nonfinancial
Intangible Assets (except 561790 Other Services to Buildings &
Retailers should select the PBA Dwellings
associated with their primary line Depository Credit Intermediation copyrighted works)
of products sold. For example, 522110 Commercial Banking 561900 Other Support Services
establishments primarily selling
Professional, Scientific, and (including packaging & labeling
522130 Credit Unions
services, & convention & trade
prescription and non-prescription 522180 Savings Institutions & Other Technical Services show organizers)
drugs, select PBA code 456110 Depository Credit Intermediation
Pharmacies & Drug Retailers. Legal Services Waste Management and Remediation
Nondepository Credit Intermediation 541110 Offices of Lawyers Services
Transportation and 522210 Credit Card Issuing 562000 Waste Management &
541190 Other Legal Services
Warehousing 522220 Sales Financing Remediation Services
Accounting, Tax Preparation,
522291 Consumer Lending Bookkeeping, and Payroll Services Educational Services
Air, Rail, and Water Transportation
522292 Real Estate Credit (including 541211 Offices of Certified Public
481000 Air Transportation mortgage bankers & originators) Accountants 611000 Educational Services (including
482110 Rail Transportation 522299 Intl, Secondary Market, & Other schools, colleges, & universities)
541213 Tax Preparation Services
483000 Water Transportation Nondepos. Credit Intermediation 541214 Payroll Services Health Care and Social
Truck Transportation Activities Related to Credit 541219 Other Accounting Services
484110 General Freight Trucking, Local Intermediation Assistance
Architectural, Engineering, and Related
484120 General Freight Trucking, 522300 Activities Related to Credit Services Offices of Physicians and Dentists
Long-distance Intermediation (including loan
brokers, check clearing, & money 541310 Architectural Services 621111 Offices of Physicians (except
484200 Specialized Freight Trucking transmitting) mental health specialists)
541320 Landscape Architecture Services
Transit and Ground Passenger Securities, Commodity Contracts, and 621112 Offices of Physicians, Mental
Transportation 541330 Engineering Services Health Specialists
Other Financial Investments and 541340 Drafting Services
485110 Urban Transit Systems Related Activities 621210 Offices of Dentists
485210 Interurban & Rural Bus 541350 Building Inspection Services Offices of Other Health Practitioners
523150 Investment Banking & Securities
Transportation Intermediation 541360 Geophysical Surveying & 621310 Offices of Chiropractors
485310 Taxi and Ridesharing Services Mapping Services
621320 Offices of Optometrists

69
Codes for Principal Business Activity and Principal Product or Service (Continued)
621330 Offices of Mental Health 624310 Vocational Rehabilitation 721191 Bed & Breakfast Inns 811430 Footwear & Leather Goods
Practitioners (except Physicians) Services 721199 All Other Traveler Repair
621340 Offices of Physical, Occupational 624410 Childcare Services Accommodation 811490 Other Personal & Household
& Speech Therapists, & 721210 RV (Recreational Vehicle) Parks Goods Repair & Maintenance
Audiologists Arts, Entertainment, and & Recreational Camps Personal and Laundry Services
621391 Offices of Podiatrists Recreation 721310 Rooming & Boarding Houses, 812111 Barber Shops
621399 Offices of All Other Dormitories, & Workers’ Camps 812112 Beauty Salons
Miscellaneous Health Performing Arts, Spectator Sports, and
Related Industries Food Services and Drinking Places 812113 Nail Salons
Practitioners
711100 Performing Arts Companies 722300 Special Food Services (including 812190 Other Personal Care Services
Outpatient Care Centers food service contractors &
711210 Spectator Sports (including (including diet & weight reducing
621410 Family Planning Centers caterers) centers)
sports clubs & racetracks)
621420 Outpatient Mental Health & 722410 Drinking Places (Alcoholic 812210 Funeral Homes & Funeral
Substance Abuse Centers 711300 Promoters of Performing Arts, Beverages)
Sports, & Similar Events Services
621491 HMO Medical Centers 722511 Full-Service Restaurants 812220 Cemeteries & Crematories
711410 Agents & Managers for Artists,
621492 Kidney Dialysis Centers Athletes, Entertainers, & Other 722513 Limited Service Restaurants 812310 Coin-Operated Laundries &
621493 Freestanding Ambulatory Public Figures 722514 Cafeterias, Grill Buffets, & Buffets Drycleaners
Surgical & Emergency Centers 711510 Independent Artists, Writers, & 722515 Snack & Non-alcoholic Beverage 812320 Drycleaning & Laundry Services
621498 All Other Outpatient Care Performers Bars (except Coin-Operated)
Centers Museums, Historical Sites, and Similar 812330 Linen & Uniform Supply
Medical and Diagnostic Laboratories Institutions
Other Services
812910 Pet Care (except Veterinary)
621510 Medical & Diagnostic 712100 Museums, Historical Sites, & Repair and Maintenance Services
Laboratories Similar Institutions 811110 Automotive Mechanical & 812920 Photofinishing
Home Health Care Services Amusement, Gambling, and Recreation Electrical Repair & Maintenance 812930 Parking Lots & Garages
621610 Home Health Care Services Industries 811120 Automotive Body, Paint, Interior, 812990 All Other Personal Services
Other Ambulatory Health Care Services 713100 Amusement Parks & Arcades & Glass Repair
Religious, Grantmaking, Civic,
621900 Other Ambulatory Health Care 713200 Gambling Industries 811190 Other Automotive Repair & Professional, and Similar Organizations
Services (including ambulance 713900 Other Amusement & Recreation Maintenance (including oil
change & lubrication shops & car 813000 Religious, Grantmaking, Civic,
services & blood & organ banks) Industries (including golf Professional, & Similar
courses, skiing facilities, washes)
Hospitals Organizations (including
marinas, fitness centers, & 811210 Electronic & Precision Equipment condominium & homeowners
622000 Hospitals bowling centers) Repair & Maintenance associations)
Nursing and Residential Care Facilities 811310 Commercial & Industrial
623000 Nursing & Residential Care Accommodation and Food Machinery & Equipment (except Other
Facilities Automotive & Electronic) Repair
Services & Maintenance 999000 Unclassified Establishments
Social Assistance (unable to classify)
624100 Individual & Family Services Accommodation 811410 Home & Garden Equipment &
721110 Hotels (except Casino Hotels) & Appliance Repair & Maintenance
624200 Community Food & Housing, &
Emergency & Other Relief Motels 811420 Reupholstery & Furniture Repair
Services 721120 Casino Hotels

70
Index

Reforestation expenditures 27
A Rent 24 O
Repairs and maintenance 24
Accounting methods 7 Ordinary business income (loss) 37
Retirement plans 26
Change in accounting method 8
Salaries and wages 24, 38
Mark-to-market accounting method 8
Taxes and licenses 24
P
Nonaccrual-experience method 8, 21
Transactions between related Paid preparer authorization 7
Percentage of completion method 8 taxpayers 23 Partner contributing property with a
Accounting periods 8 Travel 26 built-in gain or loss 37
Adjusting deductions for certain Wages 24 Passive activity limitations:
credits 23
Definitions 2 Grouping activities 17
Administrative adjustment request 9
Depreciation 25 Passive activities defined 15
Allocation of partnership items:
Dispositions of contributed property 14 Recharacterization of passive income 18
Contributed property 33
Distributions: Rental activities 16
Liabilities 35
Recognition of precontribution gain 14 Reporting requirements 18
Nonrecourse liabilities 35
Dividends 38 Trade or business activities 15
Partnership agreement 33
Penalties 7
Special allocations 37
Alternative minimum tax 50 E Failure to furnish information timely 7
Late filing 7
Adjusted gain (loss) 50 Elections:
Trust fund recovery 7
Depletion (other than oil and gas) 50 By each partner 13
Period covered 6
Depreciation adjustment on property By the partnership 13
placed in service after 1986 50 Portfolio income 17, 38
Electronic filing 5
Oil, gas, and geothermal properties 51 Private delivery services 5
Entity classification election 12
Amended return 9 Publicly traded partnerships 4, 15, 22
Extensions 6
Analysis of net income (loss) per
Return 62 Q
F
Analysis of partner's capital account 36 Qualified Business Income Deduction 56
Analysis of partners' capital accounts 64 Foreign accounts 28
Assembling the return 12 Foreign partners, withholding 30
Foreign partnership 3
R
At-risk activities 35
Attached statements 34 Foreign trusts, transactions 28 Recapture:
Forms: Investment credit 53
B How to get 2 Low-income housing credit 53
That may be required 10 Mining exploration costs 40
Balance sheets per books 63 Future Developments 1 Section 179 deduction 54
Bipartisan Budget Act of 2015 (BBA) 2 Reconciliation of income (loss) per books
Business start-up expenses 23 G with income (loss) per return 64
Recordkeeping 9
C General partner 3 Reforestation costs 45
General partnership 3 Rental activities 16
Capital gain: Guaranteed payments 38, 64
Net long-term 39 Rounding off to whole dollars 9
Net short-term 39 Royalties 39
I
Change of address 20
Charitable contribution 42 Inclusion amount 24 S
Codes: Income: Sale of partnership interests 14
Partner 35 Gross receipts or sales 21 Sale of small business stock:
Principal business activity 68 Tax-exempt income 21 Exclusion 41
Schedule K-1 reporting 34 Trade or business 21 Rollover 41
Collectibles (28%) gain (loss) 39 Installment sales 21 Schedule:
Consolidated audit procedures 2 Interest income 38 B 27
Contributions to the partnership 14 Interest on production expenditures 25 K 32, 37
Cost of goods sold 21 Investment: K-1 32, 37
Credits 46 Income and expenses 52 L 63
Low-income housing 46 Interest expense 44 M-1 64
Rehabilitation 47 M-2 64
Rental activities 47 L M-3 64
Limited liability company 3 Section 179 expense deduction 42
D Limited liability partnership 3 Recapture 54
Deductions: Limited partner 3 Section 481(a) adjustment 8
Bad debts 24 Limited partnership 3 Section 59(e) expenditures 13, 22, 23, 44
Depletion 25 Self-charged interest 17
Depreciation 25 N Self-employment 45
Employee benefit programs 26 Signatures:
Net section 1231 gain (loss) 40 General partner or LLC member
Entertainment facilities 27 Nondeductible expenses 52 manager 6
Guaranteed payments 24 Nonrecourse liabilities 35 Paid preparer 6
How to report 22 Nonrecourse loans 4, 35 Special allocations 37
Interest 25 (See also Nonrecourse liabilities) Substitute forms 33
Limitations 22 Notice of inconsistent treatment 9 Syndication costs 23
Meals and entertainment 26
Membership dues 27

71
T U W
Tax shelter: Uniform capitalization rules 22 When to file 5
Registration 28 Unrealized receivables and inventory: Where to file 6
Tax-exempt income 51 Sale of partnership interests 14 Who must file 4
Termination of partnership 5 Unrecaptured section 1250 gain 39
Travel and entertainment 26, 64 Unrelated business taxable income 55

72