Form 8986 Instructions
Instructions for Form 8986, Partners Share of Adjustment(s) to Partnership-Related Item(s) (Required Under Sections 6226 and 6227)
Rev. January 2024
Department of the Treasury
Internal Revenue Service
Instructions for Form 8986
Partner’s Share of Adjustment(s) to Partnership-Related Item(s)
(January 2024)
(Required Under Sections 6226 and 6227) For use with Form 8986 (December 2019)
pass-through partner to which the adjustments in the statement
relate.
Contents
Page
Audited partnership, for purposes of Form 8986, is a BBA
partnership that made the election under section 6226 to have its
partners report their share of adjustments to partnership-related
items.
Audited partnership’s adjustment year is the year that
includes the date the court decision became final, if the
partnership filed a petition under section 6234. Otherwise, it is
the year that includes the date the final partnership adjustment
(FPA) letter was mailed, or the FPA waiver was executed by the
IRS.
Instructions for Partners That Receive Form
Adjustments that do not result in an IU. A partnership
adjustment does not result in an imputed underpayment (IU) if
the result of netting with respect to any grouping or subgrouping
that includes the particular partnership adjustment is zero or less
than zero. Adjustments do not result in an IU if the calculation of
the IU on those adjustments results in an amount that is zero or
less than zero. Any adjustment to an item which is not a
monetary item (for example, an election made by the
partnership) is an adjustment that does not result in an IU.
BBA AAR is an administrative adjustment request filed by a BBA
partnership.
Part I—Information About the Entity
Part II—Information About the Audited
Partnership or the Partnership That Filed
Part III—Information About the Pass-Through
Partner Issuing and Submitting This Form
BBA partnership is a partnership that is subject to the
centralized partnership audit regime that was enacted into law by
section 1101 of the Bipartisan Budget Act of 2015 (BBA). The
BBA is generally effective for tax years beginning on or after
January 1, 2018.
Part IV—Information About the Partner
Part V—Partner’s Total Reviewed Year
Income, Gain, Loss, Deductions, Credits,
Designated individual (DI) is the individual through whom an
entity partnership representative acts.
Section references are to the Internal Revenue Code unless
otherwise noted.
Extended due date of the partnership’s adjustment year
return is, for purposes of Form 8986, the extended due date of
the AAR or audited partnership’s adjustment year return
regardless of whether the partnership is required to file a return
for the adjustment year or timely filed a request for an extension.
Finally determined. The partnership adjustment(s) becomes
finally determined upon the later of the expiration of the time to
file a petition under section 6234 or, if a petition is filed under
section 6234, the date when the court’s decision becomes final
or the date the closing agreement is entered into between the
IRS and the partnership.
Future Developments
For the latest information about developments related to Form
8986 and its instructions, such as legislation enacted after they
Reminder
The Bipartisan Budget Act of 2015 (BBA) created a centralized
partnership audit regime that replaced the partnership audit
procedures under the Tax Equity and Fiscal Responsibility Act of
1982 (TEFRA). Form 8986 was created for partnerships to show
each partner’s share of adjustments to partnership-related items
as a result of a BBA audit or BBA administrative adjustment
request (AAR).
First affected year is the partner’s tax year that includes the
end of the audited or AAR partnership’s reviewed year(s). Each
reviewed year of an audited partnership should have a
corresponding first affected year for each partner.
Imputed underpayment (IU) is the amount determined under
sections 6225, 6226, and 6227, and the regulations thereunder.
Partnership representative (PR) is the person designated by
the partnership or by the IRS under section 6223 and the
regulations thereunder to act on behalf of the BBA partnership.
Pass-through partner is a pass-through entity that holds an
interest, either directly or indirectly, in a partnership.
Pass-through entities include partnerships, S corporations,
trusts, and decedents’ estates. For purposes of Form 8986, a
pass-through entity is not a wholly owned entity disregarded as
separate from its owner for federal tax purposes or a trust that is
wholly owned by only one person.
Purpose of Form
Form 8986 is used by BBA partnerships to furnish and transmit
each partner’s share of adjustments to partnership-related items.
Definitions
AAR partnership is a BBA partnership (see below) that has
filed an administrative adjustment request (AAR) under section
6227.
AAR partnership’s adjustment year is the partnership tax year
that includes the year the AAR was filed with the IRS.
Affected partner is a partner that held an interest in a
pass-through partner at any time during the tax year of the
Pass-through partner’s tax year end to which the
adjustments relate is the end of the pass-through partner's tax
year which includes the audited or AAR partnership's reviewed
year end date.
Jan 16, 2024
Cat. No. 69668G
Note. Certain entity partners can be both a non-pass-through
partner and a pass-through partner. To the extent the
adjustments an entity partner received on a Form 8986 relate to
items that are taxable at the entity level, it is considered a
non-pass-through partner, and with regard to adjustments that
pass through to its owners/beneficiaries it is considered a
pass-through partner.
An audited partnership can submit corrected Forms 8986,
along with Form 8985, within 60 days of the original due date
without IRS permission. If corrected forms need to be submitted
after the 60-day correction period, the audited partnership must
contact the IRS for permission to submit.
AAR partnerships. An AAR partnership that either elects to
push out the resulting adjustments to its partners or has
adjustments that do not result in an IU must furnish Forms 8986
to all partners and include them with their AAR, along with Form
8985.
Reporting year is the partner’s tax year(s) that includes the date
the audited or AAR partnership furnished the Forms 8986 to its
partners.
Reviewed year is the audited or AAR partnership’s tax year to
which the partnership adjustment(s) relates.
Pass-through partners. Direct and indirect pass-through
partners must furnish Forms 8986 to their partners and submit
them to the IRS, along with Form 8985, by the extended due
date of the audited partnership’s adjustment year return (or the
extended due date of the AAR partnership’s adjustment year
return). This date can be found in Part II, item F, of the Form 8986
that was received by the pass-through partner. Failure to submit
these forms by the due date results in the pass-through partner
being liable for an IU.
A pass-through partner who receives a Form 8986 related to
an audited partnership can submit corrected Forms 8986, along
with Form 8985, within 60 days of the original due date without
IRS permission. If corrected forms need to be submitted after the
60-day correction period, the pass-through partner must contact
the IRS for permission to submit.
Reviewed year adjustments are adjustments originating from
the AAR or audited partnership’s reviewed year(s).
Reviewed year partner is any person that held an interest in
the audited or AAR partnership at any time during the
partnership’s reviewed year.
General Instructions
Who Should Prepare Form 8986
The following persons or entities should prepare Form 8986.
Audited partnerships that have made an election under
•
section 6226.
Direct or indirect pass-through partners that receive a Form
•
8986 related to an audited partnership if they choose to furnish
statements to their partners to further push out the adjustments.
Direct or indirect pass-through partners that receive a Form 8986
related to an AAR partnership, if the direct or indirect
pass-through partner chooses to furnish statements to its
partners to further push out adjustments or have adjustments
that do not result in an IU.
Withholding for Foreign Partners
An audited partnership may have withholding and reporting
obligations if it furnishes a Form 8986 to a reviewed year partner
that includes an adjustment subject to withholding under
chapter 3 (Withholding of Tax on Nonresident Aliens and Foreign
Corporations) or chapter 4 (Taxes To Enforce Reporting on
Certain Foreign Accounts). In those cases, the audited
Partnerships that file an AAR under section 6227 and either
•
elect to push out the resulting adjustments to their partners or
have adjustments that do not result in an IU.
partnership must pay the amount of tax required to be withheld
under chapter 3 or chapter 4 before the due date of the audited
partnership's adjustment year return (without regard to
Where To Submit Form 8986
extension) or the extended due date of the audited partnership's
adjustment year return in the case of a pass-through partner.
See Instructions for Form 1042, Annual Withholding Tax Return
for U.S. Source Income of Foreign Persons; or Form 8804,
Annual Return for Partnership Withholding Tax (Section 1446),
for deposit procedures. The audited partnership must also file an
applicable withholding tax return, Form 1042 or Form 8804, and
the associated information returns, Forms 1042-S, Foreign
Person's U.S. Source Income Subject to Withholding; or Forms
8805, Foreign Partner's Information Statement of Section 1446
Withholding Tax, for the calendar year (if filing Forms
Audited partnerships and pass-through partners of audi-
ted partnerships. Section 6241(10) gives the IRS authority to
require electronic submission of anything required to be filed or
submitted under section 6226(a). Audited BBA Partnerships and
their pass-through partners are required to submit Forms 8985,
Pass-Through Statement—Transmittal/Partnership Tracking
steps required to register and submit electronically.
AAR partnerships. AAR partnerships that are electing to push
out adjustments to their partners or have adjustments that do not
result in an imputed underpayment must include Form 8985 with
their AAR along with Forms 8986. The Forms 8985 and 8986
must be filed with, and in the same manner as, the AAR.
1042/1042-S) or tax year (if filing Forms 8804/8805) that
includes the date on which the Form 8986 was furnished.
Instructions for Partners That Receive Form
8986
Pass-through partners. In general, a pass-through partner that
receives a Form 8986 should take into account the adjustments
reflected on the form by either:
Pass-through partners of an AAR partnership. Pass-through
partners of an AAR partnership must submit Form 8985 to the
IRS by fax at 888-981-6982, with or without Forms 8986, as
applicable. This fax number is not for general use. Taxpayers
should not use this for anything besides Forms 8985 and 8986.
Illegible or other submissions received via this fax number will
information.
Furnishing Forms 8986 to its own partners and submitting
•
those forms, along with Form 8985, to the IRS or
Figuring and paying an IU and submitting Form 8985 to the
•
IRS, where the adjustments result in an IU to the pass-through
entity. See Form 8985 and its instructions.
Due Dates
One of these two options must be completed by the extended
due date of the audited partnership’s adjustment year return (or
the extended due date of the AAR partnership’s adjustment year
return).
Audited partnerships. An audited partnership that has made
an election under section 6226 must furnish Forms 8986 to its
partners and submit them to the IRS, along with Form 8985, no
later than 60 days after the date on which the partnership
adjustments are finally determined. Failure to furnish and submit
by the due date may result in the audited partnership being liable
for the IU.
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Instructions for Form 8986 (January 2024)
If a pass-through partner fails to timely furnish and
submit the relevant statements, the pass-through partner
may be liable for an IU as well as any penalties and
if you entered XYZ LLC on the Form 8985, you must enter XYZ
LLC on the Form 8986. In the state field, enter the two-letter
abbreviation or the full name of the foreign province. U.S.
partnerships leave the country code field blank. Foreign
partnerships enter the country code found at Foreign Country
!
CAUTION
interest with respect to the adjustments reflected on the Form
8986 received by the pass-through partner.
Other partners. All other partners that receive Form 8986
should report the information on Form 8978, Partner’s Additional
Reporting Year Tax, and attach the Form 8978 to the partner’s
reporting year tax return. For more information, see Form 8978
and its instructions.
Item C—Enter the partnership's tax identification number. This
number must be entered exactly as it appears on the Form 8985
associated with this Form 8986.
Item D—Enter the tax year end date of the reviewed year of the
partnership. Each reviewed year should have a separate Form
8986. This form must be completed for reviewed years that have
adjustments related to an audit or an AAR.
These partners may pay in advance to stop the running of
interest.
Item E—Enter the partnership’s adjustment year ending date.
Item F—Enter the extended due date of the partnership’s
adjustment year tax return, regardless of whether the partnership
has filed for an extension. For AAR partnerships, this will be the
extended due date of the tax year the AAR was filed.
Item G—Enter the date the partnership furnished the Forms
8986 to its partners.
Pay by EFTPS, debit or credit card, or Direct Pay (Forms 1040
•
only).
Select Prepayment on BBA AAR/Exam Push Out as payment
•
type.
As applicable, apply payment to the tax form that will have the
•
Form 8978 attached to it.
Special Instructions for certain entity partners. Certain
entity partners (such as trusts and estates) that receive a Form
8986 may have some adjustments that are taxable at the entity
level, and other adjustments that pass through to the owners and
beneficiaries of the entity partner. The adjustments taxable to the
entity partner should be reported on the Form 8978 attached to
the entity partner’s reporting year tax return. For all other
adjustments that flow through to its owners or beneficiaries, the
entity partner should follow the above instructions for
“pass-through partners.”
Part III—Information About the Pass-Through
Partner Issuing and Submitting This Form 8986
Item A—On lines 1–6, enter the pass-through partner’s name,
address, city, state, country code, and ZIP code. In the state
field, enter the two-letter abbreviation or the full name of the
foreign province. U.S. partnerships leave the country code field
blank. Foreign pass-through partners enter the country code
Item B—Enter the pass-through partner’s tax identification
number.
Specific Instructions
Submitting a corrected form due to an incorrect TIN. If
submitting a corrected form due to an incorrect TIN on a
previously submitted and accepted original Form 8986, you will
need to submit two corrected forms:
Item C—Enter the pass-through partner’s tax year end to which
the adjustments relate.
Item D—Enter the name of the entity that issued the Form 8986
to the pass-through partner, if different from the audited
partnership or AAR partnership in Part II.
Item E—Enter the tax identification number of the entity that
issued the Form 8986 to the pass-through partner, if different
from the audited partnership or AAR partnership in Part II.
1. A corrected Form 8986 with the correct TIN, and
2. A corrected Form 8986 with the incorrect TIN and zeros in
Part IV, sections E through G, and in Part V. Anytime a corrected
Form 8986 is submitted, a corrected Form 8985 must also be
included.
Part IV—Information About the Partner
Receiving This Form 8986
Original or corrected. At the top of the form, check the
Item A—On lines 1–6, enter the partner’s name, address, city,
state, country code, and ZIP code. In the state field, enter the
two-letter abbreviation or the full name of the foreign province.
U.S. partners leave the country code field blank. Foreign
Item B—Enter the partner’s tax identification number.
Item C—Indicate by checking box 1 or 2 if the partner is a
general partner or LLC member manager, limited partner, or LLC
member. Indicate by checking box 3 or 4 if the partner is a
domestic or foreign partner.
appropriate box to indicate if the form is original or corrected.
Tracking number. Enter the outgoing tracking number shown
on the related Form 8985 of a BBA partnership or a pass through
partner of a BBA partnership.
Audit control number. Enter the audit control number that is
provided on correspondence with the IRS. Pass-through
partners can locate this number at the top of the Form 8986 they
received. AAR partnerships, including pass-through partners of
an AAR partnership, should leave this field blank.
Item D—Indicate if, for tax purposes, the partner is an individual,
S corporation, C corporation, partnership, or other type of entity
by checking one of the boxes 1–5. If “Other,” indicate what type
on the line provided. Also indicate if the partner is a retirement
plan or other tax-exempt entity. Note: If you entered a social
security number as the partner's tax identification number in box
B, you should check box 1. You should only select boxes 2–5
when you have entered an EIN in box B.
Part I—Information About the Entity Submitting
This Form
Item A—Indicate which entity is issuing this form by checking
one of the boxes.
Item B—Check the box that corresponds to the type of return
normally filed by the entity issuing this form. If “Other,” also
indicate the type of return filed on the line provided.
Item E—Enter the partner’s percentage share of partnership
profits, losses, and capital as originally reported on
Schedule K-1, the change per audit or AAR (if none, enter zero),
and the corrected percentage.
Part II—Information About the Audited
Partnership or the Partnership That Filed an
AAR
Item F—Enter the partner’s share of total liabilities—recourse
and nonrecourse—as originally reported on Schedule K-1, the
change per audit or AAR (if none, enter zero), and the corrected
amounts.
Items A and B—On lines 1–6, enter the name and address of
the partnership. The name must be entered exactly as it appears
on the Form 8985 associated with this Form 8986. For example,
3
Instructions for Form 8986 (January 2024)
Item G—Enter the components of the partner’s capital account
as originally reported on Schedule K-1, the change per audit or
AAR (if none, enter zero), and the corrected amounts.
Schedule K-3. For each item that was adjusted, enter the
following.
Column (a), Line number—The Schedule K-1 line number that
was adjusted. If you have changes to Schedule K-3, enter “K3”
(no dash).
Note. If the partner in the partnership is an entity, such as
single-member limited liability company (LLC), that is a
Column (b), Line title—The title of the Schedule K-1 item that
was adjusted. For adjustments to Schedule K-3, enter the part,
section (if applicable), line, and column reference.
Column (c), Code—If applicable, use the code letters listed in
the Schedule K-1 instructions that correspond to the line number
shown in column (a). For adjustments to Schedule K-3, if
applicable, enter the country code. See the Schedule K-3
instructions. If no specific code applies, enter “NA.”
Column (d), As reported—Enter the original amount reported
to the partner on their Schedule K-1 or as previously corrected
by the partnership. For adjustments to Schedule K-3, do not
enter amounts on column (d).
disregarded entity (DE) for federal income tax purposes, in item
A, enter the name and address of the beneficial owner of the DE
partner. The beneficial owner is the taxpayer who owns the DE
partner. Enter the TIN of the beneficial owner of the DE partner in
item B rather than the TIN of the DE partner. In addition to the
beneficial owner information reported in Part IV, list the name
and TIN of the DE partner in Part VI of the Form 8986.
Part V—Partner’s Total Reviewed Year Income,
Gain, Loss, Deductions, Credits, and Other
Items
Column (e), Check if statement in Part VI—Check the box in
this column if the item shown in column (a) has a corresponding
statement in Part VI. For adjustments to Schedule K-3, enter an
explanation of the adjustment on Part VI of Form 8986 with
reference to the entry on Part V, column (b).
Note. Adjustments that increase a schedule K-1 item as
originally reported or as corrected should be shown as positive
amounts; adjustments that decrease schedule K-1 items should
be shown as negative amounts.
For columns (a)–(c), refer to the relevant Schedule K-1 and
instructions. See special instructions for changes to
Example 1
On its filed 2024 return, partnership ABC reported $1,000 of general category foreign source interest income with respect to
Country Y on Partner A’s Schedule K-3. Partnership ABC later determined that the amount should have been reported as passive
category foreign source interest income on Schedule K-3. To make the correction to the 2024 return, ABC filed an AAR on
November 10, 2025, attaching Forms 8985 and 8986. The two-letter code from the list at Foreign Country Codes for Country Y is
YY. Partnership ABC includes in Part V of the Form 8986 sent to Partner A the information as follows.
Example 1. Form 8986, Part V. Partner’s Total Reviewed Year Income, Gain, Loss, Deduction, Credits, and
Other Items
Schedule K-1
(f)
(e)
(a)
(b)
Line title
(c)
Code*
(d)
Reviewed year
adjustments as
finally determined
Check if statement
in Part VI
Line number
As reported
K-3
K-3
Part II, Sec. 1, Line 6A,
column (e)
YY
YY
Part II, Sec. 1, Line 6A,
column (c)
Partnership ABC includes in Part VI of the Form 8986 sent to Partner A the information as follows.
Example 1. Form 8986, Part VI. Statements
(a)
Line no./
code
(b)
Statement
Line title
Code
As reported
Review year adjustments
As corrected
Part II, Sec. 1, Line 6A,
column (e)
K-3
YY
$1,000
$(1,000)
$0
Part II, Sec. 1, Line 6A,
column (c)
YY
$0
$1,000
$1,000
4
Instructions for Form 8986 (January 2024)
Example 2
On its filed return, Partnership ABC reported on Partner A’s Schedule K-3, Part VIII, as follows.
Example 2. Schedule K-3 (Form 1065), Part VIII.
Line
A
B
Entry
1234
PAS
C
iii
Unit
1a1i
1a1ii
Euro QBU1
YY
1000
Subsequent to filing its return, Partnership ABC determines that the amount reported on Line 1a1ii of Partner A’s Schedule K-3, Part
VIII, should have been €1,500. Partnership ABC makes the correction by filing an AAR with Forms 8985 and 8986 attached. It
includes the following information in Part V of the Form 8986.
Example 2. Form 8986, Part V. Partner’s Total Reviewed Year Income, Gain, Loss, Deduction, Credits, and
Other Items
Schedule K-1
(f)
(e)
(a)
(b)
Line title
(c)
Code*
(d)
Reviewed year
adjustments as
finally determined
Check If statement
in Part VI
Line number
As reported
K-3
Part VIII, Line 1a1
YY
Partnership ABC must report the adjustment amount with respect to Partner A in Part VI of Form 8986 as follows.
Example 2. Form 8986, Part VI. Statements
(a)
(b)
Statement
Line number/code
Part VIII, K-3 Line
As reported
1234
Adjustments
As corrected
K-3
A
B
PAS
C
iii
1a1ii
1,000
500
1,500
Note. Although the first three lines are not adjusted, they are necessary to identify the adjustment line, because there might be more
than one Part VIII.
Column (f), Reviewed year adjustments as finally
determined—Enter the partner’s share of reviewed year
adjustments that corresponds to the line item in column (a). For
adjustments to Schedule K-3, do not enter amounts on column
(f).
should not be shown in this column. For adjustments to
Schedule K-3, do not enter amounts on column (g).
Column (h), Net (column (f) minus column (g))—Enter the
amount in column (f) less the amount in column (g). For
adjustments to Schedule K-3, do not enter amounts on column
(h).
Column (g), Approved modifications—Enter the partner’s
share of the total modifications approved by the IRS with respect
to the item adjusted. Modifications related to the filing of an AAR
Loans and other items recharacterized as distributions to
partners. If a reviewed year adjustment has been made to
change a partner loan or other item to a partner distribution, this
5
Instructions for Form 8986 (January 2024)
adjustment should be reported with the column (a) line number
that corresponds to the Schedule K-1 “Distributions” category
and with column (c), code A, for cash distributions if the partner
received money, and as a code C if the partner received property
other than money.
statements section can be used to add an “As Corrected”
column to the amounts reported in Part V. If doing so be sure to
complete the line number field in column (a) which is a
mandatory field for all items entered in Part VI (Statements).
Statements related to section 199A information.
Disguised sale adjustments. Distributions to a partner that
were changed as part of an audit proceeding to disguised sale
proceeds under section 707 should be reported with the column
(a) line number that corresponds to the Schedule K-1 “Other”
category and with column (c), code DS. The partnership should
also include a statement in Part VI describing the asset that was
sold, the proceeds, and the tax basis of the asset at the time of
the contribution.
Note. Because section 199A dividends are reported as a
cumulative amount and not per qualified trade or business, these
should only be included once in the first section 199A statement
attached to Form 8986, regardless of how many statements may
be necessary.
Adjustments that increase or decrease section 199A
information reported to the partners must be shown in a separate
statement for each trade or business or each aggregated trade
or business. See below for an example of the information that
should be included in Part VI of the Form 8986.
Note. Column (f) amounts should correspond to the partner’s
distributive share of audit adjustments as finally determined (or
AAR adjustments). Column (g) amounts should only include
approved modifications with respect to the partner receiving the
Form 8986. Only approved amended return and closing
agreement modifications should be included in column (g)
above. All other modifications should be included in a separate
statement in Part VI.
Note. Section 199A dividends should only be included in the
first section 199A statement attached to Form 8986.
Each trade or business should indicate if it is a PTP, an
Aggregated, or an SSTB. See the Instructions for Schedule K-1
(Form 1065 or Form 1120-S).
Applicable penalties. The applicability of penalties is
determined at the audited partnership or AAR partnership level.
In the penalties section of Part V, enter the penalty code
sections, descriptions, rates, adjustment line numbers, and total
adjustment amount to which the penalty applies.
If the partnership is a patron of a specified agricultural or
horticultural cooperative, the partnership must also include a
statement for each trade or business identifying the
adjustment(s) to qualified items of income, gain, deduction, and
loss and W-2 wages allocable to qualified payments.
Part VI—Statements
Note. Because section 199A(g) deductions are reported as a
cumulative amount and not per qualified trade or business, these
should only be included once in the first statement of
adjustments to items allocable to qualified payments attached to
Form 8986, regardless of how many statements may be
necessary.
Column (a), Line no./code—List the corresponding Part V
column (a) Schedule K-1 line number and column (c) code (if
applicable) for each item for which a statement is included.
Column (b), Statement—Include a detailed explanation of the
amount(s) that correspond to the item in column (a).
Supporting schedules and statements should be in a format
that shows the original amount, the net change, and the correct
amount for each item listed in the statement. If any column (b)
statements exceed the space allowable in one box, continue in
the next box with the same information in column (a).
Example. Assume Partnership ABC has one trade or
business that is an SSTB and is not a patron in a specified
agricultural or horticultural cooperative. On its filed return,
Partnership ABC reported the items shown in Table 1 on
Statement A—QBI Pass-Through Entity Reporting, attached to
Partner A’s Schedule K-1.
Statements provided in addition to amounts in Part V. To
further explain the effect of any adjustment, the Part VI
Table 1. Example of Section 199A Related Amounts Reported to Partner A on Statement A—QBI
Pass-Through Entity Reporting
EIN:
PTP
Aggregated
■ SSTB
Partner A’s share of:
QBI or qualified PTP items subject to partner-specific determinations:
Ordinary business income (loss)
$200,000
$10,000
Rental income (loss)
Royalty income (loss)
Section 1231 gain (loss)
Other deductions
$50,000
$80,000
$50,000
$60,000
$5,000
W-2 wages
UBIA of qualified property
Section 199A dividends
6
Instructions for Form 8986 (January 2024)
Assume the adjustments per audit increased Partner A’s share of ordinary income by $10,000 and royalty income by $5,000, and
decreased other deductions by $20,000. Assume that all of the adjustments are determined to be qualified items of income, gain,
deduction, and loss at the partnership level.
Partnership ABC should include in Part VI of the Form 8986 sent to Partner A the information shown in Table 2.
Table 2. Example of Part VI of Form 8986
EIN:
As Reported
Net Adjustments
As Corrected
Partner’s Share:
PTP
PTP
Aggregated
■ SSTB
Aggregated
■ SSTB
QBI or qualified PTP items subject to
partner-specific determinations:
Ordinary business income (loss)
$200,000
$10,000
$10,000
$5,000
$210,000
$10,000
$5,000
Rental income (loss)
Royalty income (loss)
Section 1231 gain (loss)
Other deductions
$50,000
$80,000
$50,000
$60,000
$5,000
$50,000
$60,000
$50,000
$60,000
$5,000
($20,000)
W-2 wages
UBIA of qualified property
Section 199A dividends
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated burden
for business taxpayers filing this form is approved under OMB
control number 1545-0123 and is included in the estimates
shown in the instructions for their business income tax return.
Paperwork Reduction Act Notice. We ask for the information
on this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to
ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
If you have comments concerning the accuracy of these time
estimates or suggestions for making this form simpler, we would
be happy to hear from you. See the instructions for the tax return
with which this form is filed.
You are not required to provide the information requested on
a form that is subject to the Paperwork Reduction Act unless the
form displays a valid OMB control number. Books or records
relating to a form or its instructions must be retained as long as
their contents may become material in the administration of any
Internal Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
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Instructions for Form 8986 (January 2024)