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ფორმა 1065 ინსტრუქცია განრიგის K-1

2021 წლის პარტნიორის ინსტრუქცია K-1 გრაფიკისთვის (ფორმა 1065)

პარტნიორის ინსტრუქციები განრიგის K-1 (ფორმა 1065), პარტნიორის შემოსავლის წილის, შეღწევების, კრედიტების და ა. შ. (მხოლოდ პარტნიორის გამოყენებისათვის)

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Department of the Treasury  
Internal Revenue Service  
2023  
Partner’s Instructions for  
Schedule K-1 (Form 1065)  
Partner's Share of Income, Deductions, Credits, etc.  
(For Partner's Use Only)  
Contents  
Page  
Box 13. Other deductions. Code W, Other deductions,  
previously included a number of bulleted items. These  
items have been assigned individual codes. See Box 13.  
Other Deductions, later, for the expanded list of codes.  
Box 15. Credits. Code P, Other credits, previously  
included a number of bulleted items. These items have  
been assigned individual codes. See Box 15. Credits,  
later, for the expanded list of codes and codes for new  
energy credits.  
Box 19. Distributions. For 2023, partners receiving  
distributions of property from a partnership in a liquidating  
or non-liquidating distribution under certain circumstances  
must attach a statement to their tax return. See Box 19.  
Distributions, later.  
Box 20. Other information. Code AH, Other  
information, previously included a number of bulleted  
items. These items have been assigned individual codes.  
See Box 20. Other Information, later, for the expanded list  
of codes.  
General Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 2  
Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . . 12  
Part I. Information About the Partnership . . . . . . . . . . 12  
Part II. Information About the Partner . . . . . . . . . . . . 12  
Part III. Partner's Share of Items . . . . . . . . . . . . . . . . 14  
Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15  
Box 11. Other Income (Loss) . . . . . . . . . . . . . . . . . 17  
Box 12. Section 179 Deduction . . . . . . . . . . . . . . . . 19  
Box 13. Other Deductions . . . . . . . . . . . . . . . . . . . . 19  
Box 14. Self-Employment Earnings (Loss) . . . . . . . . 22  
Box 15. Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22  
Box 16. International Transactions . . . . . . . . . . . . . . 24  
Box 17. Alternative Minimum Tax (AMT) Items . . . . . 25  
Box 18. Tax-Exempt Income and Nondeductible  
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25  
Box 19. Distributions . . . . . . . . . . . . . . . . . . . . . . . . 25  
Box 20. Other Information . . . . . . . . . . . . . . . . . . . . 26  
List of Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32  
Section references are to the Internal Revenue Code  
unless otherwise noted.  
Box 20, code P. The instructions have been updated  
relating to section 453A information required to be  
provided by the partnership.  
Box 20, code X. Disclosure of payment obligations  
Future Developments  
For the latest information about developments related to  
Schedule K-1 (Form 1065) and the Partner's Instructions  
for Schedule K-1 (Form 1065), such as legislation enacted  
after they were published, go to IRS.gov/Form1065.  
including guarantees and deficit obligations (DROs).  
Reminders  
Domestic partnerships treated as aggregates for pur-  
poses of sections 951, 951A, and 956(a). Final  
regulations announced in T.D. 9960 treat domestic  
partnerships as aggregates of their partners for purposes  
of sections 951, 951A, and 956(a), and any provision that  
specifically applies by reference to any of those sections,  
for tax years of foreign corporations beginning on or after  
January 25, 2022, and for tax years of U.S. persons in  
which or with which such tax years of foreign corporations  
end. Domestic partnerships may apply the final  
What’s New  
Partner’s basis. The Worksheet for Adjusting the Basis  
of a Partner’s Interest in the Partnership has been  
changed to provide more details. Specific instructions are  
also included.  
Item J. The checkbox under item J has been expanded  
to include a Sale checkbox and an Exchange checkbox.  
The instructions outline what is considered a sale and an  
exchange; see Item J, later, for more information.  
Item K. Item K was expanded to 3 sections: K1, K2, and  
K3. Item K3 is a new checkbox to indicate whether the  
listed liabilities are subject to guarantees or other payment  
obligations. See Item K3, later.  
regulations to tax years of foreign corporations beginning  
after December 31, 2017, and to tax years of the domestic  
partnership in which or with which such tax years of the  
foreign corporations end, provided certain consistency  
requirements are met.  
Line 16. International transactions notice require-  
ment. If box 16 isn't checked, you should receive  
notification from the partnership that you won't be  
receiving a Schedule K-3 unless you request one.  
Box 11. Other income (loss). Code I, Other income  
(loss), previously included a number of bulleted items.  
These items have been assigned individual codes. See  
Box 11. Other Income (Loss), later, for the expanded list of  
codes.  
Individual retirement account (IRA) partners. The  
partnership has entered the identifying number of the IRA  
custodian in item E. The partnership has entered the  
Jan 18, 2024  
Cat. No. 11396N  
identifying number of the IRA itself in box 20, code AR, if  
there is unrelated business taxable income reported in  
box 20, code V. The IRA partner uses this information in  
filing Form 990-T, Exempt Organization Business Income  
Tax Return.  
Decedent’s Schedule K-1  
If you're the executor of an estate and you have received a  
decedent's Schedule K-1, then you have the responsibility  
to notify the partnership of the name and taxpayer  
identification number (TIN) of the decedent's estate if the  
partnership interest is part of the decedent's estate. If a  
decedent died in a prior year and the partnership  
continues to send the decedent a Schedule K-1 after  
being notified of the decedent's death, then you should  
request that the partnership send a corrected  
General Instructions  
Purpose of Schedule K-1  
The partnership uses Schedule K-1 to report your share of  
the partnership's income, deductions, credits, etc. Keep it  
for your records. Don’t file it with your tax return unless  
you're specifically required to do so. (See Code O under  
Box 15, later.) The partnership files a copy of  
Schedule K-1. If you receive an interest in a partnership by  
reason of a former partner's death, you must provide the  
partnership with your name and TIN. For treatment of  
partnership income upon the death of a partner, see Pub.  
559, Survivors, Executors, and Administrators.  
Schedule K-1 (Form 1065) with the IRS.  
For your protection, Schedule K-1 may show only the  
last four digits of your identifying number (social security  
number (SSN), etc.). However, the partnership has  
reported your complete identifying number to the IRS.  
Although the partnership generally isn't subject to  
income tax, you may be liable for tax on your share of the  
partnership income, whether or not distributed. Include  
your share on your tax return if a return is required. Use  
these instructions to help you report the items shown on  
Schedule K-1 on your tax return.  
The amount of loss and deduction you may claim on  
your tax return may be less than the amount reported on  
Schedule K-1. It's the partner's responsibility to consider  
and apply any applicable limitations. See Limitations on  
information.  
Sale or Exchange of Partnership  
Interest  
Generally, a partner who sells or exchanges a partnership  
interest in a section 751(a) exchange must notify the  
partnership, in writing, within 30 days of the exchange (or,  
if earlier, by January 15 of the calendar year following the  
calendar year in which the exchange occurred). A section  
751(a) exchange is any sale or exchange of a partnership  
interest in which any money or other property received by  
the partner in exchange for that partner's interest is  
attributable to unrealized receivables (as defined in  
section 751(c)) or inventory items (as defined in section  
751(d)).  
The written notice to the partnership must include the  
names and addresses of both parties to the exchange, the  
identifying numbers of the transferor and (if known) of the  
transferee, and the exchange date.  
Inconsistent Treatment of Items  
If you're a partner in a partnership that hasn't elected out  
of the centralized partnership audit regime enacted by the  
Bipartisan Budget Act of 2015 (BBA), you must report the  
items shown on your Schedule K-1 (and any attached  
statements) the same way that the partnership treated the  
items on its return.  
An exception to this rule is made for sales or exchanges  
of publicly traded partnership interests for which a broker  
is required to file Form 1099-B, Proceeds From Broker and  
Barter Exchange Transactions.  
If a partner is required to notify the partnership of a  
section 751(a) exchange but fails to do so, the partner will  
be subject to a penalty for each such failure. However, no  
penalty will be imposed if the partner can show that the  
failure was due to reasonable cause and not willful  
neglect. See Form 8308, Report of a Sale or Exchange of  
Certain Partnership Interests, and its instructions, for  
additional information.  
If the treatment on your original or amended return is  
inconsistent with the partnership's treatment, or if the  
partnership was required to but hasn't filed a return, you  
must file Form 8082, Notice of Inconsistent Treatment or  
Administrative Adjustment Request (AAR), with your  
original or amended return to identify and explain any  
inconsistency (or to note that a partnership return hasn't  
been filed).  
If you're required to file Form 8082 but don't do so, you  
may be subject to the accuracy-related penalty. This  
penalty is in addition to any tax that results from making  
your amount or treatment of the item consistent with that  
shown on the partnership's return. Any deficiency that  
results from making the amounts consistent may be  
assessed immediately.  
Gain or loss from the disposition of your  
partnership interest may be net investment  
income (NII) under section 1411 and could be  
TIP  
subject to the net investment income tax (NIIT). See Form  
8960, Net Investment Income Tax—Individuals, Estates,  
and Trusts, and its instructions for information about how  
to report and figure the tax due.  
Three-year holding period requirement for  
Errors  
applicable partnership interests. Section 1061  
!
CAUTION  
If you believe the partnership has made an error on your  
Schedule K-1, notify the partnership and ask for a  
corrected Schedule K-1. Don't change any items on your  
copy of Schedule K-1. Be sure that the partnership sends  
a copy of the corrected Schedule K-1 to the IRS.  
increases the required long-term capital gains  
holding period for an applicable partnership interest from  
more than 1 year to more than 3 years. The holding period  
applies only to applicable partnership interests held in  
connection with the performance of services as defined in  
2
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
section 1061. See section 1061 and Pub. 541,  
Partnerships, for details.  
that section). For details, see the instructions for code J in  
box 13.  
Section 108(b)(5) (election related to reduction of tax  
attributes due to exclusion from gross income of discharge  
of indebtedness).  
Nominee Reporting  
Any person who holds, directly or indirectly, an interest in  
a partnership as a nominee for another person must  
furnish a written statement to the partnership by the last  
day of the month following the end of the partnership's tax  
year. This statement must include the name, address, and  
identifying number of the nominee and such other person;  
description of the partnership interest held as nominee for  
that person; and other information required by Temporary  
Regulations section 1.6031(c)-1T. A nominee that fails to  
furnish this statement must furnish to the person for whom  
the nominee holds the partnership interest a copy of  
Schedule K-1 and related information within 30 days of  
receiving it from the partnership.  
Section 263A(d) (preproductive expenses). See the  
instructions for code P in box 13.  
Section 617 (deduction and recapture of certain mining  
exploration expenditures).  
Section 901 (foreign tax credit). See Schedule K-3.  
Additional Information  
To get forms and publications, see the instructions for your  
tax return or go to IRS.gov.  
Limitations on Losses, Deductions,  
and Credits  
There are potential limitations on partnership losses that  
you can deduct on your return. These limitations and the  
order in which you must apply them are as follows: the  
basis limitations, the at-risk limitations, and the passive  
activity limitations. These limitations are discussed below.  
A nominee who fails to furnish all the information  
required by Temporary Regulations section 1.6031(c)-1T  
when due, or who furnishes incorrect information, is  
subject to a $310 penalty for each failure. The maximum  
penalty is $3,783,000 for all such failures during a  
calendar year. If the nominee intentionally disregards the  
requirement to report correct information, each $310  
penalty increases to $630 or, if greater, 10% of the  
aggregate amount of items required to be reported, and  
there is no limit to the amount of the penalty.  
Other limitations may apply to specific deductions (for  
example, the section 179 expense deduction). Generally,  
specific limitations apply before the at-risk and passive  
loss limitations.  
Basis Limitations  
Definitions  
General Partner  
A general partner is a partner who is personally liable for  
partnership debts.  
Generally, partners may only claim their share of a  
partnership loss (including a capital loss) to the extent it  
doesn’t exceed their adjusted basis in the partnership at  
the end of the partnership’s tax year. Any losses and  
deductions not allowed can be carried forward.  
Limited Partner  
It’s the partner’s responsibility to track and maintain the  
information necessary to figure their adjusted basis in the  
partnership (also known as outside basis). Regulations  
section 1.705–1(a)(1) requires partners to determine the  
adjusted basis in their partnership interest as necessary to  
determine their tax liability. For example, a determination  
is required when a partner sells or exchanges all or part of  
their partnership interest or when a partner’s entire  
A limited partner is a partner in a partnership formed  
under a state limited partnership law, whose personal  
liability for partnership debts is limited to the amount of  
money or other property that the partner contributed or is  
required to contribute to the partnership. Some members  
of other entities, such as domestic or foreign business  
trusts or limited liability companies (LLCs) that are  
classified as partnerships, may be treated as limited  
partners for certain purposes.  
partnership interest is liquidated. In general, a partner’s  
adjusted basis is determined under the principles of  
subchapter K, including sections 705, 722, 733, and 742.  
However, whether a partner qualifies as a limited  
partner for purposes of self-employment tax depends on  
whether the partner meets the definition of a limited  
partner under section 1402(a)(13).  
Although the partnership provides an analysis of the  
partner’s capital account on item L of Schedule K-1, that  
information is based on the partnership’s books and  
records and can’t be used to figure the partner’s adjusted  
basis.  
Nonrecourse Loans  
Nonrecourse loans are those liabilities of the partnership  
for which no partner or related person bears the economic  
risk of loss.  
Use the Worksheet for Adjusting the Basis of a  
Partner’s Interest in the Partnership to figure the basis of  
your interest in the partnership.  
Elections  
For partnership tax years beginning after 2017, a  
partner's share of the adjusted basis in partnership  
charitable contributions (defined in section 170(c)) and  
taxes, described in section 901, paid or accrued to foreign  
countries and to U.S. territories is subject to this basis  
limitation (defined in section 704(d)).  
Generally, the partnership decides how to figure taxable  
income from its operations. However, certain elections are  
made by you separately on your income tax return and not  
by the partnership. These elections are made under the  
following code sections.  
Section 59(e) (deduction of certain qualified  
expenditures ratably over the period of time specified in  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
3
   
and that gain increases basis. Don’t include gain from the  
transfer of liabilities.  
Line 6. Enter the amount by which your cumulative  
depletion deduction (other than oil and gas depletion)  
exceeds your proportionate share of basis in the property  
subject to depletion.  
Partnership Basis Worksheet Specific  
Instructions  
There may be some transactions or certain distributions  
that require you to determine the adjusted basis of your  
partnership interest at the point in time of the transaction  
or distribution rather than in the order and amounts  
specified in these instructions.  
Line 7. Add lines 1, 2, 3e, 4o, 5, and 6.  
Section B—Decreases  
Part I—Partner Basis  
Line 8a. Enter the cash and marketable securities  
distributed to you by the partnership as reported in box 19,  
code A, of Schedule K-1.  
Line 8b. Enter the property distributed subject to  
recognition of precontribution gain under section 737 as  
reported in box 19, code B, of Schedule K-1. Don’t include  
the amount of property distributions included in your  
taxable income.  
Line 1. Enter your adjusted basis at the beginning of the  
partnership’s tax year. This will equal your adjusted basis  
at the end of the prior year. Basis can’t be less than zero.  
Section A—Increases  
Line 2. Enter the purchase price of any partnership  
interests acquired during the year, plus the amount of  
money or cash equivalents contributed to the partnership  
and the adjusted basis of property contributed to the  
partnership less any liabilities associated with the  
property. If liabilities associated with the property are  
greater than your adjusted basis in the property, then  
include the excess liabilities as liabilities assumed by the  
partnership on line 9b. Include the fair market value (FMV)  
of any partnership interests received in exchange for  
services provided to the partnership. Don’t include the  
FMV of services performed in exchange for guaranteed  
payments.  
Line 8c. Enter the partnership’s adjusted basis in the  
property distributed or, if less, your remaining outside  
basis assigned to the property. See Pub. 541.  
Line 8d. Add lines 8a, 8b, and 8c.  
Line 9a. If the sum of lines 3c and 3d is negative, enter  
the amount here; otherwise, enter zero.  
Line 9b. Enter the amount of your individual liabilities that  
the partnership assumed during the tax year.  
Line 9c. Add lines 9a and 9b.  
Line 10. Add lines 8d and 9c.  
Line 11a. Add lines 7 and 10. If the amount is negative,  
enter zero on line 11a and enter the amount as a positive  
number on line 11b.  
Line 3a. Enter the total ending liabilities from your  
Schedule K-1, item K1.  
Line 3b. Enter the total beginning liabilities from your  
Schedule K-1, item K1.  
Line 3c. Subtract line 3b from line 3a.  
Line 11b. See the instructions for line 11a. The amount  
reported on this line represents a taxable gain on  
distributions in excess of basis. Report the gain on your  
tax return.  
Line 3d. Enter the amount of partnership liabilities you  
assumed during the tax year. See Regulations section  
1.752-1(d).  
Line 3e. Add lines 3c and 3d. If the sum is negative, enter  
the amount on line 9a. If the sum is zero or positive, enter  
the amount on line 3e.  
Part II—Allowable Loss and Deduction Items  
A partner's distributive share of partnership losses and  
deduction items in a given tax year are only allowed to the  
extent of the partner’s adjusted basis in their partnership  
interest following the adjustments described in Part I.  
When basis is insufficient, and there is more than one  
category of loss or deduction items (for example,  
short-term capital loss and long-term capital loss) that  
reduces basis, the amount of each category of loss or  
deduction item that's disallowed is determined on a pro  
rata basis.  
Line 4. Enter on lines 4a through 4n all separately figured  
and non-separately figured items of income from  
Schedule K-1. See below for special line item instructions.  
Note. Enter only positive amounts from Schedule K-1 on  
line 4. Negative amounts (decreases to basis) are entered  
on lines 8 through 10.  
Line 4d. Reduce interest income reported on this line by  
any amount included in interest income with respect to the  
credit to holders of clean renewable energy bonds.  
Line 4n. Enter the business interest expense (BIE)  
reported in box 20, code N, of Schedule K-1, or the  
amount by which BIE reduced positive ordinary income  
amounts in box 1, 2, or 3 of Schedule K-1, if less.  
A partner's loss and deduction items in excess of basis  
are suspended and carried forward for use in the next tax  
year in which the partner has adjusted basis in their  
partnership interest available. See Regulations section  
1.704-1(d).  
Line 4o. Enter the sum of the amounts on lines 4a  
through 4n.  
Part II shows the pro rata allocation for each category of  
loss or deduction that's suspended and tracks this  
information. Enter numbers as negative amounts.  
Line 5. Enter any gain recognized on contributions of  
property during the year. For example, a contribution to a  
partnership which would be treated as an investment  
company if it were incorporated would be subject to gain  
4
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
Note. Positive amounts (increases to basis) are entered  
Line 15q, column A. Enter BIE reported in box 20, code  
on line 4.  
N, of Schedule K-1.  
Column A.  
Note that BIE is a separate loss class under  
Line 12. Enter as a negative amount any nondeductible  
expenses reported in box 18 of Schedule K-1.  
Line 13. Enter as a negative amount the current year  
deduction for depletion of any partnership oil and gas  
property, not to exceed your allocable share of the  
adjusted basis of the property.  
Regulations section 1.163(j)-6(h)(1). To the extent basis is  
proportionately allocated to this loss class (consisting of  
lines 15n and 15q), interest expense is absorbed by  
applying currently deductible BIE (line 15q) to basis first.  
Once line 15q has been fully absorbed by basis, any  
remaining basis proportionately allocated to the BIE class  
is then absorbed by applying it to EBIE on line 15n. EBIE  
is only applicable to partnerships subject to section 163(j).  
BIE is a separate loss class whether or not the taxpayer is  
subject to the section 163(j) limitation. See Regulations  
sections 1.704-1(d)(2) and 1.163(j)-6(h)(1). If any of the  
suspended loss consists of BIE, EBIE, or negative section  
163(j) expense carryover (which will be reflected as EBIE  
carryforward on line 15n, columns B (prior year) and D  
(current year disallowed carryforward)), see the  
Column B.  
Line 12. Enter any prior-year loss or deduction items  
that were suspended due to basis limitations and carried  
forward to the current tax year.  
Line 13. Enter any prior-year loss or deduction items  
that were suspended due to basis limitations and carried  
forward to the current tax year.  
Column C.  
Instructions for Form 8990, Limitation on Business Interest  
Expense Under Section 163(j), regarding the allocation of  
these three items.  
Line 12. Enter the sum of line 12, columns A and B.  
Line 13. Enter the sum of line 13, columns A and B.  
Column D.  
Lines 15, column B. Enter any prior-year loss and  
deduction items suspended due to basis limitations that  
were carried forward to the current tax year.  
Lines 15, column C. Add each line, column A and  
column B, and enter the amount in the corresponding line  
of column C.  
Lines 15, column D. If Part II, line 14, is zero, skip  
column D. If basis, as reported on Part II, line 14, is greater  
than line 15s, column C, enter the amount for each line in  
column C in column D. If basis as reported on Part II,  
line 14, is less than line 15s, column C, enter the pro rata  
amount on the corresponding line in column D. The total  
allocation amount reported in line 15s, column D, can’t  
exceed the amount report on Part II, line 14.  
Line 12. If the sum of lines 12 and 13, column C,  
doesn’t exceed the amount on line 11a, then enter the  
amount of line 12, column C, in the corresponding line of  
column D. If the sum of lines 12 and 13, column C,  
exceeds the amount of basis remaining on line 11a, then  
you must allocate the remaining basis proportionately in  
column D between lines 12 and 13, column C.  
Line 13. If the sum of lines 12 and 13, column C,  
doesn’t exceed the amount on line 11a, then enter the  
amount of line 13, column C. If the sum of lines 12 and 13,  
column C, exceeds the amount of basis remaining on  
line 11a, then you must allocate the remaining basis  
proportionately in column D between lines 12 and 13,  
column C.  
Column E.  
Note. This represents the amount of loss or deduction  
items you’re allowed to report on your return from the  
partnership this tax year, as limited by your basis. This  
amount may not match the amount reported on your  
current year Schedule K-1.  
Line 12. If the sum of lines 12 and 13, column C,  
exceeds the amount of basis remaining on line 11a,  
subtract line 12, column D, from line 12, column C, and  
enter the result in column E.  
Line 13. If the sum of lines 12 and 13, column C,  
exceeds the amount of basis remaining on line 11a,  
subtract line 13, column D, from line 13, column C, and  
enter the result in column E.  
Lines 15, column E. For each line, subtract column D  
from column C and enter the amount in column E.  
Line 16. Enter the amount from line 15s, column D.  
Line 14. Reduce line 11a by the amounts on lines 12 and  
Line 17. If you had unutilized EBIE and disposed of a  
portion or all of your partnership interest, enter the  
increase in basis on line 17. See Regulations section  
1.163(j)-6(h)(3).  
Line 18. Add lines 14, 16, and 17. This amount  
represents your basis in your partnership interest at the  
end of the year.  
13, column D, and enter on line 14.  
Lines 15, column A. Enter the loss and deduction  
amounts for each item as reported on your Schedule K-1.  
See below for special line item instructions.  
Line 15a, column A. Exclude BIE that was included in  
reporting losses in box 1, 2, or 3 of Schedule K-1. BIE is  
included as a separate loss class on line 15r.  
Line 15i, column A. Include your share of the  
partnership's section 179 expense deduction for the year  
even if you can’t deduct all of it due to limitations.  
Basis adjustments computed in different manner  
than specified in these instructions.  
Section 961(a) adjusted basis increases. Your  
adjusted basis may be increased under section 961(a) for  
amounts that you’re required to include in income with  
respect to a controlled foreign corporation (CFC) under  
sections 951(a) (for example, subpart F income) and 951A  
(global intangible low-taxed income (GILTI)) because  
Line 15n, column A. Enter excess business interest  
expense (EBIE).  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
5
you’re a U.S. shareholder of the CFC and you own (within  
the meaning of section 958(a)(2)) stock of the CFC  
through the partnership.  
corporation that begins on or after January 25, 2022. See  
the Partner’s Instructions for Schedule K-3 for more  
information on sections 951(a) and 951A inclusions.  
Section 961(b)(1) adjusted basis decreases. Your  
adjusted basis may be decreased under section 961(b)(1)  
by the sum of (a) the dollar basis in previously taxed  
earnings and profits (PTEP) in your annual PTEP  
accounts that you exclude from your gross income under  
section 959(a) by reason of a distribution made to the  
partnership, and (b) the dollar amount of any foreign  
income taxes allowed as a credit under section 960(b)  
with respect to such PTEP.  
For purposes of section 951(a), if the partnership is a  
domestic partnership, then you’ll be treated as owning  
(within the meaning of section 958(a)) stock of a CFC  
through the partnership (a) for a tax year of the foreign  
corporation that begins before January 25, 2022, only if  
the partnership applies Regulations section 1.958-1(d)(1)  
to treat it as not owning stock of the foreign corporation  
within the meaning of section 958(a) for purposes of  
section 951; and (b) for any tax year of the foreign  
6
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
Worksheet for Adjusting the Basis of a Partner’s  
Interest in the Partnership  
Keep for Your Records  
Part I—Partner Basis  
1.  
Adjusted basis at the beginning of the tax year. Don’t enter less than zero . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.  
Section A—Increases  
2.  
Acquisitions of partnership interests and contributions of money and property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.  
3a. Partner's share of liabilities at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3a.  
3b. Partner's share of liabilities at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3b  
3c. Increase (decrease) in partnership liabilities (subtract line 3b from line 3a) . . . . . . . . . . . . . . . . 3c.  
3d. Partnership liabilities assumed during the tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3d.  
3e. Increase in liabilities (add lines 3c and 3d) (If amount is negative, enter on line 9a below.) . . . . . . . . . . . . . . . . . . . . . 3e.  
4a. Ordinary business income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4a.  
4b. Net rental real estate income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4b.  
4c. Other net rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4c.  
4d. Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4d.  
4e. Ordinary dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4e.  
4f.  
Dividend equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4f.  
4g. Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4g.  
4h. Net short-term capital gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4h.  
4i.  
4j.  
Net long-term capital gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4i.  
Net section 1231 gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4j.  
4k. Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4k.  
4l. Tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4l.  
4m. Other increases to basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4m.  
4n. BIE (enter as a positive) (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4n.  
4o. Total increases (add lines 4a through 4n) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4o.  
5.  
6.  
7.  
Gain recognized on contributions of property during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.  
Excess depletion adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.  
Total basis before decreases (add lines 1, 2, 3e, 4o, 5, and 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.  
Section B—Decreases (Enter as a negative.)  
8. Withdrawals, distributions of money, and the adjusted basis of distributed property  
8a. Cash and marketable securities distributed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8a.  
8b. Distribution subject to section 737 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8b.  
8c. Other property distributed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8c.  
8d. Total distributions (add lines 8a through 8c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8d.  
9a. Decrease in partner's share of liabilities (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9a.  
9b. Partner's liabilities assumed by the partnership during the tax year . . . . . . . . . . . . . . . . . . . . . . 9b.  
9c. Decrease in liabilities (sum of lines 9a and 9b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9c.  
10. Total distributions and decrease in liabilities (add lines 8d and 9c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.  
11a. Basis after distributions (add lines 7 and 10) (If the result is negative, enter -0- on line 11a and enter the amount as a  
positive on line 11b.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11a.  
11b. Gain on distributions in excess of basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11b.  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
7
 
Worksheet for Adjusting the Basis of a Partner’s  
Interest in the Partnership (continued)  
Keep for Your Records  
Part II—Allowable Loss and Deduction Items (Enter as a  
negative.)  
Column A  
Column B  
Prior-year  
Column C  
Total of  
Column D  
Column E  
Current  
year  
distributive  
share  
Amount  
reducing  
basis (see  
instructions)  
Suspended  
carryforward  
carryforward columns A  
amount and B  
12. Nondeductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . .  
13. Depletion for oil and gas . . . . . . . . . . . . . . . . . . . . . . . . . . .  
14. Basis after nondeductible expenses and depletion (reduce line 11a by the amounts on lines 12 and 13,  
column D) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
Column A  
Column B  
Prior-year  
Column C  
Total of  
Column D  
Column E  
Current  
year  
distributive  
share  
Allowable  
loss and  
deductions  
(see  
Disallowed  
loss  
carryforward  
carryforward columns A  
amount  
and B  
instructions)  
15a. Ordinary business loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15b. Net rental real estate loss (excluding BIE) . . . . . . . . . . . . . .  
15c. Other net rental loss (excluding BIE) . . . . . . . . . . . . . . . . . .  
15d. Foreign taxes paid or accrued . . . . . . . . . . . . . . . . . . . . . .  
15e. Net short-term capital loss . . . . . . . . . . . . . . . . . . . . . . . . .  
15f. Net long-term capital loss . . . . . . . . . . . . . . . . . . . . . . . . . .  
15g. Net section 1231 loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15h. Other losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15i. Section 179 deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
Other Deductions  
15j. Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15k. Investment interest expense . . . . . . . . . . . . . . . . . . . . . . . .  
15l. Deductions (royalty income) . . . . . . . . . . . . . . . . . . . . . . . .  
15m. Section 59(e)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15n. EBIE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15o. Deductions—portfolio (other) . . . . . . . . . . . . . . . . . . . . . . .  
15p. All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15q. BIE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
15r. Other decreases to basis . . . . . . . . . . . . . . . . . . . . . . . . . .  
15s. Subtotal (add lines 15a through 15r) . . . . . . . . . . . . . . . . . .  
15t.  
16.  
Total deductions and losses (add lines 15a through 15r, column C) . . . . . . . . . . . . . . . . . .  
Allowable deductions and losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
17. Unutilized EBIE on sale of partnership interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  
18. Adjusted basis at the end of the tax year (Enter the sum of lines 14, 16, and 17.) . . . . . . . . . . . . . . . . . . . . .  
8
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
2. Rental real estate activities in which you materially  
participated if you were a real estate professional for the  
tax year. You were a real estate professional only if you  
met both of the following conditions.  
a. More than half of the personal services you  
performed in trades or businesses were performed in real  
property trades or businesses in which you materially  
participated.  
At-Risk Limitations  
Generally, if you have (a) a loss or other deduction from  
any activity carried on as a trade or business or for the  
production of income by the partnership, and (b) amounts  
in the activity for which you aren’t at risk, you’ll have to  
complete Form 6198, At-Risk Limitations, to figure your  
allowable loss for the activity.  
The at-risk rules generally limit the amount of loss and  
other deductions that you can claim to the amount you  
could actually lose in the activity. These losses and  
deductions include a loss on the disposition of assets and  
the section 179 expense deduction. However, if you  
acquired your partnership interest before 1987, the at-risk  
rules don't apply to losses from an activity of holding real  
property placed in service before 1987 by the partnership.  
The activity of holding mineral property doesn't qualify for  
this exception. The partnership should identify on a  
statement attached to Schedule K-1 any losses that aren't  
subject to the at-risk limitations.  
b. You performed more than 750 hours of services in  
real property trades or businesses in which you materially  
participated.  
For a closely held C corporation (defined in  
section 465(a)(1)(B)), the above conditions are  
treated as met if more than 50% of the  
TIP  
corporation's gross receipts were from real property trades  
or businesses in which the corporation materially  
participated.  
For purposes of this rule, each interest in rental real  
estate is a separate activity, unless you elect to treat all  
interests in rental real estate as one activity. For details on  
making this election, see the Instructions for Schedule E  
(Form 1040), Supplemental Income and Loss.  
If you're married filing jointly, either you or your spouse  
must separately meet both (a) and (b) of the above  
conditions, without taking into account services performed  
by the other spouse.  
Generally, you aren't at risk for amounts such as the  
following.  
Nonrecourse loans used to finance the activity, to  
acquire property used in the activity, or to acquire your  
interest in the activity that aren't secured by your own  
property (other than the property used in the activity). See  
the instructions for item K1, later, for the exception for  
qualified nonrecourse financing secured by real property.  
A real property trade or business is any real property  
Cash, property, or borrowed amounts used in the  
development, redevelopment, construction,  
activity (or contributed to the activity, or used to acquire  
your interest in the activity) that are protected against loss  
by a guarantee, a stop-loss agreement, or other similar  
arrangement (excluding casualty insurance and insurance  
against tort liability).  
reconstruction, acquisition, conversion, rental, operation,  
management, leasing, or brokerage trade or business.  
Services you performed as an employee aren't treated as  
performed in a real property trade or business unless you  
owned more than 5% of the stock (or more than 5% of the  
capital or profits interest) in the employer.  
Amounts borrowed for use in the activity from a person  
who has an interest in the activity, other than as a creditor,  
or who is related, under section 465(b)(3), to a person  
(other than you) having such an interest.  
3. Working interests in oil or gas wells if you were a  
general partner.  
4. The rental of a dwelling unit any partner used for  
personal purposes during the year for more than the  
greater of 14 days or 10% of the number of days that the  
residence was rented at fair rental value.  
You should get a separate statement of income,  
expenses, and other items for each activity from the  
partnership.  
5. Activities of trading personal property for the  
Note. Box 22 of Schedule K-1, Part III, will be checked  
account of owners of interests in the activities.  
when a statement is attached.  
If you're an individual, an estate, or a trust, and you  
have a passive activity loss or credit, use Form 8582,  
Passive Activity Loss Limitations, to figure your allowable  
passive losses and Form 8582-CR, Passive Activity Credit  
Limitations, to figure your allowable passive credits. For a  
corporation, use Form 8810, Corporate Passive Activity  
Loss and Credit Limitations. See the instructions for these  
forms for details.  
Passive Activity Limitations  
Section 469 provides rules that limit the deduction of  
certain losses and credits. These rules apply to partners  
who:  
Are individuals, estates, trusts, closely held C  
corporations, or personal service corporations; and  
Have a passive activity loss or credit for the tax year.  
Generally, passive activities include the following.  
Trade or business activities in which you didn't  
If the partnership had more than one activity, it’ll attach  
a statement to your Schedule K-1 that identifies each  
activity (trade or business activity, rental real estate  
activity, rental activity other than rental real estate, and  
other activity) and specifies the income (loss), deductions,  
and credits from each activity.  
materially participate.  
Activities that meet the definition of rental activities  
under Temporary Regulations section 1.469-1T(e)(3) and  
Regulations section 1.469-1(e)(3).  
Passive activities don't include the following.  
Note. Box 23 of Schedule K-1, Part III, will be checked  
1. Trade or business activities in which you materially  
when a statement is attached.  
participated.  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
9
   
(where you own your partnership interest at the time the  
work is done) is counted toward material participation.  
However, work in connection with the activity isn't counted  
toward material participation if either of the following  
applies.  
1. The work isn't the type of work that owners of the  
activity would usually do and one of the principal purposes  
of the work that you or your spouse does is to avoid the  
passive loss or credit limitations.  
2. You do the work in your capacity as an investor and  
you aren't directly involved in the day-to-day operations of  
the activity. Examples of work done as an investor that  
would not count toward material participation include:  
Material participation. You must determine if you  
materially participated (a) in each trade or business  
activity held through the partnership, and (b) if you were a  
real estate professional (defined earlier) in each rental real  
estate activity held through the partnership. All  
determinations of material participation are based on your  
participation during the partnership's tax year.  
Material participation standards for partners who are  
individuals are listed below. Special rules apply to certain  
retired or disabled farmers and to the surviving spouses of  
farmers. See the Instructions for Form 8582 for details.  
Corporations should refer to the Instructions for Form  
8810 for the material participation standards that apply to  
them.  
Individuals (other than limited partners). If you're  
an individual (either a general partner or a limited partner  
who owned a general partnership interest at all times  
during the tax year), you materially participated in an  
activity only if one or more of the following apply.  
a. Studying and reviewing financial statements or  
reports on operations of the activity,  
b. Preparing or compiling summaries or analyses of  
the finances or operations of the activity for your own use,  
and  
c. Monitoring the finances or operations of the activity  
1. You participated in the activity for more than 500  
in a non-managerial capacity.  
hours during the tax year.  
Effect of determination. Income (loss), deductions,  
and credits from an activity are nonpassive if you  
determine that:  
2. Your participation in the activity for the tax year  
constituted substantially all the participation in the activity  
of all individuals (including individuals who aren't owners  
of interests in the activity).  
3. You participated in the activity for more than 100  
hours during the tax year, and your participation in the  
activity for the tax year wasn't less than the participation in  
the activity of any other individual (including individuals  
who weren't owners of interests in the activity) for the tax  
year.  
4. The activity was a significant participation activity  
for the tax year, and you participated in all significant  
participation activities (including activities outside the  
partnership) during the year for more than 500 hours. A  
significant participation activity is any trade or business  
activity in which you participated for more than 100 hours  
during the year and in which you didn't materially  
participate under any of the material participation tests  
(other than this test).  
You materially participated in a trade or business  
activity of the partnership, or  
You were a real estate professional (defined earlier) in a  
rental real estate activity of the partnership.  
If you determine that you didn't materially participate in  
a trade or business activity of the partnership or if you  
have income (loss), deductions, or credits from a rental  
activity of the partnership (other than a rental real estate  
activity in which you materially participated as a real  
estate professional), the amounts from that activity are  
passive. Report passive income (losses), deductions, and  
credits as follows.  
If you have an overall gain (the excess of income over  
deductions and losses, including any prior year unallowed  
loss) from a passive activity, report the income,  
deductions, and losses from the activity as indicated in  
these instructions.  
If you have an overall loss (the excess of deductions  
5. You materially participated in the activity for any 5  
tax years (whether or not consecutive) during the 10 tax  
years that immediately precede the tax year.  
and losses, including any prior year unallowed loss, over  
income) or credits from a passive activity, report the  
income, deductions, losses, and credits from all passive  
activities using the Instructions for Form 8582 or the  
Instructions for Form 8582-CR (or Form 8810) to see if  
your deductions, losses, and credits are limited under the  
passive activity rules.  
6. The activity was a personal service activity and you  
materially participated in the activity for any 3 tax years  
(whether or not consecutive) preceding the tax year. A  
personal service activity involves the performance of  
personal services in the field of health, law, engineering,  
architecture, accounting, actuarial science, performing  
arts, or consulting, or any other trade or business in which  
capital isn't a material income-producing factor.  
Publicly traded partnerships (PTPs). The passive  
activity limitations are applied separately for items (other  
than the low-income housing credit and the rehabilitation  
credit) from each PTP. Thus, a net passive loss from a  
PTP may not be deducted from other passive income.  
Instead, a passive loss from a PTP is suspended and  
carried forward to be applied against passive income from  
the same PTP in later years. If the partner's entire interest  
in the PTP is completely disposed of, any unused losses  
are allowed in full in the year of disposition.  
7. Based on all the facts and circumstances, you  
participated in the activity on a regular, continuous, and  
substantial basis during the tax year.  
Limited partners. If you're a limited partner, you must  
meet item 1, 5, or 6 above to qualify as having materially  
participated.  
Work counted toward material participation.  
Generally, any work that you or your spouse does in  
connection with an activity held through a partnership  
If you have an overall gain from a PTP, the net gain is  
nonpassive income. In addition, the nonpassive income is  
10  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
included in investment income to figure your investment  
interest expense deduction.  
Don't report passive income, gains, or losses from a  
PTP on Form 8582. Instead, use the following rules to  
figure and report on the proper form or schedule your  
income, gains, and losses from passive activities that you  
held through each PTP you owned during the tax year.  
To allocate and keep a record of the unallowed  
losses, use Form 8582, Parts VII, VIII, and IX. List  
each activity of the PTP in Part VII. Enter the  
TIP  
overall loss from each activity in column (a). Complete  
Part VII, column (b), according to its instructions. Multiply  
the total unallowed loss from the PTP by each ratio in  
column (b) and enter the result in Part VII, column (c).  
Then, complete Part VIII if all the loss from the same  
activity is to be reported on one form or schedule. Use  
Part IX instead of Part VIII if you have more than one loss  
to be reported on different forms or schedules for the  
same activity. Enter the net loss plus any prior year  
unallowed losses in Part VIII, column (a) (or Part IX, if  
applicable). The losses in Part VIII, column (c), (Part IX,  
column (e)) are the allowed losses to report on the forms  
or schedules. Report both these losses and any income  
from the PTP on the forms and schedules you normally  
use.  
1. Combine any current year income, gains, and  
losses, and any prior year unallowed losses to see if you  
have an overall gain or loss from the PTP. Include only the  
same types of income and losses you would include in  
your net income or loss from a non-PTP passive activity.  
See Pub. 925, Passive Activity and At-Risk Rules, for  
more details.  
2. If you have an overall gain, the net gain portion (total  
gain minus total losses) is nonpassive income. On the  
form or schedule you normally use, report the net gain  
portion as nonpassive income and the remaining income  
and the total losses as passive income and loss. To the  
left of the entry space, enter “From PTP.” It's important to  
identify the nonpassive income because the nonpassive  
portion is included in modified adjusted gross income  
(MAGI) for purposes of figuring on Form 8582 the special  
allowance for active participation in a non-PTP rental real  
estate activity. In addition, the nonpassive income is  
included in investment income when figuring your  
investment interest expense deduction on Form 4952,  
Investment Interest Expense Deduction.  
Example. If you have Schedule E (Form 1040) income  
of $8,000, and a Form 4797, Sales of Business Property,  
prior year unallowed loss of $3,500 from the passive  
activities of a particular PTP, you have a $4,500 overall  
gain ($8,000 − $3,500). On Schedule E (Form 1040),  
line 28, report the $4,500 net gain as nonpassive income  
in column (k). In column (h), report the remaining  
Schedule E (Form 1040) gain of $3,500 ($8,000 −  
$4,500). On the appropriate line of Form 4797, report the  
prior year unallowed loss of $3,500. Be sure to enter  
“From PTP” to the left of each entry space.  
4. If you have an overall loss and you disposed of your  
entire interest in the PTP to an unrelated person in a fully  
taxable transaction during the year, your losses (including  
prior year unallowed losses) allocable to the activity for the  
year aren't limited by the passive loss rules. A fully taxable  
transaction is one in which you recognize all your realized  
gain or loss. Report the income and losses on the forms  
and schedules you normally use.  
For rules on the disposition of an entire interest  
reported using the installment method, see the  
Instructions for Form 8582.  
TIP  
Special allowance for a rental real estate activity. If  
you actively participated in a rental real estate activity, you  
may be able to deduct up to $25,000 of the loss from the  
activity from nonpassive income. This special allowance is  
an exception to the general rule disallowing losses in  
excess of income from passive activities. The special  
allowance isn't available if you were married, file a  
separate return for the year, and didn't live apart from your  
spouse at all times during the year.  
3. If you have an overall loss (but didn't dispose of your  
entire interest in the PTP to an unrelated person in a fully  
taxable transaction during the year), the losses are  
allowed to the extent of the income, and the excess loss is  
carried forward to use in a future year when you have  
income to offset it. Report as a passive loss on the  
schedule or form you normally use the portion of the loss  
equal to the income. Report the income as passive  
income on the form or schedule you normally use.  
Example. You have a Schedule E (Form 1040) loss of  
$12,000 (current year losses plus prior year unallowed  
losses) and a Form 4797 gain of $7,200. Report the  
$7,200 gain on the appropriate line of Form 4797. On  
Schedule E (Form 1040), line 28, report $7,200 of the  
losses as a passive loss in column (g). Carry forward the  
unallowed loss of $4,800 ($12,000 − $7,200).  
Only individuals, qualifying estates, and qualifying  
revocable trusts that made a section 645 election can  
actively participate in a rental real estate activity. Estates  
(other than qualifying estates), trusts (other than qualifying  
revocable trusts that made a section 645 election), and  
corporations can't actively participate. Limited partners  
can't actively participate unless future regulations provide  
an exception.  
You aren't considered to actively participate in a rental  
real estate activity if, at any time during the tax year, your  
interest (including your spouse's interest) in the activity  
was less than 10% (by value) of all interests in the activity.  
Active participation is a less stringent requirement than  
material participation. You may be treated as actively  
participating if you participated, for example, in making  
management decisions or arranging for others to provide  
services (such as repairs) in a significant and bona fide  
sense. Management decisions that can count as active  
participation include approving new tenants, deciding  
rental terms, approving capital or repair expenditures, and  
other similar decisions.  
If you have unallowed losses from more than one  
activity of the PTP or from the same activity of the PTP  
that must be reported on different forms, you must allocate  
the unallowed losses on a pro rata basis to figure the  
amount allowed from each activity or on each form.  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
11  
 
An estate is a qualifying estate if the decedent would  
have satisfied the active participation requirement for the  
activity for the tax year the decedent died. A qualifying  
estate is treated as actively participating for tax years  
ending less than 2 years after the date of the decedent's  
death.  
MAGI limitation. The maximum special allowance that  
single individuals and married individuals filing a joint  
return can qualify for is $25,000. The maximum is $12,500  
for married individuals who file separate returns and who  
lived apart at all times during the year. The maximum  
special allowance for which an estate can qualify is  
$25,000 reduced by the special allowance for which the  
surviving spouse qualifies.  
If you have net income (loss), deductions, or credits  
from any of the following activities, treat such amounts as  
nonpassive and report them as indicated in these  
instructions.  
1. Working interests in oil and gas wells if you're a  
general partner.  
2. The rental of a dwelling unit any partner used for  
personal purposes during the year for more than the  
greater of 14 days or 10% of the number of days that the  
residence was rented at fair rental value.  
3. Trading personal property for the account of owners  
of interests in the activity.  
Self-charged interest. The partnership will report any  
self-charged interest income or expense that resulted from  
loans between you and the partnership (or between the  
partnership and another partnership or S corporation if  
both entities have the same owners with the same  
proportional ownership interest in each entity). If there was  
more than one activity, the partnership will provide a  
statement allocating the interest income or expense with  
respect to each activity. The self-charged interest rules  
don't apply to your partnership interest if the partnership  
made an election under Regulations section 1.469-7(g) to  
avoid the application of these rules. See the Instructions  
for Form 8582 for details.  
If your MAGI (defined below) is $100,000 or less  
($50,000 or less if married filing separately), your loss is  
deductible up to the maximum special allowance referred  
to in the preceding paragraph. If your MAGI is more than  
$100,000 (more than $50,000 if married filing separately),  
the special allowance is limited to 50% of the difference  
between $150,000 ($75,000 if married filing separately)  
and your MAGI. When MAGI is $150,000 or more  
($75,000 or more if married filing separately), there is no  
special allowance.  
MAGI. This is your adjusted gross income (AGI) from  
Form 1040 or 1040-SR, line 11, figured without taking into  
account:  
Excess Business Loss  
1. The taxable amount of social security or equivalent  
Your distributive share of losses attributable to all of the  
partnership's trades or businesses may be limited under  
section 461(l). See Form 461, Limitation on Business  
Losses, and its instructions for more information.  
tier 1 railroad retirement benefits,  
2. The deductible contributions to traditional IRAs and  
section 501(c)(18) pension plans,  
3. The exclusion from income of interest from series  
EE or I U.S. savings bonds used to pay higher education  
expenses,  
Specific Instructions  
Part I. Information About the  
Partnership  
4. The exclusion of amounts received under an  
employer's adoption assistance program,  
5. Any passive activity income or loss included on  
Form 8582,  
Item D  
6. Any rental real estate loss allowed to real estate  
If the box in item D is checked, you're a partner in a PTP  
and must follow the rules discussed earlier under Publicly  
professionals,  
7. Any overall loss from a PTP (see Publicly Traded  
Partnerships (PTPs) in the Instructions for Form 8582),  
8. The deduction allowed for one-half of  
Part II. Information About the Partner  
Item E  
If the partner is an individual, the partnership will enter the  
partner's SSN or individual taxpayer identification number  
(ITIN). For all other partners, the partnership will enter the  
partner's employer identification number (EIN). In the case  
of a disregarded entity (DE), the partnership will enter the  
TIN of the beneficial owner of the DE in item E and the  
beneficial owner's address in item F.  
self-employment tax,  
9. The deduction allowed for interest paid on student  
loans, and  
10. The deduction allowed for foreign-derived intangible  
income and GILTI.  
Special rules for certain other activities. If you have  
net income (loss), deductions, or credits from any activity  
to which special rules apply, the partnership will identify  
the activity and all amounts relating to it on Schedule K-1  
or on an attached statement.  
If you have net income subject to recharacterization  
under Temporary Regulations section 1.469-2T(f) and  
Regulations sections 1.469-2(f)(5) and (6), report such  
amounts according to the Instructions for Form 8582 (or  
Form 8810).  
If the partner is an IRA, the partnership will enter the  
identifying number of the custodian of the IRA.  
For your protection, this form may show only the last  
four digits of the TIN in items E and H2, as noted under  
Purpose of Schedule K-1, earlier. However, the  
partnership has reported your complete identification  
number to the IRS.  
12  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
     
If your partnership is engaged in two or more different  
types of activities subject to the at-risk provisions, or a  
combination of at-risk activities and any other activity, the  
partnership should give you a statement showing your  
share of nonrecourse liabilities, partnership-level qualified  
nonrecourse financing, and other recourse liabilities for  
each activity.  
Item H2  
If the partner is a DE, such as a single-member LLC that  
didn’t elect to be treated as a corporation, the partnership  
will check the DE box and enter the name and TIN of the  
DE.  
Item J  
Generally, the amounts reported in item J are based on  
the partnership agreement. If your interest commenced  
after the beginning of the partnership's tax year, the  
partnership will have entered, in the Beginning column,  
the percentages that existed for you immediately after  
admission. If your interest terminated before the end of the  
partnership's tax year, the partnership will have entered, in  
the Ending column, the percentages that existed  
immediately before termination.  
Qualified nonrecourse financing secured by real  
property used in an activity of holding real property that's  
subject to the at-risk rules is treated as an amount at risk.  
Qualified nonrecourse financing generally includes  
financing for which no one is personally liable for  
repayment that's borrowed for use in an activity of holding  
real property and that's loaned or guaranteed by a federal,  
state, or local government or borrowed from a qualified  
person.  
Qualified persons include any persons actively and  
regularly engaged in the business of lending money, such  
as a bank or savings and loan association. Qualified  
persons generally don't include related parties (unless the  
nonrecourse financing is commercially reasonable and on  
substantially the same terms as loans involving unrelated  
persons), the seller of the property, or a person who  
receives a fee for the partnership's investment in the real  
property.  
See Pub. 925 for more information on qualified  
nonrecourse financing.  
Both the partnership and you must meet the qualified  
nonrecourse rules on this debt before you can include the  
amount shown next to Qualified nonrecourse financing in  
your at-risk computation.  
The ending percentage share shown on the Capital line  
is the portion of the capital you would receive if the  
partnership was liquidated at the end of its tax year by the  
distribution of undivided interests in the partnership's  
assets and liabilities. If your capital account is negative or  
zero, the partnership will have entered zero on this line.  
There are two options the partnership can use to  
indicate the source of a decrease: sale or exchange. The  
Sale checkbox will be checked if you sold all or part of  
your partnership interest to a new or pre-existing partner  
during this tax year, regardless of whether you recognized  
gain or loss on the transaction(s). The Exchange  
checkbox will be checked if you exchanged all or part of  
your partnership interest with a new or pre-existing partner  
during this tax year, regardless of whether you recognized  
gain or loss on the transaction(s). You may have realized a  
gain or loss on the transfer or disposition of your interest.  
See codes AB, AC, and AD on line 20 for items that have  
special gain or loss treatment. For more information, see  
Disposition of Partner's Interest and Partnership  
earlier, for more information on the at-risk limitations.  
Item K3  
If the box in item K3 is checked, see the instructions for  
box 20, code X, for additional information.  
Distributions in Pub. 541.  
Item K1  
Item L  
Item K1 should show your share of the partnership's  
nonrecourse liabilities, partnership-level qualified  
nonrecourse financing, and other recourse liabilities at the  
beginning and the end of the partnership's tax year. If you  
terminated your interest in the partnership during the tax  
year, item K1 should show the share that existed  
immediately before the total disposition. A partner's  
recourse liability is any partnership liability for which a  
partner is personally liable.  
The partnership must report your beginning capital  
account and ending capital account for the year using the  
tax-basis method, including the amount of capital you  
contributed to the partnership during the year, your share  
of the partnership's current year net income or loss as  
computed for tax purposes, any withdrawals and  
distributions made to you by the partnership, and any  
other increases or decreases to your capital account  
determined in a manner generally consistent with figuring  
the partner's adjusted tax basis in its partnership interest  
(without regard to partnership liabilities), taking into  
account the rules and principles of sections 705, 722, 733,  
and 742. See the Instructions for Form 1065 for more  
details.  
If this partnership invested in other partnerships, item  
K1 will include your share of partnership liabilities from  
those other partnerships, except to the extent the liabilities  
from those other partnerships are owed to this  
partnership.  
For many reasons, your ending capital account as  
reported to you by the partnership in item L may not equal  
the adjusted tax basis in your partnership interest.  
Generally, this is because a partner's adjusted tax basis in  
its partnership interest includes the partner's share of  
partnership liabilities (and capital accounts determined by  
using the tax-basis method don't). In addition, your  
partnership may not have all the necessary information  
Use the total of the three amounts for figuring the  
adjusted basis of your partnership interest.  
Generally, you may use only the amounts shown next to  
Qualified nonrecourse financing and Recourse to figure  
your amount at risk. Don't include any amounts that aren't  
at risk if such amounts are included in either of these  
categories.  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
13  
   
from you to accurately figure the adjusted tax basis in your  
partnership interest due to partner-level adjustments.  
You're responsible for maintaining an annual record of the  
adjusted tax basis in your partnership interest as  
amortization, the partnership will report these items on  
other parts of Schedule K-1.  
Note. Although the partnership is reporting the beginning  
and ending balances on an aggregate net basis, it's  
generally required to keep records of this information on a  
property-by-property basis.  
determined under the principles and provisions of  
subchapter K, including, for example, those under  
sections 705, 722, 733, and 742. Regulations section  
1.705-1(a)(1) provides that a partner is required to  
determine the adjusted basis of its interest in a  
Part III. Partner's Share of Current  
Year Income, Deductions, Credits,  
and Other Items  
partnership when necessary to determine its tax liability or  
that of any other person. For example, a determination is  
required in ascertaining the extent to which a partner's  
share of loss is allowed, when there is a sale or exchange  
of all or part of a partnership interest, and when a partner's  
entire partnership interest is liquidated. The adjusted  
basis of a partner's interest in a partnership is determined  
without regard to any amount shown in the partnership  
books as the partner's capital, equity, or similar account.  
The amounts shown in boxes 1 through 21 reflect your  
share of income, loss, deductions, credits, and other items  
from partnership business or rental activities without  
reference to limitations on losses or adjustments that may  
be required of you because of:  
1. The adjusted basis of your partnership interest,  
2. The amount for which you're at risk, and  
3. The passive activity limitations.  
Item M  
If you’ve contributed property with a built-in gain or loss  
during the tax year, the partnership will check the “Yes”  
box. Also, the partnership will attach a statement showing  
the property contributed, the date of the contribution, and  
the amount of any built-in gain or loss. A built-in gain or  
loss is the difference between the FMV of the property  
and your adjusted basis in the property at the time it was  
contributed to the partnership. If you contributed more  
than 10 properties on a single date during the tax year, the  
statement may instead show the number of properties  
contributed on that date, the total amount of built-in gain,  
and the total amount of built-in loss.  
For information on these provisions, see Limitations on  
Other limitations may apply to specific deductions (for  
example, the section 179 expense deduction). Generally,  
specific limitations apply before the at-risk and passive  
loss limitations.  
If you're an individual and the passive activity rules  
don't apply to the amounts shown on your Schedule K-1,  
take the amounts shown and enter them on the  
appropriate lines of your tax return. If the passive activity  
rules do apply, report the amounts shown as indicated in  
these instructions.  
The partnership is providing this for your information.  
Contributions of property with a built-in gain or loss could  
affect a partner's tax liability (in matters concerning  
precontribution gain or loss, and distributions subject to  
section 737) and may also affect how the partnership  
allocated certain items on your Schedule K-1. For  
information on precontribution gain or loss, see the  
instructions for box 20, code W. For information on  
distributions subject to section 737, see the instructions  
for box 19, code B.  
If you aren't an individual, report the amounts in each  
box as instructed on your tax return.  
If you file your tax return on a calendar-year basis, but  
your partnership files a return for a fiscal year, report the  
amounts on your tax return for the year in which the  
partnership's fiscal year ends. For example, if the  
partnership's tax year ends in February 2024, report the  
amounts on your 2024 tax return.  
Item N  
If you have losses, deductions, or credits from a prior  
year that weren’t deductible or usable because of certain  
limitations, such as the basis limitations or the at-risk  
limitations, take them into account in determining your net  
income, loss, or credits for this year. However, except for  
passive activity losses and credits, don't combine the prior  
year amounts with any amounts shown on this  
If you're allocated a share of section 704(c) gain or loss,  
the partnership will report your net unrecognized section  
704(c) gain or loss both at the beginning and at the end of  
the partnership's tax year in item N. The partnership can  
use any reasonable method in reporting net unrecognized  
section 704(c) built-in gain or loss to you. You'll be  
allocated unrecognized section 704(c) gain or loss if:  
Schedule K-1 to get a net figure to report on any  
You contributed property with FMV in excess of  
supporting schedules, statements, or forms attached to  
your return. Instead, report the amounts on the attached  
schedule, statement, or form on a year-by-year basis.  
adjusted tax basis (built-in gain property);  
You contributed property with FMV less than adjusted  
tax basis (built-in loss property); or  
The partnership elected, under certain circumstances,  
If the partnership reports a section 743(b) adjustment  
to partnership items, report these adjustments as  
to revalue property (book-up or book-down) on its books  
to reflect changes in the FMV of such property. These  
revaluations are sometimes referred to as “reverse section  
704(c) allocations.”  
separate items on Form 1040 or 1040-SR in accordance  
with the reporting instructions for the partnership item  
being adjusted. A section 743(b) adjustment increases or  
decreases your share of income, deduction, gain, or loss  
for a partnership item. For example, if the partnership  
reports a section 743(b) adjustment to depreciation for  
The partnership is providing this for your information. If  
the partnership disposes of the property or there are  
special allocations due to depreciation, depletion, or  
14  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
property used in its trade or business, report the  
adjustment on Schedule E (Form 1040), line 28, in  
accordance with the instructions for box 1 of  
Schedule K-1.  
more than one rental real estate activity, it'll attach a  
statement identifying the income or loss from each activity.  
If you're filing a 2023 Form 1040 or 1040-SR, use the  
following instructions to determine where to report a box 2  
amount.  
1. If you have a loss from a passive activity in box 2  
and you meet all the following conditions, report the loss  
on Schedule E (Form 1040), line 28, column (g).  
If you have amounts other than those shown on  
Schedule K-1 to report on Schedule E (Form  
1040), enter each item separately on Schedule E  
TIP  
(Form 1040), line 28.  
a. You actively participated in the partnership rental  
real estate activities. See Special allowance for a rental  
Codes. In box 11, boxes 13 through 15, and boxes 17  
through 20, the partnership will identify each item by  
entering a code in the column to the left of the dollar  
amount entry space. These codes are identified under List  
1065) at the end of these instructions.  
Attached statements. The partnership will enter an  
asterisk (*) after the code, if any, in the column to the left of  
the dollar amount entry space for each item for which it  
has attached a statement providing additional information.  
For those informational items that can’t be reported as a  
single dollar amount, the partnership will enter an asterisk  
(*) in the left column and enter “STMT” in the dollar  
amount entry space to indicate the information is provided  
on an attached statement.  
b. Rental real estate activities with active participation  
were your only passive activities.  
c. You have no prior year unallowed losses from these  
activities.  
d. Your total loss from the rental real estate activities  
wasn't more than $25,000 (not more than $12,500 if  
married filing separately and you lived apart from your  
spouse all year).  
e. If you're a married person filing separately, you lived  
apart from your spouse all year.  
f. You have no current or prior year unallowed credits  
from a passive activity.  
g. Your MAGI wasn’t more than $100,000 (not more  
than $50,000 if married filing separately and you lived  
apart from your spouse all year).  
Income (Loss)  
Box 1. Ordinary Business Income (Loss)  
h. Your interest in the rental real estate activity wasn't  
The amount reported in box 1 is your share of the ordinary  
income (loss) from trade or business activities of the  
partnership. Generally, where you report this amount on  
Form 1040 or 1040-SR depends on whether the amount is  
from an activity that's a passive activity to you. If you're an  
individual partner filing a 2023 Form 1040 or 1040-SR,  
find your situation below and report your box 1 income  
(loss) as instructed, after applying the basis and at-risk  
limitations on losses. If the partnership had more than one  
trade or business activity, it will attach a statement  
identifying the income or loss from each activity.  
1. Report box 1 income (loss) from partnership trade  
or business activities in which you materially participated  
on Schedule E (Form 1040), line 28, column (i) or (k).  
2. Report box 1 income (loss) from partnership trade  
or business activities in which you didn't materially  
participate, as follows.  
a. If income is reported in box 1, report the income on  
Schedule E (Form 1040), line 28, column (h). However, if  
the box in item D is checked, report the income following  
the rules for Publicly traded partnerships, earlier.  
b. If a loss is reported in box 1, follow the Instructions  
for Form 8582 to figure how much of the loss can be  
reported on Schedule E (Form 1040), line 28, column (g).  
However, if the box in item D is checked, report the loss  
following the rules for Publicly traded partnerships, earlier.  
held as a limited partner.  
2. If you have a loss from a passive activity in box 2  
and you don't meet all the conditions in (1) above, follow  
the Instructions for Form 8582 to figure how much of the  
loss you can report on Schedule E (Form 1040), line 28,  
column (g). However, if the box in item D is checked,  
report the loss following the rules for Publicly traded  
partnerships, earlier.  
3. If you were a real estate professional and you  
materially participated in the activity, report box 2 income  
(loss) on Schedule E (Form 1040), line 28, column (i) or  
(k).  
4. If you have income from a passive activity in box 2,  
report the income on Schedule E (Form 1040), line 28,  
column (h). However, if the box in item D is checked,  
report the income following the rules for Publicly traded  
partnerships, earlier.  
Box 3. Other Net Rental Income (Loss)  
The amount in box 3 is a passive activity amount for all  
partners. If the partnership had more than one rental  
activity, it'll attach a statement identifying the income or  
loss from each activity. Report the income or loss as  
follows.  
If box 3 is a loss, follow the Instructions for Form 8582 to  
figure how much of the loss can be reported on  
Schedule E (Form 1040), line 28, column (g). However, if  
the box in item D is checked, report the loss following the  
rules for Publicly traded partnerships, earlier.  
Box 2. Net Rental Real Estate Income (Loss)  
Generally, the income (loss) reported in box 2 is a passive  
activity amount for all partners. However, the income  
(loss) in box 2 isn't from a passive activity if you were a  
real estate professional (defined earlier) and you  
If income is reported in box 3, report the income on  
Schedule E (Form 1040), line 28, column (h). However, if  
the box in item D is checked, report the income following  
the rules for Publicly traded partnerships, earlier.  
materially participated in the activity. If the partnership had  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
15  
 
therefore excludable from your gross income. Don't  
include the amount attributable to PTEP in your annual  
PTEP accounts on Form 1040 or 1040-SR, line 3a. Use  
Schedule K-3, Part V, to determine your share of  
distributions by foreign corporations to the partnership that  
are attributable to PTEP in your annual PTEP accounts  
with respect to the foreign corporations.  
Box 4a. Guaranteed Payments for Services  
Guaranteed payments are payments made by a  
partnership to a partner that are determined without  
regard to the partnership's income. Generally, amounts on  
this line aren't passive income, and you should report  
them on Schedule E (Form 1040), line 28, column (k) (for  
example, guaranteed payments for personal services).  
Qualified dividends are excluded from investment  
Box 4b. Guaranteed Payments for Capital  
income, but you may elect to include part or all of  
these amounts in investment income. See the  
TIP  
These are guaranteed payments other than for services,  
such as for the use of capital or attributable to section  
736(a)(2) payments for unrealized receivables or goodwill.  
Amounts on this line should be reported on Schedule E  
(Form 1040), line 28, column (k) (for example, guaranteed  
payments for capital).  
instructions for Form 4952, line 4g, for important  
information on making this election.  
If you have any foreign source qualified dividends,  
see the Partner’s Instructions for Schedule K-3 for  
!
CAUTION  
additional information.  
Box 4c. Total Guaranteed Payments  
Amounts on this line include total guaranteed payments  
paid to you by the partnership.  
Attach a statement to the Schedule K-1 identifying the  
dividends included in box 6a or 6b that are:  
Eligible for the deduction for dividends received under  
Portfolio Income  
section 243(a), (b), or (c);  
Eligible for the deduction for dividends received under  
Portfolio income or loss (shown in boxes 5 through 9b and  
in box 11, code A) isn't subject to the passive activity  
limitations. Portfolio income includes income (not derived  
in the ordinary course of a trade or business) from  
interest, ordinary dividends, annuities or royalties, and  
gain or loss on the sale of property that produces such  
income or is held for investment.  
section 245;  
Eligible for the deduction for dividends received under  
section 245A; and  
Hybrid dividends as defined in section 245A(e)(4).  
Box 6c. Dividend Equivalents  
Dividend equivalents aren't reported on Form 1040 or  
1040-SR. This information is provided for persons that  
aren't U.S. persons, who are generally required to treat  
dividend equivalents as U.S. source dividends, and  
domestic partnerships with partners who may need this  
information. The ordinary dividends amount in box 6a  
doesn't include the amount of dividend equivalents.  
Box 5. Interest Income  
Report interest income on Form 1040 or 1040-SR, line 2b.  
If the amount of interest income included in box 5 includes  
interest from the credit for holders of clean renewable  
energy bonds, the partnership will attach a statement to  
Schedule K-1 showing your share of interest income from  
these credits. Because the basis of your interest in the  
partnership has been increased by your share of the  
interest income from these credits, you must reduce your  
basis by the same amount. See the line 4d instructions for  
the Worksheet for Adjusting the Basis of a Partner’s  
Interest in the Partnership.  
Box 7. Royalties  
Report royalties on Schedule E (Form 1040), line 4.  
Box 8. Net Short-Term Capital Gain (Loss)  
Report the net short-term capital gain (loss) on  
Schedule D (Form 1040), line 5.  
Box 6a. Ordinary Dividends  
Report ordinary dividends on Form 1040 or 1040-SR,  
line 3b.  
Box 9a. Net Long-Term Capital Gain (Loss)  
Report the net long-term capital gain (loss) on Schedule D  
(Form 1040), line 12.  
Some of the amounts reported in this box may be  
attributable to PTEP in annual PTEP accounts that you  
have with respect to a foreign corporation and are  
therefore excludable from your gross income. Don't  
include the amount attributable to PTEP in your annual  
PTEP accounts on Form 1040 or 1040-SR, line 3b. Use  
Schedule K-3, Part V, to determine your share of  
distributions by foreign corporations to the partnership that  
are attributable to PTEP in your annual PTEP accounts  
with respect to the foreign corporations.  
If you have any foreign source net long-term  
capital gain (loss), see the Partner’s Instructions  
!
CAUTION  
for Schedule K-3 for additional information.  
Box 9b. Collectibles (28%) Gain (Loss)  
Report collectibles gain or loss on line 4 of the 28% Rate  
Gain Worksheet—Line 18 in the Instructions for  
Schedule D (Form 1040).  
If you have any foreign source collectibles (28%)  
Box 6b. Qualified Dividends  
Report any qualified dividends on Form 1040 or 1040-SR,  
line 3a.  
gain (loss), see the Partner’s Instructions for  
!
CAUTION  
Schedule K-3 for additional information.  
Box 9c. Unrecaptured Section 1250 Gain  
There are three types of unrecaptured section 1250 gain.  
Report your share of this unrecaptured gain on the  
Some of the amounts reported in this box may be  
attributable to PTEP in annual PTEP accounts that you  
have with respect to a foreign corporation and are  
16  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
Unrecaptured Section 1250 Gain Worksheet—Line 19 in  
the Instructions for Schedule D (Form 1040) as follows.  
expenses that you report in Schedule E (Form 1040),  
line 38, column (e).  
Code B. Involuntary conversions. This is your net gain  
(loss) from involuntary conversions due to casualty or  
theft. The partnership will give you a statement that shows  
the amounts to be reported in Form 4684, Casualties and  
Thefts, line 34, columns (b)(i), (b)(ii), and (c).  
Report unrecaptured section 1250 gain from the sale or  
exchange of the partnership's business assets on line 5.  
Report unrecaptured section 1250 gain from the sale or  
exchange of an interest in a partnership on line 10.  
Report unrecaptured section 1250 gain from an estate,  
trust, regulated investment company (RIC), or real estate  
investment trust (REIT) on line 11.  
If there was a gain (loss) from a casualty or theft to  
property not used in a trade or business or for  
If the partnership reports only unrecaptured section  
1250 gain from the sale or exchange of its business  
assets, it'll enter a dollar amount in box 9c. If it reports the  
other two types of unrecaptured gain, it'll provide an  
attached statement that shows the amount for each type  
of unrecaptured section 1250 gain.  
income-producing purposes, the partnership will provide  
you with the information you need to complete Form 4684.  
Code C. Section 1256 contracts and straddles. The  
partnership will report any net gain or loss from section  
1256 contracts. Report this amount on Form 6781, Gains  
and Losses From Section 1256 Contracts and Straddles.  
Code D. Mining exploration costs recapture. The  
partnership will give you a statement that shows the  
information needed to recapture certain mining  
exploration costs (section 617). See the 2022 Pub. 535,  
Business Expenses, for details.  
Code E. Cancellation of debt. Generally, this  
cancellation of debt (COD) amount is included in your  
gross income (Schedule 1 (Form 1040), line 8c). Under  
section 108(b)(5), you may elect to apply any portion of  
the COD amount excluded from gross income to the  
reduction of the basis of depreciable property. See Form  
982, Reduction of Tax Attributes Due to Discharge of  
Indebtedness, for more details.  
If you have any foreign source unrecaptured  
section 1250 gain, see the Partner’s Instructions  
!
CAUTION  
for Schedule K-3 for additional information.  
Box 10. Net Section 1231 Gain (Loss)  
The amount in box 10 is generally passive if it's from a:  
Rental activity, or  
Trade or business activity in which you didn't materially  
participate.  
However, an amount from a rental real estate activity  
isn't from a passive activity if you were a real estate  
professional (defined earlier) and you materially  
participated in the activity.  
Code F. Section 743(b) positive income adjustments.  
The partnership will use this code to report the net positive  
income adjustment resulting from all section 743(b) basis  
adjustments. The partnership will provide your section  
743(b) adjustment net of cost recovery at year end by  
asset grouping in box 20, code U.  
If the amount is either (a) a loss that isn't from a passive  
activity or (b) a gain, report it in Form 4797, line 2, column  
(g). Don't complete Form 4797, line 2, columns (b)  
through (f). Instead, enter “From Schedule K-1 (Form  
1065)” across these columns.  
If the amount is a loss from a passive activity, see  
Passive Loss Limitations in the Instructions for Form 4797.  
Report the loss following the Instructions for Form 8582 to  
figure how much of the loss is allowed on Form 4797.  
However, if the box in item D is checked, report the loss  
following the rules for Publicly traded partnerships, earlier.  
If the partnership had net section 1231 gain (loss) from  
more than one activity, it’ll attach a statement that will  
identify the section 1231 gain (loss) from each activity.  
Code G. Reserved for future use.  
Code H. Section 951(a) income inclusions. If the  
partnership is a domestic partnership that doesn't apply  
Regulations sections 1.958-1(d)(1) through (3) to a tax  
year of a foreign corporation that begins before January  
25, 2022, to treat it as not owning stock of the foreign  
corporation within the meaning of section 958(a) for  
purposes of section 951, and is a U.S. shareholder of the  
foreign corporation, then any section 951(a) income  
inclusions with respect to the foreign corporation and such  
tax year are section 951(a) income inclusions of the  
partnership, a distributive share of which you generally  
include in gross income. The partnership will use this  
code to report your share of its section 951(a) income  
inclusions. Additionally, if the partnership has a distributive  
share of a lower-tier partnership's section 951(a) income  
inclusions, the partnership will use this code to report your  
share of that inclusion.  
If you have any foreign source net section 1231  
gain (loss), see the Partner’s Instructions for  
!
CAUTION  
Schedule K-3 for additional information.  
Box 11. Other Income (Loss)  
Code A. Other portfolio income (loss). The  
partnership will report portfolio income other than interest,  
ordinary dividend, royalty, and capital gain (loss) income,  
and attach a statement to tell you what kind of portfolio  
income is reported.  
If the partnership held a residual interest in a real estate  
mortgage investment conduit (REMIC), it’ll report on the  
statement your share of REMIC taxable income (net loss)  
that you report in Schedule E (Form 1040), line 38, column  
(d). The statement will also report your share of any  
excess inclusion that you report in Schedule E (Form  
1040), line 38, column (c), and your share of section 212  
Note. In all other cases, the partnership will report  
information needed for you to determine section 951(a)  
income inclusions with respect to CFCs owned by the  
partnership, directly or indirectly, on Schedule K-3, Part VI.  
The partnership will attach a statement to the  
Schedule K-1 identifying any subpart F inclusion  
attributable to:  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
17  
 
The sale or exchange by a CFC of stock in another  
Opting out of partnership election. You can opt out  
of the partnership's section 1045 election and either (a)  
recognize the gain, or (b) elect to purchase different  
replacement QSB stock, either directly or through  
foreign corporation described in section 964(e)(4), or  
Hybrid dividends of tiered corporations under section  
245A(e)(2).  
ownership of a different partnership that acquired  
Code I. Gain (loss) from disposition of oil, gas, geo-  
thermal, or other mineral properties (section 59(e)).  
The partnership will attach a statement that provides a  
description of the property; your share of the amount  
realized from the disposition; your share of the  
replacement QSB stock. You satisfy the requirement to  
purchase replacement QSB stock if you own an interest in  
a partnership that purchases QSB stock during the 60-day  
period. You must also notify the partnership, in writing, if  
you opt out of the partnership's section 1045 election. If  
you recognize gain, you must notify the partnership, in  
writing, of the amount of the gain that you're recognizing.  
Code N. Gain eligible for section 1045 rollover (re-  
placement stock not purchased by the partnership).  
The partnership should give you (a) the name of the  
corporation that issued the QSB stock, (b) your share of  
the partnership's adjusted basis and sales price of the  
QSB stock, (c) the dates the QSB stock was bought and  
sold, and (d) your share of gain from the sale of the QSB  
stock. Corporate partners aren't eligible for the section  
1045 rollover. To qualify for the section 1045 rollover:  
partnership's adjusted basis in the property (for other than  
oil or gas properties); and your share of the total intangible  
drilling costs, development costs, and mining exploration  
costs (section 59(e) expenditures) passed through for the  
property. You must figure your gain or loss from the  
disposition by increasing your share of the adjusted basis  
by the intangible drilling costs, development costs, or mine  
exploration costs for the property that you capitalized (that  
is, costs that you didn't elect to deduct under section  
59(e)). Report a loss on Form 4797, Part I. Report a gain  
on Form 4797, Part III, in accordance with the instructions  
for line 28. See Regulations section 1.1254-5 for details.  
You must have held an interest in the partnership during  
Code J. Recoveries of tax benefit items. A tax benefit  
item is an amount you deducted in a prior tax year that  
reduced your income tax. Report this amount on Schedule  
1 (Form 1040), line 8z, to the extent it reduced your tax in  
the prior tax year.  
Code K. Gambling gains and losses. If the partnership  
wasn't engaged in the trade or business of gambling, (a)  
report gambling winnings on Schedule 1 (Form 1040),  
line 8b; and (b) deduct gambling losses to the extent of  
winnings on Schedule A (Form 1040), line 16.  
the entire period in which the partnership held the QSB  
stock,  
Your share of the gain eligible for the section 1045  
rollover can't exceed the amount that would have been  
allocated to you based on your interest in the partnership  
at the time the QSB stock was acquired, and  
You must purchase other QSB stock (as defined in the  
Instructions for Schedule D (Form 1040)) during the  
60-day period that began on the date the QSB stock was  
sold by the partnership.  
If the partnership was engaged in the trade or business  
of gambling, (a) report gambling winnings on Schedule E  
(Form 1040), line 28, column (k); and (b) deduct gambling  
losses (to the extent of winnings) on Schedule E (Form  
1040), line 28, column (i).  
Code L. Any income, gain, or loss to the partnership  
from a distribution under section 751(b) (certain dis-  
tributions treated as sales or exchanges). Report this  
amount on Form 4797, line 10.  
See the Instructions for Schedule D (Form 1040) and  
the Instructions for Form 8949 for details on how to report  
the gain and the amount of the allowable postponed gain.  
Making the section 1045 election. You make a  
section 1045 election on a timely filed return for the tax  
year during which the partnership's tax year ends. See the  
Instructions for Form 8949 and the Instructions for  
Schedule D (Form 1040) for more information. Attach to  
your Schedule D (Form 1040) a statement that includes  
the following information for each amount of gain that you  
don't recognize under section 1045.  
Code M. Gain eligible for section 1045 rollover (re-  
placement stock purchased by partnership). The  
partnership should give you (a) the name of the  
The name of the corporation that issued the QSB stock.  
The name and EIN of the selling partnership.  
corporation that issued the qualified small business (QSB)  
stock, (b) your share of the partnership's adjusted basis  
and sales price of the QSB stock, (c) the dates the QSB  
stock was bought and sold, (d) your share of gain from the  
sale of the QSB stock, and (e) your share of the gain that  
was deferred by the partnership under section 1045.  
Corporate partners aren't eligible for the section 1045  
rollover. To qualify for the section 1045 rollover:  
The dates the QSB stock was purchased and sold.  
The amount of gain that isn't recognized under section  
1045.  
If a partner purchases QSB stock, the name of the  
corporation that issued the replacement QSB stock, the  
date the stock was purchased, and the cost of the stock.  
If a partner treats the partner's interest in QSB stock  
that's purchased by a purchasing partnership as the  
partner's replacement QSB stock, the name and EIN of  
the purchasing partnership, the name of the corporation  
that issued the replacement QSB stock, the partner's  
share of the cost of the QSB stock that was purchased by  
the partnership, the computation of the partner's  
You must have held an interest in the partnership during  
the entire period in which the partnership held the QSB  
stock (more than 6 months prior to the sale), and  
Your share of the gain eligible for the section 1045  
rollover can't exceed the amount that would have been  
allocated to you based on your interest in the partnership  
at the time the QSB stock was acquired.  
adjustment to basis with respect to that QSB stock, and  
the date the stock was purchased by the partnership.  
Distribution of replacement QSB stock to a partner  
that reduces another partner's interest in  
See the Instructions for Schedule D (Form 1040) and  
the Instructions for Form 8949 for details on how to report  
the gain and the amount of the allowable postponed gain.  
18  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
replacement QSB stock. You must recognize gain upon  
a distribution of replacement QSB stock to another partner  
that reduces your share of the replacement QSB stock  
held by a partnership. The amount of gain that you must  
recognize is based on the amount of gain that you would  
recognize upon a sale of the distributed replacement QSB  
stock for its FMV on the date of the distribution, but not to  
exceed the amount you previously deferred under section  
1045 with respect to the distributed replacement QSB  
stock. If the partnership distributed your share of  
replacement QSB stock to another partner, the  
section 3(w)(1) of the Federal Deposit Insurance Act),  
report the gain or loss in accordance with the Instructions  
for Form 4797, and Rev. Proc. 2008-64, 2008-47 I.R.B.  
1195.  
Code R. Specially allocated ordinary gain (loss).  
Report this amount on Form 4797, line 10.  
Code S. Non-portfolio capital gain (loss). Net  
short-term capital gain (loss) and net long-term capital  
gain (loss) from Schedule D (Form 1065) that aren’t  
portfolio income. An example is gain or loss from the  
disposition of nondepreciable personal property used in a  
trade or business activity of the partnership. Report total  
net short-term gain (loss) on Schedule D (Form 1040),  
line 5. Report the total net long-term gain (loss) on  
Schedule D (Form 1040), line 12.  
partnership should give you (a) the name of the  
corporation that issued the replacement QSB stock, (b)  
the date the replacement QSB stock was distributed to  
another partner or partners, and (c) your share of the  
partnership's adjusted basis and FMV of the replacement  
QSB stock on such date.  
Codes T through X. Reserved for future use.  
For more information, see Regulations section  
Code ZZ. Other. Any other information you may need to  
file your tax return.  
1.1045-1.  
Code O. Sale or exchange of QSB stock with section  
1202 exclusion. Gain from the sale or exchange of QSB  
stock (as defined in the Instructions for Schedule D (Form  
1065)) that's eligible for a section 1202 exclusion. The  
partnership should also give you (a) the name of the  
corporation that issued the QSB stock, (b) your share of  
the partnership's adjusted basis and sales price of the  
QSB stock, and (c) the dates the QSB stock was bought  
and sold. Corporate partners aren't eligible for the section  
1202 exclusion. The following additional limitations apply  
at the partner level.  
Report loss items that are passive activity amounts to  
you following the Instructions for Form 8582. However, if  
the box in item D is checked, report the loss following the  
rules for Publicly traded partnerships, earlier.  
Deductions  
Box 12. Section 179 Deduction  
Use this amount, along with the total cost of section 179  
property placed in service during the year from other  
sources, to complete Part I of Form 4562, Depreciation  
and Amortization. The partnership will report on an  
attached statement your allowable share of the cost of any  
qualified enterprise zone or qualified real property it  
placed in service during the tax year. Report the amount  
from Form 4562, line 12, allocable to a passive activity  
using the Instructions for Form 8582. If the amount isn't a  
passive activity deduction, report it on Schedule E (Form  
1040), line 28, column (j). However, if the box in item D is  
checked, report this amount following the rules for Publicly  
traded partnerships, earlier.  
You must have held an interest in the partnership when  
the partnership acquired the QSB stock and at all times  
thereafter until the partnership disposed of the QSB stock.  
Your share of the eligible section 1202 gain can't  
exceed the amount that would have been allocated to you  
based on your interest in the partnership at the time the  
QSB stock was acquired.  
See the Instructions for Schedule D (Form 1040) and  
the Instructions for Form 8949 for details on how to report  
the gain and the amount of the allowable exclusion.  
Code P. Gain or loss on disposition of farm recapture  
property and other items to which section 1252 ap-  
plies. Partnership gains from the disposition of farm  
recapture property (see the instructions for Form 4797,  
line 27) and other items to which section 1252 applies.  
Code Q. Gain or loss on Fannie Mae or Freddie Mac  
qualified preferred stock. Gain or loss attributable to  
the sale or exchange of qualified preferred stock of the  
Federal National Mortgage Association (Fannie Mae) and  
the Federal Home Loan Mortgage Corporation (Freddie  
Mac). The partnership will report on an attached  
Box 13. Other Deductions  
Contributions. Codes A through G. The partnership  
will give you a statement that shows charitable  
contributions subject to the 100%, 60%, 50%, 30%, and  
20% AGI limitations. For more details, see Pub. 526,  
Charitable Contributions, and the Instructions for  
Schedule A (Form 1040). If your contributions are subject  
to more than one of the AGI limitations, see Worksheet 2  
in Pub. 526.  
Charitable contribution deductions aren't taken into  
account in figuring your passive activity loss for the year.  
Don't include them on Form 8582.  
Code A. Cash contributions (60%). Report this  
amount, subject to the 60% AGI limitation, on Schedule A  
(Form 1040), line 11.  
statement the amount of gain or loss attributable to the  
sale or exchange of the qualified preferred stock, the date  
the stock was acquired by the partnership, and the date  
the stock was sold or exchanged by the partnership. If the  
partner isn’t a financial institution, report the gain or loss  
on Schedule D (Form 1040), line 5 or line 12, in  
Code B. Cash contributions (30%). Report this  
amount, subject to the 30% AGI limitation, on Schedule A  
(Form 1040), line 11.  
accordance with the Instructions for Schedule D (Form  
1040) and the Instructions for Form 8949. If a partner is a  
financial institution referred to in section 582(c)(2) or a  
depositary institution holding company (as defined in  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
19  
   
Code C. Noncash contributions (50%). If property  
other than cash is contributed, and if the claimed  
deduction for one item or group of similar items of  
property exceeds $500, the partnership must give you a  
copy of Form 8283, Noncash Charitable Contributions, to  
attach to your tax return. Don't deduct the amount shown  
on Form 8283. It's the partnership's contribution. Instead,  
deduct the amount identified by code C in box 13, subject  
to the 50% AGI limitation, on Schedule A (Form 1040),  
line 12.  
If the partnership provides you with information that the  
contribution was property other than cash and doesn't  
give you a Form 8283, see the Instructions for Form 8283  
for filing requirements. Don't file Form 8283 unless the  
total claimed deduction for all contributed items of  
property exceeds $500.  
Code D. Noncash contributions (30%). Report this  
amount, subject to the 30% AGI limitation, on Schedule A  
(Form 1040), line 12.  
Code E. Capital gain property to a 50% organization  
(30%). Report this amount, subject to the 30% AGI  
limitation, on Schedule A (Form 1040), line 12. See  
Worksheet 2 in Pub. 526.  
Code F. Capital gain property (20%). Report this  
amount, subject to the 20% AGI limitation, on Schedule A  
(Form 1040), line 12.  
Code G. Contributions (100%). The partnership will  
report your distributive share of the following contributions  
(both cash and noncash) that may be subject to the 100%  
AGI limitation.  
Qualified conservation contributions of property  
used in agriculture or livestock production. The  
partnership will report your share of qualified conservation  
contributions of property used in agriculture or livestock  
production. This contribution isn't included in the amount  
reported in box 13 using code C. If you're a farmer or  
rancher, you qualify for a 100% AGI limitation for this  
contribution. Otherwise, your deduction for this  
contribution is subject to a 50% AGI limitation. Report this  
amount on Schedule A (Form 1040), line 12. See Pub.  
526 for more information on qualified conservation  
contributions.  
Code H. Investment interest expense. Include this  
amount on Form 4952, line 1. If the partnership has  
investment income or other investment expense, it'll report  
your share of these items in box 20 using codes A and B.  
Include investment income and expenses from other  
sources to figure how much of your total investment  
interest is deductible. You'll also need this information to  
figure your investment interest expense deduction.  
If the partnership paid or accrued interest on debts  
properly allocable to investment property, the amount of  
interest you're allowed to deduct may be limited.  
For more information on the special provisions that  
apply to investment interest expense, see Form 4952 and  
Pub. 550, Investment Income and Expenses.  
Code I. Deductions—royalty income. Include  
deductions allocable to royalties on Schedule E (Form  
1040), line 19. For this type of expense, enter “From  
Schedule K-1 (Form 1065).”  
These deductions aren't taken into account in figuring  
your passive activity loss for the year. Don't enter them on  
Form 8582.  
Code J. Section 59(e)(2) expenditures. On an  
attached statement, the partnership will show the type and  
the amount of qualified expenditures for which you may  
make a section 59(e) election. The statement will also  
identify the property for which the expenditures were paid  
or incurred. If there is more than one type of expenditure,  
the amount of each type will also be listed.  
If you deduct these expenditures in full in the current  
year, they're treated as adjustments or tax preference  
items for purposes of alternative minimum tax (AMT).  
However, you may elect to amortize these expenditures  
over the number of years in the applicable period rather  
Food inventory contributions. The partnership will  
report on an attached statement your share of qualified  
food inventory contributions. The food inventory  
contribution isn't included in the amount reported in  
box 13 using code C. The partnership will also report your  
share of the partnership's net income from the business  
activities that made the food inventory contribution(s).  
Your deduction for food inventory contributions made  
during 2023 can't exceed 15% of your aggregate net  
income for the tax year from the business activities from  
which the food inventory contribution was made (including  
your share of net income from partnership or S  
corporation businesses that made food inventory  
contributions). Amounts that exceed the 15% limitation  
may be carried over for up to 5 years. Report this amount,  
subject to the 50% AGI limitation, on Schedule A (Form  
1040), line 12.  
Noncash contributions You must fill out your own  
Form 8283 with the information the partnership provides  
you. If the partnership is the entity where the noncash  
charitable contribution was originally reported, insert the  
entity name and identifying number on your own Form  
8283. See the Instructions for Form 8283 for more details.  
If the partnership isn't the entity where the noncash  
charitable contribution was originally reported, the  
partnership will provide you the entity name and  
identifying number that the noncash charitable  
contribution was originally reported. Insert this information  
on your own Form 8283.  
Qualified conservation contributions. The  
partnership will report your share of qualified conservation  
contributions of property. In general, each partner’s claim  
of a charitable contribution deduction for a conservation  
contribution is disallowed if the amount of the  
partnership’s contribution of a qualified real property  
interest exceeds 2.5 times the sum of each partner’s  
relevant basis in the partnership. See Qualified  
Conservation Contribution in Pub. 526 and Disallowance  
of conservation contribution deductions by certain  
pass-through entities in the Instructions for Form 8283.  
You must fill out your own Form 8283 and attach the Form  
8283 the partnership provides you. See the Instructions  
for Form 8283 for more details. The partnership will  
provide you your relevant basis. You must report this on  
your own Form 8283, line 3, column (h). The partnership  
may need information from you to calculate relevant basis.  
20  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
than deducting the full amount in the current year. If you  
make this election, these items aren't treated as  
adjustments or tax preference items.  
to use the excess amount on Form 8863 to figure the  
education credits.  
Code O. Dependent care benefits. The partnership will  
report the dependent care benefits you received. You  
must use Form 2441, Part III, to figure the amount, if any,  
of the benefits you may exclude from your income.  
Code P. Preproductive period expenses. You may be  
able to deduct these expenses currently or you may need  
to capitalize them under section 263A. See Pub. 225,  
Farmer's Tax Guide, and Regulations section 1.263A-4 for  
details.  
Under the election, you can deduct circulation  
expenditures ratably over a 3-year period. Research and  
experimental expenditures and mining exploration and  
development costs can be amortized over a 10-year  
period. Intangible drilling and development costs can be  
amortized over a 60-month period. The amortization  
period begins with the month in which such costs were  
paid or incurred.  
Make the election on Form 4562. If you make the  
election, report the current year amortization of section  
59(e) expenditures from Form 4562, Part VI, on  
Schedule E (Form 1040), line 28. If you don't make the  
election, report the section 59(e)(2) expenditures on  
Schedule E (Form 1040), line 28, and figure the resulting  
adjustment or tax preference item (see Form 6251,  
Alternative Minimum Tax—Individuals). Whether you  
deduct the expenditures or elect to amortize them, report  
the amount on a separate line of Schedule E, line 28,  
column (i), if you materially participated in the partnership  
activity. If you didn't materially participate, follow the  
Instructions for Form 8582 to figure how much of the  
deduction can be reported in column (g) of Schedule E,  
line 28.  
Code Q. Reserved for future use.  
Code R. Pensions and IRAs. Payments made on your  
behalf to an IRA, a qualified plan, a simplified employee  
pension (SEP), or a SIMPLE IRA plan. See the  
instructions for Schedule 1 (Form 1040), line 20, to figure  
your IRA deduction. Enter payments made to a qualified  
plan, SEP, or SIMPLE IRA plan on Schedule 1 (Form  
1040), line 16. If the payments to a qualified plan were to a  
defined benefit plan, the partnership should give you a  
statement showing the amount of the benefit accrued for  
the current tax year.  
Code S. Reforestation expense deduction. The  
partnership will provide a statement that describes the  
qualified timber property for these reforestation expenses.  
The expense deduction is limited to $10,000 ($5,000 if  
married filing separately) for each qualified timber  
property, including your share of the partnership's  
expense and any reforestation expenses you separately  
paid or incurred during the tax year.  
Code K. Excess business interest expense (EBIE). If  
the partnership reports EBIE to the partner, the partner is  
required to file Form 8990. See the Instructions for Form  
8990 for additional information.  
For tax years beginning after 2017, the partner’s basis  
in its partnership interest at the end of the tax year is  
reduced (but not below zero) by the amount of excess  
business interest allocated to the partner for the tax year,  
even if the partner isn't allowed a deduction for the  
allocated excess business interest in the year of the basis  
reduction. If the partner disposes of a partnership interest  
in which the basis has been reduced before all of the  
allocated excess business interest was used, the partner  
increases its basis immediately before the sale for the  
amount not yet deducted.  
If you didn't materially participate in the activity, use  
Form 8582 to figure the amount to report on Schedule E  
(Form 1040), line 28, column (g). If you materially  
participated in the reforestation activity, report the  
deduction on Schedule E (Form 1040), line 28, column (i).  
Codes T through U. Reserved for future use.  
Code V. Section 743(b) negative income adjust-  
ments. The partnership will use this code to report the  
net negative income adjustment resulting from all section  
743(b) basis adjustments. The partnership will provide  
your section 743(b) adjustment net of cost recovery at  
year end by asset grouping in box 20, code U.  
Code W. Soil and water conservation. Soil and water  
conservation expenditures and endangered species  
recovery expenditures. See section 175 for limitations on  
the amount you're allowed to deduct.  
Code X. Film, television, and theatrical production  
expenditures. The partnership will provide a statement  
that describes the film, television, or live theatrical  
production generating these expenses. Generally, if the  
aggregate cost of the production exceeds $15 million, you  
aren't entitled to the deduction. The limitation is $20  
million for productions in certain areas (see section 181  
for details). If you didn't materially participate in the  
activity, use Form 8582 to determine the amount that can  
be reported on Schedule E (Form 1040), line 28, column  
(g). If you materially participated in the production activity,  
report the deduction on Schedule E (Form 1040), line 28,  
column (i).  
Code L. Deductions—portfolio income (other).  
Generally, you should report these amounts on  
Schedule A (Form 1040), line 16. See the instructions for  
Schedule A, line 16, for details. These deductions aren't  
taken into account in figuring your passive activity loss for  
the year. Don't enter them on Form 8582.  
Code M. Amounts paid for medical insurance. Any  
amounts paid during the tax year for insurance that  
constitutes medical care for you, your spouse, your  
dependents, and your children under age 27 who aren't  
dependents. On Schedule 1 (Form 1040), line 17, you  
may be allowed to deduct such amounts, even if you don't  
itemize deductions. If you do itemize deductions, enter on  
Schedule A (Form 1040), line 1, any amounts not  
deducted on Schedule 1 (Form 1040), line 17.  
Code N. Educational assistance benefits. Deduct your  
educational assistance benefits on a separate line of  
Schedule E (Form 1040), line 28, up to the $5,250  
limitation. If your benefits exceed $5,250, you may be able  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
21  
Code Y. Expenditures for removal of barriers.  
Expenditures for the removal of architectural and  
transportation barriers to the elderly and disabled that the  
partnership elected to treat as a current expense. The  
deductions are limited by section 190(c) to $15,000 per  
year from all sources.  
Code Z. Itemized deductions. Itemized deductions that  
Form 1040 or 1040-SR filers report on Schedule A (Form  
1040).  
Code AA. Contributions to a capital construction  
fund (CCF). The deduction for a CCF investment isn't  
taken on Schedule E (Form 1040). Instead, you subtract  
the deduction from the amount that would normally be  
entered as taxable income on Form 1040 or 1040-SR,  
line 15. In the margin to the left of line 15, enter "CCF" and  
the amount of the deduction.  
Box 14. Self-Employment Earnings  
(Loss)  
If you and your spouse are both partners, each of you  
must complete and file your own Schedule SE (Form  
1040), Self-Employment Tax, to report your partnership  
net earnings (loss) from self-employment.  
Code A. Net earnings (loss) from self-employment. If  
you're a general partner, reduce this amount before  
entering it on Schedule SE (Form 1040) by any section  
179 expense deduction claimed, unreimbursed  
partnership expenses claimed, and depletion claimed on  
oil and gas properties. Don't reduce net earnings from  
self-employment by any separately stated deduction for  
health insurance expenses.  
If the amount on this line is a loss, enter only the  
deductible amount on Schedule SE (Form 1040). See  
Code AB. Penalty on early withdrawal of savings.  
Report this amount on Schedule 1 (Form 1040), line 18.  
If your partnership is an options dealer or a  
Code AC. Interest expense allocated to debt-financed  
distributions. The manner in which you report such  
interest expense depends on your use of the distributed  
debt proceeds. If the proceeds were used in a trade or  
business activity, report the interest on Schedule E (Form  
1040), line 28. In column (a), enter the name of the  
partnership and “interest expense.If you materially  
participated in the trade or business activity, enter the  
interest expense in column (i). If you didn't materially  
participate in the activity, follow the Instructions for Form  
8582 to figure the interest expense you can report in  
column (g). See the definition of material participation,  
earlier. If the proceeds were used in an investment activity,  
report the interest on Form 4952. If the proceeds are used  
for personal purposes, the interest is generally not  
deductible.  
Code AD. Interest expense on working interest in oil  
or gas. Interest paid or accrued on debt properly  
allocable to your share of a working interest in any oil or  
gas property (if your liability isn't limited). If you didn't  
materially participate in the oil or gas activity, this interest  
is investment interest reportable as described earlier  
under Code H; otherwise, it's trade or business interest. If  
you didn't materially participate in the oil or gas activity,  
this interest is investment interest expense and should be  
reported on Form 4952. If you materially participated in  
the activity, report the interest on Schedule E (Form 1040),  
line 28. On a separate line, enter “interest expense” and  
the name of the partnership in column (a) and the amount  
in column (i).  
commodities dealer, see section 1402(i).  
If your partnership is an investment club, see Rev. Rul.  
75-525, 1975-2 C.B. 350.  
Code B. Gross farming or fishing income. If you're an  
individual partner, enter the amount from this line, as an  
item of information, on Schedule E (Form 1040), line 42.  
Also use this amount to figure net earnings from  
self-employment under the farm optional method on  
Schedule SE (Form 1040), Part II.  
Code C. Gross nonfarm income. If you're an individual  
partner, use this amount to figure net earnings from  
self-employment under the nonfarm optional method on  
Schedule SE (Form 1040), Part II.  
Box 15. Credits  
If you have credits that are passive activity credits to you,  
you must complete Form 8582-CR (or Form 8810 for  
corporations) in addition to the credit forms identified  
below. See Passive Activity Limitations, earlier, and the  
Instructions for Form 8582-CR (or Form 8810) for details.  
Generally, you aren't required to complete the  
source credit form or attach it to Form 3800 if  
you're a taxpayer that isn't a partnership or S  
TIP  
corporation, and your only source for a credit listed on  
Form 3800, Part III, is from a partnership, S corporation,  
estate, trust, or cooperative. (Instead, you can report this  
credit directly on Form 3800, Part III, and enter the EIN of  
the partnership in column (d) of Part III.) The following  
exceptions apply.  
Code AE. Deductions—portfolio income. Formerly  
deductible by individuals under section 67 subject to the  
2% AGI floor. For taxpayers other than individuals, deduct  
amounts that are clearly and directly allocable to portfolio  
income (other than investment interest expense and  
section 212 expenses from a REMIC).  
You're claiming the investment credit (Form 3468) or the  
biodiesel, renewable diesel, or sustainable aviation fuels  
credit (Form 8864).  
The taxpayer is an estate or trust and the source credit  
can be allocated to beneficiaries. For more details, see the  
instructions for box 13 of Schedule K-1 (Form 1041),  
Beneficiary’s Share of Income, Deductions, Credits, etc.  
The partnership will give you a description and the  
amount of your share for each of these items.  
The taxpayer is a cooperative and the source credit can  
Codes AF through AJ. Reserved for future use.  
or must be allocated to patrons. For more details, see the  
instructions for Form 1120-C, U.S. Income Tax Return for  
Cooperative Associations, Schedule J, line 5c.  
Code ZZ. Other. Any other information you may need to  
file your tax return.  
22  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
   
RIC or REIT. Report these taxes on Schedule 3 (Form  
1040), line 13a.  
Code I. Biofuel producer credit. Report this amount on  
Form 6478, Biofuel Producer Credit, line 3; or Form 3800,  
Part III, line 4c (see TIP, earlier).  
Code J. Work opportunity credit. Report this amount  
on Form 5884, Work Opportunity Credit, line 3; or Form  
3800, Part III, line 4b (see TIP, earlier).  
Code K. Disabled access credit. Report this amount  
on Form 8826, Disabled Access Credit, line 7; or Form  
3800, Part III, line 1e (see TIP, earlier).  
Code L. Empowerment zone employment credit.  
Report this amount on Form 8844, Empowerment Zone  
Employment Credit, line 3; or Form 3800, Part III, line 3  
(see TIP, earlier).  
Code M. Credit for increasing research activities.  
Report this amount on Form 6765, Credit for Increasing  
Research Activities, line 37; or on Form 3800, Part III (see  
TIP, earlier) as follows.  
Code A. Zero-emission nuclear power production  
credit. Report this amount on Form 7213, Part II; or Form  
3800, Part III, line 1u.  
Code B. Production from advanced nuclear power fa-  
cilities credit. Report this amount on Form 7213, Part I;  
or Form 3800, Part III, line 1cc.  
Codes C and D. Low-income housing credit. If  
section 42(j)(5) applies, the partnership will report your  
share of the low-income housing credit using code C. If  
section 42(j)(5) doesn't apply, your share of the credit will  
be reported using code D. Any allowable low-income  
housing credit reported using code C or D is reported on  
Form 8586, line 4; or Form 3800, Part III, line 4d.  
Keep a separate record of the low-income housing  
credit from each separate source so that you can correctly  
figure any recapture of low-income housing credit that  
may result from the disposition of all or part of your  
partnership interest. For more information on recapture,  
see the instructions for Form 8611, Recapture of  
Low-Income Housing Credit.  
Code E. Qualified rehabilitation expenditures (rental  
real estate). The partnership will report your share of the  
qualified rehabilitation expenditures and other information  
you need to complete Form 3468 related to rental real  
estate activities using code E. Your share of qualified  
rehabilitation expenditures from property not related to  
rental real estate activities will be reported in box 20 using  
code D. See the Instructions for Form 3468 for details. If  
the partnership is reporting expenditures from more than  
one activity, the attached statement will separately identify  
the expenditures from each activity.  
The partnership will provide information necessary to  
determine if it's an eligible small business under section  
38(c)(5)(A). If you and the partnership are eligible small  
businesses, report the credit on line 4i. For more  
information, see the Instructions for Form 3800.  
All others, report the credit on line 1c.  
Code N. Credit for employer social security and Med-  
icare taxes. Report this amount on Form 8846, Credit for  
Employer Social Security and Medicare Taxes Paid on  
Certain Employee Tips, line 5; or Form 3800, Part III,  
line 4f (see TIP, earlier).  
Code O. Backup withholding. This is your share of the  
credit for backup withholding on dividends, interest  
income, and other types of income. Include this amount in  
the total you enter on Form 1040 or 1040-SR, line 25c,  
and attach a copy of the Schedule K-1 to your tax return.  
Instead of attaching a copy of the Schedule K-1 to the tax  
return, you can include a statement with the return that  
provides the partnership's name, address, EIN, and  
backup withholding amount.  
Other credits. Most credits identified by codes P through  
ZZ will be reported on Form 3800 (see TIP, earlier).  
Code P. Unused investment credit from the qualifying  
advanced coal project credit or qualifying gasifica-  
tion project credit allocated from cooperatives.  
Report this amount on Form 3468, Part II, line 6.  
Code Q. Unused investment credit from the qualify-  
ing advanced energy project credit allocated from  
cooperatives. Report this amount on Form 3468, Part III,  
line 2.  
Code R. Unused investment credit from the ad-  
vanced manufacturing investment credit allocated  
from cooperatives. Report this amount on Form 3468,  
Part IV, line 2.  
Combine the expenditures (for Form 3468 reporting)  
from box 15, code E, and box 20, code D. The  
expenditures related to rental real estate activities (box 15,  
code E) are reported on Schedule K-1 separately from  
other qualified rehabilitation expenditures (box 20, code  
D) because they're subject to different passive activity  
limitation rules. See the Instructions for Form 8582-CR for  
details.  
Code F. Other rental real estate credits. The  
partnership will identify the type of credit and any other  
information you need to figure these credits from rental  
real estate activities (other than the low-income housing  
credit and qualified rehabilitation expenditures). These  
credits may be limited by the passive activity limitations. If  
the credits are from more than one activity, the partnership  
will identify the credits from each activity on an attached  
statement. See Passive Activity Limitations, earlier, and  
the Instructions for Form 8582-CR for details.  
Code G. Other rental credits. The partnership will  
identify the type of credit and any other information you  
need to figure these rental credits. These credits may be  
limited by the passive activity limitations. If the credits are  
from more than one activity, the partnership will identify  
the credits from each activity on an attached statement.  
See Passive Activity Limitations, earlier, and the  
Instructions for Form 8582-CR for details.  
Code S. Reserved for future use.  
Code T. Unused investment credit from the energy  
credit allocated from cooperatives. Report this amount  
on Form 3468, Part VI, line 31.  
Code H. Undistributed capital gains credit. Code H  
represents taxes paid on undistributed capital gains by a  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
23  
 
Code U. Unused investment credit from the rehabili-  
tation credit allocated from cooperatives. Report this  
amount on Form 3468, Part VII, line 2.  
Code V. Advanced manufacturing production credit.  
Report this amount on Form 7207; or Form 3800, Part III,  
line 1b.  
Code AP. Clean renewable energy bond credit.  
Report this amount on Form 8912.  
Code AQ. New clean renewable energy bond credit.  
Report this amount on Form 8912.  
Code AR. Qualified energy conservation bond credit.  
Report this amount on Form 8912.  
Codes W and X. Reserved for future use.  
Code AS. Qualified zone academy bond credit.  
Code Y. Clean hydrogen production credit. Report  
Report this amount on Form 8912.  
this amount on Form 7210; or Form 3800, Part III, line 1g.  
Code AT. Qualified school construction bond credit.  
Code Z. Orphan drug credit. Report this amount on  
Report this amount on Form 8912.  
Form 8820; or Form 3800, Part III, line 1h.  
Code AU. Build America bond credit. Report this  
Code AA. Enhanced oil recovery credit. Report this  
amount on Form 8912.  
amount on Form 8830; or Form 3800, Part III, line 1t.  
Code AV. Credit for employer differential wage pay-  
ments. Report this amount on Form 8932; or Form 3800,  
Part III, line 1w.  
Code AW. Carbon oxide sequestration credit. Report  
this amount on Form 8933, Part III, Section D, line 20; or  
Form 3800, Part III, line 1x.  
Code AX. Carbon oxide sequestration credit recap-  
ture. Report this amount on Form 8933, Part III,  
Section D, line 22.  
Code AB. Renewable electricity production credit.  
Report this amount on Form 8835, Part II; or Form 3800,  
Part III, line 1f.  
Code AC. Biodiesel, renewable diesel, or sustainable  
aviation fuels credit. If this credit includes the small  
agri-biodiesel producer credit, the partnership will provide  
additional information on an attached statement. If no  
statement is attached, report this amount on Form 8864,  
line 10. If a statement is attached, see the instructions for  
Form 8864, line 10.  
Code AY. New clean vehicle credit. Report this amount  
on Form 8936, Part II; or Form 3800, Part III, line 1y.  
Code AD. New markets credit. Report this amount on  
Code AZ. Qualified commercial clean vehicle credit.  
Report this amount on Form 8936, Part V; or Form 3800,  
Part III, line 1aa.  
Code BA. Credit for small employer health insurance  
premiums. Report this amount on Form 8941; or Form  
3800, Part III, line 4h.  
Code BB. Employer credit for paid family and medi-  
cal leave. Report this amount on Form 8944; or Form  
3800, Part III, line 4j.  
Code BC. Eligible credits from transferor(s) under  
section 6418. Report this amount on Form 3800. See the  
instructions for Form 3800, Parts III and V, for additional  
information.  
Form 8874; or Form 3800, Part III, line 1i.  
Code AE. Credit for small employer pension plan  
startup costs. Report this amount on Form 8881, Part I;  
or Form 3800, Part III, line 1j.  
Code AF. Credit for small employer auto-enrollment.  
Report this amount on Form 8881, Part II; or Form 3800,  
Part III, line 1dd.  
Code AG. Credit for small employer military spouse  
retirement plan eligibility. Report this amount on Form  
8881, Part III; or Form 3800, Part III, line 1ee.  
Code AH. Credit for employer-provided childcare fa-  
cilities and services. Report this amount on Form 8882;  
or Form 3800, Part III, line 1k.  
Codes BD through BG. Reserved for future use.  
Code AI. Low sulfur diesel fuel production credit.  
Report this amount on Form 8896; or Form 3800, Part III,  
line 1m.  
Code ZZ. Other. Any other information you may need to  
file your tax return.  
Code AJ. Qualified railroad track maintenance credit.  
Report this amount on Form 8900; or Form 3800, Part III,  
line 4g.  
Code AK. Credit for oil and gas production from mar-  
ginal wells. Report this amount on Form 8904; or Form  
3800, Part III, line 1bb.  
Box 16. International Transactions  
If the partnership checked the box, see the attached  
Schedule K-3 with respect to items of international tax  
relevance.  
If the partnership didn't check the box, the partnership  
attached a statement to the Schedule K-1 (or issued a  
statement prior to furnishing the Schedule K-1) notifying  
the partner that the partner won't receive Schedule K-3  
from the partnership unless the partner requests the  
schedule.  
Code AL. Distilled spirits credit. Report this amount on  
Form 8906; or Form 3800, Part III, line 1n.  
Code AM. Energy efficient home credit. Report this  
amount on Form 8908; or Form 3800, Part III, line 1p.  
Code AN. Alternative motor vehicle credit. Report this  
For additional information, see the Partner’s  
Instructions for Schedule K-3.  
amount on Form 8910; or Form 3800, Part III, line 1r.  
Code AO. Alternative fuel vehicle refueling property  
credit. Report this amount on Form 8911, Part II; or Form  
3800, Part III, line 1s.  
24  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
Box 17. Alternative Minimum Tax  
(AMT) Items  
Box 19. Distributions  
Code A. Cash and marketable securities. Code A  
shows the distributions the partnership made to you of  
cash and certain marketable securities. The marketable  
securities are included at their FMVs on the date of  
distribution (minus your share of the partnership's gain on  
the securities distributed to you). If the amount shown as  
code A exceeds the adjusted basis of your partnership  
interest immediately before the distribution, the excess is  
treated as gain from the sale or exchange of your  
partnership interest. Generally, this gain is treated as gain  
from the sale of a capital asset and should be reported on  
Form 8949 and the Schedule D for your return. However, if  
you receive cash or property in exchange for any part of a  
partnership interest, the amount of the distribution  
attributable to your share of the partnership's unrealized  
receivable or inventory items results in ordinary income  
(see Regulations section 1.751-1(a) and Sale or  
Exchange of Partnership Interest, earlier). For details, see  
Form 8308.  
Use the information reported in box 17 (as well as your  
adjustments and tax preference items from other sources)  
to prepare your Form 6251; or Schedule I (Form 1041),  
Alternative Minimum Tax—Estates and Trusts.  
Code A. Post-1986 depreciation adjustment. This  
amount is your share of the partnership's post-1986  
depreciation adjustment. If you're an individual partner,  
report this amount on Form 6251, line 2l.  
Code B. Adjusted gain or loss. This amount is your  
share of the partnership's adjusted gain or loss. If you're  
an individual partner, report this amount on Form 6251,  
line 2k.  
Code C. Depletion (other than oil & gas). This amount  
is your share of the partnership's depletion adjustment. If  
you're an individual partner, report this amount on Form  
6251, line 2d.  
Codes D and E. Oil, gas, & geothermal proper-  
ties—gross income and deductions. The amounts  
reported on these lines include only the gross income  
(code D) from, and deductions (code E) allocable to, oil,  
gas, and geothermal properties included in box 1 of  
Schedule K-1. The partnership should have attached a  
statement that shows any income from or deductions  
allocable to such properties that are included in boxes 2  
through 13, 18, and 20 of Schedule K-1. Use the amounts  
reported and the amounts on the attached statement to  
help you figure the net amount to enter on Form 6251,  
line 2t.  
The partnership will separately identify both of the  
following.  
The FMVs of the marketable securities when distributed  
(minus your share of the gain on the securities distributed  
to you).  
The partnership's adjusted basis of those securities  
immediately before the distribution.  
Decrease the adjusted basis of your interest in the  
partnership (but not below zero) by the amount of cash  
distributed to you and the partnership's adjusted basis of  
the distributed securities. Advances or drawings of money  
or property against your share are treated as current  
distributions made on the last day of the partnership's tax  
year.  
Code F. Other AMT items. Enter the information on the  
statement attached by the partnership on the applicable  
lines of Form 6251, Form 466, or Schedule I (Form 1041).  
Your basis in the distributed marketable securities  
(other than in liquidation of your interest) is the smaller of:  
Box 18. Tax-Exempt Income and  
Nondeductible Expenses  
The partnership's adjusted basis in the securities  
immediately before the distribution increased by any gain  
recognized on the distribution of the securities, or  
The adjusted basis of your partnership interest reduced  
Code A. Tax-exempt interest income. Report on your  
return, as an item of information, your share of the  
by any cash distributed in the same transaction and  
increased by any gain recognized on the distribution of the  
securities.  
tax-exempt interest received or accrued by the partnership  
during the year. Individual partners include this amount on  
Form 1040 or 1040-SR, line 2a. Increase the adjusted  
basis of your interest in the partnership by this amount.  
If you received the securities in liquidation of your  
partnership interest, your basis in the marketable  
securities is equal to the adjusted basis of your  
partnership interest reduced by any cash distributed in the  
same transaction and increased by any gain recognized  
on the distribution of the securities.  
Code B. Other tax-exempt income. Increase the  
adjusted basis of your interest in the partnership by the  
amount shown, but don't include it in income on your tax  
return.  
Code B. Distribution subject to section 737. If a  
partner contributed section 704(c) built-in gain property  
within the last 7 years and the partnership made a  
distribution of property to that partner other than the  
previously contributed built-in gain property, the partner  
may be required to recognize gain under section 737. This  
gain is in addition to any gain recognized under section  
731 on the distribution.  
The partnership will attach a statement for the  
amount included under code B that's exempt by  
reason of section 892 and describe the nature of  
TIP  
the income.  
Code C. Nondeductible expenses. The nondeductible  
expenses paid or incurred by the partnership aren't  
deductible on your tax return. Decrease the adjusted  
basis of your interest in the partnership by this amount.  
When this occurs, the partnership will enter code B in  
box 19 of the contributing partner's Schedule K-1 and  
attach a statement that provides the information the  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
25  
   
partner needs to figure the recognized gain under section  
737. The partnership is required to provide the following  
information.  
partnership had in the property immediately before the  
distribution as a result of section 732(a)(2).  
Section 732(b) basis adjustment. If the basis of  
distributed property in a liquidating distribution is different  
to the recipient partner from the basis the partnership had  
in the property immediately before the distribution as a  
result of section 732(b).  
The FMV of the distributed property (other than money).  
The amount of money received in the distribution.  
The net precontribution gain of the partner.  
Using the information from the attached statement,  
complete the worksheet below to figure your recognized  
gain under section 737.  
The statement must include the following information.  
The name and EIN of the partnership from which a  
distribution was received.  
The computation of the adjustment to the basis of the  
Computation of Section 737 Gain  
1. Enter the FMV of the distributed property  
distributed property or properties.  
(other than money)  
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$
The allocation of the basis adjustment to the distributed  
2. Enter your adjusted basis in the partnership  
immediately before the distribution. See Basis  
properties in the hands of the partner.  
Limitations, earlier  
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Box 20. Other Information  
3. Enter the amount of money received in the  
distribution  
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Code A. Investment income. Report this amount on  
4. Subtract line 3 from line 2. If zero or less,  
Form 4952, line 4a.  
enter -0-  
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Code B. Investment expenses. Report this amount on  
5. Subtract line 4 from line 1  
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Form 4952, line 5.  
6. Enter your net precontribution gain  
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Code C. Fuel tax credit information. The partnership  
will report the number of gallons of each fuel sold or used  
during the tax year for a nontaxable use qualifying for the  
credit for taxes paid on fuels, type of use, and the  
7. Section 737 gain. Enter the lesser of the  
amount on line 5 or line 6 .  
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applicable credit per gallon. Use this information to  
complete Form 4136, Credit for Federal Tax Paid on Fuels.  
The type of gain (section 1231 gain, capital gain)  
generated is determined by the type of gain you would  
have recognized if you sold the property rather than  
contributing it to the partnership. Accordingly, report the  
amount from line 7, above, on Form 4797 or Form 8949  
and the Schedule D of your tax return.  
Code D. Qualified rehabilitation expenditures (other  
than rental real estate). The partnership will report your  
share of qualified rehabilitation expenditures and other  
information you need to complete Form 3468 for property  
not related to rental real estate activities in box 20 using  
code D. Your share of qualified rehabilitation expenditures  
related to rental real estate activities is reported in box 15  
using code E. See the Instructions for Form 3468 for  
details. If the partnership is reporting expenditures from  
more than one activity, the attached statement will  
Code C. Other property. Code C shows the  
partnership's adjusted basis of property other than money  
immediately before the property was distributed to you. In  
addition, the partnership should report the adjusted basis  
and FMV of each property distributed. Decrease the  
adjusted basis of your interest in the partnership by the  
amount of your basis in the distributed property. Your  
basis in the distributed property (other than in liquidation  
of your interest) is the smaller of:  
separately identify the expenditures from each activity.  
Combine the expenditures (for Form 3468 reporting)  
from box 15, code E, and box 20, code D. The  
expenditures related to rental real estate activities (box 15,  
code E) are reported on Schedule K-1 separately from  
other qualified rehabilitation expenditures (box 20, code  
D) because they're subject to different passive activity  
limitation rules. See the Instructions for Form 8582-CR for  
details.  
Code E. Basis of energy property. If the partnership  
provides an attached statement for code E, use the  
information on the statement to complete the applicable  
energy credit on Form 3468, Part VI. See Part VI—Energy  
Credit Under Section 48 in the Instructions for Form 3468.  
Codes F and G. Recapture of low-income housing  
credit. A section 42(j)(5) partnership will report recapture  
of a low-income housing credit with code F. All other  
partnerships will report recapture of a low-income housing  
credit with code G. Keep a separate record of recapture  
from each of these sources so that you'll be able to  
correctly figure any recapture of low-income housing  
credit that may result from the disposition of all or part of  
your partnership interest. For details, see Form 8611.  
The partnership's adjusted basis immediately before  
the distribution, or  
The adjusted basis of your partnership interest reduced  
by any cash distributed in the same transaction.  
If you received the property in liquidation of your  
interest, your basis in the distributed property is equal to  
the adjusted basis of your partnership interest reduced by  
any cash distributed in the same transaction.  
If you receive cash or property in exchange for any part  
of a partnership interest, the amount of the distribution  
attributable to your share of the partnership's unrealized  
receivable or inventory items results in ordinary income  
(see Regulations section 1.751-1(a) and Sale or  
Exchange of Partnership Interest, earlier).  
A partner must attach a statement to their return for the  
tax year of the distribution if either of the following  
situations is applicable.  
Section 732(a)(2) basis adjustment. If the basis of  
distributed property in a non-liquidating distribution is  
different to the recipient partner from the basis the  
26  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
Form 4797, line 22, add to the amount from item 6, above,  
the amount of your share of the section 179 expense  
deduction, reduced by any unused carryover of the  
deduction for this property. This amount may be different  
from the amount of section 179 expense you deducted for  
the property if your interest in the partnership has  
changed.  
8. If the disposition is due to a casualty or theft, a  
statement providing the information you need to complete  
Form 4684.  
9. If the sale was an installment sale, any information  
you need to complete Form 6252, Installment Sale  
Income. The partnership will separately report your share  
of all payments received for the property in future tax  
years. See the Form 6252 instructions for details.  
Code H. Recapture of investment credit. The  
partnership will provide any information you need to figure  
your recapture tax on Form 4255, Recapture of Investment  
Credit. See the Form 3468 on which you took the original  
credit for other information you need to complete Form  
4255.  
You may also need Form 4255 if you disposed of more  
than one-third of your interest in a partnership.  
Code I. Recapture of other credits. On a statement  
attached to Schedule K-1, the partnership will report any  
information you need to figure the recapture of the new  
markets credit (see Form 8874; and Form 8874-B, Notice  
of Recapture Event for New Markets Credit); any credit for  
employer-provided childcare facilities and services (see  
Form 8882); the alternative motor vehicle credit (see  
section 30B(h)(8)); the alternative fuel vehicle refueling  
property credit (see section 30C(e)(5)); or the new  
qualified plug-in electric drive motor vehicle credit (see  
section 30D(f)(5)).  
Code J. Look-back interest—completed long-term  
contracts. The partnership will report any information  
you need to figure the interest due or to be refunded under  
the look-back method of section 460(b)(2) on certain  
long-term contracts. Use Form 8697, Interest Computation  
Under the Look-Back Method for Completed Long-Term  
Contracts, to report any such interest.  
Code K. Look-back interest—income forecast meth-  
od. The partnership will report any information you need  
to figure the interest due or to be refunded under the  
look-back method of section 167(g)(2) for certain property  
placed in service after September 13, 1995, and  
depreciated under the income forecast method. Use Form  
8866, Interest Computation Under the Look-Back Method  
for Property Depreciated Under the Income Forecast  
Method, to report any such interest.  
Code L. Dispositions of property with section 179 de-  
ductions. The partnership will report your share of gain  
or loss on the sale, exchange, or other disposition of  
property for which a section 179 expense deduction was  
passed through to partners with code L. If the partnership  
passed through a section 179 expense deduction for the  
property, you must report the gain or loss and any  
recapture of the section 179 expense deduction for the  
property on your income tax return (see the Instructions  
for Form 4797 for details). The partnership will provide all  
the following information.  
Code M. Recapture of section 179 deduction. The  
partnership will report your share of any recapture of the  
section 179 expense deduction if business use of any  
property for which the section 179 expense deduction was  
passed through to partners dropped to 50% or less. If this  
occurs, the partnership must provide the following  
information.  
Your share of the depreciation allowed or allowable (not  
including the section 179 expense deduction).  
Your share of the section 179 expense deduction (if  
any) passed through for the property and the partnership's  
tax year(s) in which the amount was passed through.  
Reduce this amount by the portion, if any, of your unused  
(carryover) section 179 expense deduction for this  
property.  
Code N. Business interest expense (BIE). For tax  
years beginning after November 12, 2020, the partnership  
will report your share of the partnership's deductible BIE  
for inclusion in the separate loss class for computing any  
basis limitation (defined in section 704(d) and Regulations  
section 1.163(j)-6(h)). This information is necessary if your  
losses are limited under section 704(d). Deductible BIE is  
reported elsewhere on Schedule K-1 and the total amount  
is reported here for information only and was already  
included as a deduction on another line of your  
Schedule K-1. Included in the code N information is a  
statement providing the allocation of the BIE already  
deducted by the partnership by line number on  
Schedule K-1.  
The partner must remove the BIE deductions from  
these referenced lines when computing any basis  
!
CAUTION  
limitation.  
1. Description of the property.  
2. Date the property was acquired and placed in  
Any EBIE not deductible under section 163(j) will be  
included in box 13, code K, for inclusion in the basis  
limitation and isn't reported here. See Worksheet for  
Partnership for additional information about computing the  
loss limitation.  
service.  
3. Date of the sale or other disposition of the property.  
4. Your share of the gross sales price or amount  
realized.  
5. Your share of the cost or other basis plus the  
expense of sale.  
Code O. Section 453(l)(3) information. The  
partnership will report any information you need to figure  
the interest due under section 453(l)(3) with respect to the  
disposition of certain timeshares and residential lots on  
the installment method. If you're an individual, report the  
interest on Schedule 2 (Form 1040), line 14.  
6. Your share of the depreciation allowed or allowable.  
7. Your share of the section 179 expense deduction (if  
any) passed through for the property and the partnership's  
tax year(s) in which the amount was passed through. To  
figure the amount of depreciation allowed or allowable for  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
27  
of production for the tax year, and other information  
needed to figure your depletion deduction for oil and gas  
wells. The partnership should also allocate to you a share  
of the adjusted basis of each partnership oil or gas  
property. See the 2022 Pub. 535 for details on how to  
figure your depletion deduction.  
Code U. Section 743(b) basis adjustment. The  
partnership will provide your section 743(b) adjustment,  
net of cost recovery, by asset grouping. Go to IRS.gov/  
and-section-743b-reporting for more information.  
Code V. Unrelated business taxable income. The  
partnership will report any information you need to figure  
unrelated business taxable income under section 512(a)  
(1) (but excluding any modifications required by  
paragraphs (8) through (15) of section 512(b)) for a  
partner that's a tax-exempt organization.  
Code P. Section 453A(c) information. The partnership  
will report any information you need to figure the interest  
due under section 453A(c) with respect to certain  
installment sales. See Pub. 537, Installment Sales, for  
more information on section 453A(c). The information will  
include the following from each Form 6252 where line 5 is  
greater than $150,000.  
Description of property.  
Date acquired.  
Date property sold.  
Selling price, including mortgages and other debts (not  
including interest, whether stated or unstated).  
Mortgages, debts, and other liabilities the buyer  
assumed or took the property subject to.  
Gross profit.  
Contract price.  
Gross profit percentage.  
Current year payments and deemed payments received  
A partner is required to notify the partnership of its  
during the year, not including interest, whether stated or  
unstated.  
tax-exempt status.  
TIP  
Origination year payments and deemed payments  
received during the year, not including interest whether  
stated or unstated.  
Code W. Precontribution gain (loss). If the partnership  
distributed any property with precontribution gain or loss  
to any partner other than the contributing partner, and the  
date of the distribution was within 7 years of the date the  
property was contributed to the partnership, the  
Prior year payments, not including interest whether  
stated or unstated.  
Installment sale income.  
Character of the income—capital or ordinary.  
See section 453A(c) for information on how to compute  
contributing partner must recognize a gain or loss under  
section 704(c)(1)(B). If the partnership made such a  
distribution during its tax year, it'll enter code W in box 20  
of the contributing partner's Schedule K-1 and attach a  
statement providing the amount of the partner's  
the interest charge on the deferred tax liability. The section  
453A interest charge is reported as additional or other on  
other tax returns. See Interest on Deferred Tax in Pub. 537  
for additional details on how to compute the section  
453A(c) interest.  
precontribution gain (loss) and identifying the character of  
the gain or loss (for example, capital gain (loss) or section  
1231 gain (loss)). Report the precontribution gain or loss  
on Form 8949 and/or Schedule D (Form 1040) or Form  
4797 in accordance with the information provided by the  
partnership.  
Code Q. Section 1260(b) information. The partnership  
will report any information you need to figure the interest  
due under section 1260(b). If the partnership had gain  
from certain constructive ownership transactions, your tax  
liability must be increased by the interest charge on any  
deferral of gain recognition under section 1260(b). Report  
the interest on Schedule 2 (Form 1040), line 17z. Enter  
“1260(b)” and the amount of the interest in the space to  
the left of line 17z. See section 1260(b) for details,  
including how to figure the interest.  
Code X. Payment obligations including guarantees  
and deficit obligations (DROs). If a partnership has  
checked the box in item K3, this indicates that you or a  
person related to you has a payment obligation with  
respect to the partnership's liabilities. The attached  
statement for box 20, code X, reflects the ending balance  
of each payment obligation that was included in the  
aggregate amount reported in box 20 under code X. For  
purposes of box 20, code X, a payment obligation is  
defined as an obligation under Regulations section  
1.752-2(b)(1) that is recognized under Regulations  
sections 1.752-2(b)(3)(i)(A) and (B) (such as a recognized  
guarantee or an obligation to restore a deficit capital  
account upon liquidation) and a related person is defined  
as a related person as defined in Regulations section  
1.752-4(b).  
Code R. Interest allocable to production expendi-  
tures. The partnership will report any information you  
need relating to interest you're required to capitalize under  
section 263A for production expenditures. See  
Regulations sections 1.263A-8 through -15 for details.  
Code S. Capital construction fund (CCF) nonqualified  
withdrawals. The partnership will report your share of  
nonqualified withdrawals from a CCF. These withdrawals  
are taxed separately from your other gross income at the  
highest marginal ordinary income or capital gains tax rate.  
Attach a statement to your federal income tax return to  
show your computation of both the tax and interest for a  
nonqualified withdrawal. Include the tax and interest on  
Schedule 2 (Form 1040), line 17z. In the space to the left  
of line 17z, enter the amount of tax and interest and “CCF.”  
See Pub. 595 for details.  
Code Y. Net investment income (NII). The partnership  
may use this code Y to report information you may need to  
determine your NIIT under section 1411 that isn't reported  
elsewhere on the Schedule K-1 or K-3. Code Y is used to  
report information not provided elsewhere on  
Schedule K-3 (or an attachment) regarding income from  
CFCs and passive foreign investment companies (PFICs)  
the stock of which is owned by the partnership. For CFCs  
and PFICs that you treat as qualified electing funds  
Code T. Depletion information—oil and gas. This is  
your share of gross income from the property, your share  
28  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
(QEFs), the information that's relevant to you will depend  
on whether you, the partnership, or a lower-tier entity has  
made an election under Regulations section 1.1411-10(g)  
with respect to the CFC or QEF. For example, if the  
partnership made an election under Regulations section  
1.1411-10(g) for a CFC the stock of which is owned by the  
partnership, and the relevant income and deduction items  
derived from that CFC are reported elsewhere on the  
Schedule K-3, then you won't need the information  
provided in code Y to complete your Form 8960.  
reflect your distributive share of the partnership’s UBIA of  
qualified property of each qualified trade, business, or  
aggregation. See the instructions for Form 8995 or  
8995-A, as applicable.  
Section 199A dividends. The amount reported  
reflects your distributive share of the partnership's net  
section 199A dividends. See the instructions for Form  
8995 or 8995-A, as applicable.  
Patrons of specified agricultural and horticultural  
cooperatives. If the partnership was a patron of an  
agricultural or horticultural cooperative (specified  
cooperative), you must use Form 8995-A to figure your  
QBI deduction. You must also complete Schedule D (Form  
8995-A), Special Rules for Patrons of Agricultural or  
Horticultural Cooperatives, to determine your patron  
reduction.  
QBI items allocable to qualified payments from  
specified cooperatives subject to partner-specific  
determinations. The amounts reported to you reflect  
your distributive share of items from the partnership’s  
trade(s), business(es), or aggregation(s), and include  
items that may not be includible in your calculation of the  
QBI deduction and patron reduction. When determining  
QBI items allocable to qualified payments, you must  
include only qualified items that are included or allowed in  
determining taxable income for the tax year. To determine  
your QBI items allocable to qualified payments, see the  
Instructions for Form 8995-A.  
If you're an individual who is a U.S. citizen or resident,  
or a domestic trust or estate, follow the Instructions for  
Form 8960 to figure and report your NII and AGI or MAGI.  
Corporate partners aren't subject to the NIIT. See  
Regulations sections 1.1411-1 through -10 for details.  
Code Z. Section 199A information. Generally, you may  
be allowed a deduction of up to 20% of your net qualified  
business income (QBI) plus 20% of your qualified REIT  
dividends, also known as section 199A dividends, and  
qualified PTP income from your partnership. The  
partnership will provide the information you need to figure  
your deduction. Use one of these forms to figure your QBI  
deduction.  
1. Use Form 8995, Qualified Business Income  
Deduction Simplified Computation, if all of the following  
apply.  
a. You have QBI, section 199A dividends, or PTP  
income (defined below).  
W-2 wages allocable to qualified payments from  
specified cooperatives. The amounts reported reflect  
your distributive share of the partnership's W-2 wages  
allocable to the qualified payments of each qualified trade,  
business, or aggregation. See the Instructions for Form  
8995-A.  
Section 199A(g) deduction from specified  
cooperatives. The amount reported reflects your  
distributive share of the partnership’s net section 199A(g)  
deduction. See the Instructions for Form 8995-A.  
b. Your 2023 taxable income before the QBI deduction  
is equal to or less than $182,100 ($364,200 if married  
filing jointly).  
c. You aren’t a patron in a specified agricultural or  
horticultural cooperative.  
2. Use Form 8995-A, Qualified Business Income  
Deduction, if you don't meet all three of the above  
requirements.  
Use the information provided by your partnership to  
complete the appropriate form listed above. For definitions  
and more information, see the instructions for Form 8995  
or 8995-A, as appropriate.  
Code AA. Section 704(c) information. The partnership  
will show the portion of income or deduction items  
allocated to you under section 704(c). These items are  
included elsewhere in other income or deduction items on  
Schedule K-1.  
Code AB. Section 751 gain (loss). This code is used to  
report the partner's share of gain or loss on the sale of the  
partnership interest subject to taxation at ordinary income  
tax rates.  
Information reported for codes AB, AC, and AD may  
also have been reported to you on Form 8308. In addition,  
for foreign transferors, the information for code AB must  
also have been reported to you on Schedule K-3, Part XIII.  
See the Partner’s Instructions for Schedule K-3 (Form  
1065). Even if this information is required to be reported  
on multiple forms, it must only be reported on the partner’s  
tax return once.  
Code AC. Section 1(h)(5) gain. This code is used to  
report the partner’s share of gain or loss on the sale of the  
partnership interest subject to taxation at the rate for  
collectible assets as defined in section 1(h)(5).  
QBI/qualified PTP items subject to partner-specific  
determinations. The amounts reported to you reflect  
your distributive share of items from the partnership’s  
trade(s), business(es), or aggregation(s), and may include  
items that aren't includible in your calculation of the QBI  
deduction. When determining QBI or qualified PTP  
income, you must include only those items that are  
qualified items of income, gain, deduction, and loss  
included or allowed in determining taxable income for the  
tax year. To determine your QBI or your qualified PTP  
income amounts and for information on where to report  
them, see the instructions for Form 8995 or 8995-A, as  
appropriate.  
W-2 wages. The amounts reported reflect your  
distributive share of the partnership’s W-2 wages allocable  
to the QBI of each qualified trade, business, or  
aggregation. See the instructions for Form 8995 or  
8995-A, as appropriate.  
Unadjusted basis immediately after acquisition  
(UBIA) of qualified property. The amounts reported  
Code AD. Deemed section 1250 unrecaptured gain.  
This code is used to report the partner’s share of gain or  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
29  
loss on the sale of the partnership interest subject to  
taxation at the rate for unrecaptured section 1250 gain  
assets as defined in section 1(h)(6).  
Code AE. Excess taxable income. If the partnership  
was required to file Form 8990, it may determine it has  
excess taxable income. Report the amount of excess  
taxable income on Form 8990, Schedule A, line 43,  
column (f), if you're required to file Form 8990. See the  
Instructions for Form 8990 for additional information.  
Code AF. Excess business interest income (EBIE). If  
the partnership is required to file Form 8990, it may  
determine it has EBIE. Enter the amount of EBIE on Form  
8990, Schedule A, line 43, column (g), if you're required to  
file Form 8990. See the Instructions for Form 8990 for  
additional information.  
share of the aggregate gross income or gain, and  
aggregate deductions, from the business activity of all of  
the partnership's trades or businesses. You can use this to  
figure any excess business loss limitation that may apply.  
See section 461(l) and Form 461 and its instructions for  
details.  
Code AK. Gain from mark-to-market election. If a  
partnership is a trader in securities, commodities, or both,  
and has properly elected under section 475(f) to mark to  
market the securities, the commodities, or both, the  
partnership reports ordinary gain or loss from the  
securities or commodities (or both securities and  
commodities) trading activities separately from any other  
ordinary gain or loss.  
Code AL. Section 721(c) partnership. If the  
partnership is a section 721(c) partnership, the  
Code AG. Gross receipts for section 448(c).  
partnership should include the amounts relating to any  
remedial items made under the remedial allocation  
method (described in Regulations sections 1.704-3(d) and  
1.704-3(d)(5)(iii)) with respect to section 721(c) property  
allocable to each partner. The partnership will include a  
separate code AL for the total remedial income, if any,  
allocated to the U.S. transferor; total gain recognized due  
to an acceleration event; or total gain recognized due to a  
section 367 transfer reflected on Schedule G (Form 8865),  
Part II, columns (c), (d), and (e), respectively. Only the  
amount of the total remedial income allocated to the U.S.  
transferor will be included in box 1 of Schedule K-1, Part  
III. Any recognized gain due to an acceleration event or  
section 367 transfer must be separately reported by the  
U.S. transferor on its own federal income tax return. For all  
other partners of the section 721(c) partnership, a  
separate code AL is used to provide the remedial items  
allocated to that partner relating to section 721(c) property  
that was taken into account to determine box 1 of  
Schedule K-1, Part III. See Regulations sections  
1.721(c)-3 and 1.721(c)-6.  
Code AM. Section 1061 information. The partnership  
will furnish to the partners any information needed to  
figure their capital gains with respect to an applicable  
partnership interest. See Section 1061 Reporting  
Instructions in Pub. 541.  
Code AN. Farming and fishing business. If the  
partnership is involved in a farming or fishing business, it  
will report your distributive share of gross income and  
gains, as well as the losses and deductions attributable to  
such business activities. See section 1301.  
Regulations section 1.163(j)-2(d)(2)(iii) requires that  
partners in a partnership include a share of partnership  
gross receipts in proportion to their share of gross income  
under section 703 (unless the partnership is treated as  
one person under the aggregation rules of section 448(c)).  
Partnerships with current year gross receipts (defined in  
Regulations section 1.448-1T(f)(2)(iv)) greater than $5  
million are required to report to their partners their  
distributive shares of current year gross receipts, as well  
as their distributive shares of gross receipts for the 3  
immediately preceding tax years. If a partnership and a  
partner are treated as a single employer under the section  
448(c) aggregation rules, and the partnership has current  
year gross receipts greater than $5 million, then the  
partnership should also report its total current year gross  
receipts, as well as its total gross receipts for the 3  
immediately preceding tax years, to that partner. See  
If a partner needs gross receipts information from a  
partnership in order to figure the gross receipts test under  
section 448(c), and the partnership didn't report gross  
receipts on the Schedule K-1, the partner should request  
this information from the partnership.  
Code AH. Noncash charitable contributions. If the  
partnership made a noncash charitable contribution, your  
share of the partnership’s adjusted basis in the property is  
limited to basis and is reported here. Additionally, your  
share of the excess of the FMV over the adjusted basis of  
noncash and capital gain property contributions is  
reported here.  
Code AO. PTP information. Any information a PTP  
needs to determine whether it meets the 90% qualifying  
income test of section 7704(c)(2).  
Code AI. Interest and tax on deferred compensation  
to partners. Interest and additional tax on compensation  
deferred under a section 409A nonqualified deferred  
compensation plan that doesn't meet the requirements of  
section 409A. See section 409A(a)(1)(B) to figure the  
interest and additional tax on this income. Report this  
interest and tax on Schedule 2 (Form 1040), line 17h. This  
income is included in the amount in either box 4a or  
box 4b.  
A partner is required to notify the partnership of its  
status as a PTP.  
TIP  
Code AP. Inversion gain. The partnership will provide a  
statement showing the amounts of each type of income or  
gain that's included in inversion gain. The partnership has  
included inversion gain in income elsewhere on  
Code AJ. Excess business loss limitation. If the  
partnership has deductions attributable to a business  
activity, it'll provide a statement showing your distributive  
Schedule K-1. Inversion gain is also reported under code  
AP because your taxable income and alternative minimum  
taxable income can't be less than the inversion gain. Also,  
30  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
your inversion gain (a) isn't taken into account in figuring  
the net operating loss (NOL) for the tax year or the NOL  
that can be carried over to each tax year, (b) may limit your  
credits, and (c) is treated as income from sources within  
the United States for the foreign tax credit. See section  
7874 for details.  
Code AQ. Conservation reserve program payments.  
Individuals who received social security retirement or  
disability benefits, and are partners in farm partnerships  
that receive conservation reserve program payments,  
don't pay self-employment tax on their portion of the  
payments. The partnership will report your portion of the  
conservation reserve program payments in box 20 using  
code AQ. See Schedule SE (Form 1040) for information  
on excluding the payment from your calculation of  
self-employment tax.  
Code AX. Reserved for future use.  
Code AY. Foreign partners, Form 8990, Schedule A.  
The information needed to complete Form 8990,  
Schedule A, for foreign partners which are required to  
report their allocable share of EBIE, excess taxable  
income, and excess business interest income, if any, that's  
attributable to income effectively connected with a U.S.  
trade or business. When required, the partnership will  
make this report on an attached statement to partners that  
are a foreign corporation or a nonresident alien or partners  
that are a partnership (domestic or foreign) in which the  
reporting partnership knows, or has a reason to know, that  
one or more of the partners is a foreign corporation or  
nonresident alien.  
Codes AZ through BD. Reserved for future use.  
Code ZZ. Other. Any other information you may need to  
Code AR. IRA disclosure. If the partnership reported an  
amount in box 20, code V, the partnership also reported  
an IRA partner's unique EIN in box 20, code AR. See the  
Instructions for Form 990-T; and Pub. 598, Tax on  
file your return not shown elsewhere on Schedule K-1.  
Box 21. Foreign Taxes Paid or  
Accrued  
Unrelated Business Income of Exempt Organizations.  
Code AS. Qualifying advanced coal project property  
and qualifying gasification project property. Use the  
amounts the partnership provides you to figure the  
amounts to report on Form 3468, Part II.  
Code AT. Qualifying advanced energy project proper-  
ty. Use the amount the partnership provides you to figure  
the amount to report on Form 3468, Part III.  
Code AU. Advanced manufacturing investment prop-  
erty. Use the amount the partnership provides you to  
figure the amount to report on Form 3468, Part IV.  
Foreign taxes paid or accrued reduce a partner's basis  
and are limited to basis. Don't use this amount to  
complete your Form 1116, Foreign Tax Credit; or Form  
1118, Foreign Tax Credit—Corporations. See  
Schedule K-3 to complete your Form 1116 or 1118.  
Box 22. More Than One Activity for  
At-Risk Purposes  
When the partnership has more than one activity for  
at-risk purposes, it'll check this box and attach a  
statement. Use the information in the attached statement  
to correctly figure your at-risk limitation. For more  
information, see the discussion under At-Risk Limitations,  
earlier.  
Code AV. Reserved for future use.  
Code AW. Reportable transactions. Any information  
you need to complete a disclosure statement for  
reportable transactions in which the partnership  
participates. If the partnership participates in a transaction  
that must be disclosed on Form 8886, Reportable  
Transaction Disclosure Statement, both you and the  
partnership may be required to file Form 8886 for the  
transaction. The determination of whether you're required  
to disclose a transaction of the partnership is based on the  
category(ies) under which the transaction qualifies for  
disclosure and is determined by you and the partnership.  
You may have to pay a penalty if you're required to file  
Form 8886 and don't do so. See the Instructions for Form  
8886 for details.  
Box 23. More than One Activity for  
Passive Activity Purposes  
When the partnership has more than one activity for  
passive activity purposes, it'll check this box and attach a  
statement. Use the information in the attached statement  
to correctly figure your passive activity limitation. For more  
information, see the discussion under Passive Activity  
Limitations, earlier.  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
31  
List of Codes and References Used in Schedule K-1 (Form 1065)  
Box Number / Item  
Where to report or where to find further reporting information.  
Page numbers refer to these instructions.  
1. Ordinary business income (loss). Determine whether the income (loss) is  
passive or nonpassive and enter on your return as follows.  
Passive loss  
See page 15  
Passive income  
Nonpassive loss  
Schedule E (Form 1040), line 28, column (h)  
See page 15  
Nonpassive income  
Schedule E (Form 1040), line 28, column (k)  
See page 15  
2. Net rental real estate income (loss)  
3. Other net rental income (loss)  
Net income  
Schedule E (Form 1040), line 28, column (h)  
See Instructions for Form 8582  
See Instructions for Schedule E (Form 1040)  
See Instructions for Schedule E (Form 1040)  
See page 16  
Form 1040 or 1040-SR, line 2b  
Form 1040 or 1040-SR, line 3b  
Form 1040 or 1040-SR, line 3a  
See page 16  
Net loss  
4a. Guaranteed payment services  
4b. Guaranteed payment capital  
4c. Guaranteed payment total  
5. Interest income  
6a. Ordinary dividends  
6b. Qualified dividends  
6c. Dividend equivalents  
7. Royalties  
Schedule E (Form 1040), line 4  
Schedule D (Form 1040), line 5  
Schedule D (Form 1040), line 12  
28% Rate Gain Worksheet, line 4 (Schedule D instructions)  
See page 16  
8. Net short-term capital gain (loss)  
9a. Net long-term capital gain (loss)  
9b. Collectibles (28%) gain (loss)  
9c. Unrecaptured section 1250 gain  
10. Net section 1231 gain (loss)  
11. Other income (loss)  
See page 17  
Code A. Other portfolio income (loss)  
Code B. Involuntary conversions  
Code C. Section 1256 contracts & straddles  
Code D. Mining exploration costs recapture  
Code E. Cancellation of debt  
Code F. Section 743(b) positive adjustments  
Code G. Reserved for future use  
Code H. Section 951(a) income inclusions  
See page 17  
See page 17  
Form 6781, line 1  
See 2022 Pub. 535  
See page 17  
See page 17  
See page 17  
See page 18  
Code I. Gain (loss) from disposition of oil, gas, geothermal, or  
mineral properties (section 59(e))  
Code J. Recoveries of tax benefit items  
Code K. Gambling gains and losses  
See page 18  
See page 18  
Code L. Any income, gain, or loss to the partnership from a  
distribution under section 751(b) (certain distributions treated as  
sales or exchanges)  
See page 18  
Code M. Gain eligible for section 1045 rollover (replacement stock  
See page 18  
See page 18  
purchased by partnership)  
Code N. Gain eligible for section 1045 rollover (replacement stock  
not purchased by the partnership)  
Code O. Sale or exchange of QSB stock with section 1202 exclusion See page 19  
Code P. Gain or loss on disposition of farm recapture property and  
other items to which section 1252 applies  
See page 19  
Code Q. Gain or loss on Fannie Mae or Freddie Mac qualified  
preferred stock  
See page 19  
Code R. Specially allocated ordinary gain (loss)  
Code S. Non-portfolio capital gain (loss)  
Codes T through X. Reserved for future use  
Code ZZ. Other  
See page 19  
See page 19  
See page 19  
See page 19  
12. Section 179 deduction  
13. Other deductions  
Code A. Cash contributions (60%)  
See page 19  
See page 19  
See page 20  
Code B. Cash contributions (30%)  
Code C. Noncash contributions (50%)  
32  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
 
Box Number / Item  
Code D. Noncash contributions (30%)  
Where to report or where to find further reporting information.  
Page numbers refer to these instructions.  
See page 20  
Code E. Capital gain property to a 50% organization (30%)  
Code F. Capital gain property (20%)  
See page 20  
See page 20  
Code G. Contributions (100%)  
See page 20  
Code H. Investment interest expense  
Form 4952, line 1  
Code I. Deductions—royalty income  
Schedule E (Form 1040), line 19  
Code J. Section 59(e)(2) expenditures  
See page 20  
Code K. Excess business interest expense  
Code L. Deductions—portfolio income (other)  
Code M. Amounts paid for medical insurance  
Code N. Educational assistance benefits  
Code O. Dependent care benefits  
See page 21  
Schedule A (Form 1040), line 16  
Schedule A (Form 1040), line 1; or Schedule 1 (Form 1040), line 17  
See page 21  
Form 2441, line 12  
See page 21  
Code P. Preproductive period expenses  
Code Q. Reserved for future use  
Code R. Pensions and IRAs  
See page 21  
See page 21  
Code S. Reforestation expense deduction  
Codes T through U. Reserved for future use  
Code V. Section 743(b) negative adjustments  
Code W. Soil and water conservation  
Code X. Film, television, and theatrical production expenditures  
Code Y. Expenditures for removal of barriers  
Code Z. Itemized deductions  
Code AA. Contributions to a capital construction fund (CCF)  
Code AB. Penalty on early withdrawal of savings  
Code AC. Interest expense allocated to debt-financed distributions  
Code AD. Interest expense on working interest in oil or gas  
Code AE. Deductions—portfolio income  
Codes AF through AJ. Reserved for future use  
Code ZZ. Other  
See page 21  
See page 21  
See page 21  
See page 22  
See page 22  
See page 22  
See page 22  
See page 22  
See page 22  
See page 22  
See page 22  
14. Self-employment earnings (loss)  
Note. If you have a section 179 deduction or any partner-level deductions, see page 22 before completing Schedule SE (Form 1040).  
Code A. Net earnings (loss) from self-employment  
Code B. Gross farming or fishing income  
Code C. Gross nonfarm income  
Schedule SE (Form 1040)  
See page 22  
See page 22  
15. Credits  
Code A. Zero-emission nuclear power production  
Code B. Production from advanced nuclear power facilities credit  
See page 23  
See page 23  
Code C. Low-income housing credit (section 42(j)(5)) from  
post-2007 buildings  
See page 23  
Code D. Low-income housing credit (other) from post-2007 buildings See page 23  
Code E. Qualified rehabilitation expenditures (rental real estate)  
Code F. Other rental real estate credits  
Code G. Other rental credits  
See page 23  
See page 23  
See page 23  
Code H. Undistributed capital gains credit  
Code I. Biofuel producer credit  
Schedule 3 (Form 1040), line 13a  
See page 23  
Code J. Work opportunity credit  
See page 23  
Code K. Disabled access credit  
See page 23  
Code L. Empowerment zone employment credit  
Code M. Credit for increasing research activities  
Code N. Credit for employer social security and Medicare taxes  
Code O. Backup withholding  
See page 23  
See page 23  
See page 23  
See page 23  
Code P. Unused investment credit from the qualifying advanced coal  
project credit or qualifying gasification project credit allocated from  
cooperatives  
Code Q. Unused investment credit from the qualifying advanced  
energy project credit allocated from cooperatives  
Code R. Unused investment credit from the advanced  
manufacturing investment credit allocated from cooperatives  
See page 23  
See page 23  
See page 23  
Code S. Reserved for future use  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
33  
Box Number / Item  
Where to report or where to find further reporting information.  
Page numbers refer to these instructions.  
Code T. Unused investment credit from the energy credit allocated  
from cooperatives  
See page 23  
Code U. Unused investment credit from the rehabilitation credit  
See page 24  
See page 24  
allocated from cooperatives  
Code V. Advanced manufacturing production credit  
Codes W and X. Reserved for future use  
Code Y. Clean hydrogen production credit  
Code Z. Orphan drug credit  
Code AA. Enhanced oil recovery credit  
Code AB. Renewable electricity production credit  
See page 24  
See page 24  
See page 24  
See page 24  
Code AC. Biodiesel, renewable diesel, or sustainable aviation fuels  
credit  
See page 24  
Code AD. New markets credit  
Code AE. Credit for small employer pension plan startup costs  
Code AF. Credit for small employer auto-enrollment  
See page 24  
See page 24  
See page 24  
Code AG. Credit for small employer military spouse retirement plan  
See page 24  
See page 24  
eligibility  
Code AH. Credit for employer-provided childcare facilities and  
services  
Code AI. Low sulfur diesel fuel production credit  
Code AJ. Qualified railroad track maintenance credit  
Code AK. Credit for oil and gas production from marginal wells  
Code AL. Distilled spirits credit  
Code AM. Energy efficient home credit  
Code AN. Alternative motor vehicle credit  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
See page 24  
Code AO. Alternative fuel vehicle refueling property credit  
Code AP. Clean renewable energy bond credit  
Code AQ. New clean renewable energy bond credit  
Code AR. Qualified energy conservation bond credit  
Code AS. Qualified zone academy bond credit  
Code AT. Qualified school construction bond credit  
Code AU. Build America bond credit  
Code AV. Credit for employer differential wage payments  
Code AW. Carbon oxide sequestration credit  
Code AX. Carbon oxide sequestration credit recapture  
Code AY. New clean vehicles credit  
Code AZ. Qualified commercial clean vehicle credit  
Code BA. Credit for small employer health insurance premiums  
Code BB. Employer credit for paid family and medical leave  
Code BC. Eligible credits from transferor(s) under section 6418  
Codes BD through BG. Reserved for future use  
Code ZZ. Other  
See page 24  
17. Alternative minimum tax (AMT) items  
Code A. Post-1986 depreciation adjustment  
Code B. Adjusted gain or loss  
Code C. Depletion (other than oil & gas)  
Code D. Oil, gas, and geothermal—gross income  
Code E. Oil, gas, and geothermal—deductions  
Code F. Other AMT items  
See Instructions for Form 6251  
See Instructions for Form 6251  
See Instructions for Form 6251  
See Instructions for Form 6251  
See Instructions for Form 6251  
See Instructions for Form 6251  
18. Tax-exempt income and nondeductible expenses  
Code A. Tax-exempt interest income  
Code B. Other tax-exempt income  
Code C. Nondeductible expenses  
19. Distributions  
Form 1040 or 1040-SR, line 2a  
See page 25  
See page 25  
Code A. Cash and marketable securities  
Code B. Distribution subject to section 737  
Code C. Other property  
See page 25  
See page 25  
See page 26  
20. Other information  
Code A. Investment income  
Code B. Investment expenses  
Form 4952, line 4a  
Form 4952, line 5  
34  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
Box Number / Item  
Code C. Fuel tax credit information  
Where to report or where to find further reporting information.  
Page numbers refer to these instructions.  
Form 4136  
Code D. Qualified rehabilitation expenditures (other than rental real  
See page 26  
See page 26  
See page 26  
estate)  
Code E. Basis of energy property  
Code F. Recapture of low-income housing credit for section 42(j)(5)  
partnerships  
Code G. Recapture of low-income housing credit for other  
partnerships  
See page 26  
Code H. Recapture of investment credit  
See Form 4255  
Code I. Recapture of other credits  
See page 27  
Code J. Look-back interest—completed long-term contracts  
Code K. Look-back interest—income forecast method  
Code L. Dispositions of property with section 179 deductions  
Code M. Recapture of section 179 deduction  
Code N. Business interest expense (information item)  
Code O. Section 453(l)(3) information  
Code P. Section 453A(c) information  
Code Q. Section 1260(b) information  
Code R. Interest allocable to production expenditures  
Code S. Capital construction fund (CCF) nonqualified withdrawals  
Code T. Depletion deduction  
See Form 8697  
See Form 8866  
See page 27  
See page 27  
See page 27  
Schedule 2 (Form 1040), line 14  
Schedule 2 (Form 1040), line 15  
Schedule 2 (Form 1040), line 17z  
See Regulations sections 1.263A-8 through -15  
Schedule 2 (Form 1040), line 17z  
See 2022 Pub. 535  
Code U. Section 743(b) basis adjustment  
Code V. Unrelated business taxable income  
Code W. Precontribution gain (loss)  
See page 28  
See page 28  
Form 8949 and/or Schedule D (Form 1040); or Form 4797  
Code X. Payment obligations including guarantees and deficit  
obligations (DROs)  
See page 28  
Code Y. Net investment income  
Code Z. Section 199A information  
Code AA. Section 704(c) information  
Code AB. Section 751 gain (loss)  
See Instructions for Form 8960  
Form 8995 or Form 8995-A  
See page 29  
See page 29  
Code AC. Section 1(h)(5) gain (loss)  
Code AD. Deemed section 1250 unrecaptured gain  
Code AE. Excess taxable income  
See page 29  
See page 29  
See Instructions for Form 8990  
See page 30  
See page 30  
See page 30  
See page 30  
See page 30  
See page 30  
See page 30  
See page 30  
See page 30  
See page 30  
Code AF. Excess business interest income  
Code AG. Gross receipts for section 448(c)  
Code AH. Noncash charitable contributions  
Code AI. Interest and tax on deferred compensation to partners  
Code AJ. Excess business loss limitation  
Code AK. Gain from mark-to-market election  
Code AL. Section 721(c) partnership  
Code AM. Section 1061 information  
Code AN. Farming and fishing business  
Code AO. PTP information  
Code AP. Inversion gain  
See page 30  
Code AQ. Conservation reserve program payments  
Code AR. IRA disclosure  
See page 31  
See page 31  
Code AS. Qualifying advanced coal project property and qualifying  
gasification project property  
See page 31  
Code AT. Qualifying advanced energy project property  
Code AU. Advanced manufacturing investment property  
Code AV. Reserved for future use  
See page 31  
See page 31  
Code AW. Reportable transactions  
Code AX. Reserved for future use  
Code AY. Foreign partners, Form 8990, Schedule A  
Codes AZ through BD. Reserved for future use  
Code ZZ. Other  
See page 31  
See page 31  
See page 31  
See page 31  
21. Foreign taxes paid or accrued  
Partner's Inst. for Sch. K-1 (Form 1065) (2023)  
35