Schedule K-1 Instructions For Partner Or Member (Form 765) printable pdf download

Form 765 (2016)

Page 3

KENTUCKY SCHEDULE K-1

Commonwealth of Kentucky

DEPARTMENT OF REVENUE

PARTNER’S INSTRUCTIONS FOR SCHEDULE K-1 (FORM 765)

Who Must File—The partners or members are liable for tax on their

will adjust the items of income, loss and deductions used to compute

share of the partnership income, whether or not distributed, and must

your federal adjusted gross income to the Kentucky amounts shown

include their share on the individual income tax return.

on Form 765, Schedule K-1.

If you were a Kentucky resident for the entire year, your filing

Line 49—Include on this line the Kentucky Schedule K-1 amounts

requirement depends upon your family size, modified gross income,

from Lines 1 through 6 and 9. Also include the amounts from Lines 7

Kentucky adjusted gross income and income from self-employment.

and 11 that do not pass through to Form 740 or 740-NP, Schedule A

as itemized deductions.

Any person with gross receipts from self-employment exceeding the

threshold amount determined under KRS 141.066 must file a Form

Line 50—Include on this line the federal Schedule K-1 amounts from

740 regardless of the amount of adjusted gross income or the number

Lines 1 through 10 and 12. Also include the amounts from Lines 11

of tax credits claimed. Generally, all income of Kentucky residents,

and 13 that do not pass through to Form 740 or 740-NP, Schedule A

regardless of where it was earned, is subject to Kentucky income tax.

as itemized deductions.

See Form 740 Instructions.

NOTE: If Form 8582-K is required, adjust the amounts entered on Lines

Nonresidents with income from Kentucky sources and part-year

49 and 50 to exclude any income, loss, deduction or expense related to a

residents receiving income while a Kentucky resident or from Kentucky

passive activity. Complete the passive activities adjustment worksheet

sources while a nonresident must file a Kentucky return. Partnership

(Form 8582-K, page 2) to determine additions to or subtractions from

income is not exempted by reciprocal agreements between Kentucky

federal adjusted gross income. See Form 740 instructions for Schedule

and any other state. Form 740-NP must be filed by an individual with

M, Line 7 and/or Line 19.

income from Kentucky sources and a combined gross income from

all sources exceeding the threshold amount determined under KRS

If amounts on Lines 4(d) and 4(e) are subject to the capital loss

141.066. Full-year nonresidents must report all income from Kentucky

limitations, do not include on Lines 49 and 50. Complete federal

sources and from property located in Kentucky. Persons moving into

Schedule D using Kentucky amounts to determine additions to or

Kentucky must report income received from Kentucky sources prior

subtractions from federal adjusted gross income.

to becoming residents and income received from all sources after

becoming Kentucky residents. Residents moving out of Kentucky

during the year must report income from all sources while a resident

Line 51—Enter difference of Lines 49 and 50. If Line 49 is greater than

and from Kentucky sources while a nonresident.

Line 50, enter the difference as an addition to federal adjusted gross

income on Schedule M, Line 3. If Line 50 is greater than Line 49, enter

When to Report—Include your share of the partnership’s income or

the difference as a subtraction on Schedule M, Line 15.

(loss), credits, deductions, etc., as shown by your Schedule K-1 (Form

765) on your Kentucky income tax return for the year in which the tax

Caution: If the amount on Line 49 is a (loss) and Line 50 is a (loss), the

year of the partnership ends. For example, if you, the partner, are on

smaller amount of the (loss) is the greater amount, and to determine

a calendar year, and the partnership’s tax year ends January 31, 2016,

the difference, subtract the smaller dollar amount from the larger dollar

you must take the items listed on Schedule K-1 (Form 765) into account

amount. If the amount on Line 49 is an income amount and Line 50 is

on your tax return for calendar year 2016.

a (loss), or if Line 50 is an income amount and the amount on Line 49

is a (loss), the income amount is the greater amount; therefore, add

At-Risk Limitations—Generally, if you have a loss from any activity

the two amounts to determine the difference.

carried on as a trade or business or for the production of income by

the partnership and you, the partner, have amounts invested in that

Nonresident Individual Partners (Form 740-NP Filers)—A nonresident

activity for which you are not at risk, you will be required to complete

individual who is required to file Form 740-NP, Kentucky Individual

federal Form 6198, At-Risk Limitations, to figure the allowable loss to

Income Tax Return Nonresident or Part-Year Resident, or who elects

report on your Kentucky income tax return. Your deductible loss from

to file Form 740-NP to take advantage of capital loss and net operating

each activity for the tax year generally is limited to the amount you

loss carryovers shall enter the amounts from Schedule K-1 as follows:

are at risk for the activity at the end of the partnership’s tax year or

the amount of the loss, whichever is less. To help you complete Form

If the percentage in Item D(2) is “100%,” the amounts on Lines 1

6198, if required, the partnership will provide a schedule showing your

through 6 and 9, portions of Lines 7 and 11 and the portion of Line

share of income, expenses, etc., for each at-risk activity.

34(b) actually deducted for the current year must be entered on the

appropriate lines of Form 740-NP and related schedules.

NOTE: Form 740 filers see Form 740 instructions for Schedule M, Line

7 and/or Line 19.

If the percentage in Item D(2) is less than 100 percent, the amounts on

Lines 1 through 6 and 9, portions of Lines 7 and 11 and the portion of

Passive Activity Limitations—The passive activity limitations in IRC

Line 34(b) actually deducted for the current year must be multiplied

Section 469 are figured at the partner level and may apply to any loss

by this percentage and entered on the appropriate lines of Form 740-

reported on Lines 1, 2 or 3 and any other related items of income,

NP and related schedules. Amounts on Line 12(a) and the portions

loss and deductions reported on Schedule K-1 (Form 765). Refer to

of Lines 7 and 11 which pass through to Schedule A (Form 740-NP)

the federal Partner’s Instructions for Schedule K-1 (Form 1065) to

should not be multiplied by the percentage in Item D(2) since these

determine if the passive activity limitations apply to your share of

amounts will be multiplied by the percentage on Form 740-NP, Section

loss(es) reported on Schedule K-1 (Form 765) and if you must file Form

D, Line 36 (Percentage of Kentucky Adjusted Gross Income to Federal

8582-K, Kentucky Passive Activity Loss Limitations.

Adjusted Gross Income).

SPECIFIC INSTRUCTIONS

Lines 1 through 3—Enter on federal Schedule E using Kentucky

amounts or Form 8582-K, if applicable.

Kentucky Resident Partners (Form 740 Filers)—To determine the

net difference between the federal Schedule K-1 amounts and the

Line 4(a)—Enter on Form 740-NP, Section D, Line 3.

Kentucky Schedule K-1 amounts, complete Lines 49, 50 and 51. This

Schedule K-1 Instructions For Partner Or Member (Form 765)

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