Partner'S Instructions For Schedule K-1 (Form 1065-B) - Partner'S Share Of Income (Loss) From An Electing Large Partnership (For Partner'S Use Only) - 2001
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Department of the Treasury
Internal Revenue Service
Partner’s Instructions for
Schedule K-1 (Form
1065-B)
Partner’s Share of Income (Loss) From an Electing Large Partnership
(For Partner’s Use Only)
Section references are to the Internal Revenue Code unless otherwise noted.
rental activities are separately reported
The written notice to the partnership
General Instructions
for each activity in box 9. Income, etc.,
must include the names and addresses of
from other activities (investment and
both parties to the exchange, the
portfolio income and deductions) are
identifying numbers of the transferor and
Purpose of Schedule K-1
reported in boxes 2, 4, and 6 for both
(if known) of the transferee, and the
The partnership uses Schedule K-1 to
limited and general partners.
exchange date.
report your share of the partnership’s
An exception to this rule is made for
income, credits, deductions, etc. Keep it
Errors
sales or exchanges of publicly traded
for your records. Do not file it with
You must report partnership items shown
partnership interests for which a broker is
your tax return. The partnership has filed
on your Schedule K-1 (and any attached
required to file Form 1099-B, Proceeds
a copy with the IRS.
schedules) the same way that the
From Broker and Barter Exchange
You are liable for tax on your share of
partnership treated the items on its return.
Transactions.
the partnership income, whether or not
If you believe the partnership has made
If a partner is required to notify the
distributed. Include your share on your tax
an error on your Schedule K-1, notify the
return if a return is required. Use these
partnership of a section 751(a) exchange
partnership. Do not change any items on
but fails to do so, a $50 penalty may be
instructions to help you report the items
your copy of Schedule K-1. Generally, an
imposed for each such failure. However,
shown on Schedule K-1 on your tax
adjustment to correct an error will take
return.
no penalty will be imposed if the partner
effect for the tax year in which the
can show that the failure was due to
partnership actually makes the
The amount of loss and deduction that
reasonable cause and not willful neglect.
adjustment. However, if the error involves
you may claim on your tax return may be
a change to your distributive share of a
less than the amount reported on
partnership item, the partnership should
Nominee Reporting
Schedule K-1. It is the partner’s
file an amended partnership return and
responsibility to consider and apply
Any person who holds, directly or
send you a corrected Schedule K-1.
any applicable limitations. See
indirectly, an interest in a partnership as a
If the treatment on your original or
Limitations on Losses, Deductions,
nominee for another person must furnish
amended return is inconsistent with the
and Credits beginning on page 2 for
a written statement to the partnership by
partnership’s treatment, you may be
more information.
the last day of the month following the
subject to the accuracy-related penalty.
end of the partnership’s tax year. This
Electing Large
This penalty is in addition to any tax that
statement must include the name,
results from making your amount or
address, and identifying number of the
Partnerships
treatment of the item consistent with that
nominee and such other person,
This partnership has elected simplified
shown on the partnership’s return. Any
description of the partnership interest held
reporting requirements intended to make
deficiency that results from making the
as nominee for that person, and other
it simpler for you to report your share of
amounts consistent may be assessed
information required by Temporary
partnership income, credits, deductions,
immediately.
Regulations section 1.6031(c)-1T. A
etc. Generally, income, capital gains,
nominee that fails to furnish this
Sale or Exchange of
credits, and deductions are combined at
statement must furnish to the person for
the partnership level so that the number
whom the nominee holds the partnership
Partnership Interest
of partnership items separately reported
interest a copy of Schedule K-1 and
to partners is reduced. Most limitations
Generally, a partner who sells or
related information within 30 days of
and elections affecting partnership
exchanges a partnership interest in a
receiving it from the partnership.
income are made by the electing large
section 751(a) exchange must notify the
A nominee who fails to furnish when
partnership. For limited partners, income
partnership, in writing, within 30 days of
due all the information required by
and other items from the partnership’s
the exchange (or, if earlier, by January 15
trade or business and rental activities are
of the calendar year following the
Temporary Regulations section
1.6031(c)-1T, or who furnishes incorrect
treated as being from a trade or business
calendar year in which the exchange
information, is subject to a $50 penalty for
that is a single passive activity. These
occurred). A “section 751(a) exchange” is
each statement for which a failure occurs.
items are reported in boxes 1, 3, and 5,
any sale or exchange of a partnership
with most credits being reported in boxes
interest in which any money or other
The maximum penalty is $100,000 for all
such failures during a calendar year. If the
7 and 8. General partners must make
property received by the partner in
nominee intentionally disregards the
their own determinations as to whether
exchange for that partner’s interest is
the activities are passive for them.
attributable to unrealized receivables (as
requirement to report correct information,
each $50 penalty increases to $100 or, if
Therefore, partnership items from trade or
defined in section 751(c)) or inventory
greater, 10% of the aggregate amount of
business, rental real estate, and other
items (as defined in section 751(d)).
Cat. No. 26141W
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