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beginning with the month in which such

Decrease the adjusted basis of your

the adjusted basis of your partnership

costs were paid or incurred.

interest in the partnership (but not below

interest immediately before the

zero) by the amount of cash distributed to

distribution (reduced by any cash

If you make this election, these items

you and the partnership’s adjusted basis

received in the distribution), you may

are not treated as adjustments or tax

of the distributed securities. Advances or

have to recognize gain on the appreciated

preference items for purposes of the

drawings of money or property against

property. For property contributed after

alternative minimum tax. Make the

your distributive share are treated as

June 8, 1997, the 5-year period is

election on Form 4562.

current distributions made on the last day

generally extended to 7 years. See

Because each partner decides

of the partnership’s tax year.

section 737 for details.

whether to make the election under

Your basis in the distributed

Lines 24a and 24b—Recapture

section 59(e), the partnership cannot

marketable securities (other than in

provide you with the amount of the

of Low-Income Housing Credit

liquidation of your interest) is the smaller

adjustment or tax preference item related

of:

A section 42(j)(5) partnership will report

to the expenses listed on line 18b. You

•

The partnership’s adjusted basis in the

recapture of a low-income housing credit

must decide both how to claim the

securities immediately before the

on line 24a. All other partnerships will

expenses on your return and compute the

distribution increased by any gain

report recapture of a low-income housing

resulting adjustment or tax preference

credit on line 24b. Keep a separate record

recognized on the distribution of the

item.

of recapture from each of these sources

securities or

•

so that you will be able to correctly

The adjusted basis of your partnership

Line 19—Tax-Exempt Interest

compute any recapture of low-income

interest reduced by any cash distributed

Income

housing credit that may result from the

in the same transaction and increased by

You must report on your return, as an

disposition of all or part of your

any gain recognized on the distribution of

item of information, your share of the

the securities.

partnership interest. For more

tax-exempt interest received or accrued

If you received the securities in

information, see Form 8611, Recapture

by the partnership during the year.

liquidation of your partnership interest,

of Low-Income Housing Credit.

Individual partners must include this

your basis in the marketable securities is

amount on Form 1040, line 8b. Increase

equal to the adjusted basis of your

Supplemental Information

the adjusted basis of your interest in the

partnership interest reduced by any cash

partnership by this amount.

distributed in the same transaction and

Line 25

increased by any gain recognized on the

Line 20—Other Tax-Exempt

Amounts shown on line 25 include:

distribution of the securities.

Income

1. Taxes paid on undistributed capital

If, within 5 years of a distribution to you

Increase the adjusted basis of your

gains by a regulated investment company

of marketable securities, you contributed

interest in the partnership by the amount

or real estate investment trust. Form 1040

appreciated property (other than those

shown on line 20, but do not include it in

filers enter your share of these taxes on

securities) to the partnership and the FMV

income on your tax return.

line 68, check the box for Form 2439, and

of those securities exceeded the adjusted

add the words “Form 1065.”

basis of your partnership interest

Line 21—Nondeductible

2. Number of gallons of each fuel sold

immediately before the distribution

Expenses

or used during the tax year for a

(reduced by any cash received in the

nontaxable use qualifying for the credit for

The nondeductible expenses paid or

distribution), you may have to recognize

taxes paid on fuels, type of use, and the

incurred by the partnership are not

gain on the appreciated property. For

applicable credit per gallon. Use this

deductible on your tax return. Decrease

property contributed after June 8, 1997,

information to complete Form 4136,

the adjusted basis of your interest in the

the 5-year period is generally extended to

Credit for Federal Tax Paid on Fuels.

partnership by this amount.

7 years. See section 737 for details.

3. Your share of gross income from

Line 22—Distributions of

Line 23—Distributions of

the property, share of production for the

Money (Cash and Marketable

Property Other Than Money

tax year, etc., needed to figure your

Securities)

depletion deduction for oil and gas wells.

Line 23 shows the partnership’s adjusted

The partnership should also allocate to

Line 22 shows the distributions the

basis of property other than money

you a share of the adjusted basis of each

partnership made to you of cash and

immediately before the property was

partnership oil or gas property. See Pub.

certain marketable securities. The

distributed to you. In addition, the

535 for how to figure your depletion

marketable securities are included at their

partnership should report the adjusted

deduction.

fair market value (FMV) on the date of

basis and FMV of each property

distribution (minus your share of the

4. Recapture of the section 179

distributed. Decrease the adjusted basis

partnership’s gain on the securities

expense deduction. If the recapture was

of your interest in the partnership by the

distributed to you). If the amount shown

caused by a disposition of the property,

amount of your basis in the distributed

on line 22 exceeds the adjusted basis of

include the amount on Form 4797, line

property. Your basis in the distributed

your partnership interest immediately

17. The recapture amount is limited to the

property (other than in liquidation of your

before the distribution, the excess is

amount you deducted in earlier years.

interest) is the smaller of:

•

treated as gain from the sale or exchange

The partnership’s adjusted basis

5. Recapture of certain mining

of your partnership interest. Generally,

immediately before the distribution or

exploration expenditures (section 617).

•

this gain is treated as gain from the sale

The adjusted basis of your partnership

6. Any information or statements you

of a capital asset and should be reported

interest reduced by any cash distributed

need to comply with section 6111

on the Schedule D for your return.

in the same transaction.

(regarding tax shelters) or section

However, the gain may be ordinary

If you received the property in

6662(d)(2)(B)(ii) (regarding adequate

income. For details, see Pub. 541.

liquidation of your interest, your basis in

disclosure of items that may cause an

the distributed property is equal to the

understatement of income tax on your

The partnership will separately identify

adjusted basis of your partnership interest

return).

both of the following:

•

reduced by any cash distributed in the

7. Preproductive period farm

The FMV of the marketable securities

same transaction.

expenses. You may be eligible to elect to

when distributed (minus your share of the

deduct these expenses currently or

gain on the securities distributed to you).

If you contributed appreciated property

•

capitalize them under section 263A. See

The partnership’s adjusted basis of

to the partnership within 5 years of a

Pub. 225, Farmer’s Tax Guide, and

those securities immediately before the

distribution of other property to you, and

Regulations section 1.263A-4.

distribution.

the FMV of the other property exceeded

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Partner’s Instructions for Schedule K-1

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Credits, Deductions, Etc. (For Partner'S Use Only) - 2002 Page 10

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