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) - 2004
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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.
the activities are passive for them.
defined in section 751(c)) or inventory
What’s New
Therefore, partnership items from trade or
items (as defined in section 751(d)).
business, rental real estate, and other
There is a new worksheet on page 3 of
The written notice to the partnership
rental activities are separately reported
these instructions that you can use to
must include the names and addresses of
for each activity in box 9. Income, etc.,
keep track of your adjusted basis in your
both parties to the exchange, the
from other activities (investment and
partnership interest.
identifying numbers of the transferor and
portfolio income and deductions) are
(if known) of the transferee, and the
reported in boxes 2a, 2b, 4, and 6 for both
General Instructions
exchange date.
limited and general partners.
An exception to this rule is made for
Purpose of Schedule K-1
sales or exchanges of publicly traded
Errors
partnership interests for which a broker is
The partnership uses Schedule K-1 to
You must report partnership items shown
required to file Form 1099-B, Proceeds
report your share of the partnership’s
on your Schedule K-1 (and any attached
From Broker and Barter Exchange
income, deductions, credits, etc. Keep it
schedules) the same way that the
Transactions.
for your records. Do not file it with your
partnership treated the items on its return.
tax return. The partnership has filed a
If a partner is required to notify the
If you believe the partnership has made
copy with the IRS.
partnership of a section 751(a) exchange
an error on your Schedule K-1, notify the
You are liable for tax on your share of
but fails to do so, a $50 penalty may be
partnership. Do not change any items on
the partnership income, whether or not
imposed for each such failure. However,
your copy of Schedule K-1. Generally, an
distributed. Include your share on your tax
no penalty will be imposed if the partner
adjustment to correct an error will take
return if a return is required. Use these
can show that the failure was due to
effect for the tax year in which the
instructions to help you report the items
reasonable cause and not willful neglect.
partnership actually makes the
shown on Schedule K-1 on your tax
adjustment. However, if the error involves
return.
Nominee Reporting
a change to your distributive share of a
partnership item, the partnership should
The amount of loss and deduction that
Any person who holds, directly or
file an amended partnership return and
you can claim on your tax return may be
indirectly, an interest in a partnership as a
send you a corrected Schedule K-1.
less than the amount reported on
nominee for another person must furnish
Schedule K-1. It is the partner’s
a written statement to the partnership by
If the treatment on your original or
responsibility to consider and apply any
the last day of the month following the
amended return is inconsistent with the
applicable limitations. See Limitations on
end of the partnership’s tax year. This
partnership’s treatment, you may be
Losses, Deductions, and Credits
statement must include the name,
subject to the accuracy-related penalty.
beginning on page 2 for more information.
address, and identifying number of the
This penalty is in addition to any tax that
nominee and such other person,
results from making your amount or
Electing Large
description of the partnership interest held
treatment of the item consistent with that
as nominee for that person, and other
Partnerships
shown on the partnership’s return. Any
information required by Temporary
deficiency that results from making the
This partnership has elected simplified
Regulations section 1.6031(c)-1T. A
amounts consistent may be assessed
reporting requirements intended to make
nominee that fails to furnish this
immediately.
it simpler for you to report your share of
statement must furnish to the person for
partnership income, credits, deductions,
whom the nominee holds the partnership
Sale or Exchange of
etc. Generally, income, capital gains,
interest a copy of Schedule K-1 and
credits, and deductions are combined at
Partnership Interest
related information within 30 days of
the partnership level so that the number
receiving it from the partnership.
of partnership items separately reported
Generally, a partner who sells or
to partners is reduced. Most limitations
exchanges a partnership interest in a
A nominee who fails to furnish when
and elections affecting partnership
section 751(a) exchange must notify the
due all the information required by
income are made by the electing large
partnership, in writing, within 30 days of
Temporary Regulations section
partnership. For limited partners, income
the exchange (or, if earlier, by January 15
1.6031(c)-1T, or who furnishes incorrect
and other items from the partnership’s
of the calendar year following the
information, is subject to a $50 penalty for
trade or business and rental activities are
calendar year in which the exchange
each statement for which a failure occurs.
occurred). A “section 751(a) exchange” is
treated as being from a trade or business
The maximum penalty is $100,000 for all
any sale or exchange of a partnership
that is a single passive activity. These
such failures during a calendar year. If the
interest in which any money or other
items are reported in boxes 1, 3, and 5,
nominee intentionally disregards the
property received by the partner in
with most credits being reported in boxes
requirement to report correct information,
exchange for that partner’s interest is
7 and 8. General partners must make
each $50 penalty increases to $100 or, if
attributable to unrealized receivables (as
their own determinations as to whether
greater, 10% of the aggregate amount of
Cat. No. 26141W
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