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Department of the Treasury

Internal Revenue Service

Partner’s Instructions for

Schedule K-1 (Form 1065)

Partner’s Share of Income, Deductions, Credits, etc.

(For Partner’s Use Only)

Section references are to the Internal Revenue Code unless otherwise noted.

you must file Form 8082, Notice of

If a partner is required to notify the

What’s New

Inconsistent Treatment or Administrative

partnership of a section 751(a) exchange

•

Adjustment Request (AAR), with your

but fails to do so, a $50 penalty may be

The instructions have been revised in

original or amended return to identify and

imposed for each such failure. However, no

accordance with the redesign of Schedule

explain any inconsistency (or to note that a

penalty will be imposed if the partner can

K-1, which uses codes to identify many of

partnership return has not been filed).

show that the failure was due to reasonable

the items reported on the schedule. See the

cause and not willful neglect.

specific instructions for Part III on page 5 for

If you are required to file Form 8082 but

more information on the codes and how

fail to do so, you may be subject to the

attached statements are identified on

accuracy-related penalty. This penalty is in

Nominee Reporting

Schedule K-1.

addition to any tax that results from making

•

Any person who holds, directly or indirectly,

There is a new worksheet on page 2 of

your amount or treatment of the item

an interest in a partnership as a nominee for

these instructions that you can use to keep

consistent with that shown on the

another person must furnish a written

track of your adjusted basis in your

partnership’s return. Any deficiency that

statement to the partnership by the last day

partnership interest.

results from making the amounts consistent

of the month following the end of the

may be assessed immediately.

partnership’s tax year. This statement must

General Instructions

include the name, address, and identifying

Errors

number of the nominee and such other

Purpose of Schedule K-1

person, description of the partnership

If you believe the partnership has made an

error on your Schedule K-1, notify the

interest held as nominee for that person,

The partnership uses Schedule K-1 to report

partnership and ask for a corrected

and other information required by

your share of the partnership’s income,

Schedule K-1. Do not change any items on

Temporary Regulations section

deductions, credits, etc. Keep it for your

your copy of Schedule K-1. Be sure that the

1.6031(c)-1T. A nominee that fails to furnish

records. Do not file it with your tax return.

partnership sends a copy of the corrected

this statement must furnish to the person for

The partnership has filed a copy with the

Schedule K-1 to the IRS. If you are a partner

whom the nominee holds the partnership

IRS.

in a partnership that does not meet the small

interest a copy of Schedule K-1 and related

partnership exception and you report any

information within 30 days of receiving it

Although the partnership generally is not

partnership item on your return in a manner

subject to income tax, you are liable for tax

from the partnership.

different from the way the partnership

on your share of the partnership income,

reported it, you must file Form 8082.

A nominee who fails to furnish when due

whether or not distributed. Include your

all the information required by Temporary

share on your tax return if a return is

required. Use these instructions to help you

Regulations section 1.6031(c)-1T, or who

Sale or Exchange of

report the items shown on Schedule K-1 on

furnishes incorrect information, is subject to

Partnership Interest

your tax return.

a $50 penalty for each statement for which a

failure occurs. The maximum penalty is

Generally, a partner who sells or exchanges

The amount of loss and deduction that

$100,000 for all such failures during a

a partnership interest in a section 751(a)

you may claim on your tax return may be

calendar year. If the nominee intentionally

exchange must notify the partnership, in

less than the amount reported on Schedule

disregards the requirement to report correct

writing, within 30 days of the exchange (or, if

K-1. It is the partner’s responsibility to

information, each $50 penalty increases to

earlier, by January 15 of the calendar year

consider and apply any applicable

$100 or, if greater, 10% of the aggregate

following the calendar year in which the

limitations. See Limitations on Losses,

amount of items required to be reported,

exchange occurred). A “section 751(a)

Deductions, and Credits beginning on page

exchange” is any sale or exchange of a

and the $100,000 maximum does not apply.

2 for more information.

partnership interest in which any money or

other property received by the partner in

Inconsistent Treatment of

International Boycotts

exchange for that partner’s interest is

attributable to unrealized receivables (as

Items

Every partnership that had operations in, or

defined in section 751(c)) or inventory items

related to, a boycotting country, company, or

Generally, you must report partnership items

(as defined in section 751(d)).

a national of a country must file Form 5713,

shown on your Schedule K-1 (and any

International Boycott Report.

attached schedules) the same way that the

The written notice to the partnership

partnership treated the items on its return.

must include the names and addresses of

If the partnership cooperated with an

This rule does not apply if your partnership

both parties to the exchange, the identifying

international boycott, it must give you a copy

is within the “small partnership exception”

numbers of the transferor and (if known) of

of its Form 5713. You must file your own

and does not elect to have the tax treatment

the transferee, and the exchange date.

Form 5713 to report the partnership’s

of partnership items determined at the

activities and any other boycott operations

An exception to this rule is made for

partnership level.

that you may have. You may lose certain tax

sales or exchanges of publicly traded

benefits if the partnership participated in, or

If the treatment on your original or

partnership interests for which a broker is

cooperated with, an international boycott.

amended return is inconsistent with the

required to file Form 1099-B, Proceeds

See Form 5713 and its instructions for more

partnership’s treatment, or if the partnership

From Broker and Barter Exchange

information.

was required to but has not filed a return,

Transactions.

Cat. No. 11396N

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Deductions, Credits, Etc. (For Partner'S Use Only) - 2004

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