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plan, simplified employee pension (SEP), or

investment is not taken on Schedule E

employer pension plan startup costs, credit

a SIMPLE IRA plan. See Form 1040

(Form 1040). Instead, you subtract the

for employer-provided childcare facilities,

instructions for line 25 to figure your IRA

deduction from the amount that would

biodiesel fuels credit, low sulfur diesel fuel

deduction. Enter payments made to a

normally be entered as taxable income on

production credit, and credit for contributions

qualified plan, SEP, or SIMPLE IRA plan on

line 42 (Form 1040). In the margin to the left

to selected community development

Form 1040, line 32. If the payments to a

of line 42, write ‘‘CCF’’ and the amount of

corporations), you must complete Form

qualified plan were to a defined benefit plan,

the deduction.

3800, General Business Credit, in addition

the partnership should give you a statement

to the credit forms identified below. If you

The partnership will give you a

showing the amount of the benefit accrued

have more than one credit, see the

description and the amount of your share for

for the current tax year.

Instructions for Form 3800.

each of these items.

Codes A and B. Low-income housing

Code S. Reforestation expense

credit. The partnership will report your

deduction. The partnership will provide a

Box 14. Self-Employment

share of the low-income housing credit

statement that describes the qualified timber

using code A if section 42(j)(5) applies. If

property for these reforestation expenses.

Earnings (Loss)

section 42(j)(5) does not apply, your share

The expense deduction is limited to $10,000

of the credit will be reported using code B.

If you and your spouse are both partners,

($5,000 if married filing separately) for each

Any allowable low-income housing credit

each of you must complete and file your

qualified timber property, including your

(reported as code A or code B) is entered on

own Schedule SE (Form 1040),

distributive share of the partnership’s

line 5 of Form 8586, Low-Income Housing

Self-Employment Tax, to report your

expense and any reforestation expenses

Credit.

partnership net earnings (loss) from

you separately paid or incurred after

self-employment.

October 22, 2004, for the property. Follow

Keep a separate record of the amount of

low-income housing credit from each of

the instructions for Form 8582 to report a

Code A. Net earnings (loss) from

these sources so that you can correctly

deduction allocable to a passive activity. If

self-employment. If you are a general

compute any recapture of low-income

you materially participated in the

partner, reduce this amount before entering

reforestation activity, report the deduction on

housing credit that may result from the

it on Schedule SE (Form 1040) by any

line 28, column (h), of Schedule E (Form

disposition of all or part of your partnership

section 179 expense deduction claimed,

1040).

interest. For more information, see the

unreimbursed partnership expenses

claimed, and depletion claimed on oil and

instructions for Form 8611, Recapture of

Code T. Other deductions. Amounts with

Low-Income Housing Credit.

gas properties. Do not reduce net earnings

this code may include:

from self-employment by any separately

•

If part or all of the low-income housing

Itemized deductions (Form 1040 filers

stated deduction for health insurance

credit reported using code A or B is

enter on Schedule A (Form 1040)).

expenses.

•

attributable to additions to qualified basis

Soil and water conservation expenditures.

If the amount on this line is a loss, enter

property placed in service before 1990, the

See section 175 for limitations on the

only the deductible amount on Schedule SE

partnership will provide an attached

amount you are allowed to deduct.

•

(Form 1040). See Limitations on Losses,

statement that will separately identify these

Expenditures for the removal of

Deductions, and Credits beginning on

amounts. Amounts placed in service before

architectural and transportation barriers to

page 2.

1990 are subject to different passive activity

the elderly and disabled that the partnership

limitation rules. See Passive Activity

If your partnership is an options dealer or

elected to treat as a current expense. The

Limitations and Form 8582-CR for more

a commodities dealer, see section 1402(i).

deductions are limited by section 190(c) to

information.

$15,000 per year from all sources.

If your partnership is an investment club,

•

Interest expense allocated to

Codes C and D. Qualified rehabilitation

see Rev. Rul. 75-525, 1975-2 C.B. 350.

debt-financed distributions. The manner in

expenditures. The partnership will report

Code B. Gross farming or fishing

your share of the qualified rehabilitation

which you report such interest expense

income. If you are an individual partner,

expenditures related to rental real estate

depends on your use of the distributed debt

enter the amount from this line, as an item

activities using code C. Your share of

proceeds. If the proceeds were used in a

of information, on Schedule E (Form 1040),

qualified rehabilitation expenditures from

trade or business activity, report the interest

line 42. Also use this amount to figure net

on line 28 of Schedule E (Form 1040). In

property not related to rental real estate

earnings from self-employment under the

column (a) enter the name of the

activities will be reported using code D. On

farm optional method on Schedule SE

an attached statement, the partnership will

partnership and “interest expense.” If you

(Form 1040), Section B, Part II.

indicate the line number on Form 3468,

materially participated in the trade or

Code C. Gross non-farm income. If you

Investment Credit, to report these

business activity, enter the amount of

are an individual partner, use this amount to

expenditures (line 1b for pre-1936 buildings

interest expense in column (h). If you did not

figure net earnings from self-employment

or line 1c for certified historic structures). If

materially participate in the activity, follow

under the nonfarm optional method on

the instructions for Form 8582 to determine

the partnership is reporting expenditures

Schedule SE (Form 1040), Section B, Part

the amount of interest expense you can

from more than one activity, the attached

II.

statement will separately identify the amount

report in column (f). See page 3 for a

of expenditures from each activity for lines

definition of material participation. If the

1b and 1c.

proceeds were used in an investment

Box 15. Credits & Credit

activity, enter the interest on Form 4952. If

Combine the code C and code D

the proceeds are used for personal

Recapture

expenditures on lines 1b and 1c of Form

purposes, the interest is generally not

3468. The expenditures related to rental real

If you have credits that are passive activity

deductible.

estate activities (code C) are reported on

•

credits to you, you must complete Form

Interest paid or accrued on debt properly

Schedule K-1 separately from other qualified

8582-CR (or Form 8810 for corporations) in

allocable to your share of a working interest

rehabilitation expenditures (code D)

addition to the credit forms identified below.

in any oil or gas property (if your liability is

because they are subject to different

See Passive Activity Limitations on page 3

not limited). If you did not materially

passive activity limitation rules. See the

and the Instructions for Form 8582-CR (or

participate in the oil or gas activity, this

instructions for Form 8582-CR, Passive

Form 8810) for more information.

interest is investment interest reportable as

Activity Credit Limitations, for details.

described on page 8; otherwise, it is trade or

Also, if you are entitled to claim more

Code E. Basis of energy property. Report

business interest. If you did not materially

than one listed general business credit

this amount on Form 3468, line 2.

participate in the oil or gas activity, this

(investment credit, work opportunity credit,

Code F. Qualified timber property. Report

interest is investment interest expense and

welfare-to-work credit, credit for alcohol

this amount on Form 3468, line 3.

should be reported on Form 4952. If you

used as fuel, research credit, low-income

materially participated in the activity, report

housing credit, enhanced oil recovery credit,

Code G. Other rental real estate credit.

the interest on line 28 of Schedule E (Form

disabled access credit, renewable electricity

The partnership will identify the type of

1040). On a separate line, enter “interest

and refined coal production credit, Indian

credit and any other information you need to

expense” and the name of the partnership in

employment credit, credit for employer

compute credits from rental real estate

column (a) and the amount in column (h).

social security and Medicare taxes paid on

activities (other than the low-income housing

•

Contributions to a capital construction

certain employee tips, orphan drug credit,

credit and qualified rehabilitation

fund (CCF). The deduction for a CCF

new markets credit, credit for small

expenditures). These credits may be limited

-9-

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

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Deductions, Credits, Etc. (For Partner'S Use Only) - 2004 Page 9

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