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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, Credits, Deductions, etc.

(For Partner’s Use Only)

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

either the schedule that the partnership

section 751(a) exchange must notify the

Changes To Note

has attached for that line or line 25 of

partnership, in writing, within 30 days of

•

Schedule K-1.

the exchange (or, if earlier, by January 15

Under the Jobs and Growth Tax Relief

of the calendar year following the

Reconciliation Act of 2003, the general

Inconsistent Treatment of

calendar year in which the exchange

tax rates applicable to net capital gain for

occurred). A “section 751(a) exchange” is

individuals have been reduced. The new

Items

any sale or exchange of a partnership

gains rates also apply to qualified

Generally, you must report partnership

interest in which any money or other

dividend income under new section

items shown on your Schedule K-1 (and

property received by the partner in

1(h)(11). The new rates apply to sales,

any attached schedules) the same way

exchange for that partner’s interest is

other dispositions, and installment

that the partnership treated the items on

attributable to unrealized receivables (as

payments received after May 5, 2003.

its return. This rule does not apply if your

defined in section 751(c)) or inventory

Schedule K-1 has been revised to take

partnership is within the “small

items (as defined in section 751(d)).

into account the partner’s shares of these

partnership exception” and does not elect

gains and dividends.

The written notice to the partnership

to have the tax treatment of partnership

•

The instructions for line 25 of Schedule

must include the names and addresses of

items determined at the partnership level.

K-1 have been revised to change how

both parties to the exchange, the

If the treatment on your original or

dispositions of property are reported if the

identifying numbers of the transferor and

amended return is inconsistent with the

partnership previously passed through a

(if known) of the transferee, and the

partnership’s treatment, or if the

section 179 expense deduction to any of

exchange date.

partnership was required to but has not

its partners for the property.

An exception to this rule is made for

•

filed a return, you must file Form 8082,

On page 12, under Supplemental

sales or exchanges of publicly traded

Notice of Inconsistent Treatment or

Information, Line 25, we added item 21

partnership interests for which a broker is

Administrative Adjustment Request

for collectibles gain (loss), and item 22 for

required to file Form 1099-B, Proceeds

(AAR), with your original or amended

qualified 5-year gain. These items were

From Broker and Barter Exchange

return to identify and explain any

added due to the deletion of these

Transactions.

inconsistency (or to note that a

specific line items from Schedule K-1.

If a partner is required to notify the

partnership return has not been filed).

partnership of a section 751(a) exchange

General Instructions

If you are required to file Form 8082

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

but fail to do so, you may be subject to

imposed for each such failure. However,

the accuracy-related penalty. This penalty

Purpose of Schedule K-1

no penalty will be imposed if the partner

is in addition to any tax that results from

can show that the failure was due to

making your amount or treatment of the

The partnership uses Schedule K-1 to

reasonable cause and not willful neglect.

item consistent with that shown on the

report your share of the partnership’s

partnership’s return. Any deficiency that

income, credits, deductions, etc. Keep it

Nominee Reporting

results from making the amounts

for your records. Do not file it with

Any person who holds, directly or

consistent may be assessed immediately.

your tax return. The partnership has filed

indirectly, an interest in a partnership as a

a copy with the IRS.

Errors

nominee for another person must furnish

Although the partnership generally is

a written statement to the partnership by

If you believe the partnership has made

not subject to income tax, you are liable

the last day of the month following the

an error on your Schedule K-1, notify the

for tax on your share of the partnership

end of the partnership’s tax year. This

partnership and ask for a corrected

income, whether or not distributed.

statement must include the name,

Schedule K-1. Do not change any items

Include your share on your tax return if a

address, and identifying number of the

on your copy of Schedule K-1. Be sure

return is required. Use these instructions

nominee and such other person,

that the partnership sends a copy of the

to help you report the items shown on

description of the partnership interest held

corrected Schedule K-1 to the IRS. If you

Schedule K-1 on your tax return.

as nominee for that person, and other

are a partner in a partnership that does

The amount of loss and deduction that

information required by Temporary

not meet the small partnership exception

you may claim on your tax return may be

Regulations section 1.6031(c)-1T. A

and you report any partnership item on

less than the amount reported on

nominee that fails to furnish this

your return in a manner different from the

Schedule K-1. It is the partner’s

statement must furnish to the person for

way the partnership reported it, you must

responsibility to consider and apply

whom the nominee holds the partnership

file Form 8082.

any applicable limitations. See

interest a copy of Schedule K-1 and

Limitations on Losses, Deductions,

related information within 30 days of

Sale or Exchange of

and Credits beginning on page 2 for

receiving it from the partnership.

Partnership Interest

more information.

A nominee who fails to furnish when

Where “attach schedule” appears

Generally, a partner who sells or

due all the information required by

beside a line item on Schedule K-1, see

exchanges a partnership interest in a

Temporary Regulations section

Cat. No. 11396N

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Credits, Deductions, Etc. (For Partner'S Use Only) - 2003

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