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) - 2002
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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.
for each activity in box 9. Income, etc.,
The written notice to the partnership
General Instructions
from other activities (investment and
must include the names and addresses of
portfolio income and deductions) are
both parties to the exchange, the
Purpose of Schedule K-1
reported in boxes 2, 4, and 6 for both
identifying numbers of the transferor and
limited and general partners.
(if known) of the transferee, and the
The partnership uses Schedule K-1 to
exchange date.
report your share of the partnership’s
Errors
income, credits, deductions, etc. Keep it
An exception to this rule is made for
for your records. Do not file it with
sales or exchanges of publicly traded
You must report partnership items shown
your tax return. The partnership has filed
partnership interests for which a broker is
on your Schedule K-1 (and any attached
a copy with the IRS.
required to file Form 1099-B, Proceeds
schedules) the same way that the
You are liable for tax on your share of
From Broker and Barter Exchange
partnership treated the items on its return.
the partnership income, whether or not
Transactions.
If you believe the partnership has made
distributed. Include your share on your tax
an error on your Schedule K-1, notify the
If a partner is required to notify the
return if a return is required. Use these
partnership. Do not change any items on
partnership of a section 751(a) exchange
instructions to help you report the items
your copy of Schedule K-1. Generally, an
but fails to do so, a $50 penalty may be
shown on Schedule K-1 on your tax
adjustment to correct an error will take
imposed for each such failure. However,
return.
effect for the tax year in which the
no penalty will be imposed if the partner
partnership actually makes the
The amount of loss and deduction that
can show that the failure was due to
adjustment. However, if the error involves
you may claim on your tax return may be
reasonable cause and not willful neglect.
a change to your distributive share of a
less than the amount reported on
partnership item, the partnership should
Schedule K-1. It is the partner’s
Nominee Reporting
file an amended partnership return and
responsibility to consider and apply
send you a corrected Schedule K-1.
any applicable limitations. See
Any person who holds, directly or
Limitations on Losses, Deductions,
indirectly, an interest in a partnership as a
If the treatment on your original or
and Credits beginning on page 2 for
nominee for another person must furnish
amended return is inconsistent with the
more information.
a written statement to the partnership by
partnership’s treatment, you may be
the last day of the month following the
subject to the accuracy-related penalty.
Electing Large
end of the partnership’s tax year. This
This penalty is in addition to any tax that
statement must include the name,
Partnerships
results from making your amount or
address, and identifying number of the
treatment of the item consistent with that
This partnership has elected simplified
nominee and such other person,
shown on the partnership’s return. Any
reporting requirements intended to make
description of the partnership interest held
deficiency that results from making the
it simpler for you to report your share of
as nominee for that person, and other
amounts consistent may be assessed
partnership income, credits, deductions,
information required by Temporary
immediately.
etc. Generally, income, capital gains,
Regulations section 1.6031(c)-1T. A
credits, and deductions are combined at
nominee that fails to furnish this
Sale or Exchange of
the partnership level so that the number
statement must furnish to the person for
of partnership items separately reported
whom the nominee holds the partnership
Partnership Interest
to partners is reduced. Most limitations
interest a copy of Schedule K-1 and
and elections affecting partnership
Generally, a partner who sells or
related information within 30 days of
exchanges a partnership interest in a
income are made by the electing large
receiving it from the partnership.
partnership. For limited partners, income
section 751(a) exchange must notify the
A nominee who fails to furnish when
and other items from the partnership’s
partnership, in writing, within 30 days of
the exchange (or, if earlier, by January 15
due all the information required by
trade or business and rental activities are
treated as being from a trade or business
of the calendar year following the
Temporary Regulations section
1.6031(c)-1T, or who furnishes incorrect
that is a single passive activity. These
calendar year in which the exchange
occurred). A “section 751(a) exchange” is
information, is subject to a $50 penalty for
items are reported in boxes 1, 3, and 5,
any sale or exchange of a partnership
each statement for which a failure occurs.
with most credits being reported in boxes
7 and 8. General partners must make
interest in which any money or other
The maximum penalty is $100,000 for all
property received by the partner in
such failures during a calendar year. If the
their own determinations as to whether
exchange for that partner’s interest is
nominee intentionally disregards the
the activities are passive for them.
Therefore, partnership items from trade or
attributable to unrealized receivables (as
requirement to report correct information,
defined in section 751(c)) or inventory
each $50 penalty increases to $100 or, if
business, rental real estate, and other
items (as defined in section 751(d)).
greater, 10% of the aggregate amount of
rental activities are separately reported
Cat. No. 26141W
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