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) - 2008 Page 11

another partner that reduces your share

distributive share of foreign trading gross

Code S2. Qualified Production

of the replacement QSB stock held by a

receipts from this partnership to

Activities Income (QPAI)

partnership. The amount of gain that you

determine if you met the $5 million or less

Report the QPAI reported to you by the

must recognize is based on the amount of

exception discussed above for purposes

partnership (in box 9 using code S2) on

gain that you would recognize upon the

of qualifying for an extraterritorial income

line 7 of Form 8903.

sale of the distributed replacement QSB

exclusion from other sources.

stock for its fair market value on the date

Code S3. Employer’s W-2 Wages

Note. Upon request, the partnership

of the distribution, but not to exceed the

Report the portion of W-2 wages reported

should furnish you a copy of the

amount you previously deferred under

to you by the partnership (in box 9 using

partnership’s Form 8873 if there is a

section 1045 with respect to the

code S3) on line 15 of Form 8903.

reduction for international boycott

distributed replacement QSB stock. If the

operations, illegal bribes, kickbacks, etc.

Code T. Section 409A Income

partnership distributed your share of

replacement QSB stock to another

This is compensation to partners deferred

Code P. Inversion Gain

partner, the partnership should give you

under a section 409A nonqualified

The partnership must provide a statement

(a) the name of the corporation that

deferred compensation plan that does not

issued the replacement QSB stock, (b)

showing the amounts of each type of

meet the requirements of section 409A.

income or gain that is included in

the date the replacement QSB stock was

This amount is also reported in box 9

distributed to another partner or partners,

inversion gain. The partnership has

using Code F. This amount is subject to

and (c) your share of the partnership’s

included inversion gain in income

interest and additional tax to be reported

adjusted basis and fair market value of

elsewhere on Schedule K-1. Inversion

on line 61 of Form 1040. See the

the replacement QSB stock on such date.

gain is also reported under Code P

instructions for line 61 of Form 1040 for

because your taxable income and

For more information, see Regulations

details.

alternative minimum taxable income

section 1.1045-1.

Code U. Other Information

cannot be less than the inversion gain.

Code N. Unrecaptured Section

Also, your inversion gain (a) is not taken

The partnership will use Code U to report

1250 Gain

into account in figuring the amount of net

the following to partners.

•

operating loss (NOL) for the tax year or

Report this gain on line 11 of the

The recapture of any credit (other than

Unrecaptured Section 1250 Gain

the amount of NOL that can be carried

the low-income housing credit or

Worksheet on page D-9 of the

over to each tax year, (b) may limit the

investment credit) is reported to you as a

Instructions for Schedule D (Form 1040).

amount of your credits, and (c) is treated

separately stated item. See the

Do not report the gain on line 5 as stated

as income from sources within the U.S.

instructions for the specific form identified

on the worksheet.

for the foreign tax credit. See section

with the credit for more information on

7874 for details.

reporting the recapture.

Codes O1 and O2. Extraterritorial

•

Any information a partner that is a

Income Exclusion

Code Q. Commercial Revitalization

publicly traded partnership may need to

Deduction

determine if it meets the 90% qualifying

Partnership did not claim the

income test of section 7704(c)(2).

exclusion. If the partnership reports

Follow the Instructions for Form 8582 for

Partners are required to notify the

your distributive share of foreign trading

commercial revitalization deductions from

partnership of their status as a publicly

gross receipts (Code O1) and the

rental real estate activities to figure how

traded partnership.

extraterritorial income exclusion (Code

much of the deduction can be reported on

•

The partnership will report any

O2), the partnership was not entitled to

Schedule E (Form 1040), line 28, column

information you need to complete a

claim the exclusion because it did not

(f).

disclosure statement for reportable

meet the foreign economic process

transactions in which the partnership

requirements. You may still qualify for

Codes R1 and R2. Interest

participates. If the partnership participates

your distributive share of this exclusion if

Deduction Limitation for Corporate

in a transaction that must be disclosed on

the partnership’s foreign trading gross

Partners

Form 8886, Reportable Transaction

receipts for the tax year were $5 million or

A corporate partner is required to treat its

Disclosure Statement, both you and the

less.

distributive share of interest income,

partnership may be required to file Form

To qualify for this exclusion, your

interest expense, and partnership

8886 for the transaction. The

foreign trading gross receipts from all

liabilities as income, expense, and

determination of whether you are required

sources for the tax year also must have

liabilities of the corporation for purposes

to disclose a transaction of the

been $5 million or less.

of the interest deduction limitation under

partnership is based on the category(s)

Limited partners who qualify for the

section 163(j). The corporation’s

under which the transaction qualifies for

exclusion. Report the extraterritorial

distributive share of interest income is

disclosure and is determined by the

exclusion amount (Code O2) as a

reported in box 9 using code R1. Its

partnership. See the Instructions for Form

deduction reducing the amount reported

distributive share of interest expense is

8886 for details.

in box 1 (see the box 1 instructions on

•

reported using code R2. The amounts

Conservation reserve program

page 6).

reported using code R1 and R2 are for

payments. Individuals who received social

information only, and are included in

General partners who qualify for the

security retirement or disability benefits,

amounts reported elsewhere on Schedule

exclusion. Report the Code O2 amount

and are partners in a farm partnership

K-1. The corporation’s distributive share

in accordance with the instructions for box

that receives conservation reserve

of partnership liabilities is shown in the

9, Code A1, B1, or C1, whichever applies.

program payments, do not pay

first column of Schedule K-1.

See Form 8873, Extraterritorial Income

self-employment tax on their share of the

Exclusion, for more information.

conservation reserve payments. The

Code S1. Domestic Production

Partnership claimed the exclusion. If

partnership will report your share of the

Activities Information

the partnership reports your distributive

conservation reserve program payments

The partnership must attach a statement

share of foreign trading gross receipts

in box 9 using code U. See Schedule SE

to Schedule K-1 that provides the

(Code O1) but not the amount of the

(Form 1040) for information on excluding

information you need to figure the

extraterritorial income exclusion, the

the payments from your calculation of

domestic production activities deduction.

partnership met the foreign economic

self-employment tax.

•

process requirements and claimed the

Use Form 8903, Domestic Production

Gain or loss attributable to the sale or

Activities Deduction, to figure this

exclusion when figuring your distributive

exchange of qualified preferred stock of

deduction. See the Instructions for Form

share of partnership income. You also

the Federal National Mortgage

8903 for details.

may need to know the amount of your

Association (Fannie Mae) and the Federal

-11-

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