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 9

Code K5. Interest expense allocated

Code M3. Unrelated business taxable

this amount by depletion claimed on oil

and apportioned at the partner level.

income. The partnership must give you

and gas properties. If this amount is a

Include this amount on line 4b of the

any information you need to figure

loss, enter only the deductible amount on

applicable Forms 1116.

unrelated business taxable income under

Schedule SE. For purposes of

section 512(a)(1) (but excluding any

self-employment tax, no income from an

Code K6. Other expenses allocated

ELP is treated as farming or fishing

modifications required by paragraphs (8)

and apportioned at the partner level.

income.

through (15) of section 512(b)) for a

Include this amount on line 2 of the

partner that is a tax-exempt organization.

applicable Forms 1116.

Code J2. Gross nonfarm income.

Individual partners use this amount to

Note. For Codes K5 and K6, do not

Reminder. A partner is required to notify

figure net earnings from self-employment

include any expenses allocated and

the partnership of its tax-exempt status.

under the nonfarm optional method on

apportioned to U.S. source income on

Code M4. Health insurance. Include

Schedule SE (Form 1040), Section B,

any line of Part I of Form 1116.

any amounts paid during the tax year for

Part II.

Codes K7(a) Through Codes K7(c).

insurance that constitutes medical care

Codes K1 Through K9. Foreign Tax

Deductions allocated and apportioned

for you, your spouse, and your

Credit Information

at partnership level to foreign source

dependents on line 29 of your 2008 Form

income. The following codes report the

Use the information reported under

1040. You may be allowed to deduct such

expenses allocated and apportioned by

Codes K1 through K9 to figure your

amounts, even if you do not itemize

the partnership to foreign source

foreign tax credit. For more information,

deductions. If you do itemize deductions,

categories of income. Include these

see Form 1116, Foreign Tax Credit

enter on line 1 of Schedule A (Form 1040)

amounts on line 2 of the applicable Forms

(Individual, Estate, or Trust) and its

any amounts not deducted on line 29 of

1116 (that is, the Forms 1116 for each

instructions; Form 1118, Foreign Tax

Form 1040.

category of income provided to you).

Credit — Corporations, and its

•

Code M5. Distributions of money (cash

Code K7(a). Deductions allocated

instructions; and Pub. 514, Foreign Tax

and marketable securities). This

and apportioned at partnership level to

Credit for Individuals. See page 4 of the

amount includes the distributions the

passive category foreign source

Instructions for Form 1116 for detailed

partnership made to you of cash and

income.

instructions for reporting foreign tax

•

certain marketable securities. The

Code K7(b). Deductions allocated

information from partnerships.

marketable securities are included at their

and apportioned at partnership level to

Note. The line references in this section

fair market value (FMV) on the date of

general category foreign source

of the Form 1116 instructions do not

distribution (minus your share of the

income.

apply to the Schedule K-1 of Form

•

partnership’s gain on the securities

Code K7(c). Deductions allocated

1065-B.

distributed to you). If this amount exceeds

and apportioned at partnership level to

Code K1. Name of foreign country or

the adjusted basis of your partnership

other foreign source income.

U.S. possession. Include on Form

interest immediately before the

Code K8(a). Total foreign taxes paid.

1116, Part I, item g. For each country

distribution, the excess is treated as gain

Include this amount in Part II of Form

reported, the partnership must give you

from the sale or exchange of your

1116.

the amount and a description of your

partnership interest. Generally, this gain

Code K8(b). Total foreign taxes

share of the following items for Codes K2

is treated as gain from the sale of a

accrued. Include this amount in Part II of

through K9. For each country or

capital asset and should be reported on

Form 1116.

possession being reported, a separate

the Schedule D for your return. However,

Code K9. Reduction in taxes available

column in Part I and a separate line in

the gain may be ordinary income. For

for credit. Enter this amount on line 12

Part II is needed on Form 1116.

details, see Pub. 541.

of Form 1116.

Code K2. Gross income from all

The partnership must separately

sources. Enter this amount on line 3e of

Code L. Oil and Gas Activities

identify both of the following.

•

Form 1116.

The FMV of the marketable securities

Generally, oil and gas income,

Code K3. Gross income sourced at

when distributed (minus your share of the

deductions, credits, and other items are

partner level. Although all this income

gain on the securities distributed to you).

included in your distributive share of

•

reported has been apportioned to foreign

The partnership’s adjusted basis of

income or loss from passive loss

source categories of income, you must

those securities immediately before the

limitation activities, general credits, and

nevertheless determine whether the

distribution.

the alternative minimum tax adjustment.

income being reported is U.S. source

However, distributive shares of all oil

Decrease the adjusted basis of your

income or foreign source income. See the

and gas income, deductions, credits, and

interest in the partnership (but not below

Instructions for Form 1116 for the rules to

other items are separately reported to

zero) by the amount of cash distributed to

source the income reported to you. Enter

partners who are disqualified persons in

you and the partnership’s adjusted basis

only foreign source income on lines 1a

accordance with the regular partnership

of the distributed securities. Advances or

and 3d of Form 1116. A separate Form

rules, here or on an attached schedule.

drawings of money or property against

1116 or 1118 is required for each foreign

your distributive share are treated as

Note. A partner must notify the ELP of

source category of income. Do not

current distributions made on the last day

its status as a “disqualified person”.

include income that you determined to be

of the partnership’s tax year.

U.S. source income.

Codes M1 Through M9.

Codes K4(a) Through K4(c). Foreign

Your basis in the distributed

Miscellaneous

gross income sourced at partnership

marketable securities (other than in

Code M1. Other tax-exempt income.

level. The following types of income

liquidation of your interest) is the smaller

Increase the adjusted basis of your

have already been sourced for you by the

of:

•

interest in the partnership by this amount,

partnership. Include these amounts on

The partnership’s adjusted basis in the

but do not include it in income on your

lines 1a and 3d of the applicable Form

securities immediately before the

income tax return.

1116 (that is, the Form 1116 for each

distribution increased by any gain

category of income provided to you).

Code M2. Nondeductible expenses.

recognized on the distribution of the

•

Code K4(a). Passive category

Decrease the adjusted basis of your

securities or

•

foreign source income.

interest in the partnership by this amount.

The adjusted basis of your partnership

•

Code K4(b). General category

The nondeductible expenses paid or

interest reduced by any cash distributed

foreign source income.

incurred by the partnership are not

in the same transaction and increased by

•

Code K4(c). Other foreign source

deductible on your income tax return, but

any gain recognized on the distribution of

income.

they do affect your basis.

the securities.

-9-

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