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Only individuals, qualifying estates, and

Any taxable social security or equivalent

Specific Instructions

qualifying revocable trusts that made a

railroad retirement benefits.

section 645 election can actively participate

Any deductible contributions to an IRA or

Part I. Information About

in a rental real estate activity. Estates (other

certain other qualified retirement plans under

than qualifying estates), trusts (other than

section 219.

the Partnership

qualifying revocable trusts that made a

The domestic production activities

section 645 election), and corporations

deduction.

Item D

cannot actively participate. Limited partners

The student loan interest deduction.

cannot actively participate unless future

The tuition and fees deduction.

If the box in item D is checked, you are a

partner in a publicly traded partnership and

regulations provide an exception.

The deductible part of self-employment

must follow the rules discussed, earlier,

taxes.

You are not considered to actively

The exclusion from income of interest

under Publicly traded partnerships.

participate in a rental real estate activity if, at

from Series EE or I U.S. Savings Bonds used

any time during the tax year, your interest

to pay higher education expenses.

(including your spouse's interest) in the

Part II. Information About

The exclusion of amounts received under

activity was less than 10% (by value) of all

the Partner

an employer's adoption assistance program.

interests in the activity.

Active participation is a less stringent

Commercial revitalization deduction.

Item E

requirement than material participation. You

The special $25,000 allowance for the

For your protection, this form may show only

may be treated as actively participating if you

commercial revitalization deduction from

the last four digits of your social security

participated, for example, in making

rental real estate activities isn't subject to the

number (SSN), individual taxpayer

management decisions or arranging for

active participation rules or modified

identification number (ITIN), or employer

others to provide services (such as repairs)

adjusted gross income limits discussed

identification number (EIN). However, the

in a significant and bona fide sense.

earlier. See the instructions for box 13, code

partnership has reported your complete

Management decisions that can count as

Q, for more information.

identification number to the IRS.

active participation include approving new

Special rules for certain other activities.

tenants, deciding rental terms, approving

Item J

If you have net income (loss), deductions, or

capital or repair expenditures, and other

credits from any activity to which special

Generally, the amounts reported in item J are

similar decisions.

rules apply, the partnership will identify the

based on the partnership agreement. If your

An estate is a qualifying estate if the

activity and all amounts relating to it on

interest commenced after the beginning of

decedent would have satisfied the active

Schedule K-1 or on an attached statement.

the partnership's tax year, the partnership

participation requirement for the activity for

If you have net income subject to

will have entered, in the Beginning column,

the tax year the decedent died. A qualifying

recharacterization under Temporary

the percentages that existed for you

estate is treated as actively participating for

Regulations section 1.469-2T(f) and

immediately after admission. If your interest

tax years ending less than 2 years after the

Regulations section 1.469-2(f), report such

terminated before the end of the

date of the decedent's death.

amounts according to the Instructions for

partnership's tax year, the partnership will

Form 8582 (or Form 8810).

have entered, in the Ending column, the

Modified adjusted gross income

percentages that existed immediately before

limitation. The maximum special

If you have net income (loss), deductions,

termination.

allowance that single individuals and married

or credits from any of the following activities,

individuals filing a joint return can qualify for

treat such amounts as nonpassive and report

The ending percentage share shown on

is $25,000. The maximum is $12,500 for

them as indicated in these instructions.

the Capital line is the portion of the capital

married individuals who file separate returns

1. Working interests in oil and gas wells

you would receive if the partnership was

and who lived apart at all times during the

if you are a general partner.

liquidated at the end of its tax year by the

year. The maximum special allowance for

2. The rental of a dwelling unit any

distribution of undivided interests in the

which an estate can qualify is $25,000

partner used for personal purposes during

partnership's assets and liabilities. If your

reduced by the special allowance for which

the year for more than the greater of 14 days

capital account is negative or zero, the

the surviving spouse qualifies.

or 10% of the number of days that the

partnership will have entered zero on this

If your modified adjusted gross income

residence was rented at fair rental value.

line.

(defined below) is $100,000 or less ($50,000

3. Trading personal property for the

Item K

or less if married filing separately), your loss

account of owners of interests in the activity.

is deductible up to the maximum special

Item K should show your share of the

allowance referred to in the preceding

partnership's nonrecourse liabilities,

Self-charged interest. The partnership will

paragraph. If your modified adjusted gross

partnership-level qualified nonrecourse

report any “self-charged” interest income or

income is more than $100,000 (more than

financing, and other recourse liabilities as of

expense that resulted from loans between

$50,000 if married filing separately), the

the end of the partnership's tax year. If you

you and the partnership (or between the

special allowance is limited to 50% of the

terminated your interest in the partnership

partnership and another partnership or S

difference between $150,000 ($75,000 if

during the tax year, item K should show the

corporation if both entities have the same

married filing separately) and your modified

share that existed immediately before the

owners with the same proportional

adjusted gross income. When modified

total disposition. A partner's “recourse

ownership interest in each entity). If there

adjusted gross income is $150,000 or more

liability” is any partnership liability for which a

was more than one activity, the partnership

($75,000 or more if married filing separately),

partner is personally liable.

will provide a statement allocating the

there is no special allowance.

interest income or expense with respect to

Modified adjusted gross income is your

Use the total of the three amounts for

each activity. The self-charged interest rules

adjusted gross income figured without taking

figuring the adjusted basis of your

do not apply to your partnership interest if the

into account the following amounts, if

partnership interest.

partnership made an election under

applicable.

Regulations section 1.469-7(g) to avoid the

Any passive activity loss.

Generally, you may use only the amounts

application of these rules. See the

Any rental real estate loss allowed under

shown next to “Qualified nonrecourse

Instructions for Form 8582 for details.

section 469(c)(7) to real estate professionals

financing” and “Recourse” to figure your

(defined earlier).

amount at risk. Do not include any amounts

Any overall loss from a publicly traded

that are not at risk if such amounts are

partnership.

included in either of these categories.

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

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Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Deductions, Credits, Etc. (For Partner'S Use Only) - 2016 Page 5

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