20 - Cherry Bekaert

1 2020 Department of the Treasury Internal Revenue Service Partner's Instructions for Schedule K-1 ( form 1065). Partner's Share of Income, Deductions, Credits, etc. (For Partner's Use Only). Contents Page November 12, 2020, for purposes of loss The amount of loss and deduction you limitation. As a result, all partnerships must may claim on your tax return may be less General Instructions .. 1. report to partners, business interest expense than the amount reported on Schedule K-1. It Worksheet for Adjusting the Basis separately for purposes of section 704(d). is the partner's responsibility to consider and of a Partner's Interest in the apply any applicable limitations. See Partnership .. 3 Code AG, box 20. Gross receipts for sec- Limitations on Losses, Deductions, and Specific Instructions .. 6 tion 448(c). For tax years ending after Credits, later, for more information. Part I. Information About the December 30, 2020, partners in a Partnership.

2 6 partnership must include a share of Part II. Information About the partnership gross receipts in proportion to Inconsistent Treatment of Partner .. 6 their share of gross income under section Items Part III. Partner's Share of Items .. 7 703 unless the partnership and the partner If you are a partner in a partnership that has are treated as a single employer under not elected out of the centralized partnership Income (Loss) .. 8. section 448(c). See Regulations section audit regime enacted by the Bipartisan Box 11. Other Income (Loss) .. 9 (j)-2(d)(iii) and Box 12. Section 179 Deduction .. 11 Budget Act of 2015 (BBA), you must report faqs-regarding-the-aggregation-rules-und er- the items shown on your Schedule K-1 (and Box 13. Other Deductions .. 11 section-448c2-that-apply-to-the- any attached statements) the same way that Box 14. Self-Employment section-163j-small-business-exemption. the partnership treated the items on its Earnings (Loss).

3 13. Section 743(b) adjustments. The return. Box 15. Credits .. 13 partnership will provide your section 743(b). Box 16. Foreign Transactions .. 14 adjustment net of cost recovery, by asset If the treatment on your original or Box 17. Alternative Minimum Tax grouping. See Box 20. Other Information, amended return is inconsistent with the (AMT) Items .. 15 Code AH. Other information. partnership's treatment, or if the partnership Box 18. Tax-Exempt Income and was required to but has not filed a return, you Nondeductible Expenses .. 15 Excess business loss. The excess must file form 8082, Notice of Inconsistent Box 19. Distributions .. 15 business loss limitation rules were repealed Treatment or Administrative adjustment for the 2020 tax year by the Coronavirus Aid, request (AAR), with your original or Box 20. Other Information .. 16 Relief, and Economic Security Act (CARES amended return to identify and explain any List of Codes.)

4 21 Act), which also retroactively repealed the inconsistency (or to note that a partnership Section references are to the Internal Revenue Code unless otherwise noted. rules for the 2018 and 2019 tax years. return has not been filed). Future Developments General Instructions If you are required to file form 8082 but do not do so, you may be subject to the accuracy-related penalty. This penalty is in For the latest information about Purpose of Schedule K-1 addition to any tax that results from making developments related to Schedule K-1 ( form The partnership uses Schedule K-1 to report your amount or treatment of the item 1065) and the Partner's Instructions for your share of the partnership's income, consistent with that shown on the Schedule K-1 ( form 1065), such as deductions, credits, etc. Keep it for your partnership's return. Any deficiency that legislation enacted after they were records.

5 Do not file it with your tax return results from making the amounts consistent published, go to unless you are specifically required to do so. may be assessed immediately. (See the instructions for Code O. Backup What's New withholding, later.) The partnership files a Errors copy of Schedule K-1 ( form 1065) with the If you believe the partnership has made an Changed format of Schedule K-1. IRS. Schedule K-1 no longer has a page 2 with error on your Schedule K-1, notify the the list of codes. The list of codes and For your protection, Schedule K-1 may partnership and ask for a corrected descriptions are provided beginning at List of show only the last four digits of your Schedule K-1. Do not change any items on Codes Used in Schedule K-1 ( form 1065) in identifying number (social security number your copy of Schedule K-1. Be sure that the these instructions. (SSN), etc.). However, the partnership has partnership sends a copy of the corrected reported your complete identifying number to Schedule K-1 to the IRS.

6 Decendent's Schedule K-1. An executor is the IRS. responsible to notify the partnership of the Decedent's Schedule K-1. name and tax identification number of the Although the partnership generally isn't If you are the executor of an estate and you decedent's estate when the partnership subject to income tax, you may be liable for have received a decedent's Schedule K-1, interest is part of a decedent's estate. See tax on your share of the partnership income, then you have the responsibility to notify the Decedent's Schedule K-1 below. whether or not distributed. Include your partnership of the name and TIN of the share on your tax return if a return is Code N, box 20. Loss class under sec- decedent's estate if the partnership interest required. Use these instructions to help you tion 704(d). Regulations section is part of decedent's estate. If a decedent report the items shown on Schedule K-1 on (j)-6(h) created a new section 704(d) died in a prior year and the partnership your tax return.

7 Loss class for business interest expense continues to send the decedent a effective for tax years beginning after Schedule K-1 after being notified of the Feb 04, 2021 Cat. No. 11396N. decedent's death, then you should request of the month following the end of the However, certain elections are made by you that the partnership send a corrected partnership's tax year. This statement must separately on your income tax return and not Schedule K-1. If you receive an interest in a include the name, address, and identifying by the partnership. These elections are partnership by reason of a former partner's number of the nominee and such other made under the following code sections. death, you must provide the partnership with person, description of the partnership Section 59(e) (deduction of certain your name and TIN. For treatment of interest held as nominee for that person, and qualified expenditures ratably over the period partnership income upon the death of a other information required by Temporary of time specified in that section).

8 For details, partner, see Pub. 559. Regulations section (c)-1T. A see the instructions for code J in box 13. nominee that fails to furnish this statement Section 108(b)(5) (election related to Sale or Exchange of must furnish to the person for whom the reduction of tax attributes due to exclusion nominee holds the partnership interest a from gross income of discharge of Partnership Interest copy of Schedule K-1 and related indebtedness). Generally, a partner who sells or exchanges information within 30 days of receiving it from Section 263A(d) (preproductive a partnership interest in a section 751(a) the partnership. expenses). See the instructions for code P in exchange must notify the partnership, in box 13. writing, within 30 days of the exchange (or, if A nominee who fails to furnish all the Section 617 (deduction and recapture of earlier, by January 15 of the calendar year information required by Temporary certain mining exploration expenditures).)

9 Following the calendar year in which the Regulations section (c)-1T when due, Section 901 (foreign tax credit). exchange occurred). A section 751(a) or who furnishes incorrect information, is subject to a $270 penalty for each failure. exchange is any sale or exchange of a partnership interest in which any money or The maximum penalty is $3,339,000 for all Additional Information such failures during a calendar year. If the For more information on the treatment of other property received by the partner in nominee intentionally disregards the partnership income, deductions, credits, and exchange for that partner's interest is requirement to report correct information, other items, see Pub. 535, Business attributable to unrealized receivables (as each $270 penalty increases to $550 or, if Expenses. defined in section 751(c)) or inventory items (as defined in section 751(d)). greater, 10% of the aggregate amount of To get forms and publications, see the items required to be reported, and there is no instructions for your tax return or visit the IRS.

10 The written notice to the partnership must limit to the amount of the penalty. include the names and addresses of both website at parties to the exchange, the identifying numbers of the transferor and (if known) of International Boycotts Limitations on Losses, Every partnership that had operations in, or the transferee, and the exchange date. related to, a boycotting country, company, or Deductions, and Credits An exception to this rule is made for sales a national of a boycotting country must file There are potential limitations on partnership or exchanges of publicly traded partnership form 5713, International Boycott Report. losses that you can deduct on your return. interests for which a broker is required to file These limitations and the order in which you form 1099-B, Proceeds From Broker and If the partnership cooperated with an must apply them are as follows: the basis Barter Exchange Transactions.