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Credit for employer social security and

If the amount on this line is a loss,

Foreign Taxes

Medicare taxes paid on certain employee

enter only the deductible amount on

Use the information on lines 17a through

tips (Form 8846).

Schedule SE (Form 1040). See

17h and attached schedules to figure your

•

Orphan drug credit (Form 8820).

Limitations on Losses, Deductions,

•

foreign tax credit. For more information,

New markets credit (Form 8874).

and Credits beginning on page 2.

•

see Form 1116, Foreign Tax Credit

Credit for contributions to selected

If your partnership is an options dealer

(Individual, Estate, Trust, or Nonresident

community development corporations

or a commodities dealer, see section

Alien Individual), and its instructions;

(Form 8847).

1402(i).

•

Form 1118, Foreign Tax Credit —

General credits from an electing large

If your partnership is an investment

Corporations, and its instructions; and

partnership. Report these credits on Form

club, see Rev. Rul. 75-525, 1975-2 C.B.

Pub. 514, Foreign Tax Credit for

3800, line 1o.

350.

Individuals.

Investment Interest

Line 15b—Gross Farming or

Other

Fishing Income

If the partnership paid or accrued interest

on debts properly allocable to investment

If you are an individual partner, enter the

Lines 18a and 18b—Section

property, the amount of interest you are

amount from this line, as an item of

59(e)(2) Expenditures

allowed to deduct may be limited.

information, on Schedule E (Form 1040),

The partnership will show on line 18a the

For more information and the special

Part V, line 41. Also use this amount to

type of qualified expenditures to which an

provisions that apply to investment

figure net earnings from self-employment

election under section 59(e) may apply. It

interest expense, see Form 4952,

under the farm optional method on

will identify the amount of the expenditure

Investment Interest Expense Deduction,

Schedule SE (Form 1040), Section B,

on line 18b. If there is more than one type

and Pub. 550, Investment Income and

Part II.

of expenditure, the amount of each type

Expenses.

Line 15c—Gross Nonfarm

will be listed on an attachment.

Line 14a—Interest Expense on

Income

Generally, section 59(e) allows each

Investment Debts

If you are an individual partner, use this

partner to elect to deduct certain

Enter this amount on Form 4952, line 1,

amount to figure net earnings from

expenses ratably over the number of

along with your investment interest

self-employment under the nonfarm

years in the applicable period rather than

expense from Schedule K-1, line 11, if

optional method on Schedule SE (Form

deduct the full amount in the current year.

any, and from other sources to figure how

1040), Section B, Part II.

Under the election, you may deduct

much of your total investment interest is

circulation expenditures ratably over a

Adjustments and Tax

deductible.

3-year period. Research and

Lines 14b(1) and 14b(2)—

Preference Items

experimental expenditures and mining

exploration and development costs qualify

Investment Income and

Use the information reported on lines 16a

for a writeoff period of 10 years.

Investment Expenses

through 16e (as well as your adjustments

Intangible drilling and development costs

and tax preference items from other

Use the amounts on these lines to figure

may be deducted over a 60-month period,

sources) to prepare your Form 6251,

the amounts to enter in Part II of Form

beginning with the month in which such

Alternative Minimum Tax — Individuals;

4952.

costs were paid or incurred.

Form 4626, Alternative Minimum Tax —

The amounts shown on lines

Corporations; or Schedule I of Form

If you make this election, these items

14b(1) and 14b(2) include only

1041, U.S. Income Tax Return for Estates

are not treated as adjustments or tax

investment income and expenses

CAUTION

and Trusts.

preference items for purposes of the

included on lines 4a, 4b, 4c, 4f, and 10 of

alternative minimum tax. Make the

Note: A partner that is a corporation

this Schedule K-1. The partnership should

election on Form 4562.

subject to alternative minimum tax must

attach a schedule that shows the amount

notify the partnership of its status.

of any investment income and expenses

Because each partner decides

included on any other lines of this

Lines 16d(1) and 16d(2)—Gross

whether to make the election under

Schedule K-1. Be sure to take these

section 59(e), the partnership cannot

Income From, and Deductions

amounts into account, along with the

provide you with the amount of the

Allocable to, Oil, Gas, and

amounts on lines 14b(1) and 14b(2) and

adjustment or tax preference item related

Geothermal Properties

your investment income and expenses

to the expenses listed on line 18b. You

from other sources, when figuring the

The amounts reported on these lines

must decide both how to claim the

amounts to enter in Part II of Form 4952.

include only the gross income from, and

expenses on your return and compute the

deductions allocable to, oil, gas, and

resulting adjustment or tax preference

Self-Employment

geothermal properties that are included

item.

on line 1 of Schedule K-1. The

If you and your spouse are both partners,

partnership should have attached a

each of you must complete and file your

Line 19—Tax-Exempt Interest

schedule that shows any income from or

own Schedule SE (Form 1040),

Income

deductions allocable to such properties

Self-Employment Tax, to report your

You must report on your return, as an

that are included on lines 2 through 11

partnership net earnings (loss) from

item of information, your share of the

and line 25 of Schedule K-1. Use the

self-employment.

tax-exempt interest received or accrued

amounts reported on lines 16d(1) and

Line 15a—Net Earnings (Loss)

by the partnership during the year.

16d(2) and the amounts on the attached

From Self-Employment

Individual partners must include this

schedule to help you figure the net

amount on Form 1040, line 8b. Increase

If you are a general partner, reduce this

amount to enter on line 14e of Form 6251

the adjusted basis of your interest in the

amount before entering it on Schedule SE

(line 4t of Schedule I, Form 1041; line 2o

partnership by this amount.

(Form 1040) by any section 179 expense

of Form 4626).

deduction claimed, unreimbursed

Line 20—Other Tax-Exempt

Line 16e—Other Adjustments

partnership expenses claimed, and

Income

and Tax Preference Items

depletion claimed on oil and gas

Increase the adjusted basis of your

properties. Do not reduce net earnings

Enter the information on the schedule

interest in the partnership by the amount

from self-employment by any separately

attached by the partnership for line 16e

shown on line 20, but do not include it in

stated deduction for health insurance

on the applicable lines of Form 6251,

income on your tax return.

expenses.

Form 4626, or Schedule I of Form 1041.

-9-

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

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Credits, Deductions, Etc. (For Partner'S Use Only) - 2001 Page 9

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