Partner'S Instructions For Schedule K-1 (Form 1065-B)

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Department of the Treasury

Internal Revenue Service

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)

Section references are to the Internal Revenue Code unless otherwise noted.

Income, etc., from other activities

identifying numbers of the transferor and

General Instructions

(investment and portfolio income and

(if known) of the transferee, and the

deductions) are reported in boxes 2, 3,

exchange date.

Purpose of Schedule K-1

4b, and 6 for both limited and general

An exception to this rule is made for

partners.

The partnership uses Schedule K-1 to

sales or exchanges of publicly traded

report your share of the partnership’s

partnership interests for which a broker is

Errors

income, deductions, credits, etc. Keep it

required to file Form 1099-B, Proceeds

for your records. Do not file it with your

You must report partnership items shown

From Broker and Barter Exchange

tax return. The partnership has filed a

on your Schedule K-1 (and any attached

Transactions.

copy with the IRS.

schedules) the same way that the

If a partner is required to notify the

partnership treated the items on its return.

You are liable for tax on your share of

partnership of a section 751(a) exchange

If you believe the partnership has made

the partnership income, whether or not

but fails to do so, a $50 penalty may be

an error on your Schedule K-1, notify the

distributed. Include your share on your tax

imposed for each such failure. However,

partnership. Do not change any items on

return if a return is required. Use these

no penalty will be imposed if the partner

your copy of Schedule K-1. Generally, an

instructions to help you report the items

can show that the failure was due to

adjustment to correct an error will take

shown on Schedule K-1 on your tax

reasonable cause and not willful neglect.

effect for the tax year in which the

return.

partnership actually makes the

Nominee Reporting

The amount of loss and deduction that

adjustment. However, if the error involves

you can claim on your tax return may be

Any person who holds, directly or

a change to your distributive share of a

less than the amount reported on

indirectly, an interest in a partnership as a

partnership item, the partnership should

Schedule K-1. It is the partner’s

nominee for another person must furnish

file an amended partnership return and

responsibility to consider and apply any

a written statement to the partnership by

send you a corrected Schedule K-1.

applicable limitations. See Limitations on

the last day of the month following the

If the treatment on your original or

Losses, Deductions, and Credits

end of the partnership’s tax year. This

amended return is inconsistent with the

beginning on page 2 for more information.

statement must include the name,

partnership’s treatment, you may be

address, and identifying number of the

subject to the accuracy-related penalty.

Electing Large

nominee and such other person,

This penalty is in addition to any tax that

description of the partnership interest held

Partnerships (ELPs)

results from making your amount or

as nominee for that person, and other

treatment of the item consistent with that

This partnership has elected simplified

information required by Temporary

shown on the partnership’s return. Any

reporting requirements intended to make

Regulations section 1.6031(c)-1T. A

deficiency that results from making the

it simpler for you to report your share of

nominee who fails to furnish this

amounts consistent may be assessed

partnership income, credits, deductions,

statement must furnish to the person for

immediately.

etc. Generally, income, capital gains,

whom the nominee holds the partnership

credits, and deductions are combined at

interest a copy of Schedule K-1 and

Sale or Exchange of

the partnership level so that the number

related information within 30 days of

of partnership items separately reported

Partnership Interest

receiving it from the partnership.

to partners is reduced. Most limitations

A nominee who fails to furnish when

Generally, a partner who sells or

and elections affecting partnership

due all the information required by

exchanges a partnership interest in a

income are made by the electing large

Temporary Regulations section

section 751(a) exchange must notify the

partnership (ELP).

1.6031(c)-1T, or who furnishes incorrect

partnership, in writing, within 30 days of

For limited partners, income and other

information, is subject to a $50 penalty for

the exchange (or, if earlier, by January 15

items from the partnership’s trade or

each statement for which a failure occurs.

of the calendar year following the

business and rental activities are treated

The maximum penalty is $100,000 for all

calendar year in which the exchange

as being from a trade or business that is a

such failures during a calendar year. If the

occurred). A “section 751(a) exchange” is

single passive activity. These items are

nominee intentionally disregards the

any sale or exchange of a partnership

reported in boxes 1, 4a, and 5, with most

requirement to report correct information,

interest in which any money or other

credits being reported in boxes 7 and 8.

each $50 penalty increases to $100 or, if

property received by the partner in

greater, 10% of the aggregate amount of

exchange for that partner’s interest is

General partners must make their own

items required to be reported, and the

attributable to unrealized receivables (as

determinations as to whether the activities

$100,000 maximum does not apply.

defined in section 751(c)) or inventory

are passive for them. Therefore,

items (as defined in section 751(d)).

partnership items from trade or business,

International Boycotts

rental real estate, and other rental

The written notice to the partnership

activities are separately reported for each

must include the names and addresses of

Every partnership that had operations in,

activity in box 9.

both parties to the exchange, the

or related to, a boycotting country,

Cat. No. 26141W

Partner'S Instructions For Schedule K-1 (Form 1065-B) - 2005

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