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

the partnership at the time the stock was

the gain and the amount of the allowable

into account in figuring the amount of net

acquired.

postponed gain.

operating loss (NOL) for the tax year or

the amount of NOL that can be carried

Code O. Unrecaptured Section

See the Instructions for Schedule D

over to each tax year, (b) may limit the

1250 Gain

(Form 1040) for details on how to report

amount of your credits, and (c) is treated

the gain and the amount of the allowable

Report this gain on line 11 of the

as income from sources within the U.S.

exclusion.

Unrecaptured Section 1250 Gain

for the foreign tax credit. See section

Worksheet on page D-8 of the

Code N8. Gain eligible for section 1045

7874 for details.

Instructions for Schedule D (Form 1040).

rollover – stock replaced. This gain is

Code R. Commercial Revitalization

Do not report the gain on line 5 as stated

eligible for the section 1045 rollover.

Deduction

in the worksheet instructions.

Replacement stock has been purchased

Follow the instructions on Form 8582 for

by the partnership. The partnership must

Codes P1 and P2. Extraterritorial

commercial revitalization deductions from

also provide you with:

Income Exclusion

•

rental real estate activities to figure how

The name of the corporation that

much of the deduction can be reported on

issued the stock,

a. Partnership did not claim the

•

Schedule E (Form 1040), line 28, column

exclusion. If the partnership reports your

Your share of the partnership’s

(f).

distributive share of foreign trading gross

adjusted basis,

•

Your share of the partnership’s sales

receipts (Code P1) and the extraterritorial

Code S1. Domestic Production

income exclusion (Code P2), the

price of the stock, and

Activities Information

•

partnership was not entitled to claim the

The dates the stock was bought and

The partnership must attach a statement

exclusion because it did not meet the

sold.

to Schedule K-1 that provides the

foreign economic process requirements.

Corporate partners are not eligible for

information you need to figure the

You may still qualify for your distributive

the section 1045 rollover. To qualify for

domestic production activities deduction.

share of this exclusion if the partnership’s

the section 1045 rollover:

Use Form 8903, Domestic Production

foreign trading gross receipts for the tax

1. You must have held an interest in

Activities Deduction, to figure this

year were $5 million or less.

the partnership during the entire period in

deduction. See the instructions for Form

To qualify for this exclusion, your

which the partnership held the qualified

8903 for details.

foreign trading gross receipts from all

small business stock (more than 6

Code S2. Qualified Production

sources for the tax year also must have

months prior to the sale) and

been $5 million or less.

Activities Income (QPAI)

2. Your distributive share of the gain

Limited partners who qualify for the

eligible for the section 1045 rollover

Report the QPAI reported to you by the

exclusion must report the extraterritorial

cannot exceed the amount that would

partnership (in box 9 using code S2) on

exclusion amount (Code P2) as a

have been allocated to you based on your

line 7 of Form 8903.

deduction reducing the amount reported

interest in the partnership at the time the

Code S3. Employer’s W-2 Wages

in box 1 (see the box 1 instructions on

stock was acquired.

Report the portion of W-2 wages reported

page 6).

See the Instructions for Schedule D

to you by the partnership (in box 9 using

General partners who qualify for the

(Form 1040) for details on how to report

code S3) on line 13 of Form 8903.

exclusion must report the Code P2

the gain and the amount of the allowable

amount in accordance with the

Code T. Section 409A Income

postponed gain.

instructions for box 9, Code A1, B1, or

This is compensation to partners deferred

Code N9. Gain eligible for section 1045

C1, whichever applies. See Form 8873,

under a section 409A nonqualified

rollover – stock not replaced. This gain

Extraterritorial Income Exclusion, for more

deferred compensation plan that does not

is eligible for the section 1045 rollover.

information.

meet the requirements of section 409A.

Replacement stock has not been

b. Partnership claimed the exclusion. If

This amount is also reported in box 9

purchased by the partnership. The

the partnership reports your distributive

using Code F. This amount is subject to a

partnership must also provide you with:

share of foreign trading gross receipts

•

substantial additional tax to be reported

The name of the corporation that

(Code P1) but not the amount of the

on line 63 of Form 1040. See the

issued the stock,

extraterritorial income exclusion, the

•

instructions for line 63 of Form 1040 for

Your share of the partnership’s

partnership met the foreign economic

details.

adjusted basis,

process requirements and claimed the

•

Disclosure of Reportable

Your share of the partnership’s sales

exclusion when figuring your distributive

price of the stock, and

Transactions

share of partnership income. You also

•

The dates the stock was bought and

The partnership will report any

may need to know the amount of your

sold.

distributive share of foreign trading gross

information you need to complete a

Corporate partners are not eligible for

disclosure statement for reportable

receipts from this partnership to

the section 1045 rollover. To qualify for

transactions in which the partnership

determine if you met the $5 million or less

the section 1045 rollover:

exception discussed above for purposes

participates. If the partnership participates

in a transaction that must be disclosed on

of qualifying for an extraterritorial income

1. You must have held an interest in

Form 8886, Reportable Transaction

exclusion from other sources.

the partnership during the entire period in

Disclosure Statement, both you and the

which the partnership held the qualified

Note. Upon request, the partnership

partnership may be required to file Form

small business stock (more than 6

should furnish you a copy of the

8886 for the transaction. The

months prior to the sale),

partnership’s Form 8873 if there is a

determination of whether you are required

2. Your distributive share of the gain

reduction for international boycott

to disclose a transaction of the

eligible for the section 1045 rollover

operations, illegal bribes, kickbacks, etc.

partnership is based on the category(s)

cannot exceed the amount that would

Code Q. Inversion Gain

under which the transaction qualifies for

have been allocated to you based on your

disclosure and is determined by the

The partnership must provide a statement

interest in the partnership at the time the

partnership. See the Instructions for Form

showing the amounts of each type of

stock was acquired, and

8886 for details.

income or gain that is included in

3. You must purchase other qualified

inversion gain. The partnership has

small business stock (as defined in the

Other

included inversion gain in income

Instructions for Schedule D (Form 1040))

Any other information you may need to

elsewhere on Schedule K-1. Inversion

during the 60-day period that began on

file with your return not shown elsewhere

gain is also reported under Code Q

the date the stock was sold by the

on Schedule K-1. The partnership must

because your taxable income and

partnership.

give you a description and the amount of

alternative minimum taxable income

your share for each of these items.

See the Instructions for Schedule D

cannot be less than the inversion gain.

(Form 1040) for details on how to report

Also, your inversion gain (a) is not taken

-10-

Partner'S Instructions For Schedule K-1 (Form 1065-B) - 2005 Page 10

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