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

company, or a national of a country must

Change of Tax Year

you can claim to the amount you could

file Form 5713, International Boycott

actually lose in the activity. However, if

If the partnership attaches a statement to

Report.

you acquired your partnership interest

Schedule K-1 indicating that it has

before 1987, the at-risk rules do not apply

If the partnership cooperated with an

changed its tax year and that you can

to losses from an activity of holding real

international boycott, it must provide you

elect to report your distributive share of

property placed in service before 1987 by

with a copy of its Form 5713. As a

the income attributable to that change

the partnership. The activity of holding

general or limited partner, you must file

ratably over 4 tax years, see Rev. Proc.

mineral property does not qualify for this

your own Form 5713 to report the

2003-79, 2003-45 I.R.B. 1036, for details

exception. The partnership should identify

partnership’s activities and any other

on making the election. To make the

on an attachment to Schedule K-1 the

boycott operations that you may have.

election, you must file Form 8082, Notice

amount of any losses that are not subject

You may lose certain tax benefits if the

of Inconsistent Treatment or

to the at-risk limitations.

partnership participated in, or cooperated

Administrative Adjustment Request, with

with, an international boycott. See Form

your income tax return for each of the 4

Generally, you are not at risk for

5713 and its instructions for more

tax years. File Form 8082 for this purpose

amounts such as the following.

•

information.

in accordance with Rev. Proc. 2003-79

Nonrecourse loans used to finance the

instead of the Form 8082 instructions.

activity, to acquire property used in the

Definitions

activity, or to acquire your interest in the

Additional Information

activity, that are not secured by your own

General Partner

property (other than the property used in

For more information on the treatment of

the activity). See the instructions for

A general partner is a partner who is

partnership income, deductions, credits,

Partner’s Share of Liabilities on page 5 for

personally liable for partnership debts.

etc., see the following:

•

the exception for qualified nonrecourse

Pub. 541, Partnerships;

Limited Partner

•

financing secured by real property.

Pub. 535, Business Expenses; and

•

A limited partner is a partner in a

Cash, property, or borrowed amounts

Pub. 925, Passive Activity and At-Risk

partnership formed under a state limited

used in the activity (or contributed to the

Rules.

activity, or used to acquire your interest in

partnership law, whose personal liability

To get forms and publications, see the

the activity) that are protected against

for partnership debts is limited to the

instructions for your tax return.

amount of money or other property that

loss by a guarantee, stop-loss agreement,

the partner contributed or is required to

or other similar arrangement (excluding

Limitations on Losses,

casualty insurance and insurance against

contribute to the partnership. Some

members of other entities, such as

tort liability).

Deductions, and Credits

•

domestic or foreign business trusts or

Amounts borrowed for use in the

There are three separate potential

activity from a person who has an interest

limited liability companies that are

limitations on the amount of partnership

classified as partnerships, may be treated

in the activity, other than as a creditor, or

losses that you can deduct on your return.

as limited partners for certain purposes.

who is related, under section 465(b)(3), to

These limitations and the order in which

a person (other than you) having such an

For example, see Temporary Regulations

you must apply them are as follows: the

section 1.469-5T(e)(3), which treats all

interest.

basis rules, the at-risk limitations, and the

members with limited liability as limited

You should get a separate statement

passive activity limitations. Each of these

partners for purposes of section 469(h)(2)

of income, expenses, etc., for each

limitations is discussed separately below.

(relating to the passive activity loss

activity from the partnership.

limitation rules).

Basis Rules

Passive Activity Limitations

Disqualified Person

Generally, you cannot claim your share of

a partnership loss (including a capital

Section 469 provides rules that limit the

If you are a partner in a partnership

deduction of certain losses and credits.

loss) to the extent that it is greater than

holding oil and gas properties, you are a

the adjusted basis of your partnership

These rules apply to partners who:

“disqualified person” if:

•

interest at the end of the partnership’s tax

Are individuals, estates, trusts, closely

•

You are an oil or natural gas retailer

year. Any losses and deductions not

held corporations, or personal service

described in section 613A(d)(2) or crude

corporations and

allowed this year because of the basis

•

oil refiner described in section 613A(d)(4)

limit can be carried forward indefinitely

Have a passive activity loss or credit for

and deducted in a later year subject to the

the tax year.

•

Your average daily production of

basis limit for that year.

Individuals, estates, and trusts. If you

domestic crude oil and natural gas

The partnership is not responsible for

have a passive activity loss or credit, use

exceeds 500 barrels for your tax year in

keeping the information needed to figure

Form 8582, Passive Activity Loss

which the partnership’s tax year ends.

the basis of your partnership interest. You

Limitations, to figure your allowable

See section 776(b) for more details.

can figure the adjusted basis of your

passive losses and Form 8582-CR,

Note. Disqualified persons must report

partnership interest by adding items that

Passive Activity Credit Limitations, to

items of income, gain, loss, deduction,

increase your basis and then subtracting

figure your allowable passive credits.

and credit attributable to partnership oil

items that decrease your basis.

Corporations. Use Form 8810,

and gas properties as if the special rules

Use the worksheet on page 3 to figure

Corporate Passive Activity Loss and

for ELPs did not apply.

the basis of your interest in the

Credit Limitations. See the instructions for

Nonrecourse Loans

partnership.

more information.

Note. Additional basis adjustments may

Nonrecourse loans are those liabilities of

If the publicly traded partnership

apply to partners claiming deductions for

the partnership for which no partner bears

(PTP) box on Schedule K-1 is

depletion. See Pub. 541 for more details.

the economic risk of loss.

checked, do not report passive

CAUTION

income (loss) from the partnership on

At-Risk Limitations

Elections

Form 8582. See page 5 for the special

Generally, if you have (a) a loss or other

Generally, the partnership decides how to

rules for PTPs.

deduction from any activity carried on as

figure taxable income from its operations.

For limited partners of an ELP, all

a trade or business or for the production

However, two elections are made by you

income, loss, deductions, and credits

of income by the partnership and (b)

separately on your income tax return and

from trade or business and rental

amounts in the activity for which you are

not by the partnership. These elections

activities generally are reported as being

not at risk, you will have to complete

are made under the following code

from a trade or business that is a single

Form 6198, At-Risk Limitations, to figure

sections.

•

passive activity.

your allowable loss.

Section 108(b)(5) (income from the

discharge of indebtedness).

The at-risk rules generally limit the

However, the determination of

•

Section 901 (foreign tax credit).

amount of loss and other deductions that

whether an activity is a passive activity

-2-

Partner'S Instructions For Schedule K-1 (Form 1065-B) - 2005 Page 2

Related Articles

Related forms

Related Categories