Partner'S Instructions For Schedule K-1 (Form 1065-B) - Partner'S Share Of Income (Loss) From An Electing Large Partnership - 2006
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112006
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)
rental real estate, and other rental
defined in section 751(c)) or inventory
Section references are to the Internal
activities are separately reported for each
items (as defined in section 751(d)).
Revenue Code unless otherwise noted.
activity in box 9.
The written notice to the partnership
General Instructions
must include the names and addresses of
Income, etc., from other activities
both parties to the exchange, the
(investment and portfolio income and
Purpose of Schedule K-1
identifying numbers of the transferor and
deductions) are reported in boxes 2, 3,
(if known) of the transferee, and the
The partnership uses Schedule K-1 to
4b, and 6 for both limited and general
exchange date.
report your share of the partnership’s
partners.
income, deductions, credits, etc. Keep it
An exception to this rule is made for
for your records. Do not file it with your
Errors
sales or exchanges of publicly traded
tax return. The partnership has filed a
partnership interests for which a broker is
You must report partnership items shown
copy with the IRS.
required to file Form 1099-B, Proceeds
on your Schedule K-1 (and any attached
From Broker and Barter Exchange
You are liable for tax on your share of
schedules) the same way that the
Transactions.
the partnership income, whether or not
partnership treated the items on its return.
distributed. Include your share on your tax
If you believe the partnership has made
If a partner is required to notify the
return if a return is required. Use these
an error on your Schedule K-1, notify the
partnership of a section 751(a) exchange
instructions to help you report the items
but fails to do so, a $50 penalty may be
partnership. Do not change any items on
shown on Schedule K-1 on your tax
your copy of Schedule K-1. Generally, an
imposed for each such failure. However,
return.
adjustment to correct an error will take
no penalty will be imposed if the partner
can show that the failure was due to
effect for the tax year in which the
The amount of loss and deduction that
partnership actually makes the
reasonable cause and not willful neglect.
you can claim on your tax return may be
adjustment. However, if the error involves
less than the amount reported on
Nominee Reporting
a change to your distributive share of a
Schedule K-1. It is the partner’s
partnership item, the partnership should
responsibility to consider and apply any
Any person who holds, directly or
file an amended partnership return and
applicable limitations. See Limitations on
indirectly, an interest in a partnership as a
send you a corrected Schedule K-1.
Losses, Deductions, and Credits
nominee for another person must furnish
beginning on page 2 for more information.
a written statement to the partnership by
If the treatment on your original or
the last day of the month following the
amended return is inconsistent with the
Electing Large
end of the partnership’s tax year. This
partnership’s treatment, you may be
statement must include the name,
Partnerships (ELPs)
subject to the accuracy-related penalty.
address, and identifying number of the
This penalty is in addition to any tax that
This partnership has elected simplified
nominee and such other person,
results from making your amount or
reporting requirements intended to make
description of the partnership interest held
treatment of the item consistent with that
it simpler for you to report your share of
as nominee for that person, and other
shown on the partnership’s return. Any
partnership income, credits, deductions,
information required by Temporary
deficiency that results from making the
etc. Generally, income, capital gains,
Regulations section 1.6031(c)-1T. A
amounts consistent may be assessed
credits, and deductions are combined at
nominee who fails to furnish this
immediately.
the partnership level so that the number
statement must furnish to the person for
of partnership items separately reported
whom the nominee holds the partnership
Sale or Exchange of
to partners is reduced. Most limitations
interest a copy of Schedule K-1 and
and elections affecting partnership
Partnership Interest
related information within 30 days of
income are made by the electing large
receiving it from the partnership.
Generally, a partner who sells or
partnership.
exchanges a partnership interest in a
A nominee who fails to furnish when
For limited partners, income and other
section 751(a) exchange must notify the
due all the information required by
items from the partnership’s trade or
partnership, in writing, within 30 days of
Temporary Regulations section
business and rental activities are treated
the exchange (or, if earlier, by January 15
1.6031(c)-1T, or who furnishes incorrect
as being from a trade or business that is a
of the calendar year following the
information, is subject to a $50 penalty for
single passive activity. These items are
calendar year in which the exchange
each statement for which a failure occurs.
reported in boxes 1, 4a, and 5, with most
occurred). A “section 751(a) exchange” is
The maximum penalty is $100,000 for all
credits being reported in boxes 7 and 8.
any sale or exchange of a partnership
such failures during a calendar year. If the
General partners must make their own
interest in which any money or other
nominee intentionally disregards the
determinations as to whether the activities
property received by the partner in
requirement to report correct information,
are passive for them. Therefore,
exchange for that partner’s interest is
each $50 penalty increases to $100 or, if
partnership items from trade or business,
attributable to unrealized receivables (as
greater, 10% of the aggregate amount of
Cat. No. 26141W
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