Partner'S Instructions For Schedule K-1 (Form 1065-B) - Partner'S Share Of Income (Loss) From An Electing Large Partnership - 2006 Page 2
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11items required to be reported, and the
Note. Additional basis adjustments may
Elections
$100,000 maximum does not apply.
apply to partners claiming deductions for
Generally, the partnership decides how to
depletion. See chapter 9 of Pub. 535 for
figure taxable income from its operations.
details.
International Boycotts
However, two elections are made by you
Every partnership that had operations in,
separately on your income tax return and
At-Risk Limitations
or related to, a boycotting country,
not by the partnership. These elections
Generally, if you have (a) a loss or other
company, or a national of a country must
are made under the following code
deduction from any activity carried on as
file Form 5713, International Boycott
sections.
a trade or business or for the production
•
Report.
Section 108(b)(5) (income from the
of income by the partnership and (b)
discharge of indebtedness).
amounts in the activity for which you are
If the partnership cooperated with an
•
Section 901 (foreign tax credit).
not at risk, you will have to complete
international boycott, it must provide you
Form 6198, At-Risk Limitations, to figure
Change of Tax Year
with a copy of its Form 5713. As a
your allowable loss.
general or limited partner, you must file
If the partnership attaches a statement to
your own Form 5713 to report the
The at-risk rules generally limit the
Schedule K-1 indicating that it has
partnership’s activities and any other
amount of loss and other deductions that
changed its tax year and that you can
boycott operations that you may have.
you can claim to the amount you could
elect to report your distributive share of
You may lose certain tax benefits if the
actually lose in the activity. However, if
the income attributable to that change
partnership participated in, or cooperated
you acquired your partnership interest
ratably over 4 tax years, see Rev. Proc.
with, an international boycott. See Form
before 1987, the at-risk rules do not apply
2003-79, 2003-45 I.R.B. 1036, for details
5713 and its instructions for more
to losses from an activity of holding real
on making the election. To make the
information.
property placed in service before 1987 by
election, you must file Form 8082, Notice
the partnership. The activity of holding
of Inconsistent Treatment or
Definitions
mineral property does not qualify for this
Administrative Adjustment Request, with
exception. The partnership should identify
your income tax return for each of the 4
on an attachment to Schedule K-1 the
General Partner
tax years. File Form 8082 for this purpose
amount of any losses that are not subject
in accordance with Rev. Proc. 2003-79
A general partner is a partner who is
to the at-risk limitations.
instead of the Form 8082 instructions.
personally liable for partnership debts.
Generally, you are not at risk for
Additional Information
Limited Partner
amounts such as the following.
•
For more information on the treatment of
Nonrecourse loans used to finance the
A limited partner is a partner in a
partnership income, deductions, credits,
activity, to acquire property used in the
partnership formed under a state limited
etc., see the following:
activity, or to acquire your interest in the
partnership law, whose personal liability
•
Pub. 541, Partnerships;
activity, that are not secured by your own
for partnership debts is limited to the
•
Pub. 535, Business Expenses; and
property (other than the property used in
amount of money or other property that
•
Pub. 925, Passive Activity and At-Risk
the activity). See the instructions for
the partner contributed or is required to
Rules.
Partner’s Share of Liabilities on page 5 for
contribute to the partnership. Some
the exception for qualified nonrecourse
members of other entities, such as
To get forms and publications, see the
financing secured by real property.
domestic or foreign business trusts or
instructions for your tax return.
•
Cash, property, or borrowed amounts
limited liability companies that are
used in the activity (or contributed to the
classified as partnerships, may be treated
Limitations on Losses,
activity, or used to acquire your interest in
as limited partners for certain purposes.
Deductions, and Credits
the activity) that are protected against
For example, see Temporary Regulations
loss by a guarantee, stop-loss agreement,
section 1.469-5T(e)(3), which treats all
There are three separate potential
or other similar arrangement (excluding
members with limited liability as limited
limitations on the amount of partnership
casualty insurance and insurance against
partners for purposes of section 469(h)(2)
losses that you can deduct on your return.
tort liability).
(relating to the passive activity loss
These limitations and the order in which
•
Amounts borrowed for use in the
limitation rules).
you must apply them are as follows: the
activity from a person who has an interest
basis rules, the at-risk limitations, and the
Disqualified Person
in the activity, other than as a creditor, or
passive activity limitations. Each of these
who is related, under section 465(b)(3), to
If you are a partner in a partnership
limitations is discussed separately below.
a person (other than you) having such an
holding oil and gas properties, you are a
Basis Rules
interest.
“disqualified person” if:
Generally, you cannot claim your share of
You should get a separate statement
•
You are an oil or natural gas retailer
a partnership loss (including a capital
of income, expenses, etc., for each
described in section 613A(d)(2) or crude
loss) to the extent that it is greater than
activity from the partnership.
oil refiner described in section 613A(d)(4)
the adjusted basis of your partnership
or
Passive Activity Limitations
interest at the end of the partnership’s tax
•
Your average daily production of
year. Any losses and deductions not
Section 469 provides rules that limit the
domestic crude oil and natural gas
allowed this year because of the basis
deduction of certain losses and credits.
exceeds 500 barrels for your tax year in
limit can be carried forward indefinitely
These rules apply to partners who:
which the partnership’s tax year ends.
•
and deducted in a later year subject to the
Are individuals, estates, trusts, closely
See section 776(b) for more details.
basis limit for that year.
held corporations, or personal service
corporations and
The partnership is not responsible for
Note. Disqualified persons must report
•
Have a passive activity loss or credit for
keeping the information needed to figure
items of income, gain, loss, deduction,
the tax year.
the basis of your partnership interest. You
and credit attributable to partnership oil
can figure the adjusted basis of your
and gas properties as if the special rules
Individuals, estates, and trusts. If you
for ELPs did not apply.
partnership interest by adding items that
have a passive activity loss or credit, use
increase your basis and then subtracting
Form 8582, Passive Activity Loss
Nonrecourse Loans
items that decrease your basis.
Limitations, to figure your allowable
Nonrecourse loans are those liabilities of
Use the worksheet on page 3 to figure
passive losses and Form 8582-CR,
the partnership for which no partner bears
the basis of your interest in the
Passive Activity Credit Limitations, to
the economic risk of loss.
partnership.
figure your allowable passive credits.
-2-
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