Shareholder'S Instructions For Schedule K-1 (Form 1120s)

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Department of the Treasury

Internal Revenue Service

Shareholder’s Instructions

for Schedule K-1

(Form 1120S)

Shareholder’s Share of Income, Deductions, Credits, etc.

(For Shareholder’s Use Only)

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

way that the corporation treated the

must file your own Form 5713 to

General Instructions

items on its return.

report the corporation’s activities and

any other boycott operations that you

If the treatment on your original or

Purpose of Schedule K-1

may have. You may lose certain tax

amended return is inconsistent with

benefits if the corporation participated

The corporation uses Schedule K-1 to

the corporation’s treatment, or if the

in, or cooperated with, an

report your share of the corporation’s

corporation has not filed a return, file

international boycott. See Form 5713

income (reduced by any tax the

Form 8082, Notice of Inconsistent

and its instructions for details.

corporation paid on the income),

Treatment or Administrative

deductions, credits, etc. Keep it for

Adjustment Request (AAR), with your

Elections

your records. Do not file it with your

original or amended return to identify

tax return. The corporation has filed a

and explain any inconsistency (or to

Generally, the corporation decides

copy with the IRS.

note that a corporate return has not

how to figure taxable income from its

been filed).

operations. However, certain

You are liable for tax on your share

elections are made by you separately

If you are required to file Form

of the corporation’s income, whether

on your income tax return and not by

8082, but fail to do so, you may be

or not distributed. Include your share

the corporation. These elections are

subject to the accuracy-related

on your tax return if a return is

made under the following code

penalty. This penalty is in addition to

required. Use these instructions to

sections.

any tax that results from making your

help you report the items shown on

•

Section 59(e) (deduction of certain

amount or treatment of the item

Schedule K-1 on your tax return.

qualified expenditures ratably over

consistent with that shown on the

Your pro rata share of S

the period of time specified in that

corporation’s return. Any deficiency

corporation income is not

section). For details, see the

that results from making the amounts

self-employment income and it is not

instructions for code J in box 12 on

consistent may be assessed

subject to self-employment tax.

page 9.

immediately.

•

Section 263A(d) (preproductive

The amount of loss and deduction

Errors

expenses). See the instructions for

that you may claim on your tax return

code N in box 12 on page 9.

If you believe the corporation has

•

may be less than the amount

Section 617 (deduction and

made an error on your Schedule K-1,

reported on Schedule K-1. It is the

recapture of certain mining

notify the corporation and ask for a

shareholder’s responsibility to

exploration expenditures).

corrected Schedule K-1. Do not

•

consider and apply any applicable

Section 901 (foreign tax credit).

change any items on your copy of

limitations. See Limitations on

Schedule K-1. Be sure that the

If the corporation previously

Losses, Deductions, and Credits for

corporation sends a copy of the

changed its tax year and you elected

more information.

corrected Schedule K-1 to the IRS. If

to report your pro rata share of the

Schedule K-1 does not show the

you are unable to reach agreement

income attributable to that change

amount of actual dividend

with the corporation regarding the

ratably over 4 tax years, see Rev.

distributions the corporation made to

inconsistency, you must file Form

Proc. 2003-79, 2003-45 I.R.B. 1036.

you. The corporation must report

8082.

If you made the election, you must file

such amounts totaling $10 or more

Form 8082 with your income tax

for the calendar year on Form

International Boycotts

return for each of the 4 tax years. File

1099-DIV, Dividends and

Form 8082 for this purpose in

Every corporation that had operations

Distributions.

accordance with Rev. Proc. 2003-79

in, or related to, a boycotting country,

instead of the Form 8082 instructions.

company, or a national of a country,

Inconsistent Treatment

must file Form 5713, International

of Items

Additional Information

Boycott Report.

Generally, you must report items

If the corporation cooperated with

For more information on the

shown on your Schedule K-1 (and

an international boycott, it must give

treatment of S corporation income,

any attached schedules) the same

you a copy of its Form 5713. You

deductions, credits, etc., see Pub.

Cat. No. 11521O

Shareholder'S Instructions For Schedule K-1 (Form 1120s) - 2005

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