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Department of the Treasury

Internal Revenue Service

Partner’s Instructions for

Schedule K-1 (Form 1065)

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

(For Partner’s Use Only)

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

your amount or treatment of the item

show that the failure was due to reasonable

General Instructions

consistent with that shown on the

cause and not willful neglect.

partnership’s return. Any deficiency that

Purpose of Schedule K-1

results from making the amounts consistent

Nominee Reporting

may be assessed immediately.

The partnership uses Schedule K-1 to report

Any person who holds, directly or indirectly,

your share of the partnership’s income,

Errors

an interest in a partnership as a nominee for

deductions, credits, etc. Keep it for your

another person must furnish a written

If you believe the partnership has made an

records. Do not file it with your tax return.

statement to the partnership by the last day

error on your Schedule K-1, notify the

The partnership has filed a copy with the

of the month following the end of the

partnership and ask for a corrected

IRS.

partnership’s tax year. This statement must

Schedule K-1. Do not change any items on

Although the partnership generally is not

include the name, address, and identifying

your copy of Schedule K-1. Be sure that the

subject to income tax, you are liable for tax

number of the nominee and such other

partnership sends a copy of the corrected

on your share of the partnership income,

person, description of the partnership

Schedule K-1 to the IRS. If you are a partner

whether or not distributed. Include your

interest held as nominee for that person,

in a partnership that does not meet the small

share on your tax return if a return is

and other information required by

partnership exception and you report any

required. Use these instructions to help you

Temporary Regulations section

partnership item on your return in a manner

report the items shown on Schedule K-1 on

1.6031(c)-1T. A nominee that fails to furnish

different from the way the partnership

your tax return.

this statement must furnish to the person for

reported it, you must file Form 8082.

The amount of loss and deduction that

whom the nominee holds the partnership

you may claim on your tax return may be

interest a copy of Schedule K-1 and related

Sale or Exchange of

less than the amount reported on Schedule

information within 30 days of receiving it

K-1. It is the partner’s responsibility to

Partnership Interest

from the partnership.

consider and apply any applicable

Generally, a partner who sells or exchanges

A nominee who fails to furnish when due

limitations. See Limitations on Losses,

a partnership interest in a section 751(a)

all the information required by Temporary

Deductions, and Credits beginning on page

exchange must notify the partnership, in

Regulations section 1.6031(c)-1T, or who

2 for more information.

writing, within 30 days of the exchange (or, if

furnishes incorrect information, is subject to

earlier, by January 15 of the calendar year

Inconsistent Treatment of

a $50 penalty for each statement for which a

following the calendar year in which the

failure occurs. The maximum penalty is

Items

exchange occurred). A “section 751(a)

$100,000 for all such failures during a

exchange” is any sale or exchange of a

calendar year. If the nominee intentionally

Generally, you must report partnership items

partnership interest in which any money or

disregards the requirement to report correct

shown on your Schedule K-1 (and any

other property received by the partner in

information, each $50 penalty increases to

attached schedules) the same way that the

exchange for that partner’s interest is

$100 or, if greater, 10% of the aggregate

partnership treated the items on its return.

attributable to unrealized receivables (as

amount of items required to be reported,

This rule does not apply if your partnership

defined in section 751(c)) or inventory items

and the $100,000 maximum does not apply.

is within the “small partnership exception”

(as defined in section 751(d)).

and does not elect to have the tax treatment

The written notice to the partnership

of partnership items determined at the

International Boycotts

must include the names and addresses of

partnership level.

Every partnership that had operations in, or

both parties to the exchange, the identifying

If the treatment on your original or

related to, a boycotting country, company, or

numbers of the transferor and (if known) of

amended return is inconsistent with the

a national of a country must file Form 5713,

the transferee, and the exchange date.

partnership’s treatment, or if the partnership

International Boycott Report.

An exception to this rule is made for

was required to but has not filed a return,

sales or exchanges of publicly traded

you must file Form 8082, Notice of

If the partnership cooperated with an

partnership interests for which a broker is

Inconsistent Treatment or Administrative

international boycott, it must give you a copy

required to file Form 1099-B, Proceeds

Adjustment Request (AAR), with your

of its Form 5713. You must file your own

From Broker and Barter Exchange

original or amended return to identify and

Form 5713 to report the partnership’s

Transactions.

explain any inconsistency (or to note that a

activities and any other boycott operations

partnership return has not been filed).

that you may have. You may lose certain tax

If a partner is required to notify the

benefits if the partnership participated in, or

If you are required to file Form 8082 but

partnership of a section 751(a) exchange

fail to do so, you may be subject to the

but fails to do so, a $50 penalty may be

cooperated with, an international boycott.

See Form 5713 and its instructions for more

accuracy-related penalty. This penalty is in

imposed for each such failure. However, no

information.

addition to any tax that results from making

penalty will be imposed if the partner can

Cat. No. 11396N

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Deductions, Credits, Etc. (For Partner'S Use Only) - 2005

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