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maximum special allowance referred to in

owners with the same proportional

the at-risk provisions, or a combination of

the preceding paragraph. If your modified

ownership interest in each entity). If there

at-risk activities and any other activity, the

adjusted gross income is more than

was more than one activity, the partnership

partnership should give you a statement

$100,000 (more than $50,000 if married

will provide a statement allocating the

showing your share of nonrecourse

filing separately), the special allowance is

interest income or expense with respect to

liabilities, partnership-level qualified

limited to 50% of the difference between

each activity. The self-charged interest rules

nonrecourse financing, and other recourse

$150,000 ($75,000 if married filing

do not apply to your partnership interest if

liabilities for each activity.

separately) and your modified adjusted

the partnership made an election under

Qualified nonrecourse financing secured

gross income. When modified adjusted

Regulations section 1.469-7(g) to avoid the

by real property used in an activity of

gross income is $150,000 or more ($75,000

application of these rules. See the

holding real property that is subject to the

or more if married filing separately), there is

Instructions for Form 8582 for more

at-risk rules is treated as an amount at risk.

no special allowance.

information.

Qualified nonrecourse financing generally

Modified adjusted gross income is your

includes financing for which no one is

adjusted gross income figured without taking

personally liable for repayment that is

into account:

Specific Instructions

borrowed for use in an activity of holding

•

Any passive activity loss.

real property and that is loaned or

•

Any rental real estate loss allowed under

guaranteed by a federal, state, or local

Part I. Information About

section 469(c)(7) to real estate professionals

government or borrowed from a “qualified”

(as defined on page 3).

person.

the Partnership

•

Any overall loss from a publicly-traded

Qualified persons include any persons

partnership.

•

actively and regularly engaged in the

Item D

Any taxable social security or equivalent

business of lending money, such as a bank

railroad retirement benefits.

If the box in item D is checked, you are a

•

or savings and loan association. Qualified

Any deductible contributions to an IRA or

partner in a publicly traded partnership and

persons generally do not include related

certain other qualified retirement plans

must follow the rules discussed on page 4

parties (unless the nonrecourse financing is

under section 219.

under Publicly traded partnerships.

•

commercially reasonable and on

The domestic production activities

substantially the same terms as loans

Item E

deduction.

•

involving unrelated persons), the seller of

The student loan interest deduction.

If the partnership is a registration-required

the property, or a person who receives a fee

•

The tuition and fees deduction.

tax shelter, it should have completed item E.

•

for the partnership’s investment in the real

The deduction for one-half of

Use the information on Schedule K-1 (name

property.

self-employment taxes.

of the partnership, partnership identifying

•

See Pub. 925 for more information on

The exclusion from income of interest

number, and tax shelter registration number)

qualified nonrecourse financing.

from Series EE or I U.S. Savings Bonds

to complete your Form 8271, Investor

used to pay higher education expenses.

Both the partnership and you must meet

Reporting of Tax Shelter Registration

•

The exclusion of amounts received under

Number.

the qualified nonrecourse rules on this debt

an employer’s adoption assistance program.

before you can include the amount shown

Item F

Commercial revitalization deduction.

next to “Qualified nonrecourse financing” in

The special $25,000 allowance for the

your at-risk computation.

If you claim or report any income, loss,

commercial revitalization deduction from

deduction, or credit from a

See Limitations on Losses, Deductions,

rental real estate activities is not subject to

registration-required tax shelter, you must

and Credits beginning on page 2 for more

the active participation rules or modified

attach Form 8271 to your tax return. If the

information on the at-risk limitations.

adjusted gross income limits discussed

partnership has invested in a

above. See the instructions for box 13, code

registration-required tax shelter, it will check

Q, for more information.

item F and it must give you a copy of its

Part III. Partner’s Share of

Special rules for certain other activities.

Form 8271 with Schedule K-1. Use this

If you have net income (loss), deductions, or

information to complete your Form 8271.

Current Year Income,

credits from any activity to which special

Deductions, Credits, and

rules apply, the partnership will identify the

activity and all amounts relating to it on

Part II. Information About

Other Items

Schedule K-1 or on an attachment.

the Partner

The amounts shown in boxes 1 through 20

If you have net income subject to

reflect your share of income, loss,

recharacterization under Temporary

deductions, credits, etc., from partnership

Item M

Regulations section 1.469-2T(f) and

business or rental activities without

Regulations section 1.469-2(f), report such

Item M should show your share of the

reference to limitations on losses or

amounts according to the Instructions for

partnership’s nonrecourse liabilities,

adjustments that may be required of you

Form 8582 (or Form 8810).

partnership-level qualified nonrecourse

because of:

If you have net income (loss),

financing, and other recourse liabilities as of

1. The adjusted basis of your

deductions, or credits from any of the

the end of the partnership’s tax year. If you

partnership interest,

following activities, treat such amounts as

terminated your interest in the partnership

2. The amount for which you are at risk,

during the tax year, item M should show the

nonpassive and report them as instructed in

share that existed immediately before the

these instructions:

3. The passive activity limitations.

total disposition. A partner’s “recourse

1. Working interests in oil and gas wells

4. Any other limitations that must be

liability” is any partnership liability for which

if you are a general partner.

taken into account at the shareholder level

a partner is personally liable.

2. The rental of a dwelling unit any

in figuring taxable income (for example, the

partner used for personal purposes during

Use the total of the three amounts for

section 179 expense limitation).

the year for more than the greater of 14

computing the adjusted basis of your

days or 10% of the number of days that the

partnership interest.

For information on these provisions, see

residence was rented at fair rental value.

Limitations on Losses, Deductions, and

Generally, you may use only the

3. Trading personal property for the

Credits beginning on page 2.

amounts shown next to “Qualified

account of owners of interests in the activity.

nonrecourse financing” and “Recourse” to

If you are an individual and the passive

compute your amount at risk. Do not include

Self-charged interest. The partnership will

activity rules do not apply to the amounts

any amounts that are not at risk if such

report any “self-charged” interest income or

shown on your Schedule K-1, take the

amounts are included in either of these

expense that resulted from loans between

amounts shown and enter them on the lines

categories.

you and the partnership (or between the

on your tax return as indicated in the

partnership and another partnership or S

If your partnership is engaged in two or

summarized reporting information shown on

corporation if both entities have the same

more different types of activities subject to

page 2 of the Schedule K-1. If the passive

-5-

Partner’s Instructions for Schedule K-1 (Form 1065)

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Deductions, Credits, Etc. (For Partner'S Use Only) - 2005 Page 5

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