2010 Partner'S Instructions For Schedule K-1 (Form 1065-B) - Department Of The Treasury Page 9

Individual partners must include this

and 3d of Form 1116. A separate Form

accordance with the regular partnership

amount on Form 1040, line 8b. Increase

1116 or 1118 is required for each foreign

rules, here or on an attached schedule.

the adjusted basis of your interest in the

source category of income. Do not

Note. A partner must notify the ELP of

partnership by this amount.

include income that you determined to be

its status as a “disqualified person.”

U.S. source income.

Code I. Limited Partner’s

Codes M1 Through M9.

Codes K4(a) Through K4(c). Foreign

Rehabilitation Credit From Rental

Miscellaneous

gross income sourced at partnership

Real Estate Activities

level. The following types of income

Code M1. Other tax-exempt income.

Limited partners only. Report this

have already been sourced for you by the

Increase the adjusted basis of your

amount on line 11m of Form 3468.

partnership. Include these amounts on

interest in the partnership by this amount,

Because the credit is treated as being

lines 1a and 3d of the applicable Form

but do not include it in income on your

from a single passive activity, you must

1116 (that is, the Form 1116 for each

income tax return.

also file Form 3800.

category of income provided to you).

Code M2. Nondeductible expenses.

•

Code K4(a). Passive category

Codes J1 and J2. Self-Employment

Decrease the adjusted basis of your

foreign source income.

interest in the partnership by this amount.

•

Code J1. Net earnings or (loss) from

Code K4(b). General category

The nondeductible expenses paid or

self-employment. Enter this amount on

foreign source income.

incurred by the partnership are not

•

Schedule SE (Form 1040), line 2, Section

Code K4(c). Other foreign source

deductible on your income tax return, but

A or B, whichever is applicable. General

income.

they do affect your basis.

partners should reduce this amount by

Code K5. Interest expense allocated

Code M3. Unrelated business taxable

unreimbursed partnership expenses

and apportioned at the partner level.

income. The partnership must give you

claimed. General partners who are

Include this amount on line 4b of the

any information you need to figure

disqualified persons also should reduce

applicable Forms 1116.

unrelated business taxable income under

this amount by depletion claimed on oil

Code K6. Other expenses allocated

section 512(a)(1) (but excluding any

and gas properties. If this amount is a

and apportioned at the partner level.

modifications required by paragraphs (8)

loss, enter only the deductible amount on

Include this amount on line 2 of the

through (15) of section 512(b)) for a

Schedule SE. For purposes of

applicable Forms 1116.

partner that is a tax-exempt organization.

self-employment tax, no income from an

Note. For Codes K5 and K6, do not

Reminder. A partner is required to notify

ELP is treated as farming or fishing

include any expenses allocated and

income.

the partnership of its tax-exempt status.

apportioned to U.S. source income on

Code J2. Gross nonfarm income.

Code M4. Health insurance. Include

any line of Part I of Form 1116.

Individual partners use this amount to

any amounts paid during the tax year for

Codes K7(a) Through Codes K7(c).

figure net earnings from self-employment

insurance that constitutes medical care

Deductions allocated and apportioned

under the nonfarm optional method on

for you, your spouse, your dependents,

at partnership level to foreign source

Schedule SE (Form 1040), Section B,

and any children under age 27 who are

income. The following codes report the

Part II.

not dependents on line 29 of your 2010

expenses allocated and apportioned by

Form 1040. You may be allowed to

Codes K1 Through K9. Foreign Tax

the partnership to foreign source

deduct such amounts, even if you do not

Credit Information

categories of income. Include these

itemize deductions. If you do itemize

Use the information reported under

amounts on line 2 of the applicable Forms

deductions, enter on line 1 of Schedule A

Codes K1 through K9 to figure your

1116 (that is, the Forms 1116 for each

(Form 1040) any amounts not deducted

foreign tax credit. For more information,

category of income provided to you).

on line 29 of Form 1040.

•

see Form 1116, Foreign Tax Credit

Code K7(a). Deductions allocated

Code M5. Distributions of money (cash

(Individual, Estate, or Trust) and its

and apportioned at partnership level to

and marketable securities). This

instructions; Form 1118, Foreign Tax

passive category foreign source

amount includes the distributions the

Credit — Corporations, and its

income.

partnership made to you of cash and

•

instructions; and Pub. 514, Foreign Tax

Code K7(b). Deductions allocated

certain marketable securities. The

Credit for Individuals. See page 4 of the

and apportioned at partnership level to

marketable securities are included at their

Instructions for Form 1116 for detailed

general category foreign source

fair market value (FMV) on the date of

instructions for reporting foreign tax

income.

distribution (minus your share of the

•

information from partnerships.

Code K7(c). Deductions allocated

partnership’s gain on the securities

and apportioned at partnership level to

Code K1. Name of foreign country or

distributed to you). If this amount exceeds

other foreign source income.

U.S. possession. Include on Form

the adjusted basis of your partnership

1116, Part I, item g. For each country

Code K8(a). Total foreign taxes paid.

interest immediately before the

reported, the partnership must give you

Include this amount in Part II of Form

distribution, the excess is treated as gain

the amount and a description of your

1116.

from the sale or exchange of your

share of the following items for Codes K2

partnership interest. Generally, this gain

Code K8(b). Total foreign taxes

through K9. For each country or

is treated as gain from the sale of a

accrued. Include this amount in Part II of

possession being reported, a separate

capital asset and should be reported on

Form 1116.

column in Part I and a separate line in

the Schedule D for your return. However,

Code K9. Reduction in taxes available

Part II is needed on Form 1116.

the gain may be ordinary income. For

for credit. Enter this amount on line 12

details, see Pub. 541.

Code K2. Gross income from all

of Form 1116.

sources. Enter this amount on line 3e of

The partnership must separately

Code L. Oil and Gas Activities

Form 1116.

identify both of the following.

•

Generally, oil and gas income,

The FMV of the marketable securities

Code K3. Gross income sourced at

deductions, credits, and other items are

when distributed (minus your share of the

partner level. Although all this income

included in your distributive share of

gain on the securities distributed to you).

reported has been apportioned to foreign

•

income or loss from passive loss

The partnership’s adjusted basis of

source categories of income, you must

limitation activities, general credits, and

those securities immediately before the

nevertheless determine whether the

the alternative minimum tax adjustment.

distribution.

income being reported is U.S. source

income or foreign source income. See the

However, distributive shares of all oil

Decrease the adjusted basis of your

Instructions for Form 1116 for the rules to

and gas income, deductions, credits, and

interest in the partnership (but not below

source the income reported to you. Enter

other items are separately reported to

zero) by the amount of cash distributed to

only foreign source income on lines 1a

partners who are disqualified persons in

you and the partnership’s adjusted basis

-9-

Instructions for Schedule K-1 (1065-B) (2010)

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2010 Partner'S Instructions For Schedule K-1 (Form 1065-B) - Department Of The Treasury Page 9

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