Partner'S Instructions For Schedule K-1 (Form 1065-B) - Partner'S Share Of Income (Loss) From An Electing Large Partnership (For Partner'S Use Only) - 2007 Page 9

instructions for reporting foreign tax

passive category foreign source

partnership made to you of cash and

information from partnerships.

income.

certain marketable securities. The

•

Code K7(b). Deductions allocated

marketable securities are included at their

Note. The line references in this section

and apportioned at partnership level to

fair market value (FMV) on the date of

of the Form 1116 instructions do not

general category foreign source

distribution (minus your share of the

apply to the Schedule K-1 of Form

income.

partnership’s gain on the securities

1065-B.

•

Code K7(c). Deductions allocated

distributed to you). If this amount exceeds

Code K1. Name of foreign country or

and apportioned at partnership level to

the adjusted basis of your partnership

U.S. possession. Include on Form

other foreign source income.

interest immediately before the

1116, Part I, item g. For each country

distribution, the excess is treated as gain

Code K8(a). Total foreign taxes paid.

reported, the partnership must give you

from the sale or exchange of your

Include this amount in Part II of Form

the amount and a description of your

partnership interest. Generally, this gain

1116.

share of the following items for Codes K2

is treated as gain from the sale of a

Code K8(b). Total foreign taxes

through K9. For each country or

capital asset and should be reported on

accrued. Include this amount in Part II of

possession being reported, a separate

the Schedule D for your return. However,

Form 1116.

column in Part I and a separate line in

the gain may be ordinary income. For

Code K9. Reduction in taxes available

Part II is needed on Form 1116.

details, see Pub. 541.

for credit. Enter this amount on line 12

Code K2. Gross income from all

The partnership must separately

of Form 1116.

sources. Enter this amount on line 3e of

identify both of the following.

•

Code L. Oil and Gas Activities

Form 1116.

The FMV of the marketable securities

Generally, oil and gas income,

when distributed (minus your share of the

Code K3. Gross income sourced at

deductions, credits, and other items are

gain on the securities distributed to you).

partner level. Although all this income

•

included in your distributive share of

The partnership’s adjusted basis of

reported has been apportioned to foreign

income or loss from passive loss

those securities immediately before the

source categories of income, you must

limitation activities, general credits, and

distribution.

nevertheless determine whether the

the alternative minimum tax adjustment.

income being reported is U.S. source

Decrease the adjusted basis of your

income or foreign source income. See the

However, distributive shares of all oil

interest in the partnership (but not below

Instructions for Form 1116 for the rules to

and gas income, deductions, credits, and

zero) by the amount of cash distributed to

source the income reported to you. Enter

other items are separately reported to

you and the partnership’s adjusted basis

only foreign source income on lines 1a

partners who are disqualified persons in

of the distributed securities. Advances or

and 3d of Form 1116. A separate Form

accordance with the regular partnership

drawings of money or property against

1116 or 1118 is required for each foreign

rules, here or on an attached schedule.

your distributive share are treated as

source category of income. Do not

current distributions made on the last day

Note. A partner must notify the ELP of

include income that you determined to be

of the partnership’s tax year.

its status as a “disqualified person”.

U.S. source income.

Your basis in the distributed

Codes M1 Through M9.

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

marketable securities (other than in

Miscellaneous

gross income sourced at partnership

liquidation of your interest) is the smaller

level. The following types of income

Code M1. Other tax-exempt income.

of:

have already been sourced for you by the

•

Increase the adjusted basis of your

The partnership’s adjusted basis in the

partnership. Include these amounts on

interest in the partnership by this amount,

securities immediately before the

lines 1a and 3d of the applicable Form

but do not include it in income on your

distribution increased by any gain

1116 (that is, the Form 1116 for each

income tax return.

recognized on the distribution of the

category of income provided to you).

securities or

Code M2. Nondeductible expenses.

•

Code K4(a). Passive category

•

The adjusted basis of your partnership

Decrease the adjusted basis of your

foreign source income.

interest reduced by any cash distributed

interest in the partnership by this amount.

•

Code K4(b). General category

in the same transaction and increased by

The nondeductible expenses paid or

foreign source income.

any gain recognized on the distribution of

incurred by the partnership are not

•

Code K4(c). Other foreign source

the securities.

deductible on your income tax return, but

income.

they do affect your basis.

If you received the securities in

Code K5. Interest expense allocated

Code M3. Unrelated business taxable

liquidation of your partnership interest,

and apportioned at the partner level.

income. The partnership must give you

your basis in the marketable securities is

Include this amount on line 4b of the

any information you need to figure

equal to the adjusted basis of your

applicable Forms 1116.

unrelated business taxable income under

partnership interest reduced by any cash

Code K6. Other expenses allocated

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

distributed in the same transaction and

and apportioned at the partner level.

modifications required by paragraphs (8)

increased by any gain recognized on the

Include this amount on line 2 of the

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

distribution of the securities.

applicable Forms 1116.

partner that is a tax-exempt organization.

If, within 7 years of a distribution to you

Reminder. A partner is required to notify

Note. For Codes K5 and K6, do not

of marketable securities, you contributed

the partnership of its tax-exempt status.

include any expenses allocated and

appreciated property (other than those

apportioned to U.S. source income on

securities) to the partnership and the FMV

Code M4. Health insurance. Include

any line of Part I of Form 1116.

of those securities exceeded the adjusted

any amounts paid during the tax year for

basis of your partnership interest

insurance that constitutes medical care

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

immediately before the distribution

for you, your spouse, and your

Deductions allocated and apportioned

(reduced by any cash received in the

dependents on line 29 of your 2007 Form

at partnership level to foreign source

distribution), you may have to recognize

1040. You may be allowed to deduct such

income. The following codes report the

gain on the appreciated property. See

amounts, even if you do not itemize

expenses allocated and apportioned by

section 737 for details.

deductions. If you do itemize deductions,

the partnership to foreign source

enter on line 1 of Schedule A (Form 1040)

categories of income. Include these

Code M6. Distributions of property

any amounts not deducted on line 29 of

amounts on line 2 of the applicable Forms

other than money. Box 9, Code M6,

Form 1040.

1116 (that is, the Forms 1116 for each

shows the partnership’s adjusted basis of

category of income provided to you).

Code M5. Distributions of money (cash

property other than money immediately

•

Code K7(a). Deductions allocated

and marketable securities). This

before the property was distributed to

and apportioned at partnership level to

amount includes the distributions the

you. In addition, the partnership should

-9-

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