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or more if married filing separately), there is

real property and that is loaned or

Specific Instructions

no special allowance.

guaranteed by a federal, state, or local

government or borrowed from a “qualified”

Modified adjusted gross income is your

person.

Part I. Information About

adjusted gross income figured without taking

Qualified persons include any persons

into account:

the Partnership

actively and regularly engaged in the

•

Any passive activity loss.

business of lending money, such as a bank

•

Any rental real estate loss allowed under

or savings and loan association. Qualified

Item D

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

persons generally do not include related

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

(as defined on page 3).

parties (unless the nonrecourse financing is

•

partner in a publicly traded partnership and

Any taxable social security or equivalent

commercially reasonable and on

must follow the rules discussed on page 4

railroad retirement benefits.

substantially the same terms as loans

•

under Publicly traded partnerships.

involving unrelated persons), the seller of

Any deductible contributions to an IRA or

the property, or a person who receives a fee

certain other qualified retirement plans

Item E

for the partnership’s investment in the real

under section 219.

If the partnership is a registration-required

•

property.

The student loan interest deduction.

tax shelter, it should have completed item E.

•

See Pub. 925 for more information on

The tuition and fees deduction.

Use the information on Schedule K-1 (name

qualified nonrecourse financing.

•

of the partnership, partnership identifying

The deduction for one-half of

Both the partnership and you must meet

number, and tax shelter registration number)

self-employment taxes.

•

the qualified nonrecourse rules on this debt

to complete your Form 8271, Investor

The exclusion from income of interest

before you can include the amount shown

Reporting of Tax Shelter Registration

from Series EE or I U.S. Savings Bonds

next to “Qualified nonrecourse financing” in

Number.

used to pay higher education expenses.

your at-risk computation.

•

The exclusion of amounts received under

Item F

See Limitations on Losses, Deductions,

an employer’s adoption assistance program.

If you claim or report any income, loss,

and Credits beginning on page 2 for more

Commercial revitalization deduction.

deduction, or credit from a

information on the at-risk limitations.

The special $25,000 allowance for the

registration-required tax shelter, you must

commercial revitalization deduction from

attach Form 8271 to your tax return. If the

rental real estate activities is not subject to

partnership has invested in a

Part III. Partner’s Share of

the active participation rules or modified

registration-required tax shelter, it will check

Current Year Income,

adjusted gross income limits discussed

item F and it must give you a copy of its

above. See code P for box 13 on page 8.

Form 8271 with Schedule K-1. Use this

Deductions, Credits, and

information to complete your Form 8271.

Special rules for certain other activities.

Other Items

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

The amounts shown in boxes 1 through 20

credits from any activity to which special

Part II. Information About

reflect your share of income, loss,

rules apply, the partnership will identify the

deductions, credits, etc., from partnership

activity and all amounts relating to it on

the Partner

business or rental activities without

Schedule K-1 or on an attachment.

reference to limitations on losses or

Item M

If you have net income subject to

adjustments that may be required of you

recharacterization under Temporary

Item M should show your share of the

because of:

Regulations section 1.469-2T(f) and

partnership’s nonrecourse liabilities,

1. The adjusted basis of your

Regulations section 1.469-2(f), report such

partnership-level qualified nonrecourse

partnership interest,

amounts according to the Instructions for

financing, and other recourse liabilities as of

2. The amount for which you are at risk,

Form 8582 (or Form 8810).

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

terminated your interest in the partnership

3. The passive activity limitations.

If you have net income (loss),

during the tax year, item M should show the

deductions, or credits from any of the

share that existed immediately before the

For information on these provisions, see

following activities, treat such amounts as

total disposition. A partner’s “recourse

Limitations on Losses, Deductions, and

nonpassive and report them as instructed in

liability” is any partnership liability for which

Credits beginning on page 2.

these instructions:

a partner is personally liable.

If you are an individual and the passive

1. Working interests in oil and gas wells

Use the total of the three amounts for

activity rules do not apply to the amounts

if you are a general partner.

computing the adjusted basis of your

shown on your Schedule K-1, take the

2. The rental of a dwelling unit any

partnership interest.

amounts shown and enter them on the lines

partner used for personal purposes during

on your tax return as indicated in the

Generally, you may use only the

the year for more than the greater of 14

summarized reporting information shown on

amounts shown next to “Qualified

days or 10% of the number of days that the

the back of the Schedule K-1. If the passive

nonrecourse financing” and “Recourse” to

residence was rented at fair rental value.

activity rules do apply, report the amounts

compute your amount at risk. Do not include

3. Trading personal property for the

shown as indicated in these instructions.

any amounts that are not at risk if such

account of owners of interests in the activity.

amounts are included in either of these

If you are not an individual, report the

categories.

amounts in each box as instructed on your

Self-charged interest. The partnership will

tax return.

If your partnership is engaged in two or

report any “self-charged” interest income or

more different types of activities subject to

The line numbers in the summarized

expense that resulted from loans between

the at-risk provisions, or a combination of

reporting information on page 2 of Schedule

you and the partnership (or between the

at-risk activities and any other activity, the

K-1 are references to forms in use for

partnership and another partnership or S

partnership should give you a statement

calendar year 2004. If you file your tax

corporation if both entities have the same

showing your share of nonrecourse

return on a calendar year basis, but your

owners with the same proportional

liabilities, partnership-level qualified

partnership files a return for a fiscal year,

ownership interest in each entity). If there

nonrecourse financing, and other recourse

enter the amounts on your tax return for the

was more than one activity, the partnership

liabilities for each activity.

year in which the partnership’s fiscal year

will provide a statement allocating the

ends. For example, if the partnership’s tax

interest income or expense with respect to

Qualified nonrecourse financing secured

year ends in February 2005, report the

each activity. The self-charged interest rules

by real property used in an activity of

amounts on your 2005 tax return.

do not apply to your partnership interest if

holding real property that is subject to the

the partnership made an election under

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

If you have losses, deductions, or credits

Regulations section 1.469-7(g) to avoid the

Qualified nonrecourse financing generally

from a prior year that were not deductible or

application of these rules. See the

includes financing for which no one is

usable because of certain limitations, such

Instructions for Form 8582 for more

personally liable for repayment that is

as the basis rules or the at-risk limitations,

information.

borrowed for use in an activity of holding

take them into account in determining your

-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) - 2004 Page 5

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