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ARIZONA FORM

Arizona Nonresident and Out-of-State Partner's

165

Schedule K-1(NR)

Share of Income and Deductions

Instructions for Individuals and Fiduciaries

Note: The amount of Internal Revenue Code § 179 expense

deductible is limited to the Arizona portion of the amount deducted

on federal Form 1040, Schedule E.

Column (c) is your Arizona source income. Nonresident individuals

should report the amounts in column (c) on the Form 140NR line

Line 12 -

numbers indicated on the Schedule K-1(NR). Nonresident

fiduciaries should add lines 4 through 8, column (c), and enter the

Line 12 reflects the amount of partnership income which must be

total on Arizona Form 141, line 7.

adjusted to determine the difference between Internal Revenue

Code § 702(a)(8) and ARS § 43-1401.2. If the amount on line 12 is

However, if your Arizona Form 165 Schedule K-1(NR) shows a

a positive number, individual partners should enter this amount as

loss, you may only claim such losses on your Arizona nonresident

an "other addition to income" on Form 140NR, line C18. Fiduciaries

return to the extent that such losses are included in your federal

should enter a positive amount on line 12 as an "other addition" on

adjusted gross income (individuals) or federal taxable income

Arizona Form 141, page 1, line 8(e). If the amount on line 12 is a

(fiduciaries). Therefore, if the loss is considered to be a passive

negative number, individual partners should enter this amount as

activity loss for federal purposes, the loss will likewise be

an "other subtraction from income" on Form 140NR, line D29.

considered to be a passive activity loss for Arizona purposes.

Fiduciaries ahould enter a negative amount on line 12 as an "other

subtraction" on Arizona Form 141, page 1, line 11(e).

If you have an Arizona source passive activity partnership loss, you

would not necessarily begin the Arizona return with the amounts

Instructions for Corporate Partners

shown in column (c) of your Arizona Schedule K-1(NR). For

Arizona purposes, you must first determine if any portion of the loss

shown on your Arizona Schedule K-1(NR) has been limited on your

Corporate partners should report the amount on line 12 of the

federal return because of the federal passive activity loss rules.

Schedule K-1(NR) according to the instructions in Arizona Form

120 or Form 120A.

The amount of passive activity loss which is derived from Arizona

sources is the amount of the passive activity loss which will be

allowed on the Arizona return. Therefore, any portion of the passive

activity loss which is not allowed on the federal return due to the

passive activity loss limitations will likewise be limited on the

Arizona return. That portion of the passive activity loss derived from

Arizona sources which is required to be carried forward for federal

purposes will similarly be carried forward for Arizona purposes.

ADOR 06-0033 (99)

Form 165 (Schedule K-1(Nr)) - Arizona Nonresident And Out-Of-State Partner'S Share Of Income And Deductions - 1999 Page 2

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