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Instructions for Schedule C

Department of the Treasury

Internal Revenue Service

(Form 1065)

(Rev. December 2014)

Additional Information for Schedule M-3 Filers

Section references are to the Internal Revenue Code

2. Certain debt is incurred by a partner within two

unless otherwise noted.

years of the earlier of:

A written agreement to transfer or

General Instructions

A transfer of the property that secures the debt, if the

debt, nevertheless, is treated as a qualified liability; or

Future Developments

3. Transfers from a partnership to a partner occur

For the latest information about developments related to

which are the equivalent to those listed in 1 or 2 above.

Schedule C (Form 1065) and its instructions, such as

legislation enacted after they were published, go to

The disclosure must be made on the transferor

partner's return using Form 8275, Disclosure Statement,

or on an attached statement providing the same

What's New

information. When more than one partner transfers

property to a partnership under a plan, the disclosure may

Some filers of Form 1065, U.S. Return of Partnership

be made by the partnership rather than by each partner.

Income, that file Schedule M-3 (Form 1065), Net Income

(Loss) Reconciliation for Certain Partnerships, with tax

Question 2. Answer “Yes” if this partnership is a partner

years ending on December 31, 2014 or later are not

in another partnership and has received special

required to file Schedule C (Form 1065). See Who Must

allocations of income, gain, loss, deduction, or credit from

File, later.

that partnership. For more information on special

allocations, see Special Allocations, in the Instructions for

Purpose of Form

Form 1065.

Use Schedule C (Form 1065) to provide answers to

Example. P, a partnership, joins with B, an individual,

additional questions for some filers of Schedule M-3

in forming the PB partnership. P and B each contribute

(Form 1065), Net Income (Loss) Reconciliation for Certain

$50,000 cash to PB partnership. Profits and losses are

Partnerships.

split 50/50, with the exception of depreciation, which is

allocated 99% to P and 1% to B. P answers “Yes” to

Who Must File

question 2 because its 99% allocation of depreciation

Generally, filers of Form 1065, U.S. Return of Partnership

deductions from PB partnership is disproportionate to its

Income, that file Schedule M-3 (Form 1065), Net Income

ratio of sharing other items from PB partnership.

(Loss) Reconciliation for Certain Partnerships, must

complete and file Schedule C (Form 1065) and attach it to

Question 5. The term “change in accounting principle”

their return. However, for tax years ending on December

means a change from one generally accepted accounting

31, 2014 or later, partnerships that (a) are required to file

principle to another generally accepted accounting

Schedule M-3 and have less than $50 million in total

principle as described in “Statement of Financial

assets at the end of the tax year or (b) are not required to

Accounting Standards No. 154–Accounting Changes and

file Schedule M-3 and voluntarily file Schedule M-3, are

Error Corrections.”

not required to file Schedule C (Form 1065). For more

For purposes of this question, answer “Yes” if such a

information, visit IRS.gov and enter “Schedule M-3 for

change in accounting principle occurred during the tax

Large Business International (LBI)” in the Search box.

year and such change resulted in, or is expected to result

Also see the Instructions for Schedule M-3 (Form 1065)

in, an effect on the amount of income reported for financial

for more information.

statement purposes.

Specific Instructions

Question 6. File Form 3115, Application for Change in

Accounting Method, to request a change in a method of

Question 1. For certain transfers that are presumed to

accounting. See the Instructions for Form 3115 for

be sales, the partnership or the partners must comply with

information on requesting a change in accounting method.

the disclosure requirements in Regulations section

1.707-8. Generally, disclosure is required when:

1. Certain transfers to a partner are made within two

years of a transfer of property by the partner to the

partnership;

Apr 01, 2014

Cat. No. 51534B

Instructions For Schedule C (Form 1065) - Additional Information For Schedule M-3 Filers - 2014

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