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The passive loss rules apply separately to the items attributable to each

If the partnership has income from activities both within and outside

publicly traded partnership (P T P) that is not treated as a corporation under

California, the amount nonresidents or corporate partners must report on

I R C Section 7704. Thus, partners who do not materially participate in the

their California returns is a function of the partnership’s apportionment

operations of a P T P are allowed to deduct their share of the P T P’s losses

percentage and allocation of income. Reporting instructions are included

only to the extent of passive income from the same P T P or when the entire

in the information provided by the partnership. See Cal. Code Regs., tit. 18

interest is sold, I R C Section 469(k). See the instructions for form FTB 3801

sections 17951-4 and 25137-1 for more information. In addition, see General

and form FTB 3802 for the rules to calculate and report income, gains, and

Information E, Unitary Partners.

losses from passive activities that you held through each P T P you owned

Line 2 – Net Income (Loss) from Rental Real Estate Activities

during the taxable year.

Generally, the income (loss) reported on line 2, column (d), is a passive

See the instructions for federal Schedule K-1 (1065), Passive Activity

activity amount to all partners. However, the loss limitations of I R C

Limitations, and federal Publication 925 for more information.

Section 469 do not apply to qualified investors in qualified low-income

housing projects. If applicable, the partnership will attach a schedule for

Investment Partnership Income

line 2 to identify such amounts. If you have an amount on Schedule K-1

(5 65), line 2, column (c), report the California adjustment on Schedule CA

If you are a nonresident individual, the amounts in column (e) will generally

(5 40 or 5 40N R), line 17, column B or column C, whichever is applicable.

not be taxable by California (R&TC Section 17955). However, nonresident

Use the following instructions to determine where to enter the line 2 amount.

individuals will be taxed on their distributive share of California source

income from an investment partnership if the income from the qualifying

• If you have a loss on line 2, column (d) (other than a qualified

investment securities is interrelated with either of the following:

low-income housing project loss), enter the loss on the applicable line of

form FTB 3801 or form FTB 3802 to determine how much of the loss is

• Any other business activity of the nonresident partner.

allowable. Your share of the loss may be eligible for the special $25,000

• Any other entity in which the nonresident partner owns an interest that is

allowance for rental real estate losses. Get the instructions for form

separate and distinct from the investment activity of the partnership and

FTB 3801 or form FTB 3802 for more information.

that is conducted in California.

See the federal Schedule K-1 (1065) Specific Instructions for box 2, item 1,

If you are a corporate partner, the amounts in column (e) will also generally

and item 2 for more information.

not be taxable in California provided the income from the partnership is the

corporation’s only California source income. However, if the corporation does

Report any California adjustment amount from column (c) on Schedule CA

either of the following:

(5 40 or 5 40N R) if you are a qualified investor reporting a qualified

low-income housing project loss.

• Participates in the management of the investment activities of the

partnership or is engaged in a unitary business with another corporation

• If you have only income on line 2, column (d), and no other passive

or partnership that participates in the management of the investment

losses, enter any California adjustment amount from column (c) on

activities of the partnership.

Schedule CA (5 40 or 5 40N R). However, if in addition to this passive

• Has income attributable to sources within California other than income

activity income, you have a passive activity loss from this partnership

from the investment partnership.

or from any other source, report the line 2, column (d), income on the

applicable line of form FTB 3801 or form FTB 3802.

Then the corporation will be taxable on its distributive share of California

source income of the partnership. See R&TC Section 23040.1 for more

Line 3 – Net Income (Loss) from Other Rental Activities

information.

The amount on line 3, column (d) is a passive activity amount for all partners.

• If line 3, column (d) is a loss, report the loss on the applicable line of

Line Instructions

form FTB 3801 or form FTB 3802.

• If only income is reported on line 3, column (d), and you have no other

Enter the difference between federal and California amounts from column (c)

passive losses, report the California adjustment from column (c) on

on Schedule C A (5 40), if you are a resident; or on Schedule CA (5 40N R), if

Schedule CA (5 40 or 5 40N R). However, if in addition to this passive

you are a nonresident or part-year resident. Also, if you are a nonresident or

activity income, you have a passive activity loss from this partnership or

part-year resident, enter California source amounts from the Schedule K-1

from any other source, report the line 3 income on the applicable line of

(5 65), column (e), on your Schedule C A (5 40N R), column E.

form FTB 3801 or form FTB 3802.

G(1) – If this box is checked, the partnership is a P T P as defined in I R C

Line 4 – Guaranteed Payments to Partners

Section 469(k)(2). Follow the instructions for form FTB 3801 or form

Amounts on this line are not normally part of a passive activity. If there is

FTB 3802 for reporting income, gains, and losses from PTPs.

an amount on Schedule K-1 (5 65), line 4, column (c), enter this amount

G(2) – If this box is checked, the partnership is an investment partnership

on Schedule CA (5 40 or 5 40N R), line 21f, column B or line 21f, column C,

as defined in R&TC Sections 17955 and 23040.1. If you are a nonresident

whichever is applicable. If this is a passive activity for the partner, then the

individual, the amounts in column (e) will generally not be taxable in

partner must also complete the passive activity form. Use federal Form 8582,

California.

Passive Activity Loss Limitations, for federal purposes and form FTB 3801

Nonresident and Part-Year Resident Partners, get FTB Pub. 1100, Taxation

for California purposes.

of Nonresidents and Individuals Who Change Residency. Part-year resident

Portfolio Income – Line 5 through Line 11a

partners must consider their period of residency and nonresidency in the

Portfolio income (loss), referred to as “portfolio” income (loss) in these

computation of total California income. The line instructions below that

instructions, is generally not subject to the passive activity limitation rules

instruct you to enter information from Schedule K-1 (565), column (d),

of IRC Section 469. Portfolio income includes interest, dividend, royalty

on other forms, apply to resident partners. When the instructions make

income and gain or loss on the sale of property held for investment.

reference to column (d), nonresident members should take information from

Generally, amounts reported on line 8, line 9, and line 11a are gains or

columns (c), (d), and (e) and apply the information to the appropriate line

losses attributable to the disposition of property held for investment and

relating to computation of total income and income from California sources.

are, therefore, classified as portfolio income (loss). However, if an amount

reported on line 8, line 9, or line 11a, column (d), is a passive activity

Income (Loss)

amount, the partnership should identify the amount.

Line 1 – Ordinary Income (Loss) from Trade or Business Activities

Line 5 – Interest Income

The amount reported on line 1, column (d), is your share of the ordinary

If you have an amount on Schedule K-1 (5 65) line 5, column (c), report this

income (loss) from the trade or business activities of the partnership. For

amount on Schedule C A (5 40 or 5 40N R), line 8, column B or column C,

individual partners, where this amount is reported depends on whether or

whichever is applicable.

not this amount is a passive activity to you.

Line 6 – Dividends

If, in addition to this passive activity income, you have a passive activity

If you have an amount on Schedule K-1 (5 65) line 6, column (c), report this

loss from this partnership or from any other source, report the income on

amount on Schedule CA (5 40 or 5 40N R), line 9, column B or column C,

form FTB 3801 or form FTB 3802. If a loss is reported on line 1, column (d),

whichever is applicable.

report the loss on the applicable line of form FTB 3801 or form FTB 3802 to

determine how much of the loss is allowable.

Page 4 Schedule K-1 (5 65) Instructions 2013

Partner'S Instructions For Schedule K-1 (Form 565) - Partner'S Share Of Income, Deductions, Credits, Etc. - 2013 Page 4

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