Instructions For Form 165 - Arizona Partnership Income Tax Return

Arizona Form 165

qualified small business that is included in the individual

(Form 1065) does not include any capital gain (loss), the

taxpayer’s federal adjusted gross income or the federal

partnership is not required to complete Part IV.

taxable income of the estate and trust. A qualified small

For the nonresident individual partner, Form 165, Schedule

business is determined by the Arizona Commerce Authority

K-1(NR), Part IV, provides information so the partner can

pursuant to A.R.S. §41-1518.

calculate its subtraction for net long-term capital gain for

For resident or part-year resident individual partner, Part III

assets acquired after December 31, 2011.

of Arizona Form 165, Schedule K-1(NR), provides

For the nonresident estate partner or nonresident trust partner,

information so each individual partner can calculate its

Form 165, Schedule K-1(NR), Part IV, provides information so

subtraction for net capital gain from investment in a qualified

the partner can (1) calculate its subtraction for net long-term

small business.

capital gain for assets acquired after December 31, 2011;

For resident estate partner or resident trust partner, Part III of

and/or (2) provide information to each beneficiary so each

Arizona Form 165, Schedule K-1(NR), provides information

beneficiary can calculate its subtraction for net long-term

to the partner so the partner can (1) calculate its subtraction

capital gain for assets acquired after December 31, 2011.

for net capital gain from investment in a qualified small

The subtraction is only available to individuals, estates,

business; and/or (2) provide information to each beneficiary

and trusts.

so each beneficiary can calculate its subtraction for net

For the partnership partner or S corporation partner, Form 165,

capital gain from investment in a qualified small business.

Schedule K-1(NR), Part IV, provides information so the

The subtraction is only available to individuals, estates

partner can provide information to each partner or shareholder

and trusts.

to provide to lower tiered partners or shareholders.

If the partner’s federal Schedule K-1 (Form 1065) includes

For the C corporation partner, Form 165, Schedule K-1(NR),

any net capital gain (loss) from investment in a qualified

Part IV, is informational only.

small business, the partnership should complete Part III, line

A worksheet is provided at the end of these instructions that

18, and Part IV, line 20. If Part IV, line 20, is zero, put zero

may assist the partnership in determining the amounts to

on line 20.

include on each nonresident partner’s Arizona Form 165,

If the partner’s federal Schedule K-1 (Form 1065) does not

Schedule K-1(NR), Part IV, line 19.

include any net capital gain (loss) from investment in a

Complete

three

copies

Arizona

Form

165,

qualified small business, the partnership is not required to

Schedule K-1(NR), for each partner. File one copy of each

complete Part III, line 18, and Part IV, line 20.

partner's Arizona Form 165, Schedule K-1(NR), with the

Part

IV:

Net

Long-Term

Capital

Gain

partnership's Arizona Form 165. Provide all partners with a

copy of their Arizona Form 165, Schedule K-1(NR). Retain a

Subtraction – Information Schedule

copy for the partnership's records.

Arizona allows a subtraction from Arizona gross income for a

Information on Filing Composite Returns on

percentage of any net long-term capital gain from assets

Arizona Form 140NR for Qualifying Nonresident

acquired after December 31, 2011, and included in the

individual taxpayer’s federal adjusted gross income or the

Partners

federal taxable income of the estate or trust. Although the

Arizona law requires an individual resident or nonresident to

subtraction is only available to individuals, estates and trusts,

file his or her own income tax return. The Arizona

a partner that is a pass-through entity (estate, partnership, S

Department of Revenue will accept a composite return on

corporation or trust) will need this information to calculate

Arizona Form 140NR for qualifying nonresident individual

the subtraction for the estate or trust or complete the Arizona

partners of a partnership.

Form 141AZ, Schedule K-1 or Schedule K-1(NR), for each

NOTE: A composite return cannot be filed with fewer than

beneficiary; or Arizona Form 120S, Schedule K-1 or

ten participating members.

Schedule K-1(NR), for each shareholder; or Arizona Form

165, Schedule K-1 or Schedule K-1(NR), for each partner.

Refer to Arizona Individual Income Tax Ruling ITR 13-2 for

information regarding the requirements for filing a composite

If the partner’s federal Schedule K-1 (Form 1065) includes

return on Arizona Form 140NR.

capital gain (loss), complete Part IV, line 19 and line 20 (if

line 20 is applicable). If the partner’s federal Schedule K-1

The Worksheet for Net Long-Term Capital Gain Subtraction for Assets Acquired After December 31, 2011, is on the next page.

Instructions For Form 165 - Arizona Partnership Income Tax Return - 2014 Page 11

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