Instructions For Form 165 - Arizona Partnership Income Tax Return

Arizona Form 165

 The employment of any other method to effectuate an

qualified small business that is included in the individual

taxpayer’s federal adjusted gross income or the federal

equitable allocation and apportionment of the taxpayer's

taxable income of the estate and trust. A qualified small

income.

business is determined by the Arizona Commerce Authority

This section permits a departure from the allocation and

pursuant to A.R.S. §41-1518.

apportionment provisions only in limited cases. A.R.S.

§ 43-1148 may be invoked only in specific cases where

For resident or part-year resident individual partner, Part II of

unusual fact situations produce incongruous results under the

Arizona Form 165, Schedule K-1, provides information so

apportionment and allocation provisions.

each individual partner can calculate its subtraction for net

capital gain from investment in a qualified small business.

Taxpayers seeking relief should submit a letter to the

Corporate Income Tax Audit Section 60 days prior to the

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

filing of the return setting forth the relief that is requested

Arizona Form 165, Schedule K-1, provides information to the

and the justification for the relief. The department

partner so the partner can (1) calculate its subtraction for net

normally makes such determinations only upon audit of

capital gain from investment in a qualified small business;

the taxpayer. Such a detailed examination of the specific

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

facts and circumstances reveals whether such unusual

beneficiary can calculate its subtraction for net capital gain

fact situations and incongruous results exist.

from investment in a qualified small business.

The subtraction is only available to individuals, estates

Schedule D - Business Information

and trusts.

If the partnership has income from business activity taxable entirely

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

within Arizona, complete only the first part of the schedule.

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

If the partnership has income from business activity taxable

small business, the partnership should complete Part II, line

within and without Arizona, complete both parts of the schedule.

4, and Part III, line 6, for the partner. If Part III, line 6, is

zero, put zero on line 6. If the partner’s federal Schedule K-1

Certification

(Form 1065) does not include any net capital gain (loss) from

investment in a qualified small business, the partnership is

One of the partners must sign the return. If receivers, trustees

not required to complete Part II, line 4, and Part III, line 6.

in bankruptcy, or assignees are in control of the property or

business of the organization, such receivers, trustees, or

Part

III:

Net

Long-Term

Capital

Gain

assignees must sign the return.

Subtraction – Information Schedule

Paid preparers: Sign and date the return. Complete the firm

Arizona allows a subtraction from Arizona gross income for a

name and address lines (the paid preparer’s name and

percentage of any net long-term capital gain from assets

address, if self-employed). Enter the paid preparer’s TIN,

acquired after December 31, 2011, and included in the

which is the firm’s EIN or the individual paid preparer’s

individual taxpayer’s federal adjusted gross income or the

social security number.

federal taxable income of the estate or trust. Although the

subtraction is only available to individuals, estates and trusts,

5 Schedule K-1 - Partnership

a partner that is a pass-through entity (estate or trust) will

Instructions

need this information to calculate the subtraction for the

estate or trust or complete the Arizona Form 141AZ,

Use Form 165, Schedule K-1, for all resident or part-year

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

resident individual partners, all resident estate partners, and all

resident trust partners. Use Form 165, Schedule K-1(NR), for

Complete Part III, line 5 and line 6 (if line 6 is applicable) as

all other partners.

instructed on the form. If the partner’s federal Schedule K-1

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

Type or print the required information in the name, address,

partnership is not required to complete Part III.

and information boxes on the top of the Form 165, Schedule

K-1. Indicate whether the partnership’s taxable year is a

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

of Arizona Form 165, Schedule K-1, provides information so

calendar year or a fiscal year; if a fiscal year, indicate the

each individual partner can calculate its subtraction for net

period covered by the taxable year on the schedule. Indicate

long-term capital gain for assets acquired after December 31,

whether this is an original or an amended schedule.

2011.

Part I: Arizona Partnership Adjustment

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

Complete Part I, lines 1 through 3 as instructed on the form.

Arizona Form 165, Schedule K-1, provides information to the

Part II: Net Capital Gain from Investment in a

partner so the partner can (1) calculate its subtraction for net

long-term capital gain for assets acquired after December 31,

Qualified

Small

Business

–

Information

2011; and/or (2) provide information to each beneficiary so each

Schedule

beneficiary can calculate its subtraction for net long-term capital

For taxable years beginning from and after December 31,

gain for assets acquired after December 31, 2011.

2013, Arizona allows a subtraction from Arizona gross

income for any net capital gain derived from investment in a

Instructions For Form 165 - Arizona Partnership Income Tax Return - 2014 Page 9

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