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2014

Department of the Treasury

Internal Revenue Service

Partner's Instructions for

Schedule K-1 (Form 1065)

Partner's Share of Income, Deductions, Credits, etc.

(For Partner's Use Only)

If the treatment on your original or

Form 1099-B, Proceeds From Broker and

Section references are to the Internal Revenue Code

unless otherwise noted.

amended return is inconsistent with the

Barter Exchange Transactions.

partnership's treatment, or if the partnership

If a partner is required to notify the

Future Developments

was required to but has not filed a return, you

partnership of a section 751(a) exchange but

must file Form 8082, Notice of Inconsistent

fails to do so, the penalty is $100 for each

For the latest information about

Treatment or Administrative Adjustment

such failure. However, no penalty will be

developments related to Schedule K-1 (Form

Request (AAR), with your original or

imposed if the partner can show that the

1065) and the Partner's Instructions for

amended return to identify and explain any

failure was due to reasonable cause and not

Schedule K-1 (Form 1065), such as

inconsistency (or to note that a partnership

willful neglect.

legislation enacted after they were

return has not been filed).

published, go to

Note. Gain or loss from the disposition of

If you are required to file Form 8082 but

your partnership interest is generally net

do not do so, you may be subject to the

General Instructions

investment income under section 1411 and

accuracy-related penalty. This penalty is in

may be subject to the net investment income

addition to any tax that results from making

Purpose of Schedule K-1

tax. See Form 8960, Net Investment Income

your amount or treatment of the item

Tax—Individuals, Estates, and Trusts, and

consistent with that shown on the

The partnership uses Schedule K-1 to report

its instructions for information about how to

partnership's return. Any deficiency that

your share of the partnership's income,

report and figure the tax due.

results from making the amounts consistent

deductions, credits, etc. Keep it for your

may be assessed immediately.

records. Do not file it with your tax return

Nominee Reporting

unless you are specifically required to do so.

Errors

Any person who holds, directly or indirectly,

(See the instructions for Code O. Backup

an interest in a partnership as a nominee for

withholding, later.) The partnership files a

If you believe the partnership has made an

another person must furnish a written

copy of Schedule K-1 (Form 1065) with the

error on your Schedule K-1, notify the

statement to the partnership by the last day

IRS.

partnership and ask for a corrected

of the month following the end of the

Schedule K-1. Do not change any items on

For your protection, Schedule K-1 may

partnership's tax year. This statement must

your copy of Schedule K-1. Be sure that the

show only the last four digits of your

include the name, address, and identifying

partnership sends a copy of the corrected

identifying number (social security number

number of the nominee and such other

Schedule K-1 to the IRS. If you are a partner

(SSN), etc.). However, the partnership has

person, description of the partnership

in a partnership that does not meet the small

reported your complete identifying number to

interest held as nominee for that person, and

partnership exception and you report any

the IRS.

other information required by Temporary

partnership item on your return in a manner

Regulations section 1.6031(c)-1T. A

different from the way the partnership

Although the partnership generally is not

nominee that fails to furnish this statement

reported it, you must file Form 8082.

subject to income tax, you may be liable for

must furnish to the person for whom the

tax on your share of the partnership income,

Sale or Exchange of

nominee holds the partnership interest a

whether or not distributed. Include your

copy of Schedule K-1 and related

Partnership Interest

share on your tax return if a return is

information within 30 days of receiving it from

required. Use these instructions to help you

the partnership.

Generally, a partner who sells or exchanges

report the items shown on Schedule K-1 on

a partnership interest in a section 751(a)

A nominee who fails to furnish all the

your tax return.

exchange must notify the partnership, in

information required by Temporary

writing, within 30 days of the exchange (or, if

The amount of loss and deduction you

Regulations section 1.6031(c)-1T when due,

earlier, by January 15 of the calendar year

may claim on your tax return may be less

or who furnishes incorrect information, is

following the calendar year in which the

than the amount reported on Schedule K-1. It

subject to a $100 penalty for each failure.

exchange occurred). A “section 751(a)

is the partner's responsibility to consider and

The maximum penalty is $1,500,000 for all

exchange” is any sale or exchange of a

apply any applicable limitations. See

such failures during a calendar year. If the

partnership interest in which any money or

Limitations on Losses, Deductions, and

nominee intentionally disregards the

other property received by the partner in

Credits, later, for more information.

requirement to report correct information,

exchange for that partner's interest is

each $100 penalty increases to $250 or, if

Inconsistent Treatment of

attributable to unrealized receivables (as

greater, 10% of the aggregate amount of

defined in section 751(c)) or inventory items

items required to be reported, and the

Items

(as defined in section 751(d)).

$1,500,000 maximum does not apply.

Generally, you must report partnership items

The written notice to the partnership must

International Boycotts

shown on your Schedule K-1 (and any

include the names and addresses of both

attached statements) the same way that the

parties to the exchange, the identifying

Every partnership that had operations in, or

partnership treated the items on its return.

numbers of the transferor and (if known) of

related to, a boycotting country, company, or

This rule does not apply if your partnership is

the transferee, and the exchange date.

a national of a boycotting country must file

within the “small partnership exception” and

Form 5713, International Boycott Report.

does not elect to have the tax treatment of

An exception to this rule is made for sales

partnership items determined at the

or exchanges of publicly traded partnership

If the partnership cooperated with an

partnership level.

interests for which a broker is required to file

international boycott, it must give you a copy

Nov 18, 2014

Cat. No. 11396N

Partner'S Instructions For Schedule K-1 (Form 1065) - Partner'S Share Of Income, Deductions, Credits, Etc. (For Partner'S Use Only) - 2014

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