Shareholder'S Instructions For Schedule K-1 (Form 1120s)

8. If the disposition is due to a

Deferred cancellation of debt

Code O. Section 1260(b) informa-

casualty or theft, any information you

income.

tion. The corporation will report any

need to complete Form 4684.

Deferred original issue discount

information you need to figure the

deduction.

9. If the sale was an installment

interest due under section 1260(b). If

sale made during the corporation's tax

the corporation had gain from certain

Code U. Net investment income.

year, any information you need to

constructive ownership transactions,

The corporation may use code U to

complete Form 6252, Installment Sale

your tax liability must be increased by

report information you may need to

Income. The corporation will

the interest charge on any deferral of

determine your net investment income

separately report your share of all

gain recognition under section

tax under section 1411, including

payments received for the property in

1260(b). Report the interest on Form

information regarding income from

the following tax years. See the Form

1040, line 62. Enter “1260(b)” and the

controlled foreign corporations

6252 instructions for details.

amount of the interest in the space to

(CFCs) and passive foreign

the left of line 62. See section 1260(b)

investment companies (PFICs) the

Code L. Recapture of section 179

for details on how to figure the

stock of which is owned by the

deduction. The corporation will

interest.

corporation. Any information not

report your share of any recapture of

provided elsewhere on Schedule K-1

Code P. Interest allocable to pro-

section 179 expense deduction if

(or an attachment to Schedule K-1) is

duction expenditures. The

business use of any property for

provided using code U. For CFCs and

corporation will report any information

which the section 179 expense

PFICs that you treat as qualified

you need relating to interest you are

deduction was passed through to

electing funds (QEFs), the information

required to capitalize under section

shareholders dropped to 50% or less

that is relevant to you will depend on

263A for production expenditures.

before the end of the recapture

whether you, the corporation, or a

See Regulations sections 1.263A-8

period. If this occurs, the corporation

subsidiary pass-through entity has

through 1.263A-15 for details.

must provide the following

made an election under Regulations

information.

Code Q. CCF nonqualified with-

section 1.1411-10(g) with respect to

drawals. The corporation will report

1. Your share of the depreciation

the CFC or QEF. For example, if the

your share of nonqualified

allowed or allowable (not including the

corporation made an election under

withdrawals from a capital

section 179 expense deduction).

Regulations section 1.1411-10(g) for

construction fund (CCF). These

a CFC the stock of which is owned by

2. Your share of the section 179

withdrawals are taxed separately from

the corporation, and the relevant

expense deduction (if any) passed

your other gross income at the highest

income and deduction items derived

through for the property and the

marginal ordinary income or capital

from that CFC are reported elsewhere

corporation's tax year(s) in which the

gains tax rate. Attach a statement to

on Schedule K-1, you will not need

amount was passed through. Reduce

your federal income tax return to show

the information provided using code U

this amount by the portion, if any, of

your computation of both the tax and

to complete your Form 8960, Net

your unused (carryover) section 179

interest for a nonqualified withdrawal.

Investment Income Tax—Individuals,

expense deduction for this property.

Include the tax and interest on Form

Estates, and Trusts.

1040, line 62. In the space to the left

Code M. Section 453(l)(3) informa-

Follow the Instructions for Form

of line 62, enter the amount of tax and

tion. The corporation will report any

8960 to figure and report your net

interest and “CCF.”

information you need to figure the

investment income and adjusted

interest due under section 453(l)(3)

Code R. Depletion information—oil

gross income or modified adjusted

with respect to the disposition of

and gas. This is your share of gross

gross income. See Regulations

certain timeshares and residential lots

income from the property, share of

sections 1.1411-1 through 1.1411-10

on the installment method. Report the

production for the tax year, and other

for more details.

interest on Form 1040, line 62. Check

information needed to figure your

Code V. Other information. The

box “c” and enter “453(l)(3)” and the

depletion deduction for oil and gas

corporation will use code V to report

amount of the interest in the space

wells. The corporation should also

the following to shareholders.

next to that box. See section 453(l)(3)

allocate to you a proportionate share

for details on how to figure the

1. Any information you need to

of the adjusted basis of each

interest.

complete a disclosure statement for

corporate oil or gas property. See

reportable transactions in which the

Pub. 535 for details on how to figure

Code N. Section 453A(c) informa-

corporation participates. If the

your depletion deduction.

tion. The corporation will report any

corporation participates in a

information you need to figure the

Reduce the basis of your stock by

transaction that must be disclosed on

interest due under section 453A(c)

the amount of this deduction up to the

Form 8886, Reportable Transaction

with respect to certain installment

extent of your adjusted basis in the

Disclosure Statement, both you and

sales. Report the interest on Form

property.

the corporation may be required to file

1040, line 62. Check box “c” and enter

Code S. Reserved.

Form 8886 for the transaction. The

“453A(c)” and the amount of the

determination of whether you are

Code T. Section 108(i) information.

interest in the space next to that box.

required to disclose a transaction of

If the corporation made a section

See section 453A(c) for details on

the corporation is based on the

108(i) election, it will provide all the

how to figure the interest.

category(ies) under which the

information you will need to determine

transaction qualifies for disclosure

your share of the following.

Instructions for Schedule K-1 (Form 1120S) (2016)

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Shareholder'S Instructions For Schedule K-1 (Form 1120s) - 2016 Page 15

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