Partner'S Instructions For Schedule K-1 (Form 1065-B) - Partner'S Share Of Income (Loss) From An Electing Large Partnership (For Partner'S Use Only) - 2016 Page 10

Code K2. Gross income from all sour-

Code K8(a). Total foreign taxes paid.

Code M3. Unrelated business taxable

ces. Enter this amount on Form 1116,

Include this amount in Part II of Form

income. The partnership must give you

line 3e.

1116.

any information you need to figure

unrelated business taxable income under

Code K3. Gross income sourced at

Code K8(b). Total foreign taxes ac-

section 512(a)(1) (but excluding any

partner level. Although all this income

crued. Include this amount in Part II of

modifications required by paragraphs (8)

reported has been apportioned to foreign

Form 1116.

through (15) of section 512(b)) for a

source categories of income, you must

The partnership will attach a

partner that is a tax-exempt organization.

nevertheless determine whether the

statement that separately

income being reported is U.S. source

Reminder. A partner is required to notify

identifies any arrangement, along

income or foreign source income. See the

CAUTION

the partnership of its tax-exempt status.

with the taxes paid or accrued in

Instructions for Form 1116 for the rules to

connection with the arrangement, in which

Code M4. Health insurance. Include

source the income reported to you. Enter

the partnership participates that would

any amounts paid during the tax year for

only foreign source income on lines 1a

qualify as a splitter arrangement under

insurance that constitutes medical care for

and 3d of Form 1116. A separate Form

section 909 if one or more partners are

you, your spouse, your dependents, and

1116 or 1118 is required for each foreign

covered persons with respect to an entity

your children under age 27 who aren’t

source category of income. Do not include

that took into account related income from

dependents on line 29 of your 2016 Form

income that you determined to be U.S.

the arrangement. The statement will also

1040. You may be allowed to deduct such

source income.

indicate whether the partnership has taken

amounts, even if you do not itemize

Codes K4(a) through K4(c). Foreign

into account any related income from any

deductions. If you do itemize deductions,

gross income sourced at partnership

such splitter arrangement. See section

enter on line 1 of Schedule A (Form 1040)

level. The following types of income have

909 and the related regulations for rules

any amounts not deducted on line 29 of

already been sourced for you by the

regarding splitter arrangements.

Form 1040.

partnership. Include these amounts on

Code M5. Distributions of money (cash

Code K9. Reduction in taxes available

lines 1a and 3d of the applicable Form

and marketable securities). This

for credit. Enter this amount on Form

1116 (that is, the Form 1116 for each

amount includes the distributions the

1116, line 12.

category of income provided to you).

partnership made to you of cash and

Code K4(a). Passive category

certain marketable securities. The

foreign source income.

Code L. Oil and Gas Activities

marketable securities are included at their

Code K4(b). General category

Generally, oil and gas income, deductions,

fair market value (FMV) on the date of

foreign source income.

credits, and other items are included in

distribution (minus your share of the

Code K4(c). Other foreign source

your share of income or loss from passive

partnership's gain on the securities

income.

loss limitation activities, general credits,

distributed to you). If this amount exceeds

Code K5. Interest expense allocated

and the alternative minimum tax

the adjusted basis of your partnership

and apportioned at the partner level.

adjustment.

interest immediately before the

Include this amount on line 4b of the

distribution, the excess is treated as gain

applicable Forms 1116.

However, shares of all oil and gas

from the sale or exchange of your

income, deductions, credits, and other

partnership interest. Generally, this gain is

Code K6. Other expenses allocated

items are separately reported to partners

treated as gain from the sale of a capital

and apportioned at the partner level.

who are disqualified persons in

asset and should be reported on Form

Include this amount on line 2 of the

accordance with the regular partnership

8949 and the Schedule D for your return.

applicable Forms 1116.

rules, here or on an attached statement.

However, the gain may be ordinary

For Codes K5 and K6, do not

income. For details, see Pub. 541.

Note. A partner must notify the ELP of its

include any expenses allocated

status as a “disqualified person.”

and apportioned to U.S. source

The partnership must separately

CAUTION

income on any line of Part I of Form 1116.

identify both of the following.

The FMV of the marketable securities

Codes M1 Through M9.

Codes K7(a) through K7(c). Deduc-

when distributed (minus your share of the

Miscellaneous

tions allocated and apportioned at

gain on the securities distributed to you).

partnership level to foreign source in-

The partnership's adjusted basis of

Code M1. Other tax-exempt income.

come. The following codes report the

those securities immediately before the

Increase the adjusted basis of your

expenses allocated and apportioned by

distribution.

interest in the partnership by this amount,

the partnership to foreign source

but don’t include it in income on your

Decrease the adjusted basis of your

categories of income. Include these

income tax return.

interest in the partnership (but not below

amounts on line 2 of the applicable Forms

zero) by the amount of cash distributed to

The partnership will attach a

1116 (that is, the Forms 1116 for each

you and the partnership's adjusted basis

statement to Schedule K-1 for the

category of income provided to you).

of the distributed securities. Advances or

amount included in box 9, Code

Code K7(a). Deductions allocated

drawings of money or property against

CAUTION

M1, that is exempt due to section 892 and

and apportioned at partnership level

your share are treated as current

describe the nature of the income.

to passive category foreign source

distributions made on the last day of the

income.

partnership's tax year.

Code M2. Nondeductible expenses.

Code K7(b). Deductions allocated

Your basis in the distributed

Decrease the adjusted basis of your

and apportioned at partnership level

marketable securities (other than in

interest in the partnership by this amount.

to general category foreign source

liquidation of your interest) is the smaller

The nondeductible expenses paid or

income.

of:

incurred by the partnership are not

Code K7(c). Deductions allocated

The partnership's adjusted basis in the

deductible on your income tax return, but

and apportioned at partnership level

securities immediately before the

they do affect your basis.

to other foreign source income.

distribution increased by any gain

Instructions for Schedule K-1 (1065-B)

-10-

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