Partner's Instructions for Schedule K-1 (Form 1065)receipts under section 59A(e). The following codes have been added or changed as a result of the Tax Cuts and Jobs Act. your amount

811201 01-18-19

Section references are to the Internal Revenue Codeunless otherwise noted.

Jan 15, 2019

Limitations on Losses, Deductions, andCredits

IRS.gov/Form1065.

Codes Z through AD, Deduction for qualifiedbusiness income, under Box 20. Otherinformation.

Code O. Backupwithholding,

Department of the Treasury

¥ Box 15, code P is used to report the newsection 45S credit reported on Form 8994,Employer Credit for Paid Family and MedicalLeave.

report the items shown on Schedule K-1 onyour tax return.

The amount of loss and deduction youmay claim on your tax return may be lessthan the amount reported on Schedule K-1. Itis the partner's responsibility to consider andapply any applicable limitations. See

, later, for more information.

For the latest information aboutdevelopments related to Schedule K-1 (Form1065) and the Partner's Instructions forSchedule K-1 (Form 1065), such aslegislation enacted after they werepublished, go to

¥ Box 16, Foreign transactions, thefollowing new codes have been added.For foreign gross income sourced at thepartnership level: code D, section 951Acategory; code E, foreign branch category.Deductions allocated and apportioned at thepartnership level to foreign source income:code K, section 951A category; code L,foreign branch category.

¥ Qualified business income deduction. Fortax years beginning after 2017, individuals,estates, and trusts may be entitled to adeduction of up to 20% of their qualifiedbusiness income from a trade or business.For more information, see section 199A andPub. 535, Business Expenses. Also, see

Other information: code U, section 951A(c)(1)(A) tested income; code V, tested foreignincome tax; code W, section 965information.

Generally, you must report partnership itemsshown on your Schedule K-1 (and anyattached statements) the same way that thepartnership treated the items on its return.

¥ Box 20, new codes have been added forthe qualified business income deduction:code Z, section 199A income; code AA,section 199A W-2 wages; code AB, section199A unadjusted basis; code AC, section199A qualified REIT dividends; code AD,section 199A qualified PTP income.

If the treatment on your original oramended return is inconsistent with thepartnership's treatment, or if the partnershipwas required to but has not filed a return, youmust file Form 8082, Notice of InconsistentTreatment or Administrative AdjustmentRequest (AAR), with your original oramended return to identify and explain anyinconsistency (or to note that a partnershipreturn has not been filed).

¥ In Part II, item K, the entry spaces wereexpanded to reflect beginning and endingpartner's share of liabilities. ¥ Box 20, new code AE, excess taxable

income, and code AF, excess businessinterest income, have been added forreporting limitations on the deduction ofbusiness interest under section 163(j).

¥ New box 6c, Dividend equivalents, hasbeen added to report section 871(m)income. If you are required to file Form 8082 but

do not do so, you may be subject to theaccuracy-related penalty. This penalty is inaddition to any tax that results from making

¥ For box 11, Other income (loss), code Findicates section 951A GILTI income. ¥ Box 20, new code AG has been added to

report each partner's share of the grossreceipts under section 59A(e).

The following codes have been added orchanged as a result of the Tax Cuts andJobs Act.

your amount or treatment of the itemconsistent with that shown on thepartnership's return. Any deficiency thatresults from making the amounts consistentmay be assessed immediately.

¥ Box 11, code G has been added forsection 965(a) inclusion.

¥ Box 11, code H has been added forsubpart F income other than sections 951Aand 965 income.

The partnership uses Schedule K-1 to reportyour share of the partnership's income,deductions, credits, etc. Keep it for yourrecords. Do not file it with your tax return

If you believe the partnership has made anerror on your Schedule K-1, notify thepartnership and ask for a correctedSchedule K-1. Do not change any items onyour copy of Schedule K-1. Be sure that thepartnership sends a copy of the corrected

¥ Box 13, Other deductions, Cashcontributions, code A, have been increasedfrom 50% to 60% .

unless you are specifically required to do so.(See the instructions for

later.) The partnership files acopy of Schedule K-1 (Form 1065) with theIRS.

¥ Box 13, Other deductions, code K,indicates excess business interest expenseunder section 163(j). Previous code K,Deductions-portfolio (2% floor) has beendeleted because the itemized deductionssubject to the 2% AGI floor were suspendedfor periods after 2017.

Schedule K-1 to the IRS.

For your protection, Schedule K-1 mayshow only the last four digits of youridentifying number (social security number(SSN), etc.). However, the partnership hasreported your complete identifying number tothe IRS.

¥ Box 13, codes T, U, and V are reservedfor future use because of the repeal of thedomestic production activity deduction,section 199. Amounts from Form 8903,Domestic Production Activities Deduction,will be reported using box 13, code W, Otherdeductions.

Generally, a partner who sells or exchangesa partnership interest in a section 751(a)exchange must notify the partnership, in

Although the partnership generally isn't writing, within 30 days of the exchange (or, ifsubject to income tax, you may be liable fortax on your share of the partnership income,whether or not distributed. Include your

earlier, by January 15 of the calendar yearfollowing the calendar year in which theexchange occurred). A "section 751(a)

share on your tax return if a return isrequired. Use these instructions to help you

exchange" is any sale or exchange of a¥ Box 13, new code X has been added forsection 965(c) deduction. partnership interest in which any money or

LHA

Internal Revenue Service

Partner's Share of Income, Deductions, Credits, etc.(For Partner's Use Only)

Purpose of Schedule K-1

Inconsistent Treatment ofItems

Errors

Sale or Exchange ofPartnership Interest

Future Developments

What's New

General Instructions

Partner's Instructions forSchedule K-1 (Form 1065)

2018

1

19000515 769114 0101350 2018.03040 ARF AVENUE ASSOCIATES, LLC 01013501

811202 01-18-19

CAUTION

Three-year holding periodrequirement for applicablepartnership interests.

Partner's Instructions for Schedule K-1 (Form 1065)

Gain or loss from the disposition ofyour partnership interest may be netinvestment income under section

1411 and could be subject to the netinvestment income tax. See Form 8960, NetInvestment Income Tax - Individuals,Estates, and Trusts, and its instructions forinformation about how to report and figurethe tax due.

New section1061 increases the required long-termcapital gains holding period for an applicablepartnership interest from more than 1 year tomore than 3 years. The new holding periodapplies only to applicable partnershipinterests held in connection with theperformance of services as defined insection 1061. See section 1061 and Pub.541 for details.

other property received by the partner inexchange for that partner's interest isattributable to unrealized receivables (asdefined in section 751(c)) or inventory items(as defined in section 751(d)).

such failures during a calendar year. If thenominee intentionally disregards therequirement to report correct information,each $270 penalty increases to $540 or, ifgreater, 10% of the aggregate amount ofitems required to be reported, and there is nolimit to the amount of the penalty.

For more information on the treatment ofpartnership income, deductions, credits, andother items, see Pub. 535, BusinessExpenses.

The written notice to the partnership mustTo get forms and publications, see theinclude the names and addresses of both

parties to the exchange, the identifyingnumbers of the transferor and (if known) ofthe transferee, and the exchange date.

instructions for your tax return or visit the IRSwebsite at IRS.gov.

Every partnership that had operations in, orrelated to, a boycotting country, company, ora national of a boycotting country must fileForm 5713, International Boycott Report.

An exception to this rule is made for salesor exchanges of publicly traded partnershipinterests for which a broker is required to fileForm 1099-B, Proceeds From Broker andBarter Exchange Transactions.

There are potential limitations on partnershiplosses that you can deduct on your return.These limitations and the order in which youmust apply them are as follows: the basislimitations, the at-risk limitations, the passiveactivity limitations, and the excess businessloss limitations. These limitations arediscussed below.

If the partnership cooperated with aninternational boycott, it must give you a copyof its Form 5713. You must file your ownForm 5713 to report the partnership'sactivities and any other boycott operations

If a partner is required to notify thepartnership of a section 751(a) exchange butfails to do so, the partner will be subject to a that you may have. You may lose certain tax

benefits if the partnership participated in, orcooperated with, an international boycott.See Form 5713 and its instructions for moreinformation.

penalty for each such failure. However, nopenalty will be imposed if the partner canshow that the failure was due to reasonablecause and not willful neglect. Other limitations may apply to specific

deductions (for example, the section 179expense deduction).Generally, specificlimitations apply before the at-risk andpassive loss limitations.

A general partner is a partner who ispersonally liable for partnership debts. Generally, you may not claim your share of a

partnership loss (including a capital loss) tothe extent that it is greater than the adjustedbasis of your partnership interest at the endof the partnership's tax year. Any losses anddeductions not allowed this year because ofthe basis limit can be carried forwardindefinitely and deducted in a later yearsubject to the basis limit for that year.

A limited partner is a partner in a partnershipformed under a state limited partnership law,whose personal liability for partnership debtsis limited to the amount of money or otherproperty that the partner contributed or isrequired to contribute to the partnership.Some members of other entities, such asdomestic or foreign business trusts or limitedliability companies that are classified aspartnerships, may be treated as limitedpartners for certain purposes.

The partnership isn't responsible forkeeping the information needed to figure thebasis of your partnership interest. Althoughthe partnership does provide an analysis ofthe changes to your capital account in item Lof Schedule K-1, that information is based onthe partnership's books and records andcannot be used to figure your basis.

Nonrecourse loans are those liabilities of thepartnership for which no partner or relatedperson bears the economic risk of loss.

You can figure the adjusted basis of yourpartnership interest by adding items that

Any person who holds, directly or indirectly,an interest in a partnership as a nominee foranother person must furnish a writtenstatement to the partnership by the last dayof the month following the end of the

increase your basis and then subtractingitems that decrease your basis.

Generally, the partnership decides how tofigure taxable income from its operations.However, certain elections are made by youseparately on your income tax return and notby the partnership. These elections aremade under the following code sections.

Use the Worksheet for Adjusting theBasis of a Partner's Interest in thePartnership to figure the basis of yourinterest in the partnership.

partnership's tax year. This statement mustinclude the name, address, and identifyingnumber of the nominee and such otherperson, description of the partnershipinterest held as nominee for that person, andother information required by Temporary

For more details on the basis limitations,and special rules for charitable contributionsand foreign taxes paid and accrued, seePub. 541, Partnerships.

¥ Section 59(e) (deduction of certainqualified expenditures ratably over the periodof time specified in that section). For details,see the instructions for code J in box 13.

Regulations section 1.6031(c)-1T. Anominee that fails to furnish this statementmust furnish to the person for whom thenominee holds the partnership interest acopy of Schedule K-1 and relatedinformation within 30 days of receiving it fromthe partnership.

¥ Section 108(b)(5) (election related toGenerally, if you have (a) a loss or otherdeduction from any activity carried on as atrade or business or for the production ofincome by the partnership, and (b) amountsin the activity for which you are not at risk,you will have to complete Form 6198,At-Risk Limitations, to figure your allowableloss for the activity.

reduction of tax attributes due to exclusionfrom gross income of discharge ofindebtedness).

Section 263A(d) (preproductive¥expenses) . See the instructions for code P inbox 13.A nominee who fails to furnish all the

information required by TemporaryRegulations section 1.6031(c)-1T when due,or who furnishes incorrect information, issubject to a $270 penalty for each failure.The maximum penalty is $3,275,500 for all

Section 617 (deduction and recapture of¥certain mining exploration expenditures).

The at-risk rules generally limit the¥ Section 901 (foreign tax credit).amount of loss and other deductions that youcan claim to the amount you could actually

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Basis Limitations

Nonrecourse Loans

At-Risk Limitations

TIP

General Partner

Limited Partner

Nominee Reporting

Additional Information

International Boycotts

Limitations on Losses,Deductions, and Credits

Definitions

!

Elections

1


811203 01-18-19

Caution: The deduction for your share of the partnership's losses and deductions is limited to youradjusted basis in your partnership interest. If you entered zero on line 13 and the amount figured forline 13 was less than zero, a portion of your share of the partnership losses and deductions may notbe deductible. (See Basis Limitations, earlier, for more information.)

1.1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

2.

3.

4.

5.

6.

7.

Caution:

8.

9.

10.

11.

12.

13.

Worksheet for Adjusting the Basis of aPartner's Interest in the Partnership

realestate professional


Keep for Your Records

For a closely held C corporation(defined in section 465(a)(1)(B)), theabove conditions are treated as met

if more than 50% of the corporation's grossreceipts were from real property trades orbusinesses in which the corporationmaterially participated.

Your adjusted basis at the end of the prior year. Do not enter less than zero.Enter -0- if this is your first tax year ~~~~~~~~~~~~~~~~~Increases:Money and your adjusted basis in property contributed to the partnershipless the associated liabilities (but not less than zero) ~~~~~~~~~~

Your increased share of or assumption of partnership liabilities. (Subtractyour share of liabilities shown in item K of your 2017 Schedule K-1 from yourshare of liabilities shown in item K of your 2018 Schedule K-1 and add theamount of any partnership liabilities you assumed during the tax year(but not less than zero)) ~~~~~~~~~~~~~~~~~~~~~~

Your share of the partnership's income or gain (including tax-exempt income)reduced by any amount included in interest income with respect to thecredit to holders of clean renewable energy bonds ~~~~~~~~~~

Any gain recognized this year on contributions of property. Do not include

gain from transfer of liabilities ~~~~~~~~~~~~~~~~~~~

Your share of the excess of the deductions for depletion (other than oil

and gas depletion) over the basis of the property subject to depletion

Decreases:

Withdrawals and distributions of money and the adjusted basis of propertydistributed to you from the partnership. Do not include the amount ofproperty distributions included in the partner's income (taxable income)

~

A distribution may be taxable if the amount exceeds your adjusted basisof your partnership interest immediately before the distribution.Your decreased share of partnership liabilities and any decrease in yourindividual liabilities because they were assumed by the partnership. (Subtractyour share of liabilities shown in item K of your 2018 Schedule K-1 from yourshare of liabilities shown in item K of your 2017 Schedule K-1 and add theamount of your individual liabilities that the partnership assumed duringthe tax year (but not less than zero))~~~~~~~~~~~~~~~~~

Your share of the partnership's nondeductible expenses that are notcapital expenditures ~~~~~~~~~~~~~~~~~~~~~~~~

Your share of the partnership's losses and deductions (including capitallosses). However, include your share of the partnership's section 179expense deduction for this year even if you cannot deduct all of it becauseof limitations ��The amount of your deduction for depletion of any partnership oil and gasproperty, not to exceed your allocable share of the adjusted basis of thatproperty ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Your share of the adjusted basis of charitable property contributions andforeign taxes paid or accrued ��Your adjusted basis in the partnership at the end of this tax year. (Add lines 1through 6 and subtract lines 7 through 13 from the total. If zero or less,enter -0-.) ~~~~~~~~~~~~~~~~~~~~~~~~~~~~

lose in the activity. These losses anddeductions include a loss on the dispositionof assets and the section 179 expensededuction. However, if you acquired yourpartnership interest before 1987, the at-riskrules do not apply to losses from an activityof holding real property placed in servicebefore 1987 by the partnership. The activityof holding mineral property doesn't qualify forthis exception. The partnership shouldidentify on a statement attached toSchedule K-1 any losses that are not subjectto the at-risk limitations.

Generally, you are not at risk for amountssuch as the following.

Nonrecourse loans used to finance the¥activity, to acquire property used in theactivity, or to acquire your interest in theactivity, that are not secured by your own ~~

property (other than the property used in theactivity). See the instructions for item K, later,for the exception for qualified nonrecoursefinancing secured by real property.

¥ Cash, property, or borrowed amountsused in the activity (or contributed to theactivity, or used to acquire your interest inthe activity) that are protected against lossby a guarantee, stop-loss agreement, orother similar arrangement (excludingcasualty insurance and insurance againsttort liability).

Amounts borrowed for use in the activity¥from a person who has an interest in theactivity, other than as a creditor, or who isrelated, under section 465(b)(3), to a person(other than you) having such an interest.

You should get a separate statement ofincome, expenses, and other items for eachactivity from the partnership.

Section 469 provides rules that limit thededuction of certain losses and credits.These rules apply to partners who:

¥ Are individuals, estates, trusts, closelyheld C corporations, or personal servicecorporations; and trades or businesses in which you materially

participated.A real property trade or business is any

real property development, redevelopment,construction, reconstruction, acquisition,conversion, rental, operation, management,leasing, or brokerage trade or business.Services you performed as an employee arenot treated as performed in a real propertytrade or business unless you owned morethan 5% of the stock (or more than 5% of thecapital or profits interest) in the employer.

¥ Have a passive activity loss or credit forb. You performed more than 750 hours

the tax year.of services in real property trades orbusinesses in which you materiallyparticipated.

Generally, passive activities include thefollowing.

1. Trade or business activities in whichyou didn't materially participate.

2. Activities that meet the definition ofrental activities under TemporaryRegulations section 1.469-1T(e)(3) andRegulations section 1.469-1(e)(3).

3. Working interests in oil or gas wells ifyou were a general partner.

4. The rental of a dwelling unit anyPassive activities do not include the

partner used for personal purposes duringthe year for more than the greater of 14 daysor 10% of the number of days that theresidence was rented at fair rental value.

For purposes of this rule, each interest infollowing.rental real estate is a separate activity,unless you elect to treat all interests in rentalreal estate as one activity. For details onmaking this election, see the Instructions forSchedule E (Form 1040), SupplementalIncome and Loss.

1. Trade or business activities in whichyou materially participated.

2. Rental real estate activities in which 5. Activities of trading personal propertyyou materially participated if you were a for the account of owners of interests in the

activities.for the tax year. Youwere a real estate professional only if youmet both of the following conditions.

If you are married filing jointly, either you If you are an individual, an estate, or aor your spouse must separately meet both(a) and (b) of the above conditions, withouttaking into account services performed bythe other spouse.

trust, and you have a passive activity loss orcredit, use Form 8582, Passive Activity LossLimitations, to figure your allowable passivelosses and Form 8582-CR, Passive Activity

a. More than half of the personalservices you performed in trades orbusinesses were performed in real property

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Passive Activity Limitations

TIP

1


811204 01-18-19

Publicly traded partnerships (PTP).

Limited partners. Material participation.

Work counted toward materialparticipation.

Effect of determination.

Example.


Credit Limitations, to figure your allowablepassive credits. For a corporation, use Form8810, Corporate Passive Activity Loss andCredit Limitations. See the instructions forthese forms for details.

activity for any 3 tax years (whether or notconsecutive) preceding the tax year. Apersonal service activity involves theperformance of personal services in thefields of health, law, engineering,architecture, accounting, actuarial science,performing arts, consulting, or any othertrade or business in which capital isn't amaterial income-producing factor.

2. If you have an overall loss (theexcess of deductions and losses, includingany prior year unallowed loss, over income)or credits from a passive activity, report theincome, deductions, losses, and credits fromall passive activities using the Instructions forForm 8582 or the Instructions for Form8582-CR (or Form 8810), to see if yourdeductions, losses, and credits are limitedunder the passive activity rules.

If the partnership had more than oneactivity, it will attach a statement to yourSchedule K-1 that identifies each activity(trade or business activity, rental real estateactivity, rental activity other than rental realestate, and other activity) and specifies theincome (loss), deductions, and credits fromeach activity.

7. Based on all the facts andcircumstances, you participated in theactivity on a regular, continuous, andsubstantial basis during the tax year.

Thepassive activity limitations are appliedseparately for items (other than thelow-income housing credit and therehabilitation credit) from each PTP. Thus, a

If you are a limitedYou mustdetermine if you materially participated (a) ineach trade or business activity held throughthe partnership, and (b) if you were a realestate professional (defined earlier) in each

partner, you do not materially participate inan activity unless you meet one of the testsin paragraph 1, 5, or 6 above.

net passive loss from a PTP may not bededucted from other passive income.Instead, a passive loss from a PTP issuspended and carried forward to be appliedrental real estate activity held through the Generally, any work that youagainst passive income from the same PTPin later years. If the partner's entire interest inthe PTP is completely disposed of, anyunused losses are allowed in full in the yearof disposition.

partnership. All determinations of materialparticipation are based on your participationduring the partnership's tax year.

or your spouse does in connection with anactivity held through a partnership (whereyou own your partnership interest at the timethe work is done) is counted toward materialMaterial participation standards for

partners who are individuals are listed below.Special rules apply to certain retired or

participation. However, work in connectionwith the activity isn't counted toward materialparticipation if either of the following applies.

If you have an overall gain from a PTP,disabled farmers and to the survivingspouses of farmers. See the Instructions forForm 8582 for details.

the net gain is nonpassive income. Inaddition, the nonpassive income is includedin investment income to figure yourinvestment interest expense deduction.

1. The work isn't the type of work thatowners of the activity would usually do andone of the principal purposes of the work thatyou or your spouse does is to avoid thepassive loss or credit limitations.

Corporations should refer to theDo not report passive income, gains, orInstructions for Form 8810 for the material

participation standards that apply to them. losses from a PTP on Form 8582. Instead,use the following rules to figure and report onthe proper form or schedule your income,gains, and losses from passive activities thatyou held through each PTP you ownedduring the tax year.

2. You do the work in your capacity asIf you are an individual (either a

general partner or a limited partner whoowned a general partnership interest at alltimes during the tax year), you materiallyparticipated in an activity only if one or moreof the following apply.

an investor and you are not directly involvedin the day-to-day operations of the activity.Examples of work done as an investor thatwould not count toward material participationinclude: 1. Combine any current year income,

gains and losses, and any prior yearunallowed losses to see if you have anoverall gain or loss from the PTP. Includeonly the same types of income and lossesyou would include in your net income or lossfrom a non-PTP passive activity. See Pub.925, Passive Activity and At-Risk Rules, formore details.

a. Studying and reviewing financial1. You participated in the activity for statements or reports on operations of the

activity,more than 500 hours during the tax year.

2. Your participation in the activity for b. Preparing or compiling summaries orthe tax year constituted substantially all theparticipation in the activity of all individuals(including individuals who are not owners ofinterests in the activity).

analyses of the finances or operations of theactivity for your own use, and

c. Monitoring the finances or operationsof the activity in a non-managerial capacity.

2. If you have an overall gain, the net3. You participated in the activity for Income (loss), gain portion (total gain minus total losses) is

nonpassive income. On the form or scheduleyou normally use, report the net gain portionas nonpassive income and the remainingincome and the total losses as passiveincome and loss. To the left of the entryspace, enter "From PTP." It is important toidentify the nonpassive income because the

deductions, and credits from an activity arenonpassive if you determine that:

more than 100 hours during the tax year, andyour participation in the activity for the taxyear wasn't less than the participation in theactivity of any other individual (includingindividuals who were not owners of interestsin the activity) for the tax year.

¥ You materially participated in a trade orbusiness activity of the partnership, or

¥ You were a real estate professional(defined earlier) in a rental real estate activityof the partnership.4. The activity was a significant

participation activity for the tax year, and youparticipated in all significant participationactivities (including activities outside thepartnership) during the year for more than500 hours. A significant participation activity

nonpassive portion is included in modifiedadjusted gross income for purposes offiguring on Form 8582 the "specialallowance" for active participation in anon-PTP rental real estate activity. In

If you determine that you didn't materiallyparticipate in a trade or business activity ofthe partnership or if you have income (loss),deductions, or credits from a rental activity ofthe partnership (other than a rental realestate activity in which you materiallyparticipated as a real estate professional),the amounts from that activity are passive.Report passive income (losses), deductions,and credits as follows.

is any trade or business activity in which youparticipated for more than 100 hours duringthe year and in which you didn't materiallyparticipate under any of the materialparticipation tests (other than this test).

addition, the nonpassive income is includedin investment income when figuring yourinvestment interest expense deduction onForm 4952, Investment Interest ExpenseDeduction.

5. You materially participated in the 1. If you have an overall gain (the If you have Schedule E (Form1040) income of $8,000, and a Form 4797,Sales of Business Property, prior yearunallowed loss of $3,500 from the passiveactivities of a particular PTP, you have a$4,500 overall gain ($8,000 - $3,500). On

activity for any 5 tax years (whether or notconsecutive) during the 10 tax years thatimmediately precede the tax year.

excess of income over deductions andlosses, including any prior year unallowedloss) from a passive activity, report theincome, deductions, and losses from theactivity as indicated in these instructions.

6. The activity was a personal serviceactivity and you materially participated in the

Individuals (other than limitedpartners ).

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1


811205 01-18-19

Special allowance for a rental real estateactivity.

Example.

Commercial revitalization deduction.

Special rules for certain other activities.

Modified adjusted gross incomelimitation.


For rules on the disposition of anentire interest reported using theinstallment method, see the

Instructions for Form 8582.

To allocate and keep a record of theunallowed losses, use Worksheets5, 6, and 7 of Form 8582. List each

activity of the PTP in Worksheet 5. Enter theoverall loss from each activity in column (a).Complete column (b) of Worksheet 5according to its instructions. Multiply the totalunallowed loss from the PTP by each ratio incolumn (b) and enter the result in column (c)of Worksheet 5. Then, complete Worksheet6 if all the loss from the same activity is to bereported on one form or schedule. UseWorksheet 7 instead of Worksheet 6 if youhave more than one loss to be reported ondifferent forms or schedules for the sameactivity. Enter the net loss plus any prior yearunallowed losses in column (a) of Worksheet6 (or Worksheet 7, if applicable). The lossesin column (c) of Worksheet 6 (column (e) ofWorksheet 7) are the allowed losses toreport on the forms or schedules. Reportboth these losses and any income from thePTP on the forms and schedules younormally use.

Schedule E (Form 1040), line 28, report the recognize all your realized gain or loss.Report the income and losses on the formsand schedules you normally use.

allowance referred to in the precedingparagraph. If your modified adjusted grossincome is more than $100,000 (more than$50,000 if married filing separately), the

$4,500 net gain as nonpassive income incolumn (k). In column (h), report theremaining Schedule E (Form 1040) gain of$3,500 ($8,000 - $4,500). On theappropriate line of Form 4797, report theprior year unallowed loss of $3,500. Be sureto enter "From PTP" to the left of each entryspace.

special allowance is limited to 50% of thedifference between $150,000 ($75,000 ifmarried filing separately) and your modifiedadjusted gross income. When modifiedadjusted gross income is $150,000 or more($75,000 or more if married filing separately),there is no special allowance.

If you actively participated in a3. If you have an overall loss (but didn'trental real estate activity, you may be able todeduct up to $25,000 of the loss from theactivity from nonpassive income. This"special allowance" is an exception to thegeneral rule disallowing losses in excess of

dispose of your entire interest in the PTP toan unrelated person in a fully taxabletransaction during the year), the losses areallowed to the extent of the income, and theexcess loss is carried forward to use in a

Modified adjusted gross income is youradjusted gross income figured without takinginto account the following amounts, ifapplicable.

¥ Any passive activity loss.¥ Any rental real estate loss allowed undersection 469(c)(7) to real estate professionals(defined earlier).

income from passive activities. The specialallowance isn't available if you were married,file a separate return for the year, and didn'tlive apart from your spouse at all timesduring the year.

future year when you have income to offsetit. Report as a passive loss on the scheduleor form you normally use the portion of theloss equal to the income. Report the incomeas passive income on the form or scheduleyou normally use.

¥ Any overall loss from a PTP.¥ Any taxable social security or equivalentrailroad retirement benefits.

Only individuals, qualifying estates, andqualifying revocable trusts that made asection 645 election can actively participatein a rental real estate activity. Estates (otherthan qualifying estates), trusts (other thanqualifying revocable trusts that made asection 645 election), and corporationscannot actively participate. Limited partnerscannot actively participate unless futureregulations provide an exception.

You have a Schedule E (Form1040) loss of $12,000 (current year lossesplus prior year unallowed losses) and a Form

¥ Any deductible contributions to an IRA orcertain other qualified retirement plans undersection 219.

4797 gain of $7,200. Report the $7,200 gainon the appropriate line of Form 4797. OnSchedule E (Form 1040), line 28, report$7,200 of the losses as a passive loss incolumn (g). Carry forward to 2019 theunallowed loss of $4,800 ($12,000 -$7,200).

¥ The domestic production activitiesdeduction.¥ The student loan interest deduction.¥ The tuition and fees deduction.

¥ The deductible part of self-employmenttaxes.You are not considered to actively¥ The exclusion from income of interestfrom Series EE or I U.S. Savings Bonds usedto pay higher education expenses.

participate in a rental real estate activity if, atany time during the tax year, your interest(including your spouse's interest) in the

If you have unallowed losses from morethan one activity of the PTP or from the sameactivity of the PTP that must be reported ondifferent forms, you must allocate theunallowed losses on a pro rata basis to figurethe amount allowed from each activity or oneach form.

¥ The exclusion of amounts received underan employer's adoption assistance program.

activity was less than 10% (by value) of allinterests in the activity.

The special $25,000 allowance for thecommercial revitalization deduction fromrental real estate activities isn't subject to theactive participation rules or modifiedadjusted gross income limits discussedearlier. See section 469(i)(3)(C) as in effectbefore March 23, 2018, and the instructionsfor box 13, code Q, for more information.

Active participation is a less stringentrequirement than material participation. Youmay be treated as actively participating if youparticipated, for example, in makingmanagement decisions or arranging forothers to provide services (such as repairs)in a significant and bona fide sense.Management decisions that can count asactive participation include approving newtenants, deciding rental terms, approvingcapital or repair expenditures, and othersimilar decisions.

If you have net income (loss), deductions, orcredits from any activity to which specialrules apply, the partnership will identify theactivity and all amounts relating to it onSchedule K-1 or on an attached statement.

An estate is a qualifying estate if thedecedent would have satisfied the activeparticipation requirement for the activity forthe tax year the decedent died. A qualifyingestate is treated as actively participating fortax years ending less than 2 years after thedate of the decedent's death.

If you have net income subject torecharacterization under TemporaryRegulations section 1.469-2T(f) andRegulations section 1.469-2(f), report suchamounts according to the Instructions forForm 8582 (or Form 8810).The maximum special

allowance that single individuals and marriedindividuals filing a joint return can qualify for

If you have net income (loss), deductions,or credits from any of the following activities,treat such amounts as nonpassive and reportthem as indicated in these instructions.

is $25,000. The maximum is $12,500 formarried individuals who file separate returnsand who lived apart at all times during theyear. The maximum special allowance forwhich an estate can qualify is $25,000reduced by the special allowance for whichthe surviving spouse qualifies.

1. Working interests in oil and gas wellsif you are a general partner.4. If you have an overall loss and you

disposed of your entire interest in the PTP toan unrelated person in a fully taxabletransaction during the year, your losses(including prior year unallowed losses)allocable to the activity for the year are notlimited by the passive loss rules. A fully

2. The rental of a dwelling unit anypartner used for personal purposes duringthe year for more than the greater of 14 daysor 10% of the number of days that theresidence was rented at fair rental value.

If your modified adjusted gross income(defined below) is $100,000 or less ($50,000or less if married filing separately), your lossis deductible up to the maximum special

3. Trading personal property for theaccount of owners of interests in the activity.

taxable transaction is one in which you

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811211 01-18-19

Self-charged interest.


Publicly tradedpartnerships.

Beginning

Ending

Capital

Limitations on Losses, Deductions,and Credits,

The partnership willreport any "self-charged" interest income orexpense that resulted from loans between

partnership will have entered zero on thisline. If a partnership reports other than tax basis

capital accounts (i.e., GAAP, section 704(b),book, or other) to its partners in Item L, andtax basis capital, if reported on any partner'sSchedule K-1 at the beginning or end of thetax year would be negative, the partnershipmust report on line 20 of Schedule K-1, usingcode AH, such partner's beginning andending shares of tax basis capital. This is inaddition to the required reporting in Item L.

you and the partnership (or between thepartnership and another partnership or Scorporation if both entities have the sameowners with the same proportionalownership interest in each entity). If there

Item K should show your share of thepartnership's nonrecourse liabilities,partnership-level qualified nonrecoursefinancing, and other recourse liabilities at thebeginning and the end of the partnership'stax year. If you terminated your interest in thepartnership during the tax year, item Kshould show the share that existedimmediately before the total disposition. Apartner's "recourse liability" is anypartnership liability for which a partner ispersonally liable.

was more than one activity, the partnershipwill provide a statement allocating theinterest income or expense with respect toeach activity. The self-charged interest rulesdo not apply to your partnership interest if thepartnership made an election underRegulations section 1.469-7(g) to avoid theapplication of these rules. See theInstructions for Form 8582 for details.

For Item L, "tax basis capital" means (i)the amount of cash plus the tax basis ofproperty contributed to a partnership by apartner minus the amount of cash plus thetax basis of property distributed to a partnerby the partnership, net of any liabilitiesassumed or taken subject to, in connectionwith such contribution or distribution; plus (ii)the partner's cumulative share of partnershiptaxable income and tax-exempt income;minus (iii) the partner's cumulative share oftaxable loss and nondeductible, noncapitalexpenditures.

Use the total of the three amounts forfiguring the adjusted basis of yourpartnership interest.

Generally, you may use only the amountsshown next to "Qualified nonrecoursefinancing" and "Recourse" to figure youramount at risk. Do not include any amountsthat are not at risk if such amounts areincluded in either of these categories.

Losses attributable to your trade or businessmay be limited pursuant to section 461. Seesection 461 and Form 461 and itsinstructions for more information.

If your partnership is engaged in two ormore different types of activities subject tothe at-risk provisions, or a combination ofat-risk activities and any other activity, thepartnership should give you a statementshowing your share of nonrecourse liabilities,partnership-level qualified nonrecoursefinancing, and other recourse liabilities foreach activity.

If you have contributed property with abuilt-in gain or loss during the tax year, thepartnership will check the "Yes" box. Also,the partnership will attach a statementshowing the property contributed, the date ofthe contribution, and the amount of anybuilt-in gain or loss. A built-in gain or loss isthe difference between the fair market valueof the property and your adjusted basis in theproperty at the time it was contributed to thepartnership. If you contributed more than 10properties on a single date during the taxyear, the statement may instead show thenumber of properties contributed on thatdate, the total amount of built-in gain, and thetotal amount of built-in loss.

If the box in item D is checked, you are apartner in a PTP and must follow the rulesdiscussed earlier under

Qualified nonrecourse financing securedby real property used in an activity of holdingreal property that is subject to the at-riskrules is treated as an amount at risk.Qualified nonrecourse financing generallyincludes financing for which no one ispersonally liable for repayment that isborrowed for use in an activity of holding realproperty and that is loaned or guaranteed bya federal, state, or local government orborrowed from a "qualified" person.

For your protection, this form may show onlythe last four digits of your social securitynumber (SSN), individual taxpayeridentification number (ITIN), or employeridentification number (EIN). However, thepartnership has reported your completeidentification number to the IRS.

The partnership is providing this for yourinformation. Contributions of property with abuilt-in gain or loss could affect a partner'stax liability (in matters concerningprecontribution gain or loss, and distributions Qualified persons include any persons

actively and regularly engaged in the subject to section 737), and may also affecthow the partnership allocated certain itemson your Schedule K-1. For information onprecontribution gain or loss, see theinstructions for box 20, code W. For

business of lending money, such as a bankor savings and loan association. Qualifiedpersons generally do not include relatedparties (unless the nonrecourse financing iscommercially reasonable and onsubstantially the same terms as loansinvolving unrelated persons), the seller of theproperty, or a person who receives a fee forthe partnership's investment in the realproperty.

Generally, the amounts reported in item J arebased on the partnership agreement. If yourinterest commenced after the beginning ofthe partnership's tax year, the partnershipwill have entered, in the column,the percentages that existed for youimmediately after admission. If your interestterminated before the end of the

information on distributions subject tosection 737, see the instructions for box 19,code B.

partnership's tax year, the partnership willhave entered, in the column, thepercentages that existed immediately beforetermination.

See Pub. 925 for more information onqualified nonrecourse financing.

The amounts shown in boxes 1 through 20reflect your share of income, loss,deductions, credits, and other items frompartnership business or rental activitieswithout reference to limitations on losses oradjustments that may be required of youbecause of:

Both the partnership and you must meetthe qualified nonrecourse rules on this debtbefore you can include the amount shownnext to "Qualified nonrecourse financing" inyour at-risk computation.

The ending percentage share shown onthe line is the portion of the capitalyou would receive if the partnership wasliquidated at the end of its tax year by thedistribution of undivided interests in thepartnership's assets and liabilities. If yourcapital account is negative or zero, the

See earlier, for more information on

the at-risk limitations. 1. The adjusted basis of yourpartnership interest,

Item L

Item K

Excess Business LossLimitations

Item M

Part I. Information Aboutthe Partnership

Item D

Part II. Information Aboutthe Partner

Item E

Item J

Part III. Partner's Share ofCurrent Year Income,Deductions, Credits, andOther Items

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Specific Instructions

1


811212 01-18-19

Codes.

Attached statements.


Limitations on Losses, Deductions, andCredits,

Special allowance for a rental real estateactivity,

Publiclytraded partnerships,

Publicly tradedpartnerships,

Publicly traded partnerships,


If you have amounts other thanthose shown on Schedule K-1 toreport on Schedule E (Form 1040),

enter each item separately on line 28 ofSchedule E (Form 1040).

2. The amount for which you are at risk, If the partnership had more than one rentalIn box 11 and boxes 13 through 20,the partnership will identify each item byentering a code in the column to the left ofthe dollar amount entry space. These codesare identified on page 2 of Schedule K-1 andin these instructions.

and real estate activity, it will attach a statementidentifying the income or loss from eachactivity.

3. The passive activity limitations.

For information on these provisions, see

earlier.

If you are filing a 2018 Form 1040, usethe following instructions to determine whereto report a box 2 amount.The partnership will

enter an asterisk (*) after the code, if any, inthe column to the left of the dollar amountentry space for each item for which it hasattached a statement providing additionalinformation. For those informational itemsthat cannot be reported as a single dollaramount, the partnership will enter an asteriskin the left column and enter "STMT" in thedollar amount entry space to indicate theinformation is provided on an attachedstatement.

Other limitations may apply to specificdeductions (for example, the section 179expense deduction). Generally, specificlimitations apply before the at-risk andpassive loss limitations.

1. If you have a loss from a passiveactivity in box 2 and you meet all thefollowing conditions, report the loss onSchedule E (Form 1040), line 28, column (g).

a. You actively participated in the If you are an individual and the passiveactivity rules do not apply to the amountsshown on your Schedule K-1, take theamounts shown and enter them on the lineson your tax return as indicated in thesummarized reporting information shown onpage 2 of the Schedule K-1. If the passiveactivity rules do apply, report the amountsshown as indicated in these instructions.

partnership rental real estate activities. See

earlier.

b. Rental real estate activities withactive participation were your only passiveactivities.

c. You have no prior year unallowedlosses from these activities.

d. Your total loss from the rental real If you are not an individual, report theamounts in each box as instructed on yourtax return.

estate activities wasn't more than $25,000(not more than $12,500 if married filingseparately and you lived apart from yourspouse all year).The amount reported in box 1 is your share

of the ordinary income (loss) from trade orbusiness activities of the partnership.Generally, where you report this amount onForm 1040 depends on whether the amountis from an activity that is a passive activity to

The line numbers in the summarizedreporting information on page 2 ofSchedule K-1 are references to forms in usefor calendar year 2018. If you file your taxreturn on a calendar year basis, but yourpartnership files a return for a fiscal year,report the amounts on your tax return for theyear in which the partnership's fiscal yearends. For example, if the partnership's taxyear ends in February 2019, report theamounts on your 2019 tax return.

e. If you are a married person filingseparately, you lived apart from your spouseall year.

f. You have no current or prior yearunallowed credits from a passive activity.

you. If you are an individual partner filing a2018 Form 1040, find your situation belowand report your box 1 income (loss) asinstructed, after applying the basis andat-risk limitations on losses. If the partnershiphad more than one trade or business activity,it will attach a statement identifying theincome or loss from each activity.

g. Your modified adjusted gross incomewasn't more than $100,000 (not more than$50,000 if married filing separately and youlived apart from your spouse all year).

h. Your interest in the rental real estateactivity wasn't held as a limited partner.If you have losses, deductions, or credits

from a prior year that were not deductible orusable because of certain limitations, suchas the basis limitations or the at-risklimitations, take them into account indetermining your net income, loss, or credits

2. If you have a loss from a passiveactivity in box 2 and you do not meet all theconditions in (1) above, follow theInstructions for Form 8582 to figure howmuch of the loss you can report onSchedule E (Form 1040), line 28, column (g).However, if the box in item D is checked,report the loss following the rules for

earlier.

1. Report box 1 income (loss) frompartnership trade or business activities inwhich you materially participated onSchedule E (Form 1040), line 28, column (i)or (k).

for this year. However, except for passiveactivity losses and credits, do not combinethe prior year amounts with any amountsshown on this Schedule K-1 to get a net

2. Report box 1 income (loss) frompartnership trade or business activities inwhich you didn't materially participate, asfollows.

figure to report on any supporting schedules,statements, or forms attached to your return.Instead, report the amounts on the attachedschedule, statement, or form on ayear-by-year basis.

3. If you were a real estate professionaland you materially participated in the activity,report box 2 income (loss) on Schedule E(Form 1040), line 28, column (i) or (k).

a. If income is reported in box 1, reportthe income on Schedule E (Form 1040),line 28, column (h). However, if the box in

4. If you have income from a passiveitem D is checked, report the incomefollowing the rules for

earlier.

If the partnership reports a section 743(b) activity in box 2, report the income onSchedule E (Form 1040), line 28, column (h).However, if the box in item D is checked,

adjustment to partnership items, report theseadjustments as separate items on Form1040 in accordance with the reporting report the income following the rules for

earlier.b. If a loss is reported in box 1, follow

instructions for the partnership item beingadjusted. A section 743(b) adjustmentincreases or decreases your share ofincome, deduction, gain, or loss for a

the Instructions for Form 8582 to figure howmuch of the loss can be reported onSchedule E (Form 1040), line 28, column (g).However, if the box in item D is checked,report the loss following the rules for

earlier.

partnership item. For example, if thepartnership reports a section 743(b)adjustment to depreciation for property usedin its trade or business, report the adjustment

The amount in box 3 is a passive activityamount for all partners. If the partnership hadmore than one rental activity, it will attach astatement identifying the income or loss fromeach activity. Report the income or loss asfollows.

on line 28 of Schedule E (Form 1040) inaccordance with the instructions for box 1 ofSchedule K-1. Generally, the income (loss) reported in

box 2 is a passive activity amount for allpartners. However, the income (loss) inbox 2 isn't from a passive activity if you werea real estate professional (defined earlier)and you materially participated in the activity.

1. If box 3 is a loss, follow theInstructions for Form 8582 to figure howmuch of the loss can be reported onSchedule E (Form 1040), line 28, column (g).However, if the box in item D is checked,

Box 1. Ordinary BusinessIncome (Loss)

Box 3. Other Net Rental Income(Loss)

Box 2. Net Rental Real EstateIncome (Loss)

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Income (Loss)

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811213 01-18-19

(a)(b)

CAUTION

CAUTION

CAUTION

Code A. Other portfolio income (loss).

Code B. Involuntary conversions.

CAUTION

CAUTIONCode C. Section 1256 contracts andstraddles.




Passive Loss Limitations

Publicly traded partnerships,If you have any foreign source netlong-term capital gain (loss), see theinstructions for box 16, later.

If you have any foreign source netsection 1231 gain (loss), see theinstructions for box 16, later.

If you have any foreign sourcecollectibles (28%) gain (loss), seethe instructions for box 16, later.

Qualified dividends are excludedfrom investment income, but youmay elect to include part or all of

these amounts in investment income. Seethe instructions for line 4g of Form 4952,Investment Interest Expense Deduction, forimportant information on making thiselection.

If you have any foreign sourcequalified dividends, see theinstructions for box 16, later.

If you have any foreign sourceunrecaptured section 1250 gain, seethe instructions for box 16, later.

report the loss following the rules for earlier.

¥ Hybrid dividends as defined in section245A(e)(4).

2. If income is reported in box 3, report The amount in box 10 is generally passive ifit is from a:the income on Schedule E (Form 1040),

line 28, column (h). However, if the box initem D is checked, report the incomefollowing the rules for

earlier.

Dividend equivalents are not reported onForm 1040. This information is provided forpersons that are not U.S. persons, whogenerally are required to treat dividendequivalents as U.S. source dividends, anddomestic partnerships with partners whomay need this information. The ordinarydividends amount in line 6a does not includethe amount of dividend equivalents.

¥ Rental activity, or¥ Trade or business activity in which youdidn't materially participate.

However, an amount from a rental realestate activity isn't from a passive activity ifyou were a real estate professional (definedearlier) and you materially participated in theactivity.

Generally, amounts on this line are notpassive income, and you should report themon Schedule E (Form 1040), line 28, column(k) (for example, guaranteed payments forpersonal services).

If the amount is either a loss that isn'tfrom a passive activity or a gain, report iton line 2, column (g), of Form 4797, Sales ofBusiness Property. Do not complete columns(b) through (f) on line 2 of Form 4797.Instead, enter "From Schedule K-1 (Form1065)" across these columns.

Report royalties on Schedule E (Form 1040),line 4.

Portfolio income or loss (shown in boxes 5through 9b and in box 11, code A) isn'tsubject to the passive activity limitations.Portfolio income includes income (notderived in the ordinary course of a trade orbusiness) from interest, ordinary dividends,annuities or royalties, and gain or loss on thesale of property that produces such incomeor is held for investment.

Report the net short-term capital gain (loss)on Schedule D (Form 1040), line 5.

If the amount is a loss from a passiveactivity, see in theInstructions for Form 4797. Report the lossfollowing the Instructions for Form 8582 tofigure how much of the loss is allowed onForm 4797. However, if the box in item D ischecked, report the loss following the rulesfor earlier. If thepartnership had net section 1231 gain (loss)from more than one activity, it will attach astatement that will identify the section 1231gain (loss) from each activity.

Report the net long-term capital gain (loss)on Schedule D (Form 1040), line 12.

Report interest income on line 2b of Form1040. If the amount of interest incomeincluded in box 5 includes interest from thecredit for holders of clean renewable energybonds, the partnership will attach astatement to Schedule K-1 showing yourshare of interest income from these credits.Because the basis of your interest in thepartnership has been increased by yourshare of the interest income from thesecredits, you must reduce your basis by thesame amount. See line 4 of the Worksheetfor Adjusting the Basis of a Partner's Interestin the Partnership.

Report collectibles gain or loss on line 4 ofthe 28% Rate Gain Worksheet - Line 18 inthe Instructions for Schedule D (Form 1040).

The partnership will report portfolio incomeother than interest, ordinary dividend,royalty, and capital gain (loss) income, andattach a statement to tell you what kind ofportfolio income is reported.Report ordinary dividends on line 3b of Form

1040.There are three types of unrecapturedsection 1250 gain. Report your share of thisunrecaptured gain on the UnrecapturedSection 1250 Gain Worksheet - Line 19 inthe Instructions for Schedule D (Form 1040)as follows.

If the partnership held a residual interestin a real estate mortgage investment conduit(REMIC), it will report on the statement yourshare of REMIC taxable income (net loss)that you report on Schedule E (Form 1040),line 38, column (d). The statement will alsoreport your share of any "excess inclusion"that you report on Schedule E (Form 1040),line 38, column (c), and your share of section212 expenses that you report on Schedule E(Form 1040), line 38, column (e).

Report any qualified dividends on line 3a ofForm 1040.

¥ Report unrecaptured section 1250 gainfrom the sale or exchange of thepartnership's business assets on line 5.

¥ Report unrecaptured section 1250 gainfrom the sale or exchange of an interest in apartnership on line 10.

This isyour net gain (loss) from involuntaryconversions due to casualty or theft. Thepartnership will give you a statement thatshows the amounts to be reported on Form4684, Casualties and Thefts, line 34,columns (b)(i), (b)(ii), and (c).

¥ Report unrecaptured section 1250 gainfrom an estate, trust, regulated investmentcompany (RIC), or real estate investmenttrust (REIT) on line 11.

If the partnership reports onlyunrecaptured section 1250 gain from thesale or exchange of its business assets, itwill enter a dollar amount in box 9c. If itreports the other two types of unrecapturedgain, it will provide an attached statementthat shows the amount for each type ofunrecaptured section 1250 gain.

Attach a statement to the K-1 identifying If there was a gain (loss) from a casualtythe dividends included in box 6a or 6b thatare:¥ Eligible for the deduction for dividendsreceived under sections 243 (a), (b) or (c),¥ Eligible for the deduction for dividendsreceived under section 245,¥ Eligible for the deduction for dividendsreceived under section 245A, and

or theft to property not used in a trade orbusiness or for income-producing purposes,the partnership will provide you with theinformation you need to complete Form4684.

The partnership will report any

Box 10. Net Section 1231 Gain(Loss)

Box 6c. Dividend Equivalents

Box 4. Guaranteed Payments

Box 7. Royalties

Box 8. Net Short-Term CapitalGain (Loss)

Box 9a. Net Long-Term CapitalGain (Loss)

Box 5. Interest Income

Box 9b. Collectibles (28% ) Gain(Loss)

Box 11. Other Income (Loss)

Box 9c. Unrecaptured Section1250 GainBox 6a. Ordinary Dividends

Box 6b. Qualified Dividends

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Portfolio Income

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811221 01-18-19

not

Code D. Mining exploration costs recap-ture.

Code E. Cancellation of debt.

Code F. Section 951A income.

(a) (b)

(c)

Code G. Section 965(a) inclusion.

Code H. Subpart F income other thansections 951A and 965 inclusions.

Replacement stock purchased by thepartnership.

(a)

(b)

(c) (d)

(e)

Code I. Other income (loss).


Publicly traded partnerships,

net gain or loss from section 1256 contracts.Report this amount on Form 6781, Gains andLosses From Section 1256 Contracts andStraddles.

Mortgage Corporation (Freddie Mac). Thepartnership will report on an attachedstatement the amount of gain or loss

¥ Net short-term capital gain (loss) and netlong-term capital gain (loss) fromSchedule D (Form 1065) that isn't portfolioincome. An example is gain or loss from thedisposition of nondepreciable personalproperty used in a trade or business activityof the partnership. Report total net short-termgain (loss) on Schedule D (Form 1040),line 5. Report the total net long-term gain(loss) on Schedule D (Form 1040), line 12.

attributable to the sale or exchange of thequalified preferred stock, the date the stockwas acquired by the partnership, and thedate the stock was sold or exchanged by thepartnership. If the partner is a financialinstitution, report the gain or loss on line 5 orline 12 of Schedule D (Form 1040) inaccordance with the Instructions for

The partnership will give you astatement that shows the information neededto recapture certain mining exploration costs(section 617). See Pub. 535 for details.

Generally,this cancellation of debt (COD) amount isincluded in your gross income (Schedule 1(Form 1040), line 21). Under section 108(b)(5), you may elect to apply any portion of theCOD amount excluded from gross income tothe reduction of the basis of depreciableproperty. See Form 982 for more details.

¥ Current year section 108(i) cancellation ofdebt (COD) income. The partnership willprovide your share of the deferred CODincome amount that you must include inincome in the current tax year under section108(i)(1) or section 108(i)(5)(D)(i) or (ii).

Schedule D (Form 1040) and the Instructionsfor Form 8949. If a partner is a financialinstitution referred to in section 582(c)(2) or adepositary institution holding company (asdefined in section 3(w)(1) of the FederalDeposit Insurance Act), report the gain orloss in accordance with the Instructions forForm 4797, and Rev. Proc. 2008-64,2008-47 I.R.B. 1195.

¥ Gain from the sale or exchange ofqualified small business (QSB) stock (asdefined in the Instructions for Schedule D(Form 1065)) that is eligible for a section

Thepartnership will provide information you needto figure section 951A income. Report yoursection 951A income on Schedule 1 (Form1040), line 21, or the comparable line of yourincome tax return. For details, see theInstructions for Form 8992, U.S. ShareholderCalculation of Global Intangible Low - TaxedIncome (GILTI).

1202 exclusion. The partnership should alsogive you the name of the corporation thatissued the QSB stock, your share of thepartnership's adjusted basis and sales priceof the QSB stock, and the dates the QSB

¥ Partnership gains from the disposition offarm recapture property (see the instructionsfor line 27 of Form 4797) and other items towhich section 1252 applies.

¥ Income from recoveries of tax benefititems. A tax benefit item is an amount youdeducted in a prior tax year that reducedyour income tax. Report this amount onSchedule 1 (Form 1040), line 21 to the extentit reduced your tax in the prior tax year.

stock was bought and sold. Corporatepartners are not eligible for the section 1202exclusion. The following additional limitationsapply at the partner level.

If you are eligible for and wish to claim adeduction under section 250 from your GILTIinclusion, see Form 8993, Section 250Deduction for Foreign Derived IntangibleIncome (FDII) and Global IntangibleLow-Taxed Income (GILTI), and itsinstructions.

1. You must have held an interest in thepartnership when the partnership acquiredthe QSB stock and at all times thereafter untilthe partnership disposed of the QSB stock.

¥ Gambling gains and losses.

1. If the partnership wasn't engaged inthe trade or business of gambling, (a) reportgambling winnings on Schedule 1 (Form1040), line 21, and (b) deduct gamblinglosses to the extent of winnings onSchedule A (Form 1040), line 16.

2. Your share of the eligible section1202 gain cannot exceed the amount thatwould have been allocated to you based onyour interest in the partnership at the time theQSB stock was acquired.

Thepartnership will provide your share of thesection 965(a) inclusions. See theInstructions for Form 965 and theInstructions for Form 965-A for more details.

2. If the partnership was engaged in thetrade or business of gambling, (a) reportgambling winnings on line 28 of Schedule E(Form 1040), and (b) deduct gamblinglosses (to the extent of winnings) on line 28of Schedule E (Form 1040), column (i).

See the Instructions for Schedule D(Form 1040) and the Instructions for Form8949 for details on how to report the gainand the amount of the allowable exclusion.

Thepartnership will provide your share of subpartF inclusions other than sections 951A and965 inclusions.

¥ Gain eligible for section 1045 rollover.¥ Gain (loss) from the disposition of aninterest in oil, gas, geothermal, or othermineral properties. The partnership willattach a statement that provides adescription of the property, your share of theamount realized from the disposition, yourshare of the partnership's adjusted basis inthe property (for other than oil or gas

The partnership should giveyou the name of the corporation thatissued the qualified small business (QSB)stock, your share of the partnership'sadjusted basis and sales price of the QSB

Attach a statement to the Schedule K-1identifying any subpart F inclusionattributable to:¥ The sale or exchange by a controlledforeign corporation (CFC) of stock in anotherforeign corporation described in section964(e)(4), or¥ Hybrid dividends of tiered corporationsunder section 245A(e)(2).

stock, the dates the QSB stock wasbought and sold, your share of gain fromthe sale of the QSB stock, and yourshare of the gain that was deferred by thepartnership under section 1045. Corporatepartners are not eligible for the section 1045rollover. To qualify for the section 1045rollover:

properties), and your share of the totalintangible drilling costs, development costs,and mining exploration costs (section 59(e)expenditures) passed through for theproperty. You must figure your gain or lossfrom the disposition by increasing your shareof the adjusted basis by the intangible drilling

Amountswith code I are other items of income, gain,or loss not included in boxes 1 through 10 orreported in box 11 using codes A through H.The partnership should give you adescription and the amount of your share foreach of these items.

costs, development costs, or mineexploration costs for the property that youcapitalized (that is, costs that you didn't electto deduct under section 59(e)). Report a lossin Part I of Form 4797. Report a gain in PartIII of Form 4797 in accordance with theinstructions for line 28. See Regulationssection 1.1254-5 for details.

1. You must have held an interest in thepartnership during the entire period in whichthe partnership held the QSB stock (morethan 6 months prior to the sale), andReport loss items that are passive activity

amounts to you following the Instructions forForm 8582. However, if the box in item D ischecked, report the loss following the rulesfor earlier.

2. Your share of the gain eligible for thesection 1045 rollover cannot exceed theamount that would have been allocated toyou based on your interest in the partnershipat the time the QSB stock was acquired.

¥ Any income, gain, or loss to thepartnership under section 751(b) (certainCode I items may include the following.distributions treated as sales or exchanges).Report this amount on Form 4797, line 10.¥ Specially allocated ordinary gain (loss).Report this amount on Form 4797, line 10.

¥ Gain or loss attributable to the sale orexchange of qualified preferred stock of theFederal National Mortgage Association(Fannie Mae) and the Federal Home Loan

See the Instructions for Schedule D(Form 1040) and the Instructions for Form8949 for details on how to report the gain

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811222 01-18-19

Opting out of partnership election.

Code A. Cash contributions (60% ).

Code B. Cash contributions (30% ).Distribution of replacement QSB stock toa partner that reduces another partner'sinterest in replacement QSB stock.

Code C. Noncash contributions (50% ).

Replacement stock not purchased by thepartnership.

(a) (b)

(c) (d)

(a)

(b)

(c)

Food inventory contributions.

Making the section 1045 election.

Code D. Noncash contributions (30% ).

Code E. Capital gain property to a 50%organization (30% ).

Contributions. Codes A through G.

Code F. Capital gain property (20% ).



Special30% Limit for Capital Gain Property

replacement QSB stock, the date the stockwas purchased, and the cost of the stock.

and the amount of the allowable postponedgain.

Schedule A (Form 1040). If yourcontributions are subject to more than one ofthe AGI limitations, see Worksheet 2.Applying the Deduction Limits in Pub. 526.

¥ If a partner treats the partner's interest inQSB stock that is purchased by a purchasingpartnership as the partner's replacementQSB stock, the name and EIN of thepurchasing partnership, the name of thecorporation that issued the replacement QSB

Youcan opt out of the partnership's section 1045election and either (1) recognize the gain or(2) elect to purchase different replacementQSB stock, either directly or throughownership of a different partnership thatacquired replacement QSB stock. Yousatisfy the requirement to purchasereplacement QSB stock if you own aninterest in a partnership that purchases QSBstock during the 60-day period. You alsomust notify the partnership, in writing, if youopt out of the partnership's section 1045election. If you recognize gain, you mustnotify the partnership, in writing, of theamount of the gain that you are recognizing.

Charitable contribution deductions arenot taken into account in figuring yourpassive activity loss for the year. Do notinclude them on Form 8582.

stock, the partner's share of the cost of theQSB stock that was purchased by thepartnership, the computation of the partner'sadjustment to basis with respect to that QSBstock, and the date the stock was purchasedby the partnership.

Report this amount, subject to the 60% AGIlimitation, on line 11 of Schedule A (Form1040).

Report this amount, subject to the 30% AGIlimitation, on line 11 of Schedule A (Form1040). You

must recognize gain upon a distribution ofreplacement QSB stock to another partnerthat reduces your share of the replacementQSB stock held by a partnership. The

Ifproperty other than cash is contributed, andif the claimed deduction for one item orgroup of similar items of property exceeds

The partnership should giveyou the name of the corporation thatissued the QSB stock, your share of thepartnership's adjusted basis and sales price

amount of gain that you must recognize isbased on the amount of gain that you wouldrecognize upon a sale of the distributedreplacement QSB stock for its fair marketvalue on the date of the distribution, but notto exceed the amount you previouslydeferred under section 1045 with respect tothe distributed replacement QSB stock. If the

$5,000, the partnership must give you a copyof Form 8283, Noncash CharitableContributions, to attach to your tax return. Donot deduct the amount shown on Form 8283.

of the QSB stock, the dates the QSBstock was bought and sold, and yourshare of gain from the sale of the QSB stock.Corporate partners are not eligible for thesection 1045 rollover. To qualify for thesection 1045 rollover:

It is the partnership's contribution. Instead,deduct the amount identified by code C,box 13, subject to the 50% AGI limitation, online 12 of Schedule A (Form 1040).

partnership distributed your share ofreplacement QSB stock to another partner,the partnership should give you the nameof the corporation that issued thereplacement QSB stock, the date thereplacement QSB stock was distributed toanother partner or partners, and yourshare of the partnership's adjusted basis andfair market value of the replacement QSBstock on such date.

If the partnership provides you withinformation that the contribution wasproperty other than cash and doesn't giveyou a Form 8283, see the Instructions forForm 8283 for filing requirements. Do not fileForm 8283 unless the total claimeddeduction for all contributed items ofproperty exceeds $500.

1. You must have held an interest in thepartnership during the entire period in whichthe partnership held the QSB stock,

2. Your share of the gain eligible for thesection 1045 rollover cannot exceed theamount that would have been allocated toyou based on your interest in the partnershipat the time the QSB stock was acquired, and The

partnership will report on an attachedstatement your share of qualified foodinventory contributions. The food inventorycontribution isn't included in the amountreported in box 13 using code C. Thepartnership will also report your share of thepartnership's net income from the businessactivities that made the food inventorycontribution(s). Your deduction for food

3. You must purchase other QSB stock For more information, see Regulations(as defined in the Instructions for Schedule D(Form 1040)) during the 60-day period thatbegan on the date the QSB stock was soldby the partnership.

section 1.1045-1.

See the Instructions for Schedule D(Form 1040) and the Instructions for Form8949 for details on how to report the gainand the amount of the allowable postponedgain.

Use this amount, along with the total cost ofsection 179 property placed in service duringthe year from other sources, to complete PartI of Form 4562, Depreciation and

inventory contributions cannot exceed 15%of your aggregate net income for the tax yearfrom the business activities from which thefood inventory contribution was made(including your share of net income frompartnership or S corporation businesses thatmade food inventory contributions). Amountsthat exceed the 15% limitation may becarried over for up to 5 years. Report thededuction, subject to the 50% AGI limitation,on line 12 of Schedule A (Form 1040).

Amortization. The partnership will report onan attached statement your allowable shareof the cost of any qualified enterprise zone orqualified real property it placed in serviceduring the tax year. Report the amount fromline 12 of Form 4562 allocable to a passive

You make a section 1045 election on atimely filed return for the tax year duringwhich the partnership's tax year ends. Seethe Instructions for Form 8949 and theInstructions for Schedule D (Form 1040) formore information. Attach to your Schedule D(Form 1040) a statement that includes thefollowing information for each amount of gainthat you do not recognize under section1045.

activity using the Instructions for Form 8582.If the amount isn't a passive activitydeduction, report it on Schedule E (Form1040), line 28, column (j). However, if thebox in item D is checked, report this amountfollowing the rules for

earlier.

Report this amount, subject to the 30% AGIlimitation, on line 12 of Schedule A (Form1040).

¥ The name of the corporation that issuedthe QSB stock.¥ The name and EIN of the sellingpartnership. Report this amount,

subject to the 30% AGI limitation, on line 12of Schedule A (Form 1040). See

in Pub.526.

Thepartnership will give you a statement thatshows charitable contributions subject to the100% , 60% , 50% , 30% , and 20% adjustedgross income (AGI) limitations. For more

¥ The dates the QSB stock was purchasedand sold.

¥ The amount of gain that isn't recognizedunder section 1045.¥ If a partner purchases QSB stock, thename of the corporation that issued the

Report this amount, subject to the 20% AGIdetails, see Pub. 526, CharitableContributions, and the Instructions for

Box 12. Section 179 Deduction

Box 13. Other Deductions

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Deductions

1


811223 01-18-19

Code G. Contributions (100% ).

Code O. Dependent care benefits.

Qualified conservation contributionsof property used in agriculture orlivestock production.

Code P. Preproductive period expenses.

Code Q. Commercial revitalization de-duction from rental real estate activities.

Cash contributions for relief efforts in Code R. Pensions and IRAs. certain disaster areas.

Code H. Investment interest expense. Code S. Reforestation expense deduc-tion.

Code K. Excess business interest ex-pense.

Code L. Deductions-portfolio (other).

Codes T through V.

Code I. Deductions-royalty income. Code W. Other deductions. Code M. Amounts paid for medical insur-ance.

Code J. Section 59(e)(2) expenditures.

Code N. Educational assistance benefits.


limitation, on line 12 of Schedule A (Form1040).

incurred. If there is more than one type ofexpenditure, the amount of each type willalso be listed.

1040), line 28, up to the $5,250 limitation. Ifyour benefits exceed $5,250, you may beable to use the excess amount on Form 8863to figure the education credits.

Thepartnership will report your distributive shareof the following contributions (both cash andnoncash) that may be subject to the 100%AGI limitation.

If you deduct these expenditures in full inthe current year, they are treated asadjustments or tax preference items forpurposes of alternative minimum tax.However, you may elect to amortize theseexpenditures over the number of years in theapplicable period rather than deduct the fullamount in the current year. If you make thiselection, these items are not treated asadjustments or tax preference items.

Thepartnership will report the dependent carebenefits you received. You must use Form2441, Part III, to figure the amount, if any, ofthe benefits you may exclude from yourincome.

The partnership willreport your share of qualified conservationcontributions of property used in agricultureor livestock production. This contribution isn't

You may be able to deduct these expensescurrently or you may need to capitalize themunder section 263A. See Pub. 225, Farmer'sTax Guide, and Regulations section1.263A-4 for details.

Under the election, you can deductcirculation expenditures ratably over a 3-yearperiod. Research and experimentalexpenditures and mining exploration anddevelopment costs can be amortized over a10-year period. Intangible drilling anddevelopment costs can be amortized over a60-month period. The amortization periodbegins with the month in which such costswere paid or incurred.

included in the amount reported in box 13using code C. If you are a farmer or rancher,you qualify for a 100% AGI limitation for thiscontribution. Otherwise, your deduction forthis contribution is subject to a 50% AGI

Follow the Instructions for Form 8582 tofigure how much of the deduction can bereported on Schedule E (Form 1040),line 28, column (g).

limitation. Report this deduction on line 12 ofSchedule A (Form 1040). See Pub. 526 formore information on qualified conservationcontributions.

Paymentsmade on your behalf to an IRA, qualifiedplan, simplified employee pension (SEP), ora SIMPLE IRA plan. See the Schedule 1(Form 1040) instructions for line 32 to figure

Make the election on Form 4562. If youmake the election, report the current yearamortization of section 59(e) expendituresfrom Part VI of Form 4562 on line 28 ofSchedule E (Form 1040). If you do not makethe election, report the section 59(e)(2)

The partnershipwill report your share of qualified cashcontributions that were donated for reliefefforts in certain disaster areas. You canelect to deduct 100% of these contributions your IRA deduction. Enter payments made to

a qualified plan, SEP, or SIMPLE IRA planon Schedule 1 (Form 1040), line 28. If thepayments to a qualified plan were to adefined benefit plan, the partnership shouldgive you a statement showing the amount ofthe benefit accrued for the current tax year.

on line 11 of Schedule A (Form 1040). If youdo not make this election, add this amount tothe cash contributions reported in box 13using code A and enter the total amount,subject to a 50% AGI limitation, on line 11 ofSchedule A (Form 1040).

expenditures on line 28 of Schedule E (Form1040) and figure the resulting adjustment ortax preference item (see Form 6251,Alternative Minimum Tax-Individuals).Whether you deduct the expenditures orelect to amortize them, report the amount ona separate line in column (i) of line 28 if you

Include this amount on Form 4952, line 1. Ifthe partnership has investment income orother investment expense, it will report yourshare of these items in box 20 using codes A

The partnership will provide astatement that describes the qualified timberproperty for these reforestation expenses.The expense deduction is limited to $10,000($5,000 if married filing separately) for eachqualified timber property, including yourshare of the partnership's expense and anyreforestation expenses you separately paidor incurred during the tax year.

materially participated in the partnershipactivity. If you didn't materially participate,follow the Instructions for Form 8582 to figurehow much of the deduction can be reportedin column (g).and B. Include investment income and

expenses from other sources to figure howmuch of your total investment interest isdeductible. You will also need thisinformation to figure your investment interestexpense deduction.

If the partnership reports excessbusiness interest expense to the partner, the partner is required to file Form 8990. See theInstructions for Form 8990 for additionalinformation.

If you didn't materially participate in the If the partnership paid or accrued intereston debts properly allocable to investmentproperty, the amount of interest you areallowed to deduct may be limited.

activity, use Form 8582 to figure the amountto report on Schedule E (Form 1040), line 28,column (g). If you materially participated inthe reforestation activity, report thededuction on line 28, column (i), ofSchedule E (Form 1040).

Generally, you should report these amountson Schedule A (Form 1040), line 16. See theinstructions for Schedule A, line 16, fordetails. These deductions are not taken intoaccount in figuring your passive activity lossfor the year. Do not enter them on Form8582.

For more information on the specialprovisions that apply to investment interestexpense, see Form 4952 and Pub. 550,Investment Income and Expenses.

These codes arereserved for future use.

Include deductions allocable to royalties onSchedule E (Form 1040), line 19. For thistype of expense, enter "From Schedule K-1(Form 1065)."

Amounts withthis code may include the following.¥ Itemized deductions that Form 1040 filersreport on Schedule A (Form 1040).¥ Soil and water conservation expendituresand endangered species recoveryexpenditures. See section 175 for limitationson the amount you are allowed to deduct.

Any amounts paid during the tax yearfor insurance that constitutes medical carefor you, your spouse, your dependents, andyour children under age 27 who are notdependents. On Schedule 1 (Form 1040),

These deductions are not taken intoaccount in figuring your passive activity lossfor the year. Do not enter them on Form8582.

line 29, you may be allowed to deduct suchamounts, even if you do not itemizedeductions. If you do itemize deductions,enter on line 1 of Schedule A (Form 1040)any amounts not deducted on Schedule 1(Form 1040), line 29.

¥ Expenditures for the removal ofarchitectural and transportation barriers tothe elderly and disabled that the partnershipelected to treat as a current expense. Thedeductions are limited by section 190(c) to$15,000 per year from all sources.¥ Interest expense allocated todebt-financed distributions. The manner in

On an attached statement, the partnershipwill show the type and the amount ofqualified expenditures for which you maymake a section 59(e) election. The

Deduct your educational assistance benefitson a separate line of Schedule E (Form

statement will also identify the property forwhich the expenditures were paid or

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811224 01-18-19

Code X. Section 965(c) deduction.

Codes A, B, C, and D. Low-income hous-ing credit.

Code A. Net earnings (loss) fromself-employment.

Code B. Gross farming or fishing in-come.

Code E. Qualified rehabilitation expendi-tures (rental real estate).

Code C. Gross nonfarm income.


Passive Activity Limitations,

materialparticipation,

Generally, you are not required tocomplete the source credit form orattach it to Form 3800 if you are a

taxpayer that isn't a partnership or Scorporation, and your only source for a creditlisted in Form 3800, Part III, is from apartnership, S corporation, estate, trust, orcooperative. (Instead, you can report thiscredit directly on Form 3800, Part III, andenter the EIN of the partnership in column (b)of Part III.) The following exceptions apply.

You are claiming the investment credit(Form 3468) or the biodiesel and renewablediesel fuels credit (Form 8864) in Part III withbox A or B checked.� The taxpayer is an estate or trust and thesource credit can be allocated tobeneficiaries. For more details, see theInstructions for Form 1041, U.S. Income TaxReturn for Estates and Trusts, Schedule K-1,box 13.

Code H. Investment interestexpense;

The taxpayer is a cooperative and thesource credit can or must be allocated topatrons. For more details, see theInstructions for Form 1120-C, U.S. IncomeTax Return for Cooperative Associations,Schedule J, line 5c.

Limitations on Losses,Deductions, and Credits,

which you report such interest expensedepends on your use of the distributed debtproceeds. If the proceeds were used in atrade or business activity, report the intereston line 28 of Schedule E (Form 1040). Incolumn (a), enter the name of the partnershipand "interest expense." If you materiallyparticipated in the trade or business activity,

can be taken in limited circumstances. SeeForm 8903 and its instructions for details. Ifyou qualify for the DPAD, the partnership will If you have credits that are passive activity

credits to you, you must complete Formprovide you with a statement with informationthat you can use to figure the DPAD. Reportthe qualified production activities income(QPAI) reported to you by the partnership inthe applicable column of Form 8903, line 7.Report the portion of Form W-2 wagesreported to you by the partnership on line 17of Form 8903.

8582-CR (or Form 8810 for corporations) inaddition to the credit forms identified below.See earlier, andthe Instructions for Form 8582-CR (or Form8810) for details.enter the interest expense in column (i). If

you didn't materially participate in theactivity, follow the Instructions for Form 8582to figure the interest expense you can reportin column (g). See the definition of

earlier. If the proceeds wereused in an investment activity, report theinterest on Form 4952. If the proceeds areused for personal purposes, the interest isgenerally not deductible.

¥ Deductions - portfolio (formerlydeductible by individuals under section 67subject to 2% AGI floor). For taxpayers otherthan individuals, deduct amounts that areclearly and directly allocable to portfolioincome (other than investment interestexpense and section 212 expenses from aREMIC).¥ Interest paid or accrued on debt properly

allocable to your share of a working interestin any oil or gas property (if your liability isn'tlimited). If you didn't materially participate inthe oil or gas activity, this interest is

The partnership will give you adescription and the amount of your share foreach of these items.

¥

investment interest reportable as describedearlier under

otherwise, it is trade or businessinterest. If you didn't materially participate inthe oil or gas activity, this interest is

Thepartnership will provide information on yourshare of the section 965(c) deduction. SeeForm 965, Form 965-A, and the relatedinstructions for more detail.

investment interest expense and should bereported on Form 4952. If you materiallyparticipated in the activity, report the intereston line 28 of Schedule E (Form 1040). On aseparate line, enter "interest expense" andthe name of the partnership in column (a)and the amount in column (i).

¥

If you and your spouse are both partners,each of you must complete and file your ownSchedule SE (Form 1040), Self-EmploymentTax, to report your partnership net earnings(loss) from self-employment.

¥ Contributions to a capital constructionfund (CCF). The deduction for a CCFinvestment isn't taken on Schedule E (Form1040). Instead, you subtract the deductionfrom the amount that would normally beentered as taxable income on line 10 of Form1040. In the margin to the left of line 10, enter"CCF" and the amount of the deduction.

If section 42(j)(5) applies, thepartnership will report your share of thelow-income housing credit using code A orcode C, depending on the date the buildingwas placed in service. If section 42(j)(5)

If you are a generalpartner, reduce this amount before entering iton Schedule SE (Form 1040) by any section179 expense deduction claimed,unreimbursed partnership expenses¥ Penalty on early withdrawal of savings.

Report this amount on Schedule 1 (Form1040), line 30.

doesn't apply, your share of the credit will bereported using code B or code D, dependingon the date the building was placed inservice. Any allowable low-income housingcredit reported using code A or code B isreported on line 4 of Form 8586, Low-IncomeHousing Credit, or line 1d of Form 3800 (see

claimed, and depletion claimed on oil andgas properties. Do not reduce net earningsfrom self-employment by any separatelystated deduction for health insuranceexpenses.

¥ Film, television, and live theatricalproduction expenses. The partnership willprovide a statement that describes the film,television, or live theatrical productiongenerating these expenses. Generally, if theaggregate cost of the production exceeds$15 million, you are not entitled to thededuction. The limitation is $20 million forproductions in certain areas (see section 181for details). If you didn't materially participatein the activity, use Form 8582 to determinethe amount that can be reported onSchedule E (Form 1040), line 28, column (g).If you materially participated in theproduction activity, report the deduction onSchedule E (Form 1040), line 28, column (i).

If the amount on this line is a loss, enteronly the deductible amount on Schedule SE(Form 1040). See

earlier.

TIP, earlier). Any allowable low-incomehousing credit reported using code C orcode D is reported on line 11 of Form 8586or line 4d of Form 3800. If your partnership is an options dealer or

a commodities dealer, see section 1402(i). Keep a separate record of thelow-income housing credit from eachseparate source so that you can correctlyfigure any recapture of low-income housingcredit that may result from the disposition ofall or part of your partnership interest. Formore information on recapture, see theInstructions for Form 8611, Recapture ofLow-Income Housing Credit.

If your partnership is an investment club,see Rev. Rul. 75-525, 1975-2 C.B. 350.

If you are an individual partner, enterthe amount from this line, as an item ofinformation, on Schedule E (Form 1040),line 42. Also use this amount to figure netearnings from self-employment under thefarm optional method on Schedule SE (Form1040), Section B, Part II.

¥ Current year section 108(i) original issuediscount (OID) deduction. The partnershipwill provide your share of the partnership'sOID deduction deferred under section 108(i)(2)(A)(i) that is allowable as a deduction inthe current tax year under section 108(i)(2)(A)(ii) or section 108(i)(5)(D) (i) or (ii).

The partnershipwill report your share of the qualifiedrehabilitation expenditures and otherinformation you need to complete Form 3468related to rental real estate activities usingcode E. Your share of qualified rehabilitationexpenditures from property not related to

If youare an individual partner, use this amount tofigure net earnings from self-employmentunder the nonfarm optional method onSchedule SE (Form 1040), Section B, Part II.

¥ Domestic productions activities deduction(DPAD). The DPAD has been repealed fortax years beginning after 2017. However, ifyour tax year begins after 2017, the DPAD

Box 15. Credits

Box 14. Self-EmploymentEarnings (Loss)

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TIP

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811225 01-18-19

Code N. Credit for employer social se-curity and Medicare taxes.

NewCode O. Backup withholding.

Code F. Other rental real estate credits.

Code P. Other credits.

Code G. Other rental credits.

Code H. Undistributed capital gains cred-it.

Codes A through R.

CAUTION

Code I. Biofuel producer credit.

Code J. Work opportunity credit.

Code K. Disabled access credit.

Code L. Empowerment zone employmentcredit.

Codes S and T. Extraterritorial incomeexclusion.

Code M. Credit for increasing researchactivities.


Passive ActivityLimitations,

Passive Activity Limitations,

Taxpayers filing Form 1116 - If youhave any qualified dividends, capitalgains (including any capital gain

distributions), capital losses, collectiblesgain, collectibles losses, unrecapturedsection 1250 gain, net section 1231 gain, ornet section 1231 losses, you may have tomake certain adjustments to those amountsbefore taking them into account on Form1116.

Partnership did not claim theexclusion.

rental real estate activities will be reported inbox 20 using code D. See the Instructions forForm 3468 for details. If the partnership isreporting expenditures from more than oneactivity, the attached statement willseparately identify the expenditures fromeach activity.

¥ The partnership will provide informationnecessary to determine if it is an eligiblesmall business under section 38(c)(5)(C). Ifyou and the partnership are eligible small

¥ Low sulfur diesel fuel production credit(Form 8896).¥ General credits from an electing largepartnership. Report these credits on Form3800, Part III, line 1bb.businesses, report the credit on line 4i. For

more information, see the Instructions forForm 3800.¥ All others, report the credit on line 1c.

¥ Oil and gas production from marginalwells (Form 8904).¥ Distilled spirits credit (Form 8906).¥ Energy efficient home credit (Form 8908).

Combine the expenditures (for Form3468 reporting) from box 15, code E, andbox 20, code D. The expenditures related torental real estate activities (box 15, code E)are reported on Schedule K-1 separatelyfrom other qualified rehabilitationexpenditures (box 20, code D) because theyare subject to different passive activitylimitation rules. See the Instructions for Form8582-CR for details.

Report thisamount on line 5 of Form 8846, Credit forEmployer Social Security and MedicareTaxes Paid on Certain Employee Tips, orline 4f of Form 3800, Part III (see TIP,earlier).

¥ Alternative motor vehicle credit (Form8910).¥ Alternative fuel vehicle refueling propertycredit (Form 8911).¥ Clean renewable energy bond credit.Report this amount on Form 8912.

¥ clean renewable energy bond credit.Report this amount on Form 8912.¥ Qualified energy conservation bondcredit. Report this amount on Form 8912.¥ Qualified zone academy bond credit.Report this amount on Form 8912.¥ Qualified school construction bond credit.Report this amount on Form 8912.¥ Build America bond credit. Report thisamount on Form 8912.¥ Mine rescue team training credit (Form8923).

This is yourshare of the credit for backup withholding ondividends, interest income, and other typesof income. Include this amount in the totalyou enter on Form 1040, line 16, and attach

The partnership will identify the type of creditand any other information you need to figurethese credits from rental real estate activities(other than the low-income housing creditand qualified rehabilitation expenditures).These credits may be limited by the passiveactivity limitations. If the credits are frommore than one activity, the partnership willidentify the credits from each activity on anattached statement. See

earlier, and the Instructions forForm 8582-CR for details.

a copy of the Schedule K-1 to your taxreturn. Instead of attaching a copy of theSchedule K-1 to the tax return, you caninclude a statement with the return thatprovides the partnership's name, address,EIN, and backup withholding amount.

¥ Agricultural chemicals security credit(Form 8931).¥ Credit for employer differential wagepayments (Form 8932).¥ Carbon oxide sequestration credit (Form8933).

On a statementattached to Schedule K-1, the partnershipwill identify the type of credit and any otherinformation you need to figure credits otherthan those reported with codes A through O.Most credits identified by code P will bereported on Form 3800 (see TIP, earlier).

Thepartnership will identify the type of credit andany other information you need to figurethese rental credits. These credits may be

¥ Qualified plug-in electric drive motorvehicle credit (Form 8936).¥ Credit for small employer health insurancepremiums (Form 8941).¥ Employer credit for paid family andmedical leave (Form 8994).

limited by the passive activity limitations. Ifthe credits are from more than one activity,the partnership will identify the credits fromeach activity on an attached statement. See

earlier, and theInstructions for Form 8582-CR for details.

Credits that may be reported with code Pinclude the following.¥ New markets credit (Form 8874).¥ Qualified railroad track maintenancecredit (Form 8900).¥ Unused investment credit from thequalifying advanced coal project credit,qualifying gasification project credit, orqualifying advanced energy project creditallocated from cooperatives (Form 3468,line 9).

Code H represents taxes paid onundistributed capital gains by a regulated Use the information

identified by codes A through R, code W, code X, and any attached statements tofigure your foreign tax credit.

investment company or real estateinvestment trust. Report these taxes onSchedule 5 (Form 1040), line 74, check box"a" for Form 2439, and enter "Form 1065."

¥ Unused investment credit from therehabilitation credit or energy credit allocatedfrom cooperatives (Form 3468, line 13).

Reportthis amount on line 3 of Form 6478, BiofuelProducer Credit, or line 4c of Form 3800,Part III (see TIP, earlier).

¥ Renewable electricity, refined coal, andIndian coal production credit. Thepartnership will provide a statement showingthe allocation of the credit for productionduring the 4-year period beginning on thedate the facility was placed in service and forproduction after that period.

Reportthis amount on line 3 of Form 5884, WorkOpportunity Credit, or line 4b of Form 3800,Part III (see TIP, earlier). ¥ Indian employment credit (Form 8845).

¥ Orphan drug credit (Form 8820).¥ Enhanced oil recovery credit (Form 8830).

Reportthis amount on line 7 of Form 8826, DisabledAccess Credit, or line 1e of Form 3800, PartIII (see TIP, earlier).

For details, see Form 1116, Foreign Tax¥ Credit for small employer pension planstartup costs (Form 8881).¥ Credit for employer-provided childcarefacilities and services (Form 8882).

Credit, and its instructions; Form 1118,Foreign Tax Credit - Corporations, and itsinstructions; and Pub. 514, Foreign TaxCredit for Individuals.

Report this amount on line 3 of Form8844, Empowerment Zone EmploymentCredit, or line 3 of Form 3800, Part III (seeTIP, earlier).

¥ Biodiesel and renewable diesel fuelscredit. If this credit includes the smallagri-biodiesel producer credit, thepartnership will provide additionalinformation on an attached statement. If nostatement is attached, report this amount online 9 of Form 8864. If a statement isattached, see the instructions for Form 8864,line 9.

1. If the partnership reports your

share of foreign trading gross receipts (codeS) and the extraterritorial income exclusion(code T), the partnership wasn't entitled toclaim the exclusion because it didn't meet

Report this amount on line 37 ofForm 6765, Credit for Increasing ResearchActivities, or in Part III of Form 3800 (see TIP,earlier) as follows.

Box 16. ForeignTransactions

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!

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811226 01-18-19

Code A. Tax-exempt interest income.

Code B. Other tax-exempt income.

Code C. Nondeductible expenses.

Codes U through X. Other foreign trans-actions. Code A. Cash and marketable securities.

Code U. Section 951A tested income. Code A. Post-1986 depreciation adjust-ment.

Code V. Tested foreign income tax. Code B. Adjusted gain or loss.

Code W. Section 965 information.

Code C. Depletion (other than oil & gas).

Codes D and E. Oil, gas, & geothermalproperties - gross income and deduc-tions.

Code X. Other foreign transactions.

Code F. Other AMT items.


Income(Loss),

Partnership claimed the exclusion.

The partnership will attach astatement for the amount includedunder code B that is exempt by

reason of section 892 and describe thenature of the income.

Upon request, the partnershipshould furnish you a copy of thepartnership's Form 8873 if there is a

reduction for international boycottoperations, illegal bribes, kickbacks, andother payments.

A partner that is a corporationsubject to AMT must notify thepartnership of its status.

Sale or Exchange of Partnership Interest,

the foreign economic process requirements.You may still qualify for your share of thisexclusion if the partnership's foreign tradinggross receipts for the tax year were $5million or less. To qualify for this exclusion,

and the related regulations for rulesregarding splitter arrangements.

6251, Form 4626, or Schedule I (Form1041).

When the gain deferral method, asdescribed in Temporary Regulations section1.721(c)-3T is being applied, a partnershipthat is a section 721(c) partnership will attachyour foreign trading gross receipts from all

sources for the tax year also must have been$5 million or less. If you qualify for theexclusion, report the exclusion amount inaccordance with the instructions for

earlier, for box 1, 2, or 3, whichever applies. See Form 8873, ExtraterritorialIncome Exclusion, for details.

to the Schedule K-1 provided to a U.S.transferor the information required underTemporary Regulations section1.721(c)-6T(b)(2) and (3). A partnership thatis a section 721(c) partnership will alsoattach to its Form 1065 a Schedule K-1 for

Report on your return, as an item ofinformation, your share of the tax-exemptinterest received or accrued by thepartnership during the year. Individualpartners include this amount on Form 1040,line 2a. Increase the adjusted basis of yourinterest in the partnership by this amount.

each partner that is a related foreign personwith respect to the U.S. transferor. For anindirect partner that is a related foreignperson with respect to the U.S. transferor,

2. Ifthe partnership reports your share of foreigntrading gross receipts but not the amount ofthe extraterritorial income exclusion, thepartnership met the foreign economicprocess requirements and claimed theexclusion when figuring your share ofpartnership income. You also may need toknow the amount of your share of foreigntrading gross receipts from this partnershipto determine if you met the $5 million or lessexception discussed above for purposes ofqualifying for an extraterritorial incomeexclusion from other sources.

Increase the adjusted basis of your interestin the partnership by the amount shown, butdo not include it in income on your tax return.

the Schedule K-1 will only include relevantinformation with respect to section 721(c)property. See Temporary Regulationssection 1.721(c)-1T for definitions.

Use the information reported in box 17 (aswell as your adjustments and tax preferenceitems from other sources) to prepare yourForm 6251, Alternative MinimumTax - Individuals; Form 4626, AlternativeMinimum Tax - Corporations; or Schedule I(Form 1041), Alternative MinimumTax - Estates and Trusts.

Thenondeductible expenses paid or incurred bythe partnership are not deductible on yourtax return. Decrease the adjusted basis ofyour interest in the partnership by thisamount.

Code A shows the distributions thepartnership made to you of cash and certainmarketable securities. The marketablesecurities are included at their fair marketvalue (FMV) on the date of distribution(minus your share of the partnership's gainon the securities distributed to you). If theamount shown as code A exceeds the

The partnership will report the aggregateamount of its distributive share of testedincome (without reduction for tested losses)as described in section 951A(c)(1)(A).

This amount is your share of thepartnership's post-1986 depreciationadjustment. If you are an individual partner,report this amount on line 2l of Form 6251.

Thepartnership will report tested foreign incometax as defined in section 960(d)(3).

Thisamount is your share of the partnership'sadjusted gain or loss. If you are an individualpartner, report this amount on line 2k of Form6251.

adjusted basis of your partnership interestimmediately before the distribution, theexcess is treated as gain from the sale orexchange of your partnership interest.Generally, this gain is treated as gain fromthe sale of a capital asset and should bereported on Form 8949 and the Schedule D

Thepartnership will report foreign income taxinformation for the calculation of creditableforeign income taxes related to the section965(a) inclusions. The partnership will attachForm 965, including its Schedules F, G, andH, to the Schedule K-1.

This amount is your share of thepartnership's depletion adjustment. If you arean individual partner, report this amount online 2d of Form 6251.

for your return. However, if you receive cashor property in exchange for any part of apartnership interest, the amount of thedistribution attributable to your share of thepartnership's unrealized receivable orThe amounts reported on these lines

include only the gross income (code D) from,

On astatement attached to Schedule K-1, thepartnership will report any other informationon foreign transactions that you may needusing code X.

inventory items results in ordinary income(see Regulations section 1.751-1(a) and

earlier). For details, see Pub. 541.

and deductions (code E) allocable to, oil,gas, and geothermal properties included inbox 1 of Schedule K-1. The partnershipshould have attached a statement thatshows any income from or deductionsallocable to such properties that are includedin boxes 2 through 13, 18, and 20 ofSchedule K-1. Use the amounts reportedand the amounts on the attached statementto help you figure the net amount to enter onForm 6251, line 2t.

The partnership will attach a statementthat separately identifies any arrangement,along with the taxes paid or accrued inconnection with the arrangement, in whichthe partnership participates that wouldqualify as a splitter arrangement under

The partnership will separately identifyboth of the following.¥ The FMV of the marketable securitieswhen distributed (minus your share of thegain on the securities distributed to you).¥ The partnership's adjusted basis of thosesecurities immediately before thedistribution.

section 909 if one or more partners arecovered persons regarding an entity thattook into account related income from thearrangement. The statement will also

Decrease the adjusted basis of yourinterest in the partnership (but not belowzero) by the amount of cash distributed to

Enter theinformation on the statement attached by thepartnership on the applicable lines of Form

indicate whether the partnership has takeninto account any related income from anysuch splitter arrangement. See section 909

Box 18. Tax-ExemptIncome and NondeductibleExpenses

Box 17. AlternativeMinimum Tax (AMT) Items

Box 19. Distributions

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811227 01-18-19

Computation of Section 737 Gain

1.

Code D. Qualified rehabilitation expendi-tures (other than rental real estate).

2.

3.

4.

5.

6.

7. Section 737 gain.

Code B. Distribution subject to section737.

Code E. Basis of energy property. Code C. Other property.

other than

Codes F and G. Recapture of low-incomehousing credit.

Code H. Recapture of investment credit.

Code I. Recapture of other credits.

Code A. Investment income.

Code B. Investment expenses.

Code C. Fuel tax credit information.


BasisLimitations,

Sale or Exchange ofPartnership Interest,

Enter the FMV of the distributed

property (other than money) ~~~

Enter your adjusted basis in thepartnership immediately beforethe distribution. See

earlier ~~~

Enter the amount of money

received in the distribution

Subtract line 3 from line 2. If zero

or less, enter -0- ~~~~~~~~~

Subtract line 4 from line 1 ~~~~~

Enter your net precontribution

gain ~~~~~~~~~~~~~~~

Enter the

lesser of the amount on line 5 or

line 6 ~~~~~~~~~~~~~~

you and the partnership's adjusted basis ofthe distributed securities. Advances or

applicable credit per gallon. Use thisinformation to complete Form 4136, Creditfor Federal Tax Paid on Fuels.drawings of money or property against your

share are treated as current distributionsmade on the last day of the partnership's taxyear.

$

Thepartnership will report your share of qualifiedrehabilitation expenditures and otherinformation you need to complete Form 3468for property not related to rental real estateactivities in box 20 using code D. Your shareof qualified rehabilitation expendituresrelated to rental real estate activities isreported in box 15 using code E. See theInstructions for Form 3468 for details. If thepartnership is reporting expenditures frommore than one activity, the attachedstatement will separately identify theexpenditures from each activity.

Your basis in the distributed marketablesecurities (other than in liquidation of yourinterest) is the smaller of:

¥ The partnership's adjusted basis in thesecurities immediately before the distributionincreased by any gain recognized on thedistribution of the securities, or¥ The adjusted basis of your partnershipinterest reduced by any cash distributed inthe same transaction and increased by anygain recognized on the distribution of thesecurities.

Combine the expenditures (for Form3468 reporting) from box 15, code E, andbox 20, code D. The expenditures related torental real estate activities (box 15, code E)are reported on Schedule K-1 separatelyfrom other qualified rehabilitationexpenditures (box 20, code D) because theyare subject to different passive activity

If you received the securities in liquidationof your partnership interest, your basis in themarketable securities is equal to theadjusted basis of your partnership interestreduced by any cash distributed in the sametransaction and increased by any gainrecognized on the distribution of thesecurities.

The type of gain (section 1231 gain,capital gain) generated is determined by thetype of gain you would have recognized ifyou sold the property rather than contributingit to the partnership. Accordingly, report theamount from line 7, above, on Form 4797 orForm 8949 and the Schedule D of your taxreturn.

limitation rules. See the Instructions for Form8582-CR for details.

If a partner contributed section 704(c)If the

partnership provides an attached statementfor code E, use the information on thestatement to complete lines 12a-d, 12f, 12g,12i, 12j, 12l, 12m, 12o, and 12q-v of Form3468.

built-in gain property within the last 7 yearsand the partnership made a distribution of

Code C showsthe partnership's adjusted basis of propertyother than money immediately before theproperty was distributed to you. In addition,the partnership should report the adjusted

property to that partner thepreviously contributed built-in gain property,the partner may be required to recognizegain under section 737. This gain is inaddition to any gain recognized undersection 731 on the distribution.

basis and FMV of each property distributed.Decrease the adjusted basis of your interestin the partnership by the amount of yourbasis in the distributed property. Your basisin the distributed property (other than inliquidation of your interest) is the smaller of:

A section 42(j)(5)partnership will report recapture of alow-income housing credit with code F. Allother partnerships will report recapture of alow-income housing credit with code G.Keep a separate record of recapture fromeach of these sources so that you will beable to correctly figure any recapture oflow-income housing credit that may result

When this occurs, the partnership willenter code B in box 19 of the contributingpartner's Schedule K-1 and attach astatement that provides the information thepartner needs to figure the recognized gainunder section 737. The partnership isrequired to provide the following information.

¥ The partnership's adjusted basisimmediately before the distribution, or¥ The adjusted basis of your partnershipinterest reduced by any cash distributed inthe same transaction.¥ The FMV of the distributed property (other

than money).¥ The amount of money received in thedistribution.¥ The net precontribution gain of thepartner.

If you received the property in liquidationof your interest, your basis in the distributedproperty is equal to the adjusted basis ofyour partnership interest reduced by anycash distributed in the same transaction.

from the disposition of all or part of yourpartnership interest. For details, see Form8611.

The partnership will provide any informationyou need to figure your recapture tax onForm 4255, Recapture of Investment Credit.

Using the information from the attachedstatement, complete the worksheet below tofigure your recognized gain under section737.

If you receive cash or property inexchange for any part of a partnershipinterest, the amount of the distributionattributable to your share of the partnership'sunrealized receivable or inventory itemsresults in ordinary income (see Regulationssection 1.751-1(a) and

earlier).

See the Form 3468 on which you took theoriginal credit for other information you needto complete Form 4255.

You may also need Form 4255 if youdisposed of more than one-third of yourinterest in a partnership.

On astatement attached to Schedule K-1, thepartnership will report any information youneed to figure the recapture of the newmarkets credit (see Form 8874 and Form8874-B, Notice of Recapture Event for NewMarkets Credit); Indian employment credit(see section 45A(d)); any credit foremployer-provided childcare facilities andservices (see Form 8882); alternative motorvehicle credit (see section 30B(h)(8));alternative fuel vehicle refueling propertycredit (see section 30C(e)(5)); or the new

Report thisamount on line 4a of Form 4952.

Reportthis amount on line 5 of Form 4952.

Thepartnership will report the number of gallonsof each fuel sold or used during the tax yearfor a nontaxable use qualifying for the creditfor taxes paid on fuels, type of use, and the

Box 20. Other Information

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811228 01-18-19

Code J. Look-back interest - completedlong-term contracts.

Code R. Interest allocable to productionexpenditures. Code M. Recapture of section 179 deduc-

tion.

Code K. Look-back interest - incomeforecast method.

Code S. CCF nonqualified withdrawals.

Code L. Dispositions of property withsection 179 deductions.

Code N. Interest expense for corporatepartners.

Code T. Depletion information - oil andgas.

Code U. Reserved.

Code V. Unrelated business taxable in-come.

Code O. Section 453(l)(3) information.

Code W. Precontribution gain (loss).

other than

Code P. Section 453A(c) information.

Code Q. Section 1260(b) information.

Code X. Section 108(i) information.


A partner is required to notify thepartnership of its tax-exempt status.

qualified plug-in electric drive motor vehiclecredit (see section 30D(f)(5)).

6252, Installment Sale Income. Thepartnership will separately report your shareof all payments received for the property infuture tax years. See the Form 6252instructions for details.

(Form 1040), line 62. Enter "1260(b)" and theamount of the interest in the space to the leftof line 62. See section 1260(b) for details,including how to figure the interest.The partnership will

report any information you need to figure theinterest due or to be refunded under thelook-back method of section 460(b)(2) oncertain long-term contracts. Use Form 8697,Interest Computation Under the Look-BackMethod for Completed Long-TermContracts, to report any such interest.

The partnership will reportany information you need relating to interestyou are required to capitalize under section263A for production expenditures. SeeRegulations sections 1.263A-8 through1.263A-15 for details.

The partnership will report your shareof any recapture of section 179 expensededuction if business use of any property forwhich the section 179 expense deductionwas passed through to partners dropped to50% or less. If this occurs, the partnershipmust provide the following information.The partnership will

report any information you need to figure theinterest due or to be refunded under thelook-back method of section 167(g)(2) forcertain property placed in service afterSeptember 13, 1995, and depreciated underthe income forecast method. Use Form8866, Interest Computation Under theLook-Back Method for Property DepreciatedUnder the Income Forecast Method, toreport any such interest.

The partnership will report your share ofnonqualified withdrawals from a capitalconstruction fund (CCF). These withdrawalsare taxed separately from your other grossincome at the highest marginal ordinaryincome or capital gains tax rate. Attach astatement to your federal income tax returnto show your computation of both the tax andinterest for a nonqualified withdrawal.Include the tax and interest on Schedule 4(Form 1040), line 62. In the space to the leftof line 62, enter the amount of tax andinterest and "CCF."

1. Your share of the depreciationallowed or allowable (not including thesection 179 expense deduction). 2. Your share of the section 179expense deduction (if any) passed throughfor the property and the partnership's taxyear(s) in which the amount was passedthrough. Reduce this amount by the portion,if any, of your unused (carryover) section179 expense deduction for this property.

The partnershipwill report your share of gain or loss on thesale, exchange, or other disposition ofproperty for which a section 179 expense

The partnership will report eachcorporate partner's share of the partnership'sinterest expense. This amount is reportedelsewhere on Schedule K-1 and the totalamount is reported here for information only.

This is your share of gross incomefrom the property, share of production for the

deduction was passed through to partnerswith code L. If the partnership passedthrough a section 179 expense deduction forthe property, you must report the gain or lossand any recapture of the section 179

tax year, and other information needed tofigure your depletion deduction for oil andgas wells. The partnership should alsoallocate to you a share of the adjusted basisof each partnership oil or gas property. SeePub. 535 for details on how to figure yourdepletion deduction.

Your share of interest income is reported inbox 5 and your share of the partnership'sliabilities is reported in Part II, item K. Acorporate partner's share of interest income,interest expense, and partnership liabilitiesexpense deduction for the property on your

income tax return (see the Instructions forForm 4797 for details). The partnership willprovide all the following information.

are treated as income, expense, andliabilities of the corporation for purposes ofthe limitation on the deduction for interestunder section 163(j).

The partnership will report anyinformation you need to figure unrelatedbusiness taxable income under section512(a)(1) (but excluding any modificationsrequired by paragraphs (8) through (15) ofsection 512(b)) for a partner that is atax-exempt organization.

1. Description of the property. 2. Date the property was acquired andplaced in service. 3. Date of the sale or other disposition ofthe property.

The partnership will report any informationyou need to figure the interest due undersection 453(l)(3) with respect to thedisposition of certain timeshares and 4. Your share of the gross sales price or

amount realized. 5. Your share of the cost or other basis

residential lots on the installment method. Ifyou are an individual, report the interest onSchedule 4 (Form 1040), line 62. Check boxc and enter "453(l)(3)" and the amount of theinterest in the space to the left of line 62.

plus the expense of sale. 6. Your share of the depreciationallowed or allowable.

Ifthe partnership distributed any property withprecontribution gain or loss to any partner

the contributing partner, and thedate of the distribution was within 7 years ofthe date the property was contributed to the

7. Your share of the section 179expense deduction (if any) passed throughfor the property and the partnership's taxyear(s) in which the amount was passedthrough. To figure the amount of depreciationallowed or allowable for Form 4797, line 22,

The partnership will report any informationyou need to figure the interest due undersection 453A(c) with respect to certaininstallment sales. If you are an individual,report the interest on Schedule 4 (Form partnership, the contributing partner must

recognize a gain or loss under section 704(c)(1)(B). If the partnership made such adistribution during its tax year, it will entercode W in box 20 of the contributingpartner's Schedule K-1 and attach a

add to the amount from item 6, above, the1040), line 62. Check box c and enter"453A(c)" and the amount of the interest inthe space to the left of line 62. See the Form6252 instructions for more information. Alsosee section 453A(c) for details on how tofigure the interest.

amount of your share of the section 179expense deduction, reduced by any unusedcarryover of the deduction for this property.This amount may be different from theamount of section 179 expense you

statement providing the amount of thepartner's precontribution gain (loss) andidentifying the character of the gain or loss(for example, capital gain (loss) or section1231 gain (loss)). Report the precontributiongain or loss on Form 8949/Schedule D orForm 4797 in accordance with theinformation provided by the partnership.

deducted for the property if your interest in

The partnership will report any informationyou need to figure the interest due undersection 1260(b). If the partnership had gainfrom certain constructive ownershiptransactions, your tax liability must be

the partnership has changed.

8. If the disposition is due to a casualtyor theft, a statement providing theinformation you need to complete Form4684.

9. If the sale was an installment salemade during the partnership's tax year, anyinformation you need to complete Form

increased by the interest charge on anydeferral of gain recognition under section1260(b). Report the interest on Schedule 4

If thepartnership made a section 108(i) election or

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811229 01-18-19

Code AF. Excess business interest in-come. Code Z. Section 199A qualified business

income.

Code AG. Partner's share of gross re-ceipts.

Code Y. Net investment income.

Code AA. Section 199A W-2 wages fromthe trade or business.

Code AH. Other information.

Code AB. Section 199A unadjusted basison acquisition of qualified property.

Code AC. Section 199A REIT dividends.

Codes Z through AD. Qualified businessincome deduction.

Code AD. Qualified publicly traded part-nership (PTP) income.

Code AE. Excess taxable income.


A partner is required to notify thepartnership of its status as a PTP.

allocates any section 108(i) items to itspartners, it will provide a statementidentifying your share of:

¥ You are not a patron in a specifiedagricultural or horticultural cooperative.Use the worksheet and the instructions inPub. 535 if you do not meet all three of theserequirements.

of excess taxable income on Form 8990,Schedule A, line 43(f) if you are required tofile Form 8990. See the Instructions for Form8990 for additional information.¥ The deferred section 108(i) cancellation of

debt (COD) income that has not beenincluded in income in the current or prior taxyears,

If the partnership is required to fileForm 8990, Limitation on Business InterestExpense Under Section 163(j), it maydetermine it has excess business interestincome. Enter the amount of excessbusiness interest income on Form 8990,Schedule A, line 43(g), if you are required tofile Form 8990. See the Instructions for Form8990 for additional information.

Use the appropriate worksheet toreport your portion of qualified businessincome.

¥ The partnership's original issue discount(OID) deduction deferred under section108(i)(2)(A)(i) that has not been deducted inthe current or prior tax years,

¥ Qualified Business IncomeDeduction-Simplified Worksheet, line 1.See the Instructions for Form 1040.¥ The deferred section 752 amount that is

treated as a distribution of money undersection 752 in the current tax year, and¥ The deferred section 752 amountremaining as of the end of the current taxyear.

¥ Pub. 535 Worksheet. If a specified servicetrade or business, see Schedule A; if you areelecting to aggregate this trade or businesswith another, see Schedule B; if any of yourqualified trades or businesses generated anet loss, see Schedule C; otherwise enterinformation on lines 1 and 2.

This code has been added to reporteach partner's share of the gross receiptsunder section 59A(e). If the partner is aforeign person, only gross receiptseffectively connected with the conduct of atrade or business within the United Statesshall be taken into account.

Thepartnership may use this code Y to reportinformation you may need to determine yournet investment income tax under section1411, including information regarding

Report the portionof Form W-2 wages reported to you by thepartnership on the appropriate worksheet.income from controlled foreign corporations

(CFCs) and passive foreign investmentcompanies (PFICs) the stock of which isowned by the partnership. Any informationthat isn't provided elsewhere on

Thepartnership will report the following.¥ Qualified Business Income

Deduction-Simplified Worksheet. This itemis not required to be reported. See theInstructions for Form 1040.¥ Pub. 535 Worksheet. If a specified servicetrade or business, see Schedule A; if you areelecting to aggregate this trade or businesswith another, see Schedule B; otherwiseenter on line 4.

1. Any information a PTP needs todetermine whether it meets the 90%qualifying income test of section 7704(c)(2).Schedule K-1 (or an attachment to

Schedule K-1) is provided using code Y. ForCFCs and PFICs that you treat as qualifiedelecting funds (QEFs), the information that isrelevant to you will depend on whether you,

2. Any information you need tothe partnership, or a lower-tier entity hasmade an election under Regulations section1.1411-10(g) with respect to the CFC orQEF. For example, if the partnership madean election under Regulations section

complete a disclosure statement forreportable transactions in which thepartnership participates. If the partnershipparticipates in a transaction that must bedisclosed on Form 8886, ReportableTransaction Disclosure Statement, both youand the partnership may be required to fileForm 8886 for the transaction. The

Report the portion of unadjusted basis ofqualified property reported to you by thepartnership on the appropriate worksheet.1.1411-10(g) for a CFC the stock of which is

owned by the partnership, and the relevantincome and deduction items derived fromthat CFC are reported elsewhere on theSchedule K-1, then you will not need theinformation provided in code Y to completeyour Form 8960.

¥ Qualified Business IncomeDeduction-Simplified Worksheet. This itemis not required to be reported. See theInstructions for Form 1040.¥ Pub. 535 Worksheet, If a specified servicetrade or business, see Schedule A ; if youare electing to aggregate this trade orbusiness with another, see Schedule B;otherwise enter on line 7.

determination of whether you are required todisclose a transaction of the partnership isbased on the category(s) under which thetransaction qualifies for disclosure and isdetermined by you and the partnership. Youmay have to pay a penalty if you are requiredto file Form 8886 and do not do so. See theInstructions for Form 8886 for details.

If you are an individual who is a U.S.citizen or resident, or a domestic trust orestate, follow the Instructions for Form 8960to figure and report your net investment

Report the portion of qualified REITdividends reported to you by the partnershipon the appropriate worksheet.

income and adjusted gross income ormodified adjusted gross income. Corporatepartners are not subject to the net investmentincome tax. See Regulations sections1.1411-1 through -10 for details.

3. Noncash charitable contributions. Ifthe partnership made a noncash charitablecontribution, your share of the partnership'sadjusted basis in the property is limited tobasis and is reported here.

¥ Qualified Business IncomeDeduction-Simplified Worksheet, line 6.See the Instructions for Form 1040.¥ Worksheet in Pub. 535, line 28. See Pub.535.

Generally, you areallowed a deduction up to 20% of your netqualified business income plus 20% ofqualified REIT dividends and qualified PTP

4. Interest and additional tax oncompensation deferred under a section409A nonqualified deferred compensationplan that doesn't meet the requirements ofsection 409A. See section 409A(a)(1)(B) tofigure the interest and additional tax on this

Report the portionof qualified PTP income reported to you bythe partnership on the appropriateworksheet.

income from your partnership. Thepartnership will provide the informationneeded to figure your deduction. Once youhave this information, you will use one of twoworksheets to help you figure your deductionfor qualified business income.

income. Report this interest and tax onSchedule 4 (Form 1040), line 62. Thisincome is included in the amount in box 4,Guaranteed payments.

¥ Qualified Business IncomeDeduction-Simplified Worksheet, line 6.See the Instructions for Form 1040.¥ Worksheet in Pub. 535, line 28. See Pub.535.

5. Inversion gain. The partnership willUse Qualified Business Incomeprovide a statement showing the amounts ofeach type of income or gain that is includedin inversion gain. The partnership has

Deduction-Simplified Worksheet, includedin the Instructions for Form 1040, if:

If thepartnership was required to file Form 8990,Limitation on Business Interest ExpenseUnder Section 163(j), it may determine it hasexcess taxable income. Report the amount

¥ You have qualified business income,(defined below),¥ Your 2018 taxable income does notexceed $157,500 ($315,000 if married filingjointly), and

included inversion gain in income elsewhereon Schedule K-1. Inversion gain is alsoreported under code AH because yourtaxable income and alternative minimum

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811230 01-18-19


taxable income cannot be less than theinversion gain. Also, your inversion gain (a)isn't taken into account in figuring the netoperating loss (NOL) for the tax year or the

11. Acceleration of alternative minimum 721(c) property allocable to each partner.The partnership will include a separate codeAH for the total remedial income, if any,allocated to the U.S. transferor; total gainrecognized due to an acceleration event; or

tax (AMT) credit (corporations only). If acorporate partner has made an election toaccelerate the AMT credit in lieu of bonusdepreciation, it is required to notify thepartnership in writing of this election. SeeRev. Proc. 2009-16, 2009-6 I.R.B. 449, andRev. Proc. 2009-33, 2009-29 I.R.B. 150, for

NOL that can be carried over to each taxyear, (b) may limit your credits, and (c) istreated as income from sources within theUnited States for the foreign tax credit. Seesection 7874 for details.

total gain recognized due to a section 367transfer reflected on Form 8865,Schedule G, Part II, columns (c), (d), and (e),respectively. Only the amount of the totalremedial income allocated to the U.S.transferor will be included in Schedule K-1,Part III, Line 1. Any recognized gain due to

more information about the writtennotification that the electing corporatepartner must provide the partnership. Thepartnership is required to refigure theelecting corporate partner's share ofdepreciation on any eligible qualifiedproperty or extension property to eliminatebonus depreciation and use the straight line

6. Qualifying advanced coal projectproperty. Use the amounts the partnershipprovides you to figure the amounts to reporton Form 3468, lines 5a through 5c.

an acceleration event or Section 367 transfermust be separately reported by the U.S.transferor on its own federal income taxreturn. For all other partners of the section721(c) partnership, a separate code AH isused to provide the remedial items allocatedto that partner relating to section 721(c)property that was taken into account todetermine Part III, line 1. See TemporaryRegulations sections 1.721(c)-3T and1.721(c)-6T.

7. Qualifying gasification projectproperty. Use the amounts the partnershipprovides you to figure the amounts to reporton Form 3468, lines 6a and 6b.

depreciation method for such property. Thepartnership will attach a statement toSchedule K-1 that lists each partnership itemthat includes bonus depreciation and showsthe electing corporate partner's adjustmentfor each item that results from the refigured

8. Qualifying advanced energy projectproperty. Use the amount the partnershipprovides you to figure the amount to reporton Form 3468, line 7. depreciation and elimination of the bonus

depreciation. The partner must adjust theamount shown on Schedule K-1 for thesepartnership items by the amount of thecorresponding adjustment. See section168(k)(4) for more information.

9. The information needed to complete16. Section 1061 information. TheSchedule P (Form 1120-F), List of Foreign

Partner Interests in Partnerships. Whenrequired, the partnership will make this reporton an attached statement to partners that area corporation (identified as a foreign partnerunder Regulations section 1.1446-1(c)(3)) orpartners that are a partnership (domestic orforeign) if the reporting partnership knows, or

partnership will furnish to the partners anyinformation needed to figure their capitalgains with respect to an applicablepartnership interest.

12. Any information you may need to17. Partners's share of the adjusted basiscomply with the limitation on excess

business losses of certain taxpayers undersection 461. See section 461 and Form 461and its instructions.

of noncash and capital gain propertycontributions, and share of the excess of theFMV over the adjusted basis of noncash andcapital gain property contributions.

has reason to know, that one or more of thepartners is a foreign corporation. If thepartnership allocates effectively connectedincome to the partner, the statement willcontain the information needed to completelines 1 through 10, 13, 14, 15b, 17a, 17b,and 18 of Schedule P (Form 1120-F). If the

13. Section 250, effective for tax years18. Patron reduction and domesticbeginning after 2017, allows a domestic

corporation a deduction for the eligiblepercentage of FDII and GILTI. If applicable,the partnership will provide the necessaryinformation to each domestic corporatepartner for its calculation of this deduction.

production activities deduction under section199A(g)(2). If the partnership is a patron ofan agricultural or horticultural cooperative,you must figure your patron reduction usingSchedule D in Pub. 535. You may also beallowed a domestic production activitiesdeduction, if one is passed through thecooperative, to the partnership, to you. SeePub 535 for more information.

partnership doesn't allocate effectivelyconnected income to the partner, thestatement will contain the informationneeded to complete lines 13, 14, and 18 ofSchedule P (Form 1120-F). 14. The partnership will provide

information for you to determine youreffectively connected gain or loss undersection 864(c)(8) if you are a nonresidentalien or foreign corporate partner that hadgain or loss from the sale, exchange, or otherdisposition of your partnership interest.

10. Conservation reserve programpayments. Individuals who received social

19. Any other information you may needsecurity retirement or disability benefits, andare partners in farm partnerships that receiveconservation reserve program payments, do

to file your return not shown elsewhere onSchedule K-1.

not pay self-employment tax on their portionof the payments. The partnership will reportyour portion of the conservation reserveprogram payments in box 20 using code AH. See Schedule SE (Form 1040) forinformation on excluding the payment fromyour calculation of self-employment tax.

15. If the partnership is a section 721(c) The partnership should give you apartnership, the partnership should includethe amounts relating to any remedial itemsmade under the remedial allocation method(described in Regulations section 1.704-3(d)and Temporary Regulations section1.704-3T(d)(5)(iii)) with respect to section

description and the amount of your share foreach of these items.

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829301 01-21-19

January 1, 2015

As a partner of the partnership, you are subject to tax on yourdistributive share of the partnership income, whether or notdistributed.

Federal Tax Reform

does not

New deduction for pass-through income

ftb.ca.gov conformity

General Partner

Limited Partner

Nonrecourse Loans

Qualified Nonrecourse FinancingSingle-Sales Factor Formula -

ftb.ca.gov single salesfactor

California Business Situs

Market Assignment - all

ftb.ca.gov market assignment Apportionment

do not

Unitary

Election

Page 1

- The Tax Cuts and Jobs Act (TCJA) signed into law onDecember 22, 2017, made changes to the Internal Revenue Code (IRC). Ingeneral, California Revenue and Taxation Code (R&TC) conform tothe changes. California taxpayers continue to follow the IRC as of thespecified date of January 1, 2015, with modifications.

The amount of loss and deduction you are allowed to claim onyour California tax return may be less than the amount reported onSchedule K-1 (565). Generally, the amount of loss and deduction youare allowed to claim is limited to your basis in the partnership andthe amount for which you are considered at-risk. If you have losses,deductions, or credits from a passive activity, you must also apply thepassive activity loss and credit rules. It is the partner's responsibility toconsider and apply any applicable limitations. See Instructions, LossLimitations.

- For tax years beginningafter December 31, 2017, and before January 1, 2026, the TCJA addsIRC Sec. 199A, "Qualified Business Income," under which a non-corporate taxpayer, including a trust or estate, who has qualifiedbusiness income (QBI) from a partnership, S corporation, or soleproprietorship is allowed a deduction. California does not conform to thededuction for qualified business income of pass-through entities under IRCSection 199A.

You should also read the federal Schedule K-1 (1065), Partner'sInstructions for Schedule K-1 (Form 1065), before completing yourCalifornia tax return with this Schedule K-1 (565) information.

For more information on the treatment of partnership income,deductions, credits, etc., get the following federal publications:

In general, for taxable years beginning on or after January 1, 2015,California law conforms to the IRC as of January 1, 2015. However,there are continuing differences between California and federal law.When California conforms to federal tax law changes, we do not always

Publication 541, PartnershipsPublication 535, Business Expenses

Any information returns required for federal purposes under IRCSections 6038, 6038A, 6038B, and 6038D are also required forCalifornia purposes. Attach the information returns to your California taxreturn when filed. If the information returns are not provided, penaltiesmay be imposed under R&TC Sections 19141.2 and 19141.5.

adopt all of the changes made at the federal level. For more information,go to and search for . Additional informationcan be found in FTB Pub. 1001, Supplemental Guidelines to CaliforniaAdjustments, the instructions for California Schedule CA (540 or540NR), and the Business Entity tax booklets.

The instructions provided with California tax forms are a summary ofCalifornia tax law and are only intended to aid taxpayers in preparingtheir state income tax returns. We include information that is mostuseful to the greatest number of taxpayers in the limited spaceavailable. It is not possible to include all requirements of the R&TCin the instructions. Taxpayers should not consider the instructions asauthoritative law.

An individual or entity owning an interest in a partnership who ispersonally liable for partnership debts and who is authorized to act onbehalf of the partnership.

An individual or entity owning an interest in a partnership whosepotential personal liability for partnership debts is limited to the amountof money or other property that the partner contributed or is required tocontribute to the partnership.

California follows the revised federal instructions (with some exceptions)for reporting the sale, exchange or disposition of an asset for which anIRC Section 179 expense was claimed in a prior year by a partnership,limited liability company (LLC) or S corporation.

Liabilities of the partnership for which none of the partners haveassumed any personal liability.

Partners should follow federal reporting requirements as detailed infederal Form 1065, U.S. Return of Partnership Income, and federalForm 4797, Sales of Business Property.

Any financing for which no one is personally liable for repayment that isborrowed for use in an activity of holding real property and that is loanedor guaranteed by a federal, state, or local government, or borrowed froma "qualified person."

R&TC Section 25128.7 requires allbusiness income of an apportioning trade or business, other thanan apportioning trade or business under R&TC Section 25128(b), toapportion its business income to California using the single-sales factorformula. For more information, get Schedule R, Apportionment andAllocation of Income, or go to and search for

. The place at which intangible personal property is employed as capitalin California or the possession and control of the property is localized inconnection with a business in California so that its substantial use andvalue attach to and become an asset of the business in California.

TC Section 25136 requires taxpayersto assign sales, other than sales of tangible personal property, usingmarket assignment. For more information, get Schedule R, or go to

and search for .The process by which business income from a trade or business isconducted in two or more states (an apportioning trade or business)is divided between taxing jurisdictions. Get Schedule R for moreinformation.The partnership uses Schedule K-1 (565), Partner's Share of

Income, Deductions, Credits, etc., to report your distributiveshare of the partnership's income, deductions, credits, etc. Keepthe Schedule K-1 (565) for your records. Information from theSchedule K-1 (565) should be used to complete your California taxreturn. However, file the schedule with your California tax return.The partnership has filed a copy with the FTB.

A method of taxation by which all of the activities comprising asingle trade or business are viewed as a single unit, regardless ofwhether those activities are conducted by divisions of a single entityor by commonly owned or controlled entities. For more informationabout unitary business principles, get FTB Pub. 1061, Guidelines forCorporations Filing a Combined Report.

The choice of a particular accounting method for tax reporting purposes.Generally, the partnership decides how to compute taxable income from

References in these instructions are to the Internal Revenue Code (IRC) as of , and to the California Revenue and Taxation Code (R&TC).

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R&

022 Schedule K-1 (565) Instructions 2018

What's New

General Information

B Definitions

A Purpose

2018 Partner's Instructions for Schedule K-1 (565)

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829302 01-21-19

Additional Definitions

Inconsistent Treatment of Items

Apportionment of Business Income - Unitary Business

Page 2

its operations. For example, it chooses the accounting method anddepreciation methods it will use.

If the partnership has income from nonbusiness intangibles, the sourceof that nonbusiness intangible income will be determined at the partnerlevel. In most cases, income from nonbusiness intangible property isHowever, certain elections are made separately on your California tax

return and not by the partnership. These elections are made under thefollowing IRC Sections, to which the R&TC conforms:

sourced at the residence or commercial domicile of the partner. If thepartner is an individual, estate, or trust, income from nonbusinessintangibles will have a California source if the intangible has acquired aCalifornia business situs. For example, a nonresident pledges stocks,IRC Section 108(b)(5) (income from discharge of indebtedness)

IRC Section 617 (deduction and recapture of certain miningexploration expenditures, paid or incurred)

bonds, or other intangible personal property in California. This pledgeis security for the payment of debt, taxes, or other liabilities incurredfor a business in the state. The pledged property will acquire a businesssitus in California. Another example is a nonresident who maintains anoffice and bank account in California for the business activities in thisstate. The bank account will acquire a business situs in California. SeeFor definitions of a partnership, general partnership, limited partnership,

limited liability partnership, etc., see the instructions for Form 565,Partnership Return of Income, or the instructions for federal Form 1065.

Cal. Code Regs., tit. 18 section 17951-2 and R&TC Section 17952. Ifthe intangible income is determined to have a business situs by thepartnership, the intangible income will be included in column (e).

If the partner is a corporation or another business entity, Cal. CodeRegs., tit. 18 sections 17951-4 and 25137-1 require that nonbusinessincome from intangibles be allocated in accordance with the rules ofR&TC Sections 25125 to 25127.

If the partnership derives income from activities conducted both withinand outside California, the partnership is an apportioning partnership.All partnerships (apportioning and nonapportioning) should completecolumns (c) and (d). Apportioning partnerships must also completecolumn (e). The apportioning partnership will determine which items Because the source of intangible nonbusiness income is dependent

upon the status of the individual partner, that income is not included incolumn (e) and is entered only in Table 1. The partner must determinethe source of such income by applying the rules described above.

of income constitute business or nonbusiness income and will useSchedule R to determine the partnership income from Californiasources. The partnership's business income apportioned to Californiaare entered in column (e). Partnership nonbusiness income from realand tangible property will also be entered in column (e). Nonbusinessintangibles are sourced or allocated at the partner level and mustbe entered on Table 1 instead. For more information see GeneralInformation D, Nonbusiness Income, and General Information E, UnitaryPartners. Resident partners will use only the information in column (c)and column (d) to report their share of the partnership's income or loss.

The following rules apply to corporations, individuals and other entitiesthat conduct a trade or business that is unitary with the partnership'strade or business (see Cal. Code Regs., tit. 18 section 17951-4,incorporating the provisions of R&TC Section 25137 and regulationsthereunder).

Nonresident, corporate, and other entity partners must report theirdistributive share of income, loss or credits apportioned or allocatedto California as indicated on Schedule K-1 (565), column (e). Specialrules apply if a partner and the partnership engage in a unitarybusiness. See Cal. Code Regs., tit. 18 sections 17951-4 and 25137-1

Unitary partners cannot use the California source information reflectedin column (e). Such partners must use the information in Table 1 andTable 2 as described in the following instructions, and in the LineInstructions.for more information. Also see General Information E, Unitary Partners.

The partner's distributive share of partnership items is determined byapplying the partnership rules in R&TC Sections 17851 through 17858.The determination of the portion of the distributive share of businessand nonbusiness income that has its source in California or, that isincludible in the partner's business income subject to apportionment is

Residents, part-year residents, and some nonresidents may qualify fora credit for taxes paid to other states on income that is apportionedor allocated to a state other than California. For more information, getCalifornia Schedule S, Other State Tax Credit.

Nonapportioning partnerships do not need to fill out column (e) onSchedule K-1 (565) if the partner is a resident and the "Yes" box ischecked on Question I. However, the final determination of residencyis made at the partner level. If the partnership is uncertain as to theresidency status of the partner, it should fill out column (e) for thatpartner.

made in accordance with Cal. Code Regs., tit. 18 section 25137-1 if thepartner, or the partnership, or both, have income from sources withinand outside this state. The partner, in computing net income for its taxaccounting period, must include its distributive share of partnershipitems referred to in this section for any partnership taxable year endingwithin or with the partner's tax accounting period.

Generally, partners must report tax items shown on their Schedule K-1sand any attached schedules, the same way the partnership treatedthe items on its tax return. If the treatment on a partner's original oramended tax return is inconsistent with the partnership's treatment, orif the partnership has not filed a tax return, the partner must attach astatement with its original or amended tax return to identify and explainany inconsistency or to note that a partnership tax return has not beenfiled. If a partner is required to attach this statement but fails to do so,the partner may be subject to an accuracy related penalty.

If the partnership's activities and the partner's activities constitute aunitary business under established standards (other than ownershiprequirements), the combined business income of this single trade orbusiness apportioned to California is determined by combining thepartner's distributive share of the partnership's apportionment factorswith the factors of the partner for any partnership year ending withinthe partner's tax accounting period. Combined business income is thenapportioned by the sales factor. Use of a 3-factor formula dependsupon whether combined gross business receipts (partner's share ofthe partnership's gross business receipts plus the partner's own grossbusiness receipts) are more than 50% from agricultural, extractive,banking, or savings and loans and other financial business activities. Formore information, get Schedule R.

The determination of whether partnership income is business incomeor nonbusiness income is made at the partnership level. Nonbusinessincome from real or tangible personal property located in California,such as rents, royalties, gains, or losses is California source income(Cal. Code Regs., tit. 18 section 17951-3 and R&TC Sections 23040,25124 and 25125). This information should be included on the

If you are a partner that is unitary with the partnership, use Table 2 tocompute your factors, applying the rules shown below (see Cal. CodeRegs., tit. 18 sections 25129 to 25137 for examples). Partners that areunitary with the partnership should perform the following steps:

appropriate line of column (e), as well as in Table 2, Part B, if thepartnership believes it is unitary with the partner or if the partnershipis uncertain whether it is unitary with the partner. Non-unitary partnersshould ignore the information in Table 2 and use column (e).

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C Reporting Information from Columns (d) and (e)

E Unitary Partners

Distributive Items of Business Income

D Nonbusiness Income

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829303 01-21-19

Important Note to Partners:

Unitary Partner's Computation of the Sales Factor

Unitary Partner's Computation of Property Factor

do not

Unitary Partner's Computation of Payroll Factor

Apportionment of Business Income - Nonunitary Business

Basis Rules

Page 3

1. Combine your distributive share of the partnership's business incomewith your own business income to determine total business income.

2. If using the single-sales factor formula, compute the sales factor bycombining your share of the partnership's sales factor from Table 2,Part C, with your own sales factor as explained in these instructions.If using the 3-factor formula, compute property, payroll, andsales factors by combining your share of the partnership's factorsfrom Table 2, Part C, with your own factors as explained in theseinstructions.

The partnership completes the questions and items on theSchedule K-1 (565) for all partners. For more information, see theinstructions for federal Schedule K-1 (1065).

3. Apply the apportionment factor determined in Step 2 to the total business income determined in Step 1 to arrive at business income apportioned tothis state. If your Schedule K-1 (565) reports losses

and/or deductions, you must first apply the basis, at-risk, and thepassive activity loss limitations before such losses/deductions can bededucted on your California return. See Instructions, Loss Limitations.Also, see IRC Section 705(a) for information on how to compute basis.

Compute the numerator and denominator of the sales factor inaccordance with Cal. Code Regs., tit. 18 sections 25134 to 25136. Applythe following special rules:

If your return is ever examined, you may be required to provide yourcomputations and the supporting documents for your partnershipinterest.

A. Include in the denominator of the sales factor your distributive shareof the partnership's sales that give rise to business income. SeeTable 2, Part C.

If you are an individual partner, the amounts in column (c), Californiaadjustments, and column (d), Total amounts using California law, thatare from nonpassive activities must be reported on the appropriateCalifornia form or schedule; such as, Schedule D (540), CaliforniaCapital Gain or Loss Adjustment, Schedule D-1, Sales of BusinessProperty, Schedule CA (540), California Adjustments - Residents, orSchedule CA (540NR), California Adjustments - Nonresidents or Part-Year Residents.

B. Include in the numerator of your sales factor the amount of suchsales described in part A (above) attributable to California.

C. Eliminate intercompany sales as one of the following:Sales by the partner to the partnership to the extent of thepartner's interest in the partnership.Sales by the partnership to the partner not to exceed the partner'sinterest in all partnership sales. See Cal. Code Regs., tit. 18section 25137-1(f)(3).

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Amounts in column (e), California source amounts and credits, that arefrom passive activities must be reported on form FTB 3801, PassiveActivity Loss Limitations, form FTB 3801-CR, Passive Activity CreditLimitations, or form FTB 3802, Corporate Passive Activity Loss andCredit Limitations. Use the related worksheets to figure any passive losslimitations. If the partnership knows that you are a California residentit may leave column (e) blank. California residents are subject to tax ontheir entire taxable income shown in column (d) (R&TC Section 17041).

Use Schedule R to compute the numerator and the denominator of theproperty factor. Adjust factors in accordance with Cal. Code Regs., tit. 18sections 25129, 25130, and 25131. Also apply the following special rules:A. Include in the denominator of your property factor your distributive

share of the partnership's beginning and ending balances of real andtangible personal property owned (if rented, multiply net annual rentspaid, by 8) and used during the tax accounting period in the regularcourse of business. See Table 2, Part C.

If you are not an individual partner, report the amounts as instructed onyour California return.

B. Include in the numerator of your property factor the value ofsuch property that is described in part A (above) that is located inCalifornia. See Table 2, Part C.

If you have losses, deductions, credits, etc., from a prior year that werenot deductible or usable because of certain limitations, they may betaken into account in determining your net income, loss, etc., for thisyear. However, combine the prior-year amounts with any amountsshown on this Schedule K-1 (565) to get a net figure. Instead, report theamounts on an attached schedule, statement, or form on a year-by-yearbasis. See the instructions for federal Schedule K-1 (1065) for moreinformation.

C. See Cal. Code Regs., tit. 18 section 25137 -1(f)(1)(B) for examples ofhow to avoid duplication of the value of property that is rented by thepartner to the partnership or vice versa.

Use Schedule R to compute the numerator and the denominator of thepayroll factor in accordance with Cal. Code Regs., tit. 18 sections 25132and 25133. Apply the following special rules:

The amounts shown on line 1 through line 3 of your Schedule K-1 (565)reflect your distributive share of income or loss from the partnership'sbusiness or rental operations. If you have losses from the partnership,you should be aware that there are three potential limitations imposedon losses before you may deduct losses on your tax return. Theselimitations and the order in which they must be applied are:

A. Include in the denominator of your payroll factor your distributiveshare of the partnership's payroll used to produce business income.See Table 2, Part C.

B. Include in the numerator any such payroll described in part A (above)that is applicable to California. See Table 2, Part C.

Basis limitations (IRC Section 704)At-risk limitations (IRC Section 465)Passive activity loss and credit limitations (IRC Section 469)

If the apportioning trade or business conducted by a partner is notunitary with the apportioning trade or business of the partnership,the partnership apportions its business income separately, usingSchedules R, R-1, R-2, R-3, and R-4 only. The different items ofbusiness income as apportioned to CA are entered in column (e).

Each of these limitations is discussed separately in the followinginstructions.

Other limitations may apply to specific deductions such as theinvestment interest expense deduction. These limitations on specificdeductions generally apply before the basis, at-risk, and passive losslimitations.

Income in Table 2, Part B, is from a California source under R&TCSections 25124 and 25125. Unitary partners must make certain to separately include such items from Tables 1 and 2 as California sourceincome. Unitary partners shall use Tables 1 and 2 to report nonbusinessincome instead of Schedule K-1 (565), column (e).

Generally, California tax law conforms to federal tax law concerningbasis limitations. You may not claim your share of a partnership loss(including a capital loss) that is greater than the adjusted basis of yourpartnership interest at the end of the partnership's taxable year.

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Distributive Items of Nonbusiness Income for aUnitary Partner

Instructions

Questions and Items

Schedule K-1 (565)

Loss Limitations

1


829304 01-21-19

At-Risk Rules

using Californiaamounts

Passive Activity Loss and Credit Rules

G(1) -

G(2) -

Nonresident and Part-Year Resident Partners, get FTB Pub. 1100, Taxationof Nonresidents and Individuals Who Change Residency.

Page 4

The partnership is not responsible for keeping the information needed tocompute the basis of your partnership interest. Although the partnershipdoes provide you with an analysis of the changes to your capital accounton your Schedule K-1 (565), Item J, that information is based on thepartnership's books and records and should not be used to computeyour basis.

(loss) or credits to all partners. There is an exception to this rule forlosses incurred by qualified investors in qualified low-income housingprojects. The partnership will identify any of these qualified amounts onan attachment for line 2.

The passive loss rules apply separately to the items attributable to eachpublicly traded partnership (PTP) that is not treated as a corporation underIRC Section 7704. Thus, partners who do not materially participate in theoperations of a PTP are allowed to deduct their share of the PTP's losses

You can compute the basis of your partnership interest by adding itemsthat increase your basis and then subtracting items that decrease yourbasis. only to the extent of passive income from the same PTP or when the entire

interest is sold (IRC Section 469(k)). See the instructions for form FTB 3801and form FTB 3802 for the rules to calculate and report income, gains, andlosses from passive activities that you held through each PTP you ownedduring the taxable year.

Items that increase your basis may include the following:

Money and the adjusted basis of property you contributed to thepartnership.Your distributive share of the partnership's income.

Your distributive share of the increase in the liabilities of the partnership(and/or your individual liabilities caused by your assumption ofpartnership liabilities).

See the instructions for federal Schedule K-1 (1065), Passive ActivityLimitations, and federal Publication 925 for more information.

Items that decrease your basis, but not below zero, may include the following:If you are a nonresident individual, the amounts in column (e) will generallynot be taxable by California (R&TC Section 17955). However, nonresidentindividuals will be taxed on their distributive share of California sourceincome from an investment partnership if the income from the qualifyinginvestment securities is interrelated with either of the following:

Money and the adjusted basis of property distributed to you.Your share of the partnership's losses.Your share of the decrease in the liabilities of the partnership(and/or your individual liabilities assumed by the partnership).

This is not a complete list of items and factors that determine basis. Getfederal Publication 541 for a complete discussion of how to determine thebasis of your partnership interest.

Any other business activity of the nonresident partner.Any other entity in which the nonresident partner owns an interest that isseparate and distinct from the investment activity of the partnership andthat is conducted in California.

The at-risk rules generally limit the amount of loss, (including loss ondisposition of assets) and other deductions (such as IRC Section 179deduction) that you can claim to the amount you could actually lose inthe activity.

If you are a corporate partner, the amounts in column (e) will also generallynot be taxable in California provided the income from the partnership is thecorporation's only California source income. However, if the corporation doeseither of the following:

If you have: (1) a loss or other deduction from an activity carried on asa trade or business or for the production of income by the partnership; and(2) amounts in the activity for which you are not at-risk, you will have tocomplete federal Form 6198, At-Risk Limitations, to figure the allowableloss to report on your return. Complete federal Form 6198

.

Participates in the management of the investment activities of thepartnership or is engaged in a unitary business with another corporationor partnership that participates in the management of the investmentactivities of the partnership.Has income attributable to sources within California other than incomefrom the investment partnership.See the instructions for federal Schedule K-1 (1065), At-Risk Limitations,

and federal Publication 925, Passive Activity and At-Risk Rules, formore information.

Then the corporation will be taxable on its distributive share of Californiasource income of the partnership. See R&TC Section 23040.1 formore information.

IRC Section 469 limits the deduction of certain losses and credits. Californialaw generally conforms to this federal provision. These rules apply topartners who have a passive activity loss or credit for the taxable year.

Enter the difference between federal and California amounts from column (c)on Schedule CA (540), if you are a resident; or on Schedule CA (540NR), ifyou are a nonresident or part-year resident. Also, if you are a nonresident orpart-year resident, enter California source amounts from the Schedule K-1(565), column (e), on your Schedule CA (540NR), column E.

For California purposes, passive loss limitations apply to individuals,estates, trusts (other than grantor trusts), closely held corporations, andS corporations.

Even though the passive loss rules do not apply to grantor trusts,partnerships, and LLCs, they do apply to the owners of these entities. If this box is checked, the partnership is a PTP as defined in IRC

Section 469(k)(2). Follow the instructions for form FTB 3801 or formFTB 3802 for reporting income, gains, and losses from PTPs.

A passive activity is generally a trade or business activity in which thepartner does not materially participate or a rental real estate activity in whichthe partner does not actively participate. A partnership may have more thanone activity. Each partner must apply the passive activity loss and creditlimitations on an activity-by-activity basis.

If this box is checked, the partnership is an investment partnershipas defined in R&TC Sections 17955 and 23040.1. If you are a nonresidentindividual, the amounts in column (e) will generally not be taxablein California.Individuals, estates, trusts, and S corporations must complete form

FTB 3801 to calculate the allowable passive losses, and form FTB 3801-CRto calculate the allowable passive credits. Corporations must complete formFTB 3802. Part-year resident

partners must consider their period of residency and nonresidency in thecomputation of total California income. The line instructions below thatThe amounts reported on Schedule K-1 (5 65), line 1 and line 15f

are normally passive activity income (loss) or credits from the tradeor business of the partnership if you are a limited partner, or if youare a general partner who did not materially participate in the tradeor business activities of the partnership. The amounts reported onSchedule K-1 (5 65), line 2, line 3, line 15b, line 15c, and line 15d arefrom rental activities of the partnership and are passive activity income

instruct you to enter information from Schedule K-1 (565), column (d),on other forms, apply to resident partners. When the instructions makereference to column (d), nonresident members should take information fromcolumns (c), (d), and (e) and apply the information to the appropriate linerelating to computation of total income and income from California sources.

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Investment Partnership Income

Line Instructions

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829311 01-21-19

Line 1 - Ordinary Income (Loss) from Trade or Business Activities

Line 5 through Line 11a - Portfolio Income

Line 5 - Interest Income

Line 6 - Dividends

Line 2 - Net Income (Loss) from Rental Real Estate Activities

Line 7 - Royalties

Line 8 and Line 9 - Net Short-term and Net Long-term Capital Gain (Loss)

Line 10a and Line 10b - Total Gain and Total Loss under IRC Section 1231(Other Than Due to Casualty or Theft)

Line 11a - Other Portfolio Income (Loss)

Line 3 - Net Income (Loss) from Other Rental Activities

Line 4 - Guaranteed Payments to Partners

Line 11b and Line 11c - Total Other Income and Total Other Loss

Page 5

Passive Activity Loss Limitations, for federal purposes and form FTB 3801for California purposes.

The amount reported on line 1, column (d), is your share of the ordinaryincome (loss) from the trade or business activities of the partnership. Forindividual partners, where this amount is reported depends on whether ornot this amount is a passive activity to you.

Portfolio income (loss), referred to as "portfolio" income (loss) in theseinstructions, is generally not subject to the passive activity limitation rulesof IRC Section 469. Portfolio income includes interest, dividend, royaltyincome and gain or loss on the sale of property held for investment.Generally, amounts reported on line 8, line 9, and line 11a are gains orlosses attributable to the disposition of property held for investment andare, therefore, classified as portfolio income (loss). However, if an amountreported on line 8, line 9, or line 11a, column (d), is a passive activityamount, the partnership should identify the amount.

If, in addition to this passive activity income, you have a passive activityloss from this partnership or from any other source, report the income onform FTB 3801 or form FTB 3802. If a loss is reported on line 1, column (d),report the loss on the applicable line of form FTB 3801 or form FTB 3802 todetermine how much of the loss is allowable.

If the partnership has income from activities both within and outsideCalifornia, the amount nonresidents or corporate partners must report ontheir California returns is a function of the partnership's apportionmentpercentage and allocation of income. Reporting instructions are includedin the information provided by the partnership. See Cal. Code Regs., tit. 18sections 17951-4 and 25137-1 for more information. In addition, see GeneralInformation E, Unitary Partners.

If you have an amount on Schedule K-1 (565), line 5, column (c), reportthis amount on Schedule CA (540), Part I, line 2, or on Schedule CA(540NR), Part II, line 2, column B or Column C, whichever is applicable.

If you have an amount on Schedule K-1 (565), line 6, column (c), reportthis amount on Schedule CA (540), Part I, line 3, or on Schedule CA(540NR), Part II, line 3, column B or column C, whichever is applicable.Generally, the income (loss) reported on line 2, column (d), is a

passive activity amount to all partners. However, the loss limitationsof IRC Section 469 do not apply to qualified investors in qualifiedlow-income housing projects. If applicable, the partnership will attach aschedule for line 2 to identify such amounts. If you have an amount onSchedule K-1 (565), line 2, column (c), report the California adjustmenton Schedule CA (540), Part I, line 17, or on Schedule CA (540NR),Part II, line 17, column B or column C, whichever is applicable.

If you have an amount on Schedule K-1 (565), line 7, column (c), reportthis amount on Schedule CA (540), Part I, line 17, or on Schedule CA(540NR), Part II, line 17, column B or column C, whichever is applicable.

If you have an amount on Schedule K-1 (565), line 8 or line 9, column (d),report this amount on the Schedule D (540 or 540NR), line 2.

Use the following instructions to determine where to enter the line 2 amount.

If you have a loss on line 2, column (d) (other than a qualifiedlow-income housing project loss), enter the loss on the applicable line ofform FTB 3801 or form FTB 3802 to determine how much of the loss isallowable. Your share of the loss may be eligible for the special $25,000allowance for rental real estate losses. Get the instructions for formFTB 3801 or form FTB 3802 for more information.

If the amounts on line 10a and line 10b relate to rental activity, the IRCSection 1231 gain (loss) is a passive activity amount. If the amounts online 10a and line 10b relate to a trade or business activity and you are alimited partner, the IRC Section 1231 gain (loss) is a passive activity amount.See the federal Schedule K-1 (1065) Specific Instructions for box 2, item 1,

and item 2 for more information. If the amount is not a passive activity amount report it on Schedule D-1,line 2, column (g).If a gain is reported on line 10a, column (d), and it is a passive activityamount report the gain on Schedule D-1, line 2, column (g).If a loss is reported on line 10b, column (d), and it is a passive activityamount, get form FTB 3801 to determine if your loss is limited.

Report any California adjustment amount from column (c) on Schedule CA(540 or 540NR) if you are a qualified investor reporting a qualifiedlow-income housing project loss.

If you have only income on line 2, column (d), and no other passivelosses, enter any California adjustment amount from column (c) onSchedule CA (540 or 540NR). However, if in addition to this passiveactivity income, you have a passive activity loss from this partnershipor from any other source, report the line 2, column (d), income on theapplicable line of form FTB 3801 or form FTB 3802.

The partnership uses line 11a, column (d), to report portfolio incomeother than interest, dividend, royalty, and capital gain (loss) income. Thepartnership should attach a schedule to Schedule K-1 (565) to tell you whatkind of portfolio income is reported on line 11a, column (d). An example ofportfolio income that could be reported on line 11a, column (d), is from areal estate mortgage investment conduit (REMIC) in which the partnership isa residual interest holder.

The amount on line 3, column (d) is a passive activity amount for all partners.

If line 3, column (d) is a loss, report the loss on the applicable line ofform FTB 3801 or form FTB 3802. If the partnership has a residual interest in a REMIC, it will report your share

of REMIC taxable income (net loss) on the schedule. Report the adjustmentamount from column (c) on Schedule CA (540 or 540NR). The partnershipwill also report your share of "excess inclusion" and your share of IRCSection 212 expenses. For taxable years beginning after December 31, 2017,and before January 1, 2026, the federal deduction for miscellaneous itemizeddeductions subject to the 2% floor is suspended. California does not conform.You may deduct these IRC Section 212 expenses as a miscellaneousdeduction for California purposes.

If only income is reported on line 3, column (d), and you haveno other passive losses, report the California adjustment fromcolumn (c) on Schedule CA (540 or 540NR). However, if in additionto this passive activity income, you have a passive activity loss fromthis partnership or from any other source, report the line 3 incomeon the applicable line of form FTB 3801 or form FTB 3802.

Amounts on this line are not normally part of a passive activity. Ifthere is an amount on Schedule K-1 (565), line 4, column (c), enterthis amount on Schedule CA (540), Part I, line 21f, or on ScheduleCA (540NR), Part II, line 21f, column B or column C, whichever isapplicable. If this is a passive activity for the partner, then the partnermust also complete the passive activity form. Use federal Form 8582,

Amounts reported on these lines are other items of income (loss) notincluded on line 1 through line 11a. The partnership should give you adescription for each of these items.

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Income (Loss)

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829312 01-21-19

Line 13b - Investment Interest Expense

Line 13c - IRC Section 59(e) Expenditures

Line 13d - Deductions Related to Portfolio Income

Line 13e - Other Deductions

Line 12 - Expense Deduction for Recovery Property

Line 14

Line 15a - Total Withholding

Line 13a - Charitable Contributions

Page 6

Use the instructions below to: If there is an amount on Schedule K-1 (565), line 13a, column (c), enterthis amount on Schedule CA (540), Part II, line 11 and/or line 12 or onSchedule CA (540NR), Part III, line 11 and/or line 12.

Report income or gain (not losses) from passive activities.Report income, gain, or losses from all other passive activities.

If you have losses from passive activities, or a combination of income, gains,and losses from passive activities, you must first complete form FTB 3801 orform FTB 3802 to determine if any of your losses are If the partnership paid or accrued interest debts it incurred to buy or

hold investment property, the amount of interest you can deduct maybe limited. For more information and the special provisions that applyto investment interest expense, get form FTB 3526, Investment InterestExpense Deduction, and federal Publication 550, Investment Income andExpenses.

limited by the passive loss rules. Use the instructions below to reportpassive income and losses after the passive loss limitations have beencomputed.

Line 11b and line 11c items may include:Enter the amount from column (d) on form FTB 3526 along with yourinvestment interest expense from any other sources. Form FTB 3526 willhelp you determine how much of your total investment interest is deductible.

Partnership gains from disposition of farm recapture property (getSchedule D-1) and other items to which IRC Section 1252 applies.Recoveries of bad debts, prior taxes, and delinquency amounts(IRC Section 111). Report the amounts from line 11b and line 11c,column (c), on Schedule CA (540), Part I, line 21f, or on ScheduleCA (540NR), Part II, line 21f, column B or column C, whichever is applicable.

If you have an amount on Schedule K-1 (565), line 13c, see the instructionsfor the federal Schedule K-1 (1065), box 13. The partnership should giveyou a description and the amount of your share for each item applicable tothis category.Gains and losses from wagering, IRC Section 165(d). Report the

amounts from line 11b and line 11c, column (c), on Schedule CA(540), Part I, line 21f, or on Schedule CA (540NR), Part II, line 21f,column B or column C, whichever is applicable. Amounts entered on this line are the deductions that are clearly and

directly allocable to portfolio income (other than investment interestexpense and expenses from a REMIC). If you have an amount onSchedule K-1 (565), line 13d, column (c), enter this amount on

Any income, gain, or loss to the partnership under IRC Section 751.Report this amount on Schedule D-1, line 10.Specially allocated ordinary gain or loss. Report this amount onSchedule D-1, line 10.

Schedule CA (540), Part II, line 21, or on Schedule CA (540NR), Part III,line 21. If any of the line 13d amount should not be reported on ScheduleCA (540 or 540NR), the partnership should identify these amounts.Net gain or loss from involuntary conversions due to casualty or theft.

The partnership will give you a schedule that shows the Californiaamounts to be entered on federal Form 4684, Casualties and Thefts,Section B, Part II, line 34, column (b)(i), column (b)(ii), and column (c). Amounts on this line are deductions not included on lines 12, 13a through

13d. If there is an amount on Schedule K-1 (565), line 13e, column (c), enterthis amount on the applicable line of Schedule CA (540 or 540NR).

See the instructions for federal Schedule K-1 (1065), box 13, for examplesof other deductions. Also, get FTB Pub. 1001 for differences between federaland California tax law for certain deductions.For California the maximum amount of expense deduction for recovery

property (IRC Section 179 deduction) that you can claim for all sources is$25,000. The $25,000 limit is reduced if the total cost of IRC Section 179property placed in service during the year exceeds $200,000. The information reported in box 14 of the federal Schedule K-1 (1065), does

not apply to California and therefore there is no line 14.California does not conform to the federal limitation amounts.

The partnership will provide information on your share of the IRCSection 179 deduction and of the cost of the partnership's IRC Section 179property so that you can compute this limitation. Your IRC Section 179deduction is also limited to your taxable income from all of your tradesor businesses. Get form FTB 3885A, Depreciation and AmortizationAdjustments, and get federal Publication 534, Depreciating Property PlacedIn Service Before 1987, and federal Publication 946, How To DepreciateProperty, for more information.

If you have credits that are passive activity credits, complete formFTB 3801-CR (use form FTB 3802 for corporations) in addition to the creditforms referenced. Get the instructions for form FTB 3801-CR (or formFTB 3802) for more information.

Total withholding is the sum of your distributive share of taxes withheldfrom payments to the partnership by another entity (allocated to all partnersaccording to their respective partnership interests) plus taxes withheld onyou by the partnership, or back up withholding on you as a domestic orforeign nonresident partner. If there is a withholding credit allocated to youor taxes were withheld on you by the partnership, the partnership mustprovide a completed Form 592-B, Resident and Nonresident WithholdingTax Statement. Attach Form 592-B to the front of your California tax return

If the IRC Section 179 deduction is a passive activity amount, report it on the applicable line of form FTB 3801. If it is not a passive activityamount and there is an amount on Schedule K-1 (565), line 12,column (c), enter this amount on Schedule CA (540), Part I, line 21f, oron Schedule CA (540NR), Part II, line 21f, column B or column C,whichever is applicable.

to claim the amount withheld. Schedule K-1 (565) may not be used to claimthe withholding credit. If the partnership is not on a calendar year, theamount on line 15a may not match the amount on Form 592-B because ofthe difference in accounting periods. Claim the amount shown on Form592-B on one of the following:

The partnership will provide a schedule that shows which contributionswere subject to the 50%, 30%, and 20% limitations. See the instructionsfor federal Form 1040, U.S. Individual Income Tax Return, and federalPublication 526, Charitable Contributions, for more information.

Form 540, California Resident Income Tax Return, line 73.Form 540NR, California Nonresident or Part-year Resident Income TaxReturn (Long), line 83.Form 541, California Fiduciary Income Tax Return, line 31.

For taxable years beginning after December 31, 2017, and beforeJanuary 1, 2026, the 50% limitation under IRC Section 170(b) forcash contributions to public charities and certain private foundationsis increased to 60% for federal purposes. California does not conform.The limitation for California is 50%. Form 109, California Exempt Organization Business Income Tax Return,

line 17.California has not conformed to any of the provisions of the KatrinaEmergency Disaster Relief Act of 2005.

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022 Schedule K-1 (565) Instructions 2018 (REV 01-19)

Deductions

Credits

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829313 01-21-19

Line 15b - Low-Income Housing Credit

Line 16Line 15c - Other Credits Related to Rental Real Estate Activities

Line 17a through Line 17f, column (d)Line 15d - Credits Related to Other Rental Activities

Line 15e - Nonconsenting Nonresident Member's Tax Paid by LLC onBehalf of Your Partnership.

Line 18a through Line 18c - Tax-exempt Income and NondeductibleExpenses

Line 15f - Other CreditsLine 19a and Line 19b - Distributions

Line 20a and Line 20b - Investment Income and Investment Expenses

Line 20c - Other Information

Page 7

Line 15f credits are related to the trade or business activities of theForm 100, California Corporation Franchise or Income Tax Return,line 33. partnership. In general, passive activity credits from passive activities are

limited to tax attributable to passive activities for California purposes (R&TCSection 17561). Credits that may be limited under the passive activity creditrules include the following:

Form 100S, California S Corporation Franchise or Income Tax Return,line 32.

Get FTB Pub. 1017, Resident and Nonresident Withholding Guidelines, formore information. Research credit

Low-income housing credit

You may be able to use the low-income housing credit, and other creditsgenerated from rental activities, against tax on other income. Get formFTB 3801-CR for more information.

The farmworker housing credit has been consolidated into the low-incomehousing tax credit. For more information, get form FTB 3521, Low-IncomeHousing Credit.

Any allowable credit is entered on form FTB 3521. The passive activity creditlimitations of IRC Section 469, however, may limit the amount of credit.Credits from passive activities are generally limited to tax attributable topassive activities.

The partnership can include on line 15f your distributive share of netincome taxes paid to other states by the partnership. Subject to thelimitations of R&TC Section 18006, partners may claim a credit againsttheir individual tax for net income taxes paid by the partnership toanother state. The amount of tax paid is required to be supported by acopy of the return filed with the other state and evidence of the paymentof the tax. Get California, Schedule S for more information.

You cannot claim the low-income housing credit on any qualified low-incomehousing project for which any person was allowed any benefit underSection 502 of the Tax Reform Act of 1986.

The information reported in box 16 of the federal Schedule K-1 (1065), doesnot apply to California and therefore there is no line 16.The information you need to compute credits related to rental real estate

activities other than the low-income housing credit is provided on this linewith an attached schedule. These credits may be limited due to passiveactivity limitation rules.

Use the information reported on line 17a through line 17f, column (d) aswell as your adjustments and tax preference items from other sourcesto complete Schedule P (100, 100W, 540, 540NR, or 541), Alternative

Any information you need to compute credits related to rental activities otherthan rental real estate activities is provided on this line. These credits may belimited due to passive activity limitation rules. Minimum Tax and Credit Limitations. For more information, see the

instructions for federal Schedule K-1 (1065), box 17, Alternative minimum tax(AMT) items.

This line shows any income tax paid on your partnership's behalf by an LLCif the general partner in the partnership did not sign form FTB 3832, LimitedLiability Company Nonresident Members' Consent, consenting to California'sjurisdiction to tax the partnership's distributive share of the LLC incomeattributable to California sources. See the instructions for federal Schedule K-1 (1065), box 18. The

partnership should give you a description and the amount of your share foreach item applicable to California in this category.

You must attach a copy of the Schedule K-1 (568), Member's Share ofIncome, Deductions, Credits, etc., previously issued to your partnership bythe LLC and the Schedule K-1 (565) issued to you by your partnership.

This line is used to report information you need to compute pass-throughcredits and other items that are not includable on line 15a through line 15dbut are related to the trade or business activity. The partnership shouldprovide a schedule and/or statement explaining any items.

See the instructions for federal Schedule K-1 (1065), box 19.

Credits that may be reported on line 15f (depending on the type of activitythey relate to) include: If the partnership paid or accrued interest on debts it incurred to buy or hold

investment property, the amount of interest you can deduct may be limited.California Competes Tax Credit. Get form FTB 3531.College Access Tax Credit. Get form FTB 3592. For more information and the special provisions that apply to investment

interest expense, get form FTB 3526, and federal Publication 550.Disabled Access Credit for Eligible Small Businesses. Get form FTB 3548.Donated Agricultural Products Transportation Credit. Get form FTB 3547.Enhanced Oil Recovery Credit. Get form FTB 3546.Enterprise Zone (EZ) Hiring Credit. Get form FTB 3805Z.Local Agency Military Base Recovery Area (LAMBRA) Hiring Credit. Getform FTB 3807.Natural Heritage Preservation Credit. Get form FTB 3503.New Advanced Strategic Aircraft Credit. Use credit code 236.New California Motion Picture and Television Production Credit. Get formFTB 3541.New Donated Fresh Fruits or Vegetables Credit. Get form FTB 3814.New Employment Credit. Get form FTB 3554.Prison Inmate Labor Credit. Get form FTB 3507.Research Credit. Get form FTB 3523.

Use the column (d) amounts to determine the amount to enter on formFTB 3526, line 1.

The amounts shown on line 20a and line 20b include only investment incomeand expenses included on lines 5, 6, 7, 11, and 13d of this Schedule K-1(565). The partnership should attach a schedule that shows the amountof any investment income and expenses included in any other lines ofthis Schedule K-1 (565). Use these amounts, if any, to adjust line 20a andline 20b to determine your total investment income and total investmentexpenses from this partnership.

Combine these totals with investment income and expenses from all othersources to determine the amount to enter on form FTB 3526, line 1.

For credit recaptures attach a schedule that includes the credit recapture,names, and amounts.The passive activity limitations of IRC Section 469 may limit the amount

of credits on line 15b, line 15c, line 15d, and line 15f. Line 15b, line 15c,and line 15d credits are related to the rental activities of the partnership. The partnership will provide supplemental information required to be

reported to you on this line. If the partnership is claiming tax benefits

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Alternative Minimum Tax (AMT) Items

Tax-Exempt Income and Nondeductible Expenses

Distributions

Other Information

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829314 01-21-19

Table 2 - Partner's Share of Distributive Items

Total within California.

any

Gross Receipts -

ftb.ca.gov 25120.

ftb.ca.govdoing business.

Table 3 - Partner's share of cost of goods sold, deductions, and rentalincome.

Table 1 - Partner's Share of Nonbusiness Income from Intangibles(source of income is dependent on residence or commercial domicileof the partner)

Page 8

from an EZ, LAMBRA, MEA, or TTA it will give you the business incomeand business capital gains and losses apportioned to the EZ, LAMBRA,MEA, or TTA on this line. Get form FTB 3805Z, FTB 3807, FTB 3808, orFTB 3809 to claim any applicable credit.

The Partnership will complete Table 2, Parts A to C for unitary partnersand Table 2, Part C for all non-unitary partners. Table 2 does not needto be completed for non-unitary individuals. The final determination ofunity is made at the partner level.

The partnership may have provided a schedule with amounts showingyour proportionate interest in the partnership's aggregate gross receipts,less returns and allowances. A qualified taxpayer may exclude income,

If the partner and the partnership are engaged in a single unitarybusiness or if the partnership is uncertain as to whether it is unitary withthe partner, the partnership will furnish the information in Table 2.positive and negative adjustments, and preference items attributable

to any trade or business from alternative minimum taxable income. A"qualified taxpayer" means a taxpayer that meets both of the following:

The partner's share of the partnership's business income is entered onTable 2, Part A. The partner then adds that income to its own businessincome and apportions the combined business income using the revisedfactor described below.Is the owner of, or has an ownership interest in a trade or business.

Has aggregate gross receipts, less returns and allowances, ofless than $1,000,000 during the taxable year from all trades orbusinesses in which the taxpayer is an owner or has an ownershipinterest. In the case of an ownership interest, you should includeonly your proportional share of aggregate gross receipts of anytrade or business from a partnership, LLC, S corporation, regulatedinvestment company (RIC), real estate investment trust (REIT), orreal estate mortgage investment conduit (REMIC).

Table 2, Part B reflects the partner's share of nonbusiness income fromreal and tangible property wholly sourced or allocable to California. Thisis added to apportioned business income and nonbusiness intangibleincome allocated to California and becomes a part of California taxableincome. For more information, see R&TC Sections 25124 and 25125,and Cal. Code Regs., tit. 18 sections 17951-1, 17951-2, and 17951-3.

The partner's share of the partnership's property, payroll, and salesfactors is in Table 2, Part C. The partner combines its apportionmentfactors with the apportionment factors of the partnership and uses therevised factor to compute its business income apportioned to California.For more information see General Information D, Nonbusiness Income,and General Information E, Unitary Partners.

You need to add your share of the aggregate gross receipts from thispartnership to your aggregate gross receipts from all other trades orbusinesses in which you hold an interest to determine if you are aqualified taxpayer.

The partnership will complete Table 2, Part C to report the partner'sdistributive share of property, payroll and sales For purposes of R&TC Section 17062(b)(4), "aggregate gross receipts,

less returns and allowances" means the sum of the following:Partners will use Table 2, Part C to determine if they meet threshold amountsof California property, payroll and sales.

The gross receipts of the trades or businesses which the taxpayerowns.The proportionate interest of the gross receipts of the trades orbusinesses which the taxpayer owns.

R&TC Section 23101 provides that a taxpayer is doing business if it activelyengages in any transaction for the purpose of financial or pecuniary gain orprofit in California or if of the following conditions are satisfied:The proportional interest of pass-through entities gross receipts in

which the taxpayer holds an interest. The taxpayer is organized or commercially domiciled in California.

The sales, as defined in R&TC Section 25120 (e) or (f), of thetaxpayer in California, including sales by the taxpayer's agents andindependent contractors, exceed the lesser of $583,867 or 25% ofthe taxpayer's total sales.

R&TC Section 25120 was amended to add thedefinition of gross receipts. "Gross receipts" means the gross amountsrealized (the sum of money and the fair market value of other propertyor services received) on:

The real property and tangible personal property of the taxpayer inCalifornia exceed the lesser of $58,387 or 25% of the taxpayer's totalreal property and tangible personal property.

The sale or exchange of property,The performance of services, orThe use of property or capital (including rents, royalties, interest, anddividends) in a transaction that produces business income, in whichthe income, gain, or loss is recognized (or would be recognized if thetransaction were in the United States) under the IRC.

The amount paid in California by the taxpayer for compensation, asdefined in R&TC Section 25120(c), exceeds the lesser of $58,387or 25% of the total compensation paid by the taxpayer.

If the partner's distributive share of property, payroll, or sales inCalifornia, when combined with the partner's property, payroll, or salesin California from other pass-through entities or its own activities,exceeds the threshold amounts set forth in R&TC Section 23101, thepartner is "doing business" in California and must file a return and payall applicable taxes, including the minimum franchise tax if the partneris a corporation or the applicable annual tax if the partner is a businessentity that is required to pay an annual tax.

Amounts realized on the sale or exchange of property shall not bereduced by the cost of goods sold or the basis of property sold.

For a complete definition of "gross receipts", refer to R&TCSection 25120(f) or go to and search for

For purposes of this section, "pass-through entity" means a partnership(as defined by R&TC Section 17008), an S corporation, a RIC, a REIT,and a REMIC. See R&TC Section 17062 for more information.

For more information, see R&TC Section 23101 or go to andsearch for

The pro-rata share of gain or loss on property subject to the IRCSection 179 expense deduction recapture should be reported onSchedule K-1 (565) as other information. Follow the instructions on thefederal Form 4797 and federal Schedule K-1 (1065) for the reportingrequirements. Table 3 is completed for partners that are partnerships or LLCs taxed

as partnerships. The information on Table 3 is used by LLCs that fileForm 568, Limited Liability Company Return of Income, to determinetheir total income.

Get FTB Pub. 1001 for a listing of items of nonconformity for individuals.

The income data contained in Table 1 is not reflected in column (e)of Schedule K-1 (565) because the source of such income must bedetermined at the partner level. The partner must make a determinationwhether the nonbusiness intangible income item is from a Californiasource. For more information, see General Information D, NonbusinessIncome, and General Information E, Unitary Partners.

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Other Partner Information

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Documents

Partner's Instructions for Schedule K-1 (Form 1065)receipts under section 59A(e). The following codes have been added or changed as a result of the Tax Cuts and Jobs Act. your amount