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If you are required to file Form 8082 but If a partner is required to notify the
General Instructions fail to do so, you may be subject to the partnership of a section 751(a) exchange
accuracy-related penalty. This penalty is but fails to do so, a $50 penalty may be
Purpose of Schedule K-1 in addition to any tax that results from imposed for each such failure. However,
making your amount or treatment of the no penalty will be imposed if the partner
The partnership uses Schedule K-1 to item consistent with that shown on the can show that the failure was due to
report your share of the partnership's partnership's return. Any deficiency that reasonable cause and not willful neglect.
income, credits, deductions, etc. Keep it results from making the amounts
for your records. Do not file it with
your tax return. The partnership has filed
consistent may be assessed immediately. Nominee Reporting
a copy with the IRS. Any person who holds, directly or
Although the partnership generally is
Errors indirectly, an interest in a partnership as
not subject to income tax, you are liable If you believe the partnership has made a nominee for another person must
for tax on your share of the partnership an error on your Schedule K-1, notify the furnish a written statement to the
income, whether or not distributed. partnership and ask for a corrected partnership by the last day of the month
Include your share on your tax return if a Schedule K-1. Do not change any items following the end of the partnership's tax
return is required. Use these instructions on your copy of Schedule K-1. Be sure year. This statement must include the
to help you report the items shown on that the partnership sends a copy of the name, address, and identifying number
Schedule K-1 on your tax return. corrected Schedule K-1 to the IRS. If you of the nominee and such other person,
The amount of loss and deduction that are a partner in a partnership that does description of the partnership interest held
you may claim on your tax return may be not meet the small partnership exception as nominee for that person, and other
less than the amount reported on and you report any partnership item on information required by Temporary
Schedule K-1. It is the partner's your return in a manner different from the Regulations section 1.6031(c)-1T. A
responsibility to consider and apply way the partnership reported it, you must nominee that fails to furnish this statement
any applicable limitations. See file Form 8082. must furnish to the person for whom the
Limitations on Losses, Deductions, nominee holds the partnership interest a
and Credits beginning on page 2 for Sale or Exchange of copy of Schedule K-1 and related
more information. information within 30 days of receiving it
Partnership Interest from the partnership.
Where “attach schedule” appears
beside a line item on Schedule K-1, see Generally, a partner who sells or A nominee who fails to furnish when
either the schedule that the partnership exchanges a partnership interest in a due all the information required by
has attached for that line or line 25 of section 751(a) exchange must notify the Temporary Regulations section
Schedule K-1. partnership, in writing, within 30 days of 1.6031(c)-1T, or who furnishes incorrect
the exchange (or, if earlier, by January 15 information, is subject to a $50 penalty for
of the calendar year following the each statement for which a failure occurs.
Inconsistent Treatment of calendar year in which the exchange The maximum penalty is $100,000 for all
Items occurred). A “section 751(a) exchange” such failures during a calendar year. If the
Generally, you must report partnership is any sale or exchange of a partnership nominee intentionally disregards the
items shown on your Schedule K-1 (and interest in which any money or other requirement to report correct information,
any attached schedules) the same way property received by the partner in each $50 penalty increases to $100 or, if
that the partnership treated the items on exchange for that partner's interest is greater, 10% of the aggregate amount of
its return. This rule does not apply if your attributable to unrealized receivables (as items required to be reported, and the
partnership is within the “small defined in section 751(c)) or inventory $100,000 maximum does not apply.
partnership exception” and does not elect items (as defined in section 751(d)).
to have the tax treatment of partnership The written notice to the partnership International Boycotts
items determined at the partnership level. must include the names and addresses
of both parties to the exchange, the Every partnership that had operations in,
If the treatment on your original or or related to, a boycotting country,
amended return is inconsistent with the identifying numbers of the transferor and
(if known) of the transferee, and the company, or a national of a country must
partnership's treatment, or if the file Form 5713, International Boycott
partnership was required to but has not exchange date.
Report.
filed a return, you must file Form 8082, An exception to this rule is made for
sales or exchanges of publicly traded If the partnership cooperated with an
Notice of Inconsistent Treatment or international boycott, it must give you a
Administrative Adjustment Request partnership interests for which a broker is
required to file Form 1099-B, Proceeds copy of its Form 5713. You must file your
(AAR), with your original or amended own Form 5713 to report the partnership's
return to identify and explain any From Broker and Barter Exchange
Transactions. activities and any other boycott operations
inconsistency (or to note that a that you may have. You may lose certain
partnership return has not been filed). tax benefits if the partnership participated
See, for example, Temporary Regulations information is based on the partnership's activity, to acquire property used in the
section 1.469-5T(e)(3), which treats all books and records and cannot be used to activity, or to acquire your interest in the
members with limited liability as limited figure your basis. activity, that are not secured by your own
partners for purposes of section You can figure the adjusted basis of property (other than the property used in
469(h)(2). your partnership interest by adding items the activity). See the instructions for item
that increase your basis and then F on page 5 for the exception for qualified
Nonrecourse Loans subtracting items that decrease your nonrecourse financing secured by real
Nonrecourse loans are those liabilities of basis. property.
Items that increase your basis are: ● Cash, property, or borrowed amounts
the partnership for which no partner bears
the economic risk of loss. ● Money and your adjusted basis in used in the activity (or contributed to the
property contributed to the partnership. activity, or used to acquire your interest in
Elections ● Your share of the increase in the
the activity) that are protected against loss
partnership's liabilities (or your individual by a guarantee, stop-loss agreement, or
Generally, the partnership decides how to other similar arrangement (excluding
liabilities caused by your assumption of
figure taxable income from its operations. casualty insurance and insurance against
partnership liabilities).
However, certain elections are made by tort liability).
● Your share of the partnership's income
you separately on your income tax return ● Amounts borrowed for use in the
and not by the partnership. These (including tax-exempt income).
activity from a person who has an interest
elections are made under the following ● Your share of the excess of the
in the activity, other than as a creditor, or
code sections: deductions for depletion over the basis of who is related, under section 465(b)(3), to
● Section 59(e) (deduction of certain the property subject to depletion. a person (other than you) having such an
qualified expenditures ratably over the Items that decrease your basis (but not interest.
period of time specified in that section). below zero) are: To help you complete Form 6198, the
For more information, see the instructions ● Money and the adjusted basis of
partnership should specify on an
for lines 18a and 18b of Schedule K-1 on property distributed to you. attachment to Schedule K-1 your share
page 9. ● Your share of the decrease in the of the total pre-1976 losses from a section
● Section 108(b)(5) (income from the partnership's liabilities (or your individual 465(c)(1) activity for which there existed
discharge of indebtedness). liabilities assumed by the partnership). a corresponding amount of nonrecourse
● Section 617 (deduction and recapture ● Your share of the partnership's losses liability at the end of the year in which the
of certain mining exploration (including capital losses). losses occurred. Also, you should get a
expenditures). ● Your share of the partnership's section separate statement of income, expenses,
● Section 901 (foreign tax credit). 179 expense deduction (even if you etc., for each activity from the partnership.
cannot deduct all of it).
Passive Activity Limitations
Additional Information ● Your share of the partnership's
nondeductible expenses. Section 469 provides rules that limit the
For more information on the treatment of deduction of certain losses and credits.
● The amount of your deduction for
partnership income, credits, deductions, These rules apply to partners who:
etc., see Pub. 541, Partnerships, and depletion of any partnership oil and gas
● Are individuals, estates, trusts, closely
Pub. 535, Business Expenses. property (not to exceed your allocable
share of the adjusted basis of that held corporations, or personal service
To get forms and publications, see the property). corporations and
instructions for your tax return. ● Have a passive activity loss or credit for
For more details on the basis rules, see
Pub. 541. the tax year.
Limitations on Losses, Generally, passive activities include:
Deductions, and Credits At-Risk Limitations 1. Trade or business activities in
There are three separate potential Generally, if you have (a) a loss or other which you did not materially participate
limitations on the amount of partnership deduction from any activity carried on as and
losses that you may deduct on your a trade or business or for the production 2. Activities that meet the definition of
return. These limitations and the order in of income by the partnership, and (b) rental activities under Temporary
which you must apply them are as follows: amounts in the activity for which you are Regulations section 1.469-1T(e)(3) and
Regulations section 1.469-1(e)(3).