Page 249 - Individual Forms & Instructions Guide

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
If you have passive activity income, must be reported on Schedule SE. Enter ship while U.S. persons controlled that
complete Part II, column (h), for that ac- the amount from Schedule K-1 (Form partnership.
tivity. If you have nonpassive income or 1065), box 14, code A, on Schedule SE 3. You had an acquisition, disposi-
losses, complete Part II, columns (i) after you reduce this amount by any al- tion, or change in proportional interest
through (k), as appropriate. lowable expenses attributable to that in- of a foreign partnership that:
If you had a loss from the partnership come. a. Increased your direct interest to at
or S corporation that was not allowed least 10% or reduced your direct interest
last year because of the passive activity Foreign Partnerships of at least 10% to less than 10%, or
loss rules, but all or part is allowed this Follow the instructions below in addi-
b. Changed your direct interest by at
year, see Line 27, later, for how to report tion to the instructions earlier under Do- least a 10% interest.
it. mestic Partnerships.
4. You contributed property to a for-
Excess business loss rules. If you re- If you are a U.S. person, you may eign partnership in exchange for a part-
port a loss on Schedule E from a part- have received Forms 1099-B,
nership or S corporation engaged in a 1099-DIV, and 1099-INT reporting your nership interest if:
trade or business, use Form 461 to figure share of certain partnership income, be- a. Immediately after the contribu-
your excess business loss. Your excess cause payors of income to the foreign tion, you owned, directly or indirectly,
business loss will not be reflected on partnership in most cases are required to at least a 10% interest in the partnership;
your Schedule E; instead, it will be add- allocate and report payments of that in- or
ed to your income on Form 1040 and come directly to each of the partners of b. The value of the property you
carried forward to a subsequent year as a the foreign partnership. If you received contributed, when added to the value of
net operating loss. For more informa- both Schedule K-1 and Form 1099 for any other property you or any related
tion, see the Instructions for Form 461. the same type and source of partnership person contributed to the partnership
income, report only the income shown during the 12-month period ending on
Domestic Partnerships on Schedule K-1 in accordance with its the date of transfer, exceeds $100,000.
See the Schedule K-1 instructions before instructions. Also, you may have to file Form
entering on your return other partnership If you are not a U.S. person, you may 8865 if you contributed property with
items from a passive activity or income have received Forms 1042-S reporting built-in gain to a foreign partnership (or
or loss from any publicly traded partner- your share of certain partnership in- certain domestic partnerships) or to re-
ship. come, because payors of income to the port certain dispositions by a foreign
You can deduct unreimbursed ordina- foreign partnership in most cases are re- partnership of property you previously
ry and necessary expenses you paid on quired to allocate and report payments contributed to that partnership if you
behalf of the partnership if you were re- of that income directly to each of the were a partner at the time of the disposi-
quired to pay these expenses under the partners of the foreign partnership. If tion.
partnership agreement. See Line 27, lat- you received both Schedule K-1 and For more details, including penalties
er, for how to report these expenses. Form 1042-S for the same type and for failing to file Form 8865, see Form
If you used loan proceeds to buy an source of partnership income, report the 8865 and its separate instructions.
interest in, or make a contribution to the income on your return as follows.
• For all income effectively connec-
capital of, a partnership (debt-financed ted with the conduct of a trade or busi- S Corporations
acquisition), report your share of deduc- ness in the United States, report only the Distributions of prior year accumulated
tible partnership interest expense on ei- income shown on Schedule K-1 in ac- earnings and profits of S corporations
ther Schedule A or Schedule E, depend- cordance with its instructions. are dividends and are reported on Form
ing on the type of asset (or expenditure 1040 or 1040-SR, line 3b.
• For all income not effectively con-
if the allocation is based on the tracing nected with the conduct of a trade or
of loan proceeds) to which the interest business in the United States, report on If you used loan proceeds to buy an
expense is allocated. See Line 28, later, Schedule NEC (Form 1040-NR) only interest in, or make a contribution to the
for more information about reporting the income shown on Form 1042-S (if capital of, an S corporation (debt-fi-
these interest expenses. you are required to file Form 1040-NR). nanced acquisition), report your share of
deductible S corporation interest ex-
If you claimed a credit for federal tax pense on either Schedule A or Sched-
on gasoline or other fuels on your 2021 Requirement to file Form 8865. If you ule E, depending on the type of asset (or
are a U.S. person, you may have to file
Form 1040, 1040-SR, or 1040-NR based Form 8865 if any of the following ap- expenditure if the allocation is based on
on information received from the part- plies. the tracing of loan proceeds) to which
nership, enter as income in column (h) the interest expense is allocated. See
or column (k), whichever applies, the 1. You controlled a foreign partner- Line 28, later, for more information
amount of the credit claimed for 2021. ship (that is, you owned more than a about reporting these interest expenses.
50% direct or indirect interest in the
Part or all of your share of partner- partnership). Your share of the net income of an S
ship income or loss from the operation corporation is not subject to self-em-
of the business may be considered net 2. You owned at least a 10% direct ployment tax.
earnings from self-employment that or indirect interest in a foreign partner-

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