Page 314 - BusinessStructures & Forms

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activity limitations. These limitations, if applicable, are determined at not be passive activity income. Likewise, guaranteed payments for
the partner level. capital are treated as interest for purposes of section 469 and are
generally not passive activity income.
Line 1 should not include rental activity income (loss) or portfolio
income (loss). A partnership must treat and report a transfer of partnership
TIP property to a partner in satisfaction of a guaranteed payment
Schedule K-1. Enter each partner's distributive share of ordinary as a sale or exchange, and not a distribution. See Rev. Rul.
business income (loss) in box 1 of Schedule K-1. Identify on 2007-40, 2007-25 I.R.B. 1426, for more details.
statements attached to Schedule K-1 any additional information the
partner needs to correctly apply the passive activity limitations. For Schedule K-1. Enter each partner's guaranteed payments for
example, if the partnership has more than one trade or business services in box 4a and guaranteed payments for use of capital in
activity, identify on an attached statement to Schedule K-1 the box 4b of Schedule K-1. Report each partner's total guaranteed
amount from each separate activity. See Passive Activity Reporting payments in box 4c of Schedule K-1.
Requirements, earlier.
Portfolio Income
Line 2. Net Rental Real Estate Income (Loss)
See Portfolio Income, earlier, for a definition of portfolio income.
Enter the net income (loss) from rental real estate activities of the
partnership from Form 8825. Attach this form to Form 1065. Do not reduce portfolio income by deductions allocated to it.
Schedule K-1. Enter each partner's distributive share of net rental Report such deductions (other than interest expense) on line 13d of
real estate income (loss) in box 2 of Schedule K-1. Identify on Schedule K. Report each partner's distributive share of deductions
statements attached to Schedule K-1 any additional information the (other than interest) allocable to portfolio income in box 13 of
partner needs to correctly apply the passive activity limitations. For Schedule K-1 using code I or L.
example, if the partnership has more than one rental real estate
activity, identify the amount attributable to each activity. Also, for Interest expense allocable to portfolio income is generally
example, identify certain items from any rental real estate activities investment interest expense reported on line 13b of Schedule K.
that may be subject to the recharacterization rules. See Passive Report each partner's distributive share of interest expense
Activity Reporting Requirements, earlier. allocable to portfolio income in box 13 of Schedule K-1 using code
H.
Line 3. Other Net Rental Income (Loss)
Line 5. Interest Income
Enter on line 3a gross income from rental activities other than those
reported on Form 8825. Include on line 3a gain (loss) from line 17 of Enter only taxable portfolio interest on this line. Taxable interest is
Form 4797 that is attributable to the sale, exchange, or involuntary interest from all sources except interest exempt from tax and interest
conversion of an asset used in a rental activity other than a rental on tax-free covenant bonds. Include interest income from the credit
real estate activity. to holders of tax credit bonds. See the instructions for Other credits
Enter on line 3b the deductible expenses of the activity. Attach a (code P) under Line 15f. Other Credits, later, and the Instructions for
Form 8912 for details.
statement of these expenses to Form 1065.
Schedule K-1. Enter each partner's distributive share of interest
Enter on line 3c the net income (loss). income in box 5 of Schedule K-1. If the partnership is reporting
interest income from clean renewable energy bonds, attach a
See Rental Activities, earlier, and Pub. 925 for more information statement to Schedule K-1 that shows each partner's distributive
on rental activities. share of interest income from this credit. Partners need this
Schedule K-1. Enter each partner's distributive share of net information to properly adjust the basis of their interest in the
partnership.
income (loss) from rental activities other than rental real estate
activities in box 3 of Schedule K-1. Identify on statements attached
to Schedule K-1 any additional information the partner needs to Line 6a. Ordinary Dividends
correctly apply the passive activity limitations. For example, if the
partnership has more than one rental activity reported in box 3, Enter only taxable ordinary dividends on line 6a, including any
identify on an attached statement to Schedule K-1 the amount from qualified dividends reported on line 6b. Do not include any dividend
each activity. See Passive Activity Reporting Requirements, earlier. equivalents reported on line 6c, or, to the extent attributable to
previously taxed earnings and profits (PTEP) in annual PTEP
Line 4. Guaranteed Payments to Partners accounts of the partnership, any distributions received by the
partnership from foreign corporations.
Guaranteed payments are payments made by a partnership to a
partner that are determined without regard to the partnership's Note. The amount determined by the partnership based on its
income. Some examples of guaranteed payments to partners annual PTEP accounts in determining the amount on line 6a does
include: not include the amount by which distributions are attributable to
• Payments for salaries, health insurance, and interest deducted by PTEP in annual PTEP accounts of a direct or indirect partner.
the partnership and reported on Form 1065, page 1, line 10; Form Schedule K-1. Enter each partner's distributive share of ordinary
8825; or Schedule K, line 3b; dividends in box 6a of Schedule K-1.
• Compensation deferred under a section 409A nonqualified
deferred compensation plan that doesn't meet the requirements of Line 6b. Qualified Dividends
section 409A reported on line 20c of Schedule K; and
• Payments the partnership must capitalize. See the instructions for
Form 1065, line 10. Enter qualified dividends on line 6b. Except as provided below,
qualified dividends are dividends received from domestic
Generally, amounts reported on line 4a as guaranteed payment corporations and qualified foreign corporations. Do not include any
for services and line 4b as guaranteed payment for the use of capital distributions received by the partnership from foreign corporations to
aren't considered to be related to a passive activity. For example, the extent that they are attributable to PTEP in annual PTEP
guaranteed payments for personal services paid to a partner would accounts of the partnership.

Instructions for Form 1065 (2022) -35-