Page 329 - BusinessStructures & Forms

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identifiable elsewhere on Schedule K-3) on either an aggregate are aggregated. The partnership must also report all QBI information
basis or an entity-by-entity basis. reported to it by any entity in which the partnership has an ownership
• Section 951(a) inclusions. interest.
• Section 1293(a)(1)(A) inclusions.
• Section 1293(a)(1)(B) inclusions. Note. The partnership must report each partner’s share of qualified
In the case of stock of CFCs and QEFs directly or indirectly items of income, gain, deduction, and loss from a PTP so that
owned by the partnership with respect to which the partnership is partners can determine their qualified PTP income. However, the
engaged in a trade or business described in section 1411(c)(2), the W-2 wages and UBIA of qualified property from the PTP should not
partnership must provide the following information (to the extent be reported because partners cannot use that information in figuring
such information isn't otherwise identifiable elsewhere on their QBI deduction.
Schedule K-3) on either an aggregate or an entity-by-entity basis, or Partnerships should use Statement A—QBI Pass-Through Entity
the partnership may aggregate this information with other income Reporting, later, or a substantially similar statement, to report
derived by the partnership that is net investment income under information for each partner’s distributive share from each trade or
section 1411(c)(1)(A)(ii). business, including QBI items, W-2 wages, UBIA of qualified
• Section 951(a) inclusions. property, qualified PTP items, and qualified REIT dividends by
• Section 1293(a)(1)(A) inclusions. attaching the completed statement(s) to each partner’s
• Section 1293(a)(1)(B) inclusions. Schedule K-1. The partnership should also use Statement A to
Section 1296 mark-to-market PFICs. In the case of stock of report each partner’s distributive share of QBI items, W-2 wages,
PFICs directly or indirectly owned by the partnership for which an UBIA of qualified property, qualified PTP items, and qualified REIT
election under section 1296 is in effect, the partnership must provide dividends reported to the partnership by another entity.
the following information (to the extent such information isn't Partnerships should use Statement B—QBI Pass-Through Entity
otherwise identifiable elsewhere on Schedule K-3) on either an Aggregation Election(s), later, or a substantially similar statement, to
aggregate basis or an entity-by-entity basis (except as provided report aggregated trades or businesses and provide supporting
below). information to partners on each Schedule K-1.
• Amounts included in income under section 1296(a)(1). Partnerships should use Statement C—QBI Pass-Through Entity
• Amounts deducted from income under section 1296(a)(2). Reporting—Patrons of Specified Agricultural and Horticultural
In the case of PFIC stock owned directly or indirectly by the Cooperatives, later, or a substantially similar statement, to report the
partnership for which an election under section 1296 is in effect and distributive share of QBI and W-2 wages allocable to qualified
with respect to which the partnership is engaged in a trade or payments from a specified agricultural or horticultural cooperative for
business described in section 1411(c)(2), the partnership may each trade or business. This statement should also be used to report
aggregate this information with other income derived by the each partner’s share of section 199A(g) deduction reported to the
partnership that is net investment income under section 1411(c)(1) partnership by the specified cooperative.
(A)(ii). Determining the partnership’s qualified trades or
Section 1291 funds. In the case of stock of PFICs directly or businesses. The partnership’s qualified trades or businesses
indirectly owned by the partnership with respect to which direct or include its section 162 trades or businesses, except for SSTBs, or
indirect partners are subject to section 1291, the partnership must the trade or business of providing services as an employee. A
provide the following information (to the extent such information isn't section 162 trade or business generally includes any activity if the
otherwise identifiable elsewhere on Schedule K-3) on an partnership’s primary purpose for engaging in the activity is for
entity-by-entity basis. income or profit and the partnership is involved in the activity with
• Excess distributions made by a PFIC for which a partner is continuity and regularity. For more information on what qualifies as a
subject to section 1291. trade or business for purposes of section 199A, see the Instructions
• Gains derived from the disposition of stock of a PFIC for which a for Form 8995, Qualified Business Income Deduction Simplified
partner is subject to section 1291. Computation, or the Instructions for Form 8995-A, Qualified
Section 199A information (code Z). The qualified business Business Income Deduction.
income (QBI) deduction may be taken by eligible taxpayers, Rental real estate. Rental real estate may constitute a trade or
including individuals and some trusts and estates. The deduction is business for purposes of the QBI deduction if the rental real estate:
determined at the partner level. Partnerships are required to report • Rises to the level of a trade or business under section 162,
information necessary for their partners to figure the deduction. Use • Satisfies the requirements for the rental real estate safe harbor in
code Z with an asterisk (Z*) on each partner’s Schedule K-1 and Rev. Proc. 2019-38, or
enter “STMT” in the entry space to indicate that the information is • Meets the self-rental exception (that is, the rental or licensing of
provided on an attached statement that separately identifies the property to a commonly controlled trade or business conducted by
partner’s distributive share of: an individual or relevant pass-through entity) described in
1. Qualified items of income, gain, deduction, and loss; Regulations section 1.199A-1(b)(14).
The determination of whether rental real estate constitutes a
2. W-2 wages; trade or business for purposes of the QBI deduction is made by the
3. Unadjusted basis immediately after acquisition (UBIA) of partnership. The partnership must first make this determination and
qualified property; then only include the distributive share of rental real estate items of
4. Qualified PTP items; and income, gain, loss, and deduction from a trade or business on the
5. Qualified REIT dividends. statement provided to partners. Rental real estate that does not
meet any of the three conditions noted above does not constitute a
The partnership must make an initial determination of which trade or business for purposes of the QBI deduction and must not be
items are qualified items of income, gain, deduction, and loss at its included in the QBI information provided to partners.
level and report to each partner its distributive share of all items that SSTBs excluded from qualified trades or businesses.
may be qualified items at the partner level. These items must be SSTBs are generally excluded from the definition of a qualified trade
separately stated where necessary for the partner to figure the or business. An SSTB is any trade or business providing services in
deduction. See Determining the partnership’s QBI or qualified PTP the field of health, law, accounting, actuarial science, performing
items, later. The partner must then determine whether each item is arts, consulting, athletics, financial services, brokerage services,
includible in QBI. investing and investment management, trading or dealing in
In addition, the partnership must also report whether any of its securities, partnership interests, or commodities, or any other trade
trades or businesses are specified service trades or businesses or business where the principal asset is the reputation or skill of one
(SSTBs) and identify on the statement any trades or businesses that or more of its employees or owners. The term “any trade or business
where the principal asset is the reputation or skill of one or more of

-50- Instructions for Form 1065 (2022)