Page 330 - BusinessStructures & Forms

12:52 - 26-Jan-2023
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Fileid: … ions/i1065/2022/a/xml/cycle08/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
its employees or owners” means any trade or business that consists or businesses, it must attach a copy of the RPE’s aggregation to
of (i) a trade or business in which a person receives fees, each Schedule K-1. The partnership cannot break apart the
compensation, or other income from endorsing products or services; aggregation of another RPE, but it may add trades or businesses to
(ii) a trade or business in which a person licenses or receives fees, the aggregation, assuming the requirements above are satisfied.
compensation, or other income for the use of an individual’s image, Determining the partnership’s QBI or qualified PTP items.
likeness, name, signature, voice, or trademark, or any other symbols The partnership’s items of QBI include qualified items of income,
associated with the individual’s identity; or (iii) receiving fees, gain, deduction, and loss from the partnership’s trades or
compensation, or other income for appearing at an event or on businesses that are effectively connected with the conduct of a trade
radio, television, or another media format. or business within the United States. This may include, but is not
Partnerships must separately report QBI information for all trades limited to, items such as ordinary business income or losses, section
or businesses engaged in by the partnership, including SSTBs, but 1231 gains or (losses), section 179 deductions, and interest from
must identify which trades or businesses are SSTBs. debt-financed distributions.
Aggregation of trades or businesses. A partnership engaged QBI may also include rental income/losses or royalty income, if
in more than one trade or business may choose to aggregate the activity rises to the level of a trade or business; and gambling
multiple trades or businesses into a single trade or business for gains or losses, but only if the partnership is engaged in the trade or
purposes of section 199A if it meets the following requirements. business of gambling. Whether an activity rises to the level of a trade
1. The same person, or group of persons, either directly or or business must be determined at the entity level and, once made,
through attribution, owns 50% or more of each trade or business for is binding on partners.
a majority of the tax year, including the last day of the tax year, and Qualified PTP items include the partnership’s share of qualified
all trades or businesses use the same tax year-end. items of income, gain, deduction, and loss from an interest in a PTP
2. None of the trades or businesses are SSTBs. and may also include gain or loss recognized on the disposition of
3. The trades or businesses to be aggregated meet at least two the partner’s partnership interest that is not treated as a capital gain
or loss. If the reporting partnership is itself a PTP, the PTP should
of the following three factors. report all qualified items of income, gain, deduction, and loss
• They provide products, property, or services that are the same or separately for each trade or business engaged in by the PTP.
that are customarily offered together. QBI and qualified PTP items don’t include the following.
• They share facilities or share significant centralized business • Items that aren’t properly includible in income.
elements, such as personnel, accounting, legal, manufacturing, • Items that are treated as capital gain or loss under any provision
purchasing, human resources, or information technology resources. of the Internal Revenue Code.
• They are operated in coordination with, or reliance upon, one or • Dividends or dividend equivalents, including qualified REIT
more of the businesses in the aggregated group. dividends.
If the partnership chooses to aggregate multiple trades or • Interest income (unless received in connection with the trade or
businesses, it must report the aggregation on Statement B, or a business).
substantially similar statement, and attach it to each Schedule K-1. • Wage income.
The statement must provide the information necessary to identify • Income that is not effectively connected with the conduct of
each separate trade or business included in each aggregation, a business within the United States (go to IRS.gov/ECI for more
description of the aggregated trades or businesses, and an information).
explanation of the factors met that allow the aggregation in • Commodities transactions, or foreign currency gains or losses
accordance with Regulations section 1.199A-4. The aggregation described in section 954(c)(1)(C) or (D).
statement must be completed each year to show the partnership's • Income, loss, or deductions from notional principal contracts
trade or business aggregations. Failure to disclose the aggregations under section 954(c)(1)(F).
may cause them to be disaggregated. • Annuities (unless received in connection with the trade or
The partnership's aggregations must be reported consistently for business).
• Guaranteed payments described in section 707(c) received by
all subsequent years, unless there is a change in facts and the entity for services rendered to a partnership.
circumstances that changes or disqualifies the aggregation. The • Payments described in section 707(a) received by the entity for
partnership must provide a written explanation for any changes to services rendered to a partnership.
prior year aggregations that describes the change in facts and
QBI flowchart. Partnerships may use this flowchart to determine
circumstances. if an item of income, gain, deduction, or loss is includible in QBI
If the partnership directly or indirectly owns an interest in another reportable to partners.
relevant pass-through entity (RPE) that aggregates multiple trades

Instructions for Form 1065 (2022) -51-