3.11.15  Return of Partnership Income (Cont. 1)

3.11.15.9  (01-01-2015)
♦Entity Perfection - General♦

  1. The entity area of a tax return identifies the taxpayer on the Business Master File. The entity area of the return contains the following:

    1. Employer Identification Number (EIN)

    2. Name

    3. "In-care-of" name

    4. Address

3.11.15.9.1  (01-01-2015)
♦Entity Perfection - Employer Identification Number (EIN)♦

  1. The EIN is a nine digit number (XX-XXXXXXX) assigned to identify the partnership.

  2. The EIN is located in the upper right of Form 1065 (Employer Identification Number, Box D).

  3. Determine the EIN as follows:

    1. If... And... Then...
      EIN is missing, You can determine the correct EIN from the attachments and/or schedules, 1. Edit the EIN to the proper location.
      The EIN is either a PTIN or ITIN (Individual Tax Identification Number), Unnumbered
      1. Remove return from batch.

      2. Forward to Entity Control following local procedures for EIN assignment.

      The EIN is either a PTIN or ITIN, Numbered,
      1. Edit Action Code 320.

      2. Leave return in batch.

      Multiple EINs are present, Unnumbered,
      1. Remove return from batch.

      2. Forward to Entity Control following local procedures for EIN assignment.

      Multiple EINs are present, Numbered,
      1. Edit Action Code 320.

      2. Leave return in batch.

      The EIN contains any of the following conditions and cannot be determined from attachments and/or schedules:
      • Illegible;

      • Missing;

      • Other than 9 digits;

      • All zeroes; or,

      • All nines,

      Unnumbered,
      1. Research IDRS.

      2. If found, edit to the proper location.

      3. If not found, route to Entity Control following local procedures.

      The EIN contains any of the following conditions and cannot be determined from attachments and/or schedules:
      • Illegible;

      • Missing;

      • Other than 9 digits;

      • All zeroes; or,

      • All nines,

      Numbered,
      1. Circle all illegible EINs, zeroes or nines.

      2. Edit Action code 320.

      3. Leave return in batch.

      "PENDING" , "APPLIED FOR" , etc., is indicated in the EIN area, Unnumbered,
      1. Research IDRS.

      2. If found, edit to the proper location.

      3. If not found, route to Entity Control following local procedures.

      "PENDING" , "APPLIED FOR" , etc., is indicated in the EIN area, Numbered,
      1. Edit Action Code 320.

      2. Leave return in batch.

3.11.15.9.1.1  (01-01-2015)
Disregarded Entity

  1. A "disregarded entity" is an entity classified as a partnership but has only one member. When completing the Form 1065, the entity must enter its “legal name” in the space for Name of Partnership (i.e., not the words, “disregarded entity”).

  2. If a Form 1065 contains the notation, "disregarded entity" , in the header or entity portion of the return (on Page 1, Form 1065), process as follows:

    1. Edit Audit Code "1" in the left margin of Form 1065 next to Line 9 in "1-1" format.

    2. Check the attachments for a name, EIN, address and other information identifying the partnership.

    3. If found, edit the entity information on Page 1 of the return and continue processing.

    4. If NOT found, correspond with the taxpayer for the legal name and the "doing business as" (dba) name(s) of the partnership, if the address information is present.

  3. See also IRM 3.11.15.3.1 for Correspondence procedures.

3.11.15.9.2  (01-01-2015)
♦Entity Perfection - Name Control♦

  1. The Name Control consists of four characters or less:

    1. Valid characters are alpha, numeric, ampersand (&), hyphen (-) and blank. However, blanks are only valid in the last three positions.

    2. Disregard the word "THE" in the Name Control only when followed by more than one word.

      Note:

      If an individual and a trade name are present and it can be determined that the trade name is for a corporation or partnership, follow the Name Control procedures for corporations or partnerships. If other than a corporation or partnership, follow the Name Control procedures for individuals, regardless of which line the individuals owner's name is listed.

  2. See job aid Document 7071A, Name Control Job Aid - For Use Outside the Entity Area, to determine the Name Control.

  3. If Line G, box (3), "Name Change" , is checked, route the return to Entity Control following local procedures. (See Figure 3.11.15-16).

  4. Edit the Name Control as follows:

    1. If... And... Then...
      Able to determine the Name Control,   Underline the Name Control
      Unable to determine the Name Control, Unnumbered,
      1. Research IDRS.

      2. If found, edit to the proper location.

      3. If not found, route to Entity Control following local procedures.

      Unable to determine the Name Control, Numbered,
      1. Edit Action Code 352 (Name Research).

      2. Leave return in batch.

      A return indicates the partnership has filed bankruptcy (e.g., shows "RECEIVER" , "TRUSTEE" , or "DEBTOR IN POSSESSION" ) in the entity area or an attachment,   Route to Entity Control following local procedures.

3.11.15.9.3  (01-01-2015)
♦Entity Perfection - "In-Care-of" Name♦

  1. An "in-care-of" name can be identified by the words "in care of" or the symbols "c/o" or "%" (percent).

  2. Ensure the "in-care-of" name is located in the proper location.

    If... Then...
    The in-care-of name is located on the street address line preceding the street address, No editing is required.
    The "in-care-of" name is located above the first name line or below the street address, Arrow the "in-care-of" name so it appears below the first name line and above the street address.
    The "in-care-of" name is shown on an attachment, Edit the "in-care-of" name above the street address beginning with the "%" or "c/o" in the first position.
    The street address for the "in-care-of" name is different from the street address of the partnership,
    1. Arrow the "in-care-of" street address below the "in-care-of" name or edit the "in-care-of" street address below the "in-care-of" name if located on an attachment.

    2. Circle the partnership street address and input TC 014 (See IRM 3.11.15.9.4).

    Note:

    Always circle the "in-care-of" symbol ("%" or "c/o" ) if it is present with an address. Do not use the ampersand (&) or the percent sign (%) when editing address information.

  3. A change to the "in-care-of" name can be determined by any of the following:

    • A check mark in the "Name Change" box Line G, Box (3)

    • A check mark in the "Address Change" box Line G, Box (4)

    • An indication that the "in-care-of" name is changed (i.e., the partnership crossed out the original "in-care-of" name and added the new name or has entered a new "in-care-of" name in brackets).

    If... Then...
    An "in-care-of" name is changed but there is no indication of an address change,
    1. Edit the "in-care-of" name as shown above.

    2. Continue editing the return.

    An "in-care-of" name is present and the "Address change" box (Line G, Box (4)) is checked or there is an indication of an address change,
    1. Edit the "in-care-of" name as shown above.

    2. Correct the address. (IRM 3.11.15.9.4)

    3. Continue editing the return.

3.11.15.9.4  (01-01-2015)
♦Entity Perfection - Domestic Addresses♦

  1. Perfection of the address is necessary when the mailing address (Street or P.O. Box) is not easily identified.

    Exception:

    Do not perfect the address on amended returns (CCC "G" ).

  2. A business may have two addresses. One is the mailing address and the other is the location address or physical location of the business.

  3. The procedures for perfection of an address on returns are as follows:

    If... And... Then...
    There is an indication on an attachment that the address has been changed,   Edit the new address in the Entity section of the return. (See Figure 3.11.15-17)
    Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party- Business, is attached, Mailing address information is the same and no location address is listed on Line 7, Take no action.
    Form 8822, Change of Address, or Form 8822-B, Change of Address or Responsible Party- Business, is attached, Mailing address information is different and/or a location address is listed on Line 7, Detach Form 8822/Form 8822-B and route to Entity Control following local procedures. (IRM 3.11.15.8.6 (3)).
    Both a P.O. Box and a street address are shown,  
    1. Notate "TC 014" in the upper left margin.

    2. Input TC 014.

    Two street addresses are shown,  
    1. Underline the second street address.

    2. Notate "TC 014" in the upper left margin.

    3. Input TC 014.

    One street address is shown, The partnership changed the address to a P.O. Box,
    1. Notate "TC 014" in the upper left margin.

    2. Input TC 014.

    The city and state are not shown on the return but are shown on an attachment,   Edit the city and state in the Entity section of the return.
    The ZIP Code is missing or illegible, Is not available from the return or attachments, See Document 7475,State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, to determine the ZIP Code.

    Note:

    Edit the 3 digits followed by "01" of the first zip code listed for the applicable state (e.g. "99501" for Alaska).

    Only the first three digits of the ZIP Code can be determined,   Edit "01" for the fourth and fifth digits.
    The "Address change" Box G(4) is checked, An "in-care-of " name is present,
    1. Edit the "%" (percent sign) or "c/o" to the left of the "in-care-of" name (in the first position) followed by the appropriate name.

    It is necessary to edit the street address,   See Document 7475, State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries for current Address/Street Abbreviations.
    The address contains information other than a street address or P.O. Box,   No perfection is necessary. ISRP will enter the complete address.

    Note:

    Always circle the "in care of" symbol ("c/o" or "%" ) if it is present with an address. Do not use the ampersand (&) or the percent symbol (%) when editing address information.

  4. The U.S. Postal Service established new address requirements for APO/DPO/FPO addresses. If the old address appears (i.e., APO New York, NY 091XX), convert to the new state code abbreviation based on the ZIP Code (i.e., the previous example would be converted to APO AE 091XX). APO/FPO addresses are considered domestic addresses. Refer to conversion chart below:

    Zip Code State Code
    340 AA
    090-098 AE
    962-966 AP

    Figure 3.11.15-15
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3.11.15.9.5  (01-01-2015)
♦Entity Perfection - Foreign Address♦

  1. A foreign (international) address is any address that is not in the 50 states or the District of Columbia.

  2. Returns with APO or FPO addresses are considered domestic addresses. (See IRM 3.11.15.9.4)

  3. Route returns with a foreign address to Ogden Campus Submission Processing (OSPC) for processing. Prepare Letter 86C to inform the partnership that the return has been sent to Ogden.

  4. Returns with addresses in the following U.S. Possessions/Territories are considered to be a foreign address for processing purposes but are edited in the same way as domestic addresses.

    1. A two-character alpha code must be edited for the possession/territory name.

      U.S. Possession/Territory Abbreviation
      American Samoa AS
      Federated States of Micronesia FM
      Guam GU
      Marshall Islands MH
      Northern Mariana Islands MP
      Palau PW
      Puerto Rico PR
      Virgin Islands (U.S.) VI
    2. A ZIP Code must be present on U.S. Possessions/Territories. Edit the appropriate ZIP Code if one is not provided. See Exhibit 3.11.15-1

  5. All other foreign addresses are edited the same as a domestic address with the following exceptions:

    1. The foreign country must be the last entry in the address.

    2. Circle the foreign country and edit the country code preceded by a "/" and followed by "/$" (e.g., edit Germany as "/GM/$" as the last entry in the address. See Document 7475,State and Address Abbreviations, Major City Codes (MCCs), ZIP Codes and Countries, for official foreign country codes.

    3. A unique country code will be edited for returns filed with an address in Canada. See "Country Code - Canada" , IRM 3.11.15.9.5.1.

      Note:

      Submission Processing BMF Foreign Address Job Aid (Number 2324-002) provides examples for editing foreign addresses.

    4. If the foreign address is from Australia, Brazil, Cuba, Italy, Mexico, or The Netherlands, check if the address contains a province, state, or territory.

      If... Then...
      A province, state or territory name is present,
      1. Circle province, state or territory name.

      2. Edit appropriate abbreviation. See Exhibit 3.11.15-2

      Province, state or territory is shown in abbreviated format, Continue editing the return.
      A province, state, or territory name is not present, Continue editing the return.
    5. A ZIP Code or state is not required on a foreign address. Foreign addresses use a postal code that is entered before the city or foreign country and is part of the address.

3.11.15.9.5.1  (01-01-2015)
♦Foreign Address - Canada Only♦

  1. In an effort to assist Compliance with workload assignment, returns filed with an address in Canada will be edited using a unique Country Code based on the Province/Territory.

    If... Then...
    The foreign address contains a Canadian Province/Territory name or abbreviation listed in the table below,
    1. See table below to ensure the correct Canadian Province/Territory is present or edited to the return.

    2. Edit the appropriate Country Code based on the province/territory preceded by a "/" and followed by a "/$" as the last entry in the address.

    The foreign address does not contain a Canadian Province/Territory name or abbreviation listed in the table below,
    1. Circle the country name.

    2. Edit the country code "/CA/$" as the last entry in the address.

    ♦Canadian Province/Territory Abbreviations, Postal Codes and Foreign Country Code Tables♦

    Canadian Province/Territory Province/Territory Abbreviation Postal Code beginning Country Code
    Alberta AB T XA
    British Columbia BC V XB
    Manitoba MB R XM
    New Brunswick NB E XN
    Newfoundland and Labrador NL A XL
    Northwest Territories NT X XT
    Nova Scotia NS B XS
    Nunavut NU X XV
    Ontario ON K, L, M, N, or P XO
    Prince Edward Island PE C XP
    Quebec QC G, H, or I XQ
    Saskatchewan SK S XW
    Yukon YT Y XY
  2. All other foreign address is edited using procedures in IRM 3.11.15.9.5.

3.11.15.10  (01-01-2015)
♦North American Industry Classification System (NAICS) Code♦

  1. The Principal Business Activity (PBA) Code is based on the North American Industry Classification System (NAICS). These Codes provide critical data for Statistics of Income, Examination, Research and other Service organizations.

  2. The NAICS Code is a six-digit number found on Page 1, Box C of Form 1065.

  3. Only one NAICS Code can be used on the return. Edit the NAICS Code as follows:

    If... Then...
    A legible six-digit NAICS Code is shown in Box "C" ,

    Note:

    The number is invalid if it contains all repeating numbers, i.e., "000000" , "333333" , "666666" , "999999" , etc.

    No editing is necessary.
    The return is an Amended return (CCC "G" ), Do not edit a NAICS Code.
    A NAICS Code is
    1. Not present,

    2. Illegible,

    3. Invalid (more than six digits or contains all repeating numbers, i.e., "000000" , "333333" , "666666" , "999999" , etc),

    4. Prior Year (four-digit code).

    1. Edit NAICS Code "999000" in Box C if you cannot make a determination.

    Figure 3.11.15-16
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3.11.15.11  (01-01-2015)
Date Business Started

  1. The Date Business Started is shown in Box E on page 1 of Form 1065.

    Note:

    Do not edit the Date Business Started on a Short Record return.

  2. Edit the date business started in YYYYMM format to the right of the partnership entry when any of the following conditions are present:

    1. If... Then...
      A partnership enters a future date (after the tax period ending shown on the return) as the date business started, DO NOT EDIT.
      Only year is shown, Edit "01" for month. See Figure 3.11.15-17 below.
      Only month is shown, Edit "1950" for year. See Figure 3.11.15-17 below.
      The date business started is illegible or indeterminable,
      1. Circle the entry.

      2. Edit date as "195001" .

      Box "E" is blank,
      1. Leave blank.

      2. Edit CCC "A" .

      Note:

      Do not edit CCC "A" on Short Record returns.

      The date only shows two digit year, not century,
      Example: 01/01/13
      Edit century above year.

    Figure 3.11.15-17

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3.11.15.12  (01-01-2015)
Total Assets

  1. This section provides instructions for editing Total Assets At End of Year, Box "F" , on Form 1065.

  2. Box "F" must have an entry unless one of the following conditions is present:

    If... Then...
    Schedule B, Question 6 is answered "YES" , The partnership is not required to complete Box "F" , Schedules L, M-1 and M-2. See Figure 3.11.15-18 below.
    Schedule L is crossed out or annotated zero (0), "none" or not applicable (n/a), Leave Box F blank.
    There is an indication of single entry bookkeeping
    1. Box "F" is blank, and

    2. The "Cash" box on Line H is checked, and

    3. there are no entries on Lines 1-22 on Form 1065, page 1,

    Leave Box F blank.
    The return is a "Final" return, Edit the return as a Final return. (See IRM 3.11.15.8.4)
    There is no transcription line (T-line) with an entry, Edit the return as a Short Record. (See IRM 3.11.15.5.6.4 for Inactive Return instructions.)

    Reminder:

    Edit the return as a Short Record if Box "F" is the only transcription line (T-line) with an entry, (See IRM 3.11.15.5.6.4 for Inactive Return instructions).

  3. If Box "F" information is required and the amount is missing, edit the amount shown on Line 14, Column (d), Schedule L, Form 1065. See Figure 3.11.15-19 below.

  4. If Line 14, Column (d) is blank and cannot be computed, use the amount on Line 22, Column (d).

  5. If Box "F" information is required and Schedule L, Balance Sheet is missing or blank, correspond for Schedule L (See IRM 3.11.15.27).

    Figure 3.11.15-18
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    Figure 3.11.15-19
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3.11.15.13  (01-01-2015)
♦Initial Return Code♦

  1. Edit an Initial Return Code "2" in the margin to the left of Line G if any of the following conditions are met:

    1. "Initial Return" box, under the entity area, is checked.

    2. Entry in Box "E" , "Date Business Started" , has a date which is within 12 months from the tax period ending date.

    3. Partnership notation such as, "FIRST RETURN" , "NEW CORPORATION" "NEW PARTNERSHIP" , etc. See Figure 3.11.15-20 below.

    Reminder:

    Edit Tax Period Beginning on "Initial" Form 1065 return per IRM 3.11.15.8.2.

    Figure 3.11.15-20
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3.11.15.14  (01-01-2015)
Technical Termination Code

  1. If Line G box (6) is checked and box (3), (4), and (5) are not checked, then edit the Technical Termination Code "1" just left of box (6)

    Figure 3.11.15-21
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3.11.15.15  (01-01-2015)
♦Computer Condition Codes♦

  1. Computer Condition Codes (CCC) are used to identify a special condition or computation for the computer. CCCs post to the Master File.

  2. CCCs are edited in the dotted portion of Lines 1a of Form 1065. See Figure 3.11.15-22 below.

    Figure 3.11.15-22
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3.11.15.15.1  (01-01-2015)
CCC "A" -
Date Business Started

  1. Edit CCC "A" when the "Date Business Started" , Box E is blank.

    Note:

    Do not edit CCC "A" on Short Record returns.

3.11.15.15.2  (01-01-2015)
♦CCC "B" -
Schedule M-3♦

  1. Edit CCC "B" when any of the following conditions are met:

    1. Schedule M-3 box (Line J on Form 1065 or Form 1065-B) is checked or

    2. A Schedule M-3 is attached.

  2. Enter Audit Code "8" if Schedule M-3 is attached to Form 1065 or Form 1065-B. (See IRM 3.11.15.19.1 (11))

    Caution:

    All returns with a Schedule M-3 attached or a check in the box for Schedule M-3 must be sent to Ogden for processing.

3.11.15.15.3  (01-01-2015)
♦CCC D - Reasonable Cause for Failing to Pay Timely♦

  1. Do not edit CCC "D" if the taxpayer requests abatement for "Failing to Pay Timely" when the return is submitted. Send Letter 1382C to inform the taxpayer of the proper procedure to follow to request penalty abatement if and when a penalty is assessed.

  2. IMPORTANT: Edit CCC "D" if an internal use form (i.e., Form 13133, Expedite Processing Cycle) or routing slip is attached and indicates "DO NOT ASSESS FAILURE TO PAY PENALTY" .

3.11.15.15.4  (01-01-2015)
♦CCC "F" -
Final Return♦

  1. Edit CCC "F" when the "Final Return Box" is checked or there is another indication the partnership is not liable for future returns. Notations may include (but are not limited to):

    • Final

    • Deceased

    • Out-of Business

    • Liquidation

    • Exempt under IRC §501(c)(3)

    • Dissolved

    • Cites IRC §708(b)(1)(B)

    • Notates "Filed in accordance with Rev. Proc. 2003-84"

    • Return is a "Nominee" return.

    • "761(a) election" notated and is accepted by Examination.

    Reminder:

    Edit Tax Period Beginning on Final Form 1065 per IRM 3.11.15.8.2.

3.11.15.15.5  (01-01-2015)
♦CCC "G" -
Amended Return♦

  1. See IRM 3.11.15.5.5.

3.11.15.15.6  (01-01-2015)
CCC "I" (i) -
Tax Straddles and Future Contracts (Form 6781)

  1. Edit CCC "I" (i) when Form 6781 (Gains and Losses From Section 1256 Contracts and Straddles) is attached. See Figure 3.11.15-23 below.

    Note:

    Edit an upper case letter "I" (as in "Idaho" ), with a line drawn on the top and on the bottom, to distinguish this letter from the number "1" (one) and to facilitate ISRP transcription.

    Figure 3.11.15-23
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3.11.15.15.7  (01-01-2015)
CCC "L" -
Treaty Based Positions

  1. Edit CCC "L" when Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), is attached.

3.11.15.15.8  (01-01-2015)
CCC "P" -
BMF Mail Indicator

  1. No editing required.

3.11.15.15.9  (01-01-2015)
♦CCC "R" -
Reasonable Cause for Failing to File a Timely Return♦

  1. CCC "R" is no longer edited when a reason is given by the partnership for a delay in filing a return. Issue Letter 1382C and continue editing the return.

  2. Edit CCC "R" on the partnership return when any of the following conditions are present:

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ "

    • "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Reminder:

    All "R" coded returns must have a IRS Received Date. If one is not present, edit the IRS Received Date in the middle of the return.

3.11.15.15.10  (01-01-2015)
♦CCC "S" - Asset Allocation Statement under Section 338♦

  1. Edit CCC "S" when Form 8883, Asset Allocation Statement under Section 338, is attached.

3.11.15.15.11  (01-01-2015)
CCC "T" -
♦ Investor Reporting of Tax Shelter Registration♦

  1. Edit CCC "T" when Form 8271, Investor Reporting of Tax Shelter Registration Number, is attached.

    Note:

    For Tax Periods 200711 and prior.

  2. Edit CCC "T" when Form 8886, Reportable Transaction Disclosure Statement, is attached.

    Note:

    For Tax Periods 201301 and subsequent.

3.11.15.15.12  (01-01-2015)
♦CCC "W" -
Return Cleared by Statute♦

  1. CCC "W" is used when the return has been cleared by Statute Control. (See IRM 3.11.15.5.1)

3.11.15.15.13  (01-01-2015)
CCC "X" -
Publicly Traded Partnership's

  1. Edit CCC "X" on partnership returns filed by Publicly Traded Partnership's that include a tax computation of 3.5% in the margin to the right of Line 22 (Form 1065) or an attachment. (See IRM 3.11.15.22.14(Ordinary Business Income (Loss)) and IRM 3.11.15.68 (Publicly Traded Partnership's).)

  2. Edit CCC "X" on partnership returns that have Form 4255 (Recapture of Investment Credit) attached to repay any unused Qualifying Therapeutic Discovery Credits (QTDP). These returns will have a notation "QTDP" and money amount in the margin near Line 22. (See IRM 3.11.15.22.14

  3. Edit CCC "X" on partnership returns if Form 8697 (Interest Computation Under the Look-Back Method for Completing Long-Term Contracts) or Form 8866 (Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method) is attached and a $ amount (interest due) is written by the taxpayer in the bottom margin of Form 1065. See IRM 3.11.15.4.1 for instructions regarding Form 8697 and Form 8866.

3.11.15.15.14  (01-01-2015)
Reserved

  1. This subsection is reserved.

3.11.15.15.15  (01-01-2015)
CCC "1" -
Like-Kind Exchange

  1. Edit CCC "1" if Form 8824, Like-Kind Exchange, is attached.

3.11.15.15.16  (01-01-2015)
Reserved

  1. This subsection is reserved.

3.11.15.15.17  (01-01-2015)
♦CCC "3" -
No Reply to Correspondence♦

  1. Edit CCC "3" when the partnership return is unprocessable.

3.11.15.15.18  (01-01-2015)
♦CCC "4" -
IRC §6020(b) Return♦

  1. Edit CCC "4" when the IRS Compliance Function prepared a return and the Revenue Officer entered "IRC §6020(b)" .

    Note:

    CCC "4" cannot be used with CCC "R" .

3.11.15.15.19  (01-01-2015)
CCC "5" -
Common Trust Return

  1. Edit CCC "5" when the partnership return is identified as a Common Trust. (See IRM 3.11.15.5.6.2.)

3.11.15.15.20  (01-01-2015)
CCC "6" -
Suppress the Failure to File on Correct Media Penalty

  1. Edit CCC "6" when the return has more than 100 partners and any of the following conditions are present:

    • Inactive return

    • Nominee return

    • IRC §501d religious organization

    • Substitute for Return (SFR)

    • Re-entry/Re-input returns that have previously been e-filed.

  2. CCC "6" can not be used with any other Computer Condition Code except "F" , "R" , "W" , "4" , "5" , "8" , and "9" .

3.11.15.15.21  (01-01-2015)
CCC "8" -
Section 761(a) Returns

  1. Edit CCC "8" when a partnership return is identified as a Section 761(a), Return and/or Election. (SeeIRM 3.11.15.5.6.1.)

3.11.15.15.22  (01-01-2015)
CCC "9" -
Foreign Partnership (Ogden Only)

  1. Edit CCC "9" when the address on the partnership return is foreign.

3.11.15.16  (01-01-2015)
Line I - Number of Schedules K-1 (or Number of Partners)

  1. The number of Schedules K-1 (Form 1065) or (number of partners) is found on Form 1065, page 1, Line I ("I" as in "Idaho" ). See Figure 3.11.15-24 below.

  2. A Schedule K-1 with the notation of "Book/Tax" , "Book/Tax Partner" or similar should be treated as a statement to the return, and should not be processed as a regular Form 1065, K-1.

  3. Only a Schedule K-1 (Form 1065) or an attachment to Form 1065 containing the information required on Schedule K-1 is acceptable. Refer to IRM 3.0.101 for complete instructions to edit and process Schedules K-1.

    Note:

    After editing Line I, detach current year Schedules K-1 through November 30th and future year Schedules K-1.

    Figure 3.11.15-24
    This image is too large to be displayed in the current screen. Please click the link to view the image.
  4. Do not correspond for missing, incomplete, or incorrect (See paragraph (3) above) Schedules K-1 (Form 1065) or number of partners (Line I) on the following types of return. Instead, edit Line I (i) as follows:

    If... Then...
    Amended Return ("G" coded) (See IRM 3.11.15.5.5), Do not edit Line I.
    Final Return (See IRM 3.11.15.15.4), Edit "2" on Line I.
    Reinput/Re-entry document (See IRM 3.11.15.5.4), Edit "2" on Line I.
    Returns filed for any Prior Year, Edit "2" on Line I.
    Short Record Return:
    •761(a) return (See IRM 3.11.15.5.6.1)
    •Common trust (See IRM 3.11.15.5.6.2)
    •Nominee return (See IRM 3.11.15.5.6.3)
    •Inactive return (See IRM 3.11.15.5.6.4)
    Edit "2" on Line I.
    Section 501(d) return (Religious and Apostolic Organizations), Edit "2" on Line I.
    Substitute for Return (SFR) (See IRM 3.11.15.5.3 and IRM 3.11.15.5.3.3), Edit "2" on Line I.
    IRC §6020(b) return (See IRM 3.11.15.5.3.1), Edit "6" on Line I.
    Treas. Regs. 1.736-1 (Payment to Retiring Partner), Edit "2" on Line I.
    Form 1065, Line 22 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Edit "2" on Line I.

    Exception:

    If Line 22 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 8825 is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , then correspond for missing Schedules K-1.

  5. A valid entry on Line I must be all numeric "2" through "999,999" .

    If... Then...
    The partnership has entered a valid numeric on Line I,
    1. No action required.

    2. Continue editing the return.

    The partnership has written the number of Schedules K-1 (Form 1065) in a non-numeric fashion ("two" instead of "2" ),
    1. Edit the numeric equivalent on Line I.

    2. Circle the non-numeric characters.

    3. Continue editing the return.

    Line I is blank or zero and no Schedules K-1 (Form 1065) or only one Schedule K-1 is attached and does not meet the correspondence exception (See IRM 3.11.15.16 ),
    1. Correspond for the total number of Schedules K-1, Form 1065, using Letter 1355C.

    2. Notate the letter sent in the bottom right margin of Form 1065.

    3. Continue editing the return.

    The partnership has entered "1" on Line I, for the number of partners or as the number of Schedule K-1 attached, See Paragraph (7), below.
    The partnership has entered more than 100 on Line I, See Paragraph (8), below.
    The partnership has entered more than 999,999 on Line I, Edit "999,999" on Line I.
    Line I is blank and the attached Schedules K-1 (Form 1065) do not appear to exceed 20,
    1. Count the attached Schedules K-1 (Form 1065) and edit the total to Line I. (See Figure 3.11.15-25)

    2. Continue editing the return.

    Line I is blank and the attached Schedules K-1 (Form 1065) exceed 20,
    1. Correspond for the total number of Schedules K-1 (Form 1065) using Letter 1355C or other approved local correspondence procedures.

    2. Notate the letter sent in the bottom right margin of Form 1065.

    3. Continue editing the return.

  6. If the partnership has indicated the number of Schedules K-1 is "1" , follow the procedures below:

    If... Then...
    The partnership entity indicates:
    • Limited Partnership (LP),

    • Limited Liability Partnership (LLP),

    • Limited Liability Company (LLC),

    • Limited Liability Land Trust (LLLT), or

    • Unincorporated Business Organization (UBO)

    or

    Box b, c or d is checked on Schedule B, Question 1, or

    Either box is checked on Schedule K-1, Part II, Line G.
    1. Edit CCC "F" .

    2. Circle out the number "1."

    3. Edit "2" on Line I.

    4. Advise the partnership that we are deleting the partnership filing requirement with a non-suspense letter. Use Letter 3733C.

      Exception:

      If the partnership has indicated the return is a "Final" return, do not send Letter 3733C.

    5. Notate the letter sent in the lower right margin of Form 1065.

    6. Continue editing the return.

    The partnership indicates any of the conditions shown in (5) above,
    1. Edit the return following the procedures in (5) above.

    2. Continue editing the return.

    Schedule K-1 (Form 1065) shows two names in the Partner's Name and Address Section,
    1. Correspond requesting separate Schedules K-1 (Form 1065) using Letter 1355C or other approved local correspondence procedures.

    2. Notate the letter sent in the bottom right margin of Form 1065.

    3. Continue editing the return.

    There is only one Schedule K-1 (Form 1065) attached that does not indicate 100% interest or no Schedules K-1 attached,
    1. Correspond for the total number of Schedules K-1 (Form 1065) using Letter 1355C or other approved local correspondence procedures.

      Caution:

      Do not correspond for any return identified in (5) above.

    2. Notate the letter sent in the bottom right margin of Form 1065.

    3. Continue editing the return.

    There is only one Schedule K-1 (Form 1065) attached showing 100% interest,
    1. Correspond using Letter 1355C or other approved local correspondence procedures, informing the partnership that they cannot have an 100% partner. Ask for an explanation.

    2. Notate the letter sent in the bottom right margin of Form 1065.

    3. Continue editing the return.

  7. For partnership with more than 100 Schedules K-1 (Form 1065), check the return and attachments for any indication from the partnership requesting a waiver from filing electronically or a request for abatement of the failure to file on correct media penalty.

    If... Then...
    A letter is attached requesting a waiver or exemption from filing electronically,

    Note:

    A waiver request can be identified by a notation at the top of the request stating, in large letters,

    "WAIVER REQUEST; IRC §6011(E)(2)" ,
    1. Detach the letter.

    2. Fax the request to:
      Ogden IRS Campus
      E-File Team 203
      (801) 620-7622
      (ensure the name, address, EIN, tax period and mailing address of the partnership is on the request)

    3. Indicate on the fax that the "WAIVER REQUEST WAS RECEIVED WITH THE ORIGINAL RETURN" .

    4. Edit the number of Schedules K-1.

    5. Continue editing the return.

    A letter is attached requesting abatement of the failure to file on correct media (electronic) penalty,
    1. Detach the letter.

    2. Fax the request to:
      Ogden IRS Campus
      E-File Team 203
      (801) 620-7622
      (ensure the name, address, EIN, tax period and mailing address of the partnership is on the request)

    3. Indicate on the fax that the "WAIVER REQUEST WAS RECEIVED WITH THE ORIGINAL RETURN" .

    4. Edit the number of Schedules K-1 (Form 1065) on Line I.

    5. Continue editing the return.

    No indication on return or letter is attached,
    1. Edit the number of Schedules K-1 (Form 1065) to Line I.

    2. Continue editing the return.

  8. Correspond for missing Schedules K-1 (Form 1065) using Letter 1355C only if:

    1. There are NO Schedules K-1 (Form 1065) attached and Form 1065, Line 22 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , or

    2. Form 8825 is attached, Line 21 on Form 8825 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , or

    3. The exceptions in (5) above are not met.

      Note:

      Notate the letter sent in the lower right margin of Form 1065.

    Figure 3.11.15-25
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.15.17  (01-01-2015)
Salary and Wage Code

  1. Edit a "1" to the right of Page 1, Line 9 (on Form 1065) if an entry greater than zero is present on any of the following:

    1. Form 1065, Page 1, Line 9,

    2. Schedule F, Line 22, (2010 and prior revisions, Schedule F, Line 24) See Figure 3.11.15-26 below.

    3. Form 8825, Line 13, Column A through H

    4. Form 1125-A, Line 3,

    5. Form 4835, Line 20, or

    6. An attachment showing an amount for salaries, wages or labor.

  2. DO NOT edit for the following:

    1. Contract, outside, custom or miscellaneous labor,

    2. Temporary help,

    3. Management fees,

    4. Janitorial service (or any other type of service),

    5. Maintenance fees, or

    6. Commissions.

    Figure 3.11.15-26

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.15.18  (01-01-2015)
EPMF Code

  1. The Employee Plan Master File (EPMF) is a master file maintained at Enterprise Computing Center at Martinsburg (ECC-MTB). This file consists of various types of tax sheltered Pension/Profit Sharing Plans.

  2. Edit a “1” to the right of Page 1, Line 18 on Form 1065 if an entry greater than zero (±) is present on any of the following:

    1. Form 1065, Page 1, Line 18,

    2. Schedule F, Line 23,

    3. Form 4835, Line 21,

    4. An attachment showing an amount for retirement plan, pension and/or profit sharing.

3.11.15.19  (01-01-2015)
Additional Partnership Perfection (previously Partnership Edit Sheet - Form 6141)

  1. This section provides instructions for coding entries previously shown on the Partnership Edit Sheet, Form 6141.

    Caution:

    Effective 1-1- 2006, the edit sheet was eliminated. Entries previously entered on the edit sheet are edited in the left margin next to Line 9 of Form 1065.

  2. Each entry is preceded by the numeric for the applicable line from the Edit Sheet.

  3. Edit entries in numeric order, such as, "1- 4" , "4-1" .

    If... Then...
    Audit Code, Edit "1" followed by appropriate Audit Code. See IRM 3.11.15.19.1
    Special Income Code, Edit "2" followed by the Special Income Code "1" (i.e., "2 - 1" ). See IRM 3.11.15.19.2
    Installment Sale Indicator, Edit "3" followed by the appropriate Installment Sale Indicator. (i.e., "3 - 1" ) See IRM 3.11.15.19.3
    Nonrecourse Loan Code, Edit "4" followed by the Nonrecourse Loan Code "1" (i.e., "4 - 1" ). See IRM 3.11.15.19.4
    Historic Structure Code, Edit "6" followed by the Historic Structure Code "3" (i.e., "6 - 3" ). See IRM 3.11.15.19.5

3.11.15.19.1  (01-01-2015)
Audit Codes

  1. No more than 9 audit codes may be used at one time.

  2. Edit Audit Codes in the left margin next to Line 9 of Form 1065.

  3. Edit as "1 -" followed by the appropriate code(s).

  4. Edit Audit Code "1" if any of the following forms or conditions are present:

    1. Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), is attached.

    2. Form 8275, Disclosure Statement, is attached or a statement referring specifically to IRC §6662 (Disclosure) or IRC 707 (Disguised Sale).

    3. Form 8275-R, Regulation Disclosure Statement, is attached.

    4. Form 8886, Reportable Transaction Disclosure Statement, is attached.

    5. Section 761(a) election that is selected for examination.

    6. Form 1065 contains the notation Disregarded Entity in the header or entity portion of the return (on Page 1, Form 1065)

  5. Edit Audit Code "2" if any of the following forms and/or conditions are present:

    1. Form 1065, page 2, Schedule B, Box 1(e), Foreign Partnership is checked.

    2. Form 1065, page 3, Schedule B, Question 11 (Foreign Trust) is answered "YES" .

    3. Form 1065, page 3, Schedule B, Question 15 (Form 8858) has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    4. Form 1065, page 3, Schedule B, Question 16 (Form 8805) has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    5. Form 1065, page 3, Schedule B, Line 17 has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    6. Form 1065, page 4, Schedule K, Line 16(l) (Total Foreign Taxes) has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    7. Form 1065-B, page 2, Schedule B, Question 1, Box (e) (Foreign Partnership) is checked.

    8. Form 1065-B, page 2, Schedule B, Question 3 (Multiple Partners) is answered "YES" .

    9. Form 1065-B, page 2, Schedule B, Question 4 (Foreign Partners) is answered "YES" .

    10. Form 1065-B, page 2, Schedule B, Question 8 (Foreign Trust) is answered "YES" .

    11. Form 1065-B, page 2, Schedule B, Question 9 (Foreign Disregarded Entity) has an entry greater than 0 (zero).

    12. Form 5471, Information Return with Respect to a Foreign Corporation, is attached.

    13. Form 5472, Information Return of a Foreign Owned Corporation, is attached.

    14. Form 5713, International Boycott Report, is attached and both questions in 7(f) are answered "YES" .

    15. Form 8621, Return by a Shareholder of a Passive Foreign Investment Co. or Qualified Electing Fund, is present and Part V Line 15a-16f has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . For prior year revision (2011 and prior) check Part IV, Line 10a - 11f. .

    16. Form 8804, Annual Return for Partnership Withholding Tax (Section 1446), is attached.

    17. Form 8805, Foreign Partners Information Statement of Section 1446 Withholding, is attached.

    18. Form 8813, Partnership Withholding Tax Payment, is attached.

    19. Form 8832, Entity Classification Election, is attached and box 6(d), 6(e) or 6(f) is checked.

    20. Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), is attached.

    21. Form 8858, Information Return of U.S. Persons With Respect to Disregarded Entities, is attached.

    22. Form 8865, Information Return of U.S. Persons With Respect to Certain Partnership's, is attached.

  6. Edit Audit Code "3" if the following condition is present:

    1. Form 1065, Page 4, Schedule K, Lines 19a or 19b has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  7. Edit Audit Code "4" if the following condition is present:

    1. Form 1065, Page 4, Schedule K, Line 9c ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and Form 1065, Page 4, Schedule K, Line 10 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    2. Form 1065, Schedule B, Question 2 (Dual Partner Code) is present and the YES box is checked.

  8. Edit Audit Code "5" if any of the following forms and/or conditions are present:

    1. Form 8283, Noncash Charitable Contributions, is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ For prior year forms, See IRM 3.11.15.4.1.

    2. Form 8283, Noncash Charitable Contributions, is attached and Page 2, Part I, Question 5, Column (c) has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . For prior year forms, See IRM 3.11.15.4.1.

    3. Form 8594 is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    4. Form 8883, Asset Allocation Statement Under Section 338, is attached ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  9. Edit Audit Code "6" if Form 3115, Application for Change in Accounting Method, is attached.

  10. Edit Audit Code "7" if any of the following forms and/or conditions are present:

    1. Form 1065, page 3, Schedule B, Question 12a is answered "YES" . (Question 7 on Form 1065-B).

    2. Form 1065, page 4, Schedule K, Line 16(l) (Total foreign taxes) is less ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    3. Form 5713, International Boycott Report, is attached and either one or both questions in 7(f) are not answered "YES."

    4. Form 8621, Return by a Shareholder of a Passive Foreign Investment Company or Qualifying Electing Fund, is attached and Part V Line 15a-16f has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . For prior year revision (2011 and prior) check Part IV, Line 10a - 11f.

  11. Edit Audit Code "8" if Schedule M-3, Net Income (Loss) Reconciliation for Certain Partnership's, is attached.

    Caution:

    All returns with a Schedule M-3 attached must be sent to Ogden for processing.

  12. Edit Audit Code "9" if Form 1065 or Form 1065-B, page 6, Schedule M-2, Line 6b (Property Distribution) has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

3.11.15.19.2  (01-01-2015)
Special Income Code

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. If present, edit Code "2 - 1" in the left margin next to Line 9 of Form 1065.

3.11.15.19.3  (01-01-2015)
♦Installment Sale Indicator ♦

  1. Form 6252, Installment Sale Income, is used to report the sale of property on the installment plan.

  2. Codes are based solely on the partnership response to Question 3 on Form 6252. See Figure 3.11.15-27 below.

  3. Edit the Installment Sale Indicator in the left margin next to Line 9 of Form 1065.

  4. Edit as "3 -" followed by the appropriate Installment Sale Indicator Code.

  5. Valid codes for Installment Sale Indicator are as follows:

    Code One Form 6252 Multiple Forms 6252
    1 "YES" response to Question 3, At least one form has a "YES" response.
    2 "NO" response to Question 3, All "NO" responses, or a combination of "NO" and/or blank responses.
    3 "YES" and "NO" are checked or Question 3 is blank, Question 3 is blank on all forms.

    Figure 3.11.15-27

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.15.19.4  (01-01-2015)
Nonrecourse Loan Code

  1. Edit a "4 - 1" in the left margin next to Line 9 of Form 1065 for the Nonrecourse Loan Code in the following instances:

    1. If there is an entry other than zero on Schedule L, Line 18, Columns (b) or (d) on Form 1065.

      Note:

      Do not edit a "1" if a nonrecourse loan is shown on a Schedule L that has been deleted.

    2. If Schedule K-1 (Form 1065), Question K, Nonrecourse, contains an entry other than zero or shows a percent figure or provides indication of any activity (all, half, prorated) rather than a dollar amount, treat the entry as if it is a dollar amount and code accordingly. (If the volume is greater than 20, sample at least 20 Schedules K-1). See Figure 3.11.15-28 below.

      Caution:

      Do not edit the amount from the Qualified Nonrecourse Financing line.

    3. If Schedule K-1 is for a tax year prior to 2004, edit a "1" if there is an entry other than zero on the first line under Question f (Nonrecourse).

    4. If an attachment indicates a nonrecourse loan.

  2. In all other instances, leave blank.

    Figure 3.11.15-28

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.15.19.5  (01-01-2015)
Historic Structure Code

  1. Edit a Code "6 - 3" in the left margin next to Line 9 of Form 1065 if the tax period is 8312 and later, Form 3468, Investment Credit, is attached, and there is an entry present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ on the credit side of any of the following lines:

    1. Tax Year 2010 and subsequent - Code "3" if an amount is present on Form 3468, Part lll, Line 11 (Rehabilitation Credit); specifically Lines e, f, g, h, i, or j.

    2. Tax Year 2008 and 2009 - Code "3" if an amount is present on Form 3468, Part III, Line 10 (Rehabilitation Credit); specifically, Lines e, f, g, h, i, or j.

    3. Tax Years 2006 and 2007 - Code "3" if an amount is present on Form 3468, Line 1 (Rehabilitation Credit); specifically, Line e, f, g, or h.

    4. Tax Years 1996 to 2005 - Code "3" if an amount is present on Form 3468, Part I, Line 1 (Rehabilitation Credit); specifically, Line b or c.

3.11.15.20  (01-01-2015)
Tax Data Perfection

  1. The following information will enable you to perfect tax data.

  2. Edit the following line items per these guidelines:

    1. Edit all monetary amounts as dollars only.

      Exception:

      The 3.5% tax on Form 1065 (edited - in the margin to the right of Line 22 (Ordinary Business Income (loss)) must be dollars and cents. (See IRM 3.11.15.22.14)

    2. Do not edit a vertical line, 00, dash or decimal point in a dollars and cents field when the partnership has entered dollars only.

    3. On monetary amounts with a decimal point present, do not edit unless otherwise specified.

    4. If any of the transcribed tax data lines are missing, compute the correct entry from available figures on the return or attachments. If entry cannot be determined, leave blank.

    5. Any misplaced entries must be moved to the appropriate line. The entry on the incorrect line must be deleted.

    6. If the correct line for the misplaced entry cannot be determined, move to the "Other" line.

3.11.15.21  (01-01-2015)
Form 1065, Income Section (Lines 1- 8)

  1. This section provides instructions for editing Lines 1a through 8 of Form 1065.

  2. Do not bracket any entry, unless editing or computing a negative amount.

  3. Perfect all illegible or misplaced entries (when possible).

  4. Delete misplaced entries and edit to the appropriate lines.

    If... Then...
    The partnership indicates missing entries are supported by schedules or there are missing entries on Lines 1a through 8,
    1. Check the schedules and edit TOTAL figures to Lines 7 and 8 of Form 1065.

    2. If no schedule(s) attached, leave corresponding entries blank.

    Lines 1a through 8 are missing and cannot be determined from an attachment, Combine Lines 21 and 22 (if present) and edit the amount to Lines 7 and 8 of Form 1065.

3.11.15.21.1  (01-01-2015)
Line 1 - Gross Receipts or Sales, Returns and Allowances, and Merchant Card and Third-Party Payments (TY 2011 only)

  1. For TY2014 Form 1065 the amount for:

    • "Gross Receipts or Sales" is claimed on Line 1a.

    • "Returns and Allowances" is claimed on Line 1b.

  2. Edit Lines 1a and 1b as follows:

    If... And... Then...
    Line 1a is blank, Amount is present on Line 1b, Edit the amount on Line 1a from the sum of Lines 1b and Line 1c.
    Amount is not present on Line 1b, Edit the amount from Line 1c on Line 1a.
    Line 1b is blank, Amount is present on Line 1a and the amount on Line 1c is less than Line 1a, Edit the difference between Line 1a and Line 1c on Line 1b.
    Amount is present on Line 1a and no amount is present on Line 1c, If Line 3 is present, then compute and edit the amount on Line 1b (Line 3 plus Line 2 minus Line 1a).

    Note:

    If no amount is present on Line 2 See IRM 3.11.15.21.2 paragraph (2).

3.11.15.21.1.1  (01-01-2015)
TY2011 Conversion of Form 1065 Lines 1a though 1e

  1. For TY2011 Form 1065 version the amounts for:

    • "Gross Receipts or Sales" is claimed on Line 1b. as "Gross Receipts or Sales not reported on Line 1a" .

    • "Returns and Allowances" is claimed on Line 1d as "Returns and Allowances plus any other adjustment to Line 1a" .

  2. If significant amounts are present on Lines 1a through 1e of Form 1065, process as follows:

    1. Line through the line numbers 1a and 1e.

    2. Change Line 1c to 1a and 1d to 1b.

    3. See IRM 3.11.15.21.1(2) if converted Lines 1a and 1b need to be computed.

      Note:

      2011 revision Form 1065, Line 1e is the equivalent revision Line 1c; although it is not a transcription line, it may be necessary to use this line to compute Lines 1a or 1b.

3.11.15.21.1.2  (01-01-2015)
TY2010 and Prior Year Conversion of Form 1065 Lines 1a and 1b

  1. For TY2010 and prior Form 1065 version the amounts for:

    • "Gross Receipts or Sales" is claimed on Line 1a.

    • "Returns and Allowances" is claimed on Line 1b as "Less Returns and Allowances" .

    1. Take no action and continue editing the return.

3.11.15.21.2  (01-01-2015)
Line 2 - Cost of Goods Sold (Form 1125-A)

  1. Cost of goods sold is reported on Line 2 of Form 1065.

  2. If Line 2 is blank, edit from Form 1125-A, Line 8 (IMPORTANT: 2010 and prior revisions - this information was entered from Schedule A (Form 1065), Line 8). Bracket if necessary

    If... And... Then...
    Line 2 is blank, There is an entry on Line 8, Form 1125-A, Edit amount from Line 8, Form 1125-A to Line 2 of Form 1065.
    Line 2 is blank, Line 8 (Form 1125-A) is also blank, Subtract Line 7 from Line 6 on Form 1125-A and edit to Line 2 of Form 1065.
    Line 2 is blank, Lines 7 and 8 (Form 1125-A) are blank, Edit the amount from Line 6 (Form 1125-A) to Line 2 of Form 1065.
  3. See IRM 3.11.15.32, Form 1125-A, Cost of Goods Sold (previously Form 1065, Schedule A), for "dummy return" preparation procedures.

  4. For Your Information: Tax Forms and Publications (TFP) removed the Schedule A (Cost of Goods Sold) from the Partnership and certain Corporate forms series returns (Forms 1065 and Form 1120, respectively). Beginning with Tax Year 2011 (Calendar Year 2012) the Schedule A is now a separate Form 1125-A, Cost of Goods Sold. Filers of Forms 1120, 1065, 1120S, 1120-C, and 1120-F will use this form. This is part of TFP's product strategy, to remove duplicate forms and schedules, and create only one product to be maintained. The form number was chosen in lieu of a schedule because it will be used with more than one form. Submission Processing and others agreed to make this change for Schedules A and E. Other schedules will be considered for similar treatment in future years. The 1125 series with the letter of the former schedule will be used for all such business schedules.

3.11.15.21.3  (01-01-2015)
Line 3 - Gross Profit (Loss)

  1. Line 3, Gross Profit, should be the amount calculated by subtracting Line 2 from Line 1c.

  2. Though Line 3 is not a T-line, it may be necessary to compute this line in the following instances:

    If... Then...
    Line 3 is blank, Compute only if needed to compute Line 8 (Total income) amount.
    Line 3 contains an entry, Accept the partnership entry. Use the partnership entry, if needed, to compute Line 8 (Total income) amount.

3.11.15.21.4  (01-01-2015)
Line 4 - Ordinary Income (Loss) from Other Partnership's and Fiduciaries

  1. Ordinary income or loss from other partnerships and fiduciaries is reported on Line 4 of Form 1065.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡


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