3.11.15  Return of Partnership Income (Cont. 2)

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

3.11.15.21.5  (01-01-2015)
Line 5 - Net Farm Profit (Loss)

  1. The net profit or loss from farming is reported on Line 5 of Form 1065.

  2. This entry is supported by Schedule F (Form 1040), Profit or Loss From Farming, or an attached schedule.

    1. If Line 5 is blank, edit the Net Farm Income or Loss from Schedule F (Form 1040), Line 34 or attached schedule.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. See IRM 3.11.15.29 for Schedule F editing procedures.

3.11.15.21.6  (01-01-2015)
Line 6 - Net Gain (Loss)

  1. The net gain or loss on the sale of property used in a trade or business shown on Line 17 of Form 4797 (Sale of Business Property) is reported on Line 6 of Form 1065.

    If... Then...
    Line 17 of Form 4797 includes the amount from Line 7 of Form 4797 (amount shown on Line 11 or 12 of Form 4797),
    1. Adjust Line 17 to delete the Line 7 amount.

    2. Edit the corrected amount from Line 17 to Line 6 of Form 1065.

    3. Edit Line 7 of Form 4797 to Line 10 of Schedule K.

    4. Continue editing the return.

    There is an entry on Line 17 of Form 4797 and the amount is not reported on either:
    • Line 3c of Schedule K, or

    • Line 19 of Form 8825 or on an attachment to Form 8825,

    1. Edit Line 17 amount to blank Line 6 of Form 1065.

    2. Continue editing the return.

    There is an entry on Line 17 of Form 4797 and the amount is reported on either:
    • Line 3c of Schedule K, or

    • Line 19 of Form 8825 or on an attachment to Form 8825,

      Note:

      If shown on Form 8825 or attachment, the amount will be included on Line 2 of Schedule K.

    1. Do not edit the amount to Line 6 of Form 1065.

    2. Continue editing the return.

  2. See IRM 3.11.15.24.1 for additional editing procedures.

3.11.15.21.7  (01-01-2015)
Line 7 - Other Income (Loss)

  1. Other income or loss not shown on lines 1a through 6 is reported on Line 7 of Form 1065.

  2. An amount on Line 7 may be supported by an attached statement.

    If... Then...
    A statement is not attached, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .
    The attachment shows the type of income to be the same as that reported on any Line 1a through 6, Decrease the Line 7 amount by that amount and increase the appropriate income line (Lines 1a through 6).
    Line 7 is blank or illegible and "Other Income" is reported on an attachment to Form 1065, Determine if the amount has been reported elsewhere on the return, if unable to determine, edit the amount to Line 7 of Form 1065.
  3. Line 7 may include an amount from Form 6478 (Alcohol and Cellulosic Biofuel Fuels Credit). If Form 6478 is attached with a significant amount on *Line 5(c) or Line 8, edit Action Code "343" .

    Note:

    *Line 5(c) or Line 7 on 2009 Form 6478. Line 7(c) or Line 9 on 2008 Form 6478. These instructions apply to Tax Year 2009 only, including fiscal year (200901 through 201011). Do not edit AC 343 for Tax Period 201012.

3.11.15.21.8  (01-01-2015)
Line 8 - Total Income (Loss)

  1. The total income or loss (sum of Lines 3 through 7) is reported on Line 8 of Form 1065.

    If... Then...
    There is an amount present for Total Income on Line 8 but the amount is not identified on Lines 1a through 7 and/or attachments, Edit the Line 8 amount to Line 7 of Form 1065.
    Line 8 is blank but there are entries on Lines 1a through 7, Compute and edit Line 8 of Form 1065.

3.11.15.22  (01-01-2015)
Form 1065, Deductions Section (Lines 9-22)

  1. This section provides instructions for editing Line 9 through 22 on 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.

  5. "X" any negative amount on Line 9, 10, 13, 14, or 15, and include in the calculation for Line 20, "Other Deductions" .

3.11.15.22.1  (01-01-2015)
Line 9 - Salaries and Wages

  1. The salaries and wages paid during the year is reported on Line 9 of Form 1065.

  2. Entry must be positive.

    Reminder:

    Edit Salary and Wage Code "1" if an entry is present on Line 9. IRM 3.11.15.17, Salary and Wage Code.

3.11.15.22.2  (01-01-2015)
Line 10 - Guaranteed Payments to Partners

  1. Payments made to partners for services or for the use of capital is reported on Line 10 of Form 1065.

  2. Entry must be positive.

  3. Accept the partnership entry.

3.11.15.22.3  (01-01-2015)
Line 11 - Repairs and Maintenance

  1. The cost of incidental repairs and maintenance that do not add to the value of the property or prolong its life is reported on Line 11 of Form 1065.

  2. Accept the partnership entry.

3.11.15.22.4  (01-01-2015)
Line 12 - Bad Debts

  1. Total debts that became worthless during the year is reported as bad debts on Line 12 of Form 1065.

  2. Accept the partnership entry.

3.11.15.22.5  (01-01-2015)
Line 13 - Rent

  1. The rent paid on business property used by the partnership is reported on Line 13 of Form 1065.

  2. Entry must be positive.

  3. Accept the partnership entry.

3.11.15.22.6  (01-01-2015)
Line 14 - Taxes and Licenses

  1. Taxes and licenses paid by the partnership is reported on Line 14 of Form 1065.

  2. Entry must be positive.

  3. Accept the partnership entry.

3.11.15.22.7  (01-01-2015)
Line 15 - Interest

  1. Interest paid by the partnership is reported on Line 15 of Form 1065.

  2. Entry must be positive.

  3. Accept the partnership entry.

3.11.15.22.8  (01-01-2015)
Line 16c - Depreciation

  1. The depreciation claimed on the partnership assets is reported on Lines 16a through 16c.

    If... And... Then...
    Lines 16a and 16c are blank, There is an entry on Line 16b, Arrow Line 16b to Line 16c.
    Lines 16b and 16c are blank, There is an entry on Line 16a, Arrow Line 16a to Line 16c on Form 1065.
    Line 16c is blank, There are entries on Lines 16a and 16b, Subtract Line 16b from Line 16a and edit the result to Line 16c of Form 1065.

3.11.15.22.9  (01-01-2015)
Line 17 - Depletion

  1. The partnership reports a deduction for depletion on Line 17 of Form 1065.

  2. Accept the partnership entry.

3.11.15.22.10  (01-01-2015)
Line 18 - Retirement Plans, etc.

  1. Partnership contributions to a qualified pension, profit-sharing, annuity or IRA plan is reported on Line 18 of Form 1065. (See IRM 3.11.15.18)

    Reminder:

    Edit the EPMF Code "1" if an entry is present on Line 18. See IRM 3.11.15.18, EPMF Code.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

3.11.15.22.11  (01-01-2015)
Line 19 - Employee Benefit Programs

  1. Partnership contributions to employee benefit programs (e.g., insurance, health and welfare programs) is reported on Line 19 of Form 1065.

  2. Accept the partnership entry.

3.11.15.22.12  (01-01-2015)
Line 20 - Other Deductions

  1. The total allowable deductions not deducted elsewhere on page 1 is reported on Line 20 of Form 1065.

    Reminder:

    "X" any negative amount on Line 9, 10, 13, 14, or 15, and include in the calculation for Line 20, "Other Deductions" .

  2. An entry on Line 20 may be supported by an attached schedule.

    If... And... Then...
    A statement is not attached There is an entry on Line 20, Accept the partnership entry.
    A statement is attached Lines 9 through 19 are blank, Enter the deductions to the appropriate lines.

    Note:

    Coding and Editing Partnership Returns, Form 1065 Job Aid (Number 2505-002) provides examples for editing deductions from attachments.

    A statement is attached There are entries on Line 9 through 19, Accept the partnership entry on Line 20.
    Line 20 is blank or illegible Other Deductions is reported on an attachment to Form 1065, Determine and edit the Line 20 amount.

3.11.15.22.13  (01-01-2015)
Line 21 - Total Deductions

  1. The total deductions (sum of Line 9 through 20) is reported on Line 21 of Form 1065.

    If... Then...
    There is an entry present for Total Deductions on Line 21 but the amount is not identified on Lines 9 through 20, Edit the Line 21 amount to Line 20 of Form 1065.
    Line 21 is blank but there are entries on Lines 9 through 20, Compute and edit Line 21 of Form 1065.

3.11.15.22.14  (01-01-2015)
Line 22 - Ordinary Business Income (Loss)

  1. Ordinary business income or loss is derived by subtracting Line 21 (Total Deductions) from Line 8 (Total Income (loss)) and reported on Line 22 of Form 1065.

    If... And... Then...
    Line 22 is present, Lines 1 through 21 are blank and cannot be determined from attachments, Edit the Line 22 amount to Line 7 (Other Income (loss)) and 8 (Total Income (loss)).
    Line 22 is blank, There are entries on Lines 8 and 21, Subtract Line 21 from Line 8 and edit to Line 22 of Form 1065.
    Lines 22 and 21 are blank, There is an entry on Line 8, Edit the Line 8 amount to Line 22 of Form 1065.
    Lines 22 and 8 are blank, There is an entry on Line 21 (Total Deductions), Edit the Line 21 amount to Line 22 of Form 1065.
  2. The right margin next to Line 22 is also used by several partnerships who have elected to retain their partnership status but must pay a 3.5% tax on all or part of their income (See IRM 3.11.15.15.13, CCC "X" - Publicly Traded Partnership's).

  3. The right margin near Line 22 is also used by certain partnership to recapture Qualified Therapeutic Discovery Credit (QTDP). The partnership will repay the unused credit by filing Form 4255, Recapture of Investment Credit, along with the Form 1065 return. These returns are identified by:

    • Form 4255, Recapture of Investment Credit, attached to Form 1065.

    • "QTDP" or Qualifying Therapeutic Discovery Credit marked on Form 1065 with an amount in the margin near Line 22. (See procedures in (4) below).

      Note:

      If the Form 4255 is attached, it may be used for recapture of investment credits other than ONLY the QTDP. Follow instructions in (4) below to process QTDP returns.

  4. Process these returns as follows:

    1. Verify EIN and name on return with Form 4255.

    2. Edit CCC "X" on Form 1065.

    3. Edit Audit trail and photocopy Page 1 of the return and Form 4255.

    4. Route photocopies of the return and the Form 4255 to Accounts Management.

    5. Continue processing Form 1065.

  5. Accept the partnership amount if there is an entry in the right margin next to Line 21 (Total Deductions).

3.11.15.22.15  (01-01-2015)
Credit for Federal Telephone Excise Tax Paid (TETR)

  1. Edit Action Code "420" on any original Form 1065 if Form 8913, Credit for Federal Excise Tax Paid, is attached.

  2. Do not edit Action Code 420 on amended Form 1065.

  3. Sequence Form 8913 after Form 8825.

3.11.15.23  (01-01-2015)
Schedule B, Pages 2 and 3, Other Information

  1. This section provides instructions for editing Other Information on Schedule B of Form 1065.

3.11.15.23.1  (01-01-2015)
Type of Partnership Entity - (Question 1)

  1. The Type of Partnership Entity is based on the partnership response to Question 1, "What type of entity is filing this tax return?"

  2. Edit Audit Code "1-2" in the left margin next to Line 9 of Form 1065 if Box 1(e) is checked.

3.11.15.23.2  (01-01-2015)
Dual Partner Code - (Question 2)

  1. The Dual Partner Code is based on the partnership answer to the question on Line 2, Schedule B Form 1065. "At any time during the tax year, was any partner in the partnership a disregarded entity, a partnership (including an entity treated as a partnership), a trust, and S corporation, an estate (other than an estate of a deceased partner), or a nominee or similar person?"

  2. The Dual Partner Code is edited as follows:

    If... Then...
    Schedule B is present and the "YES" box is checked,
    1. Enter Audit Code 1-4 to the left of line 9 of the Form 1065.

    2. Continue editing the return.

    Schedule B is present and both boxes are checked,
    1. Edit "3" in the right margin next to the checkbox.

    2. Continue editing the return.

    Schedule B is present and neither box is checked,
    1. No editing is required.

    2. Continue editing the return.

3.11.15.23.3  (01-01-2015)
Foreign or Domestic Corporate Ownership - (Question 3a)

  1. The Foreign or Domestic Corporate Ownership is based on the partnership answer to the question on Line 3a, Schedule B, Form 1065.

  2. The Foreign/Domestic Corporate Code is edited as follows:

    If... Then...
    Schedule B is present and the "YES" or "NO" box is checked,
    1. No editing required.

    2. Continue editing the return.

    Schedule B is present and both boxes are checked,
    1. Edit "3" next to the checkbox.

    2. Continue editing the return.

    Schedule B is present and neither box is checked,
    1. No editing is required.

    2. Continue editing the return.

  3. If Schedule B is not attached and the tax year is 1991 and subsequent, examine the return and attachments for Form 8865 (Information Return of U.S. Persons With Respect to Certain Foreign Partnership's):

    If... Then...
    Form 8865 is attached,
    1. Create a dummy Schedule B (Page 2) and check the "YES" box for Question 3a.

    2. Continue editing the return.

    Form 8865 is not attached,
    1. Create a dummy Schedule B and attach Schedule B (Page 2) and leave Question 3(a) blank.

    2. Continue editing the return.

3.11.15.23.4  (01-01-2015)
Foreign Individual or Estate Ownership - (Question 3b)

  1. The Foreign Individual or Estate Ownership is based on the partnership answer to the question on Line 3b, Schedule B, Form 1065.

  2. Edit the Foreign Individual or Estate Ownership Code as follows:

    If... Then...
    Schedule B is present and the "YES" or "NO" box is checked,
    1. No editing required.

    2. Continue editing the return.

    Schedule B is present and both boxes are checked,
    1. Edit "3" next to the checkbox.

    2. Continue editing the return.

    Schedule B is present and neither box is checked,
    1. No editing is required.

    2. Continue editing the return.

3.11.15.23.5  (01-01-2015)
Ownership of Foreign or Domestic Corporation Code - (Question 4a)

  1. The Ownership of Foreign or Domestic Corporation is based on the partnership answer to the question on Line 4a, Schedule B, Form 1065.

  2. Edit the Stock Ownership Code as follows:

    If... Then...
    Schedule B is present and the "YES" or "NO" box is checked,
    1. No editing required.

    2. Continue editing the return.

    Schedule B is present and both boxes are checked.,
    1. Edit "3" next to the checkbox.

    2. Continue editing the return.

    Schedule B is present and neither box is checked,
    1. No editing is required.

    2. Continue editing the return.

3.11.15.23.6  (01-01-2015)
Ownership of Foreign Partnership or Trust Code - (Question 4b)

  1. The Ownership of Foreign Partnership or Trust is based on the partnership answer to Line 4b, Schedule B, Form 1065.

  2. Edit the Ownership of Foreign Partnership or Trust Code as follows:

    If... Then...
    Schedule B is present and the "YES" or "NO" box is checked,
    1. No editing required.

    2. Continue editing the return.

    Schedule B is present and both boxes are checked,
    1. Edit "3" next to the checkbox.

    2. Continue editing the return.

    Schedule B is present and neither box is checked,
    1. No editing is required.

    2. Continue editing the return.

3.11.15.23.7  (01-01-2015)
Partnership Level Tax Treatment Election - (Question 5)

  1. The Partnership Level Tax Treatment Election (Form 8893) is based on the partnership response to Question 5, Schedule B, Form 1065.

  2. No editing is required.

3.11.15.23.8  (01-01-2015)
Balance and Reconciliation - (Question 6)

  1. The response to Question 6 on Schedule B ascertains the partnership requirement to complete and attach a balance sheet (Schedule L).

  2. See IRM 3.11.15.27 for editing procedures.

3.11.15.23.9  (01-01-2015)
Distribution From Foreign Trust - (Question 11)

  1. The distribution from foreign trust is based on the partnership response to Question 11, Schedule B, Form 1065.

  2. Edit Audit Code "1 - 2" in the left margin next to Line 9 of Form 1065 if the "Yes" box is checked.

3.11.15.23.10  (01-01-2015)
Distribution of Property Code - (Question 12a)

  1. The distribution of property code is based the partnership response to Question 12a, Schedule B, Form 1065.

    If... Then...
    Schedule B is present and the "YES" box is checked,
    1. Edit Audit Code 7 in the left margin on page 1 next to Line 9. See IRM 3.11.15.19.1.

    2. Continue editing the return.

    Schedule B is present and both boxes are checked,
    1. Edit "3" next to the checkbox.

    2. Edit Audit Code 7 in the left margin on page 1 next to Line 9. See IRM 3.11.15.19.1

    3. Continue editing the return.

    Schedule B is present and the "NO" box or neither box is checked,
    1. No editing is required.

    2. Continue editing the return.

3.11.15.23.11  (01-01-2015)
Number of Forms 8858 Attached - (Question 15)

  1. The Number of Forms 8858 is based on the partnership entry on Question 15, Schedule B, Form 1065.

  2. Edit Audit Code "1-2" in the left margin next to Line 9 of Form 1065 if there is an entry on Line 15 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  3. Accept partnership entry.

3.11.15.23.12  (01-01-2015)
Number of Forms 8805 Attached - (Question 16)

  1. The Number of Forms 8805 attached is based on the partnership entry on Question 16, Schedule B, Form 1065.

  2. Edit Audit Code "1-2" in the left margin next to Line 9 of Form 1065 if the entry on Line 16 is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  3. Accept the partnership entry.

3.11.15.23.13  (01-01-2015)
Number of Forms 8865 Attached - (Question 17)

  1. The Number of Forms 8865 attached is based on the partnership entry on Question 17, Schedule B, Form 1065. See IRM 3.11.15.19.1.

  2. Edit Audit Code "1-2" in the left margin next to Line 9 of Form 1065 if the entry on line 17 is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  3. Accept the partnership entry.

3.11.15.23.14  (01-01-2015)
Number of Form 5471, Information Return of U. S. Persons With Respect to Certain Foreign Corporations, attached to this return (Question 19)

  1. This entry is based on the number of Forms 5471 attached shown on Question 19, Schedule B, Form 1065 ("Enter the number of Forms 5471, Information Return of U. S. Persons With Respect to Certain Foreign Corporations, attached to this return" ).

  2. If this number is incorrect, circle out the incorrect entry and enter the correct number of Forms 5471 attached in the right margin of Page 3 to the right of Question 19.

3.11.15.24  (01-01-2015)
Schedule K, Form 1065

  1. Schedule K (page 4), Form 1065 reports the Partners' Distributive Share Items.

  2. Use the following instructions for missing Schedule K for tax periods ending 8712 and later:

    If... And... Then...
    Schedule K is missing or blank, Schedule D, Form 4797, and/or Form 8825 are attached, Perfect or dummy Schedule K by editing information from the attachment(s) to the appropriate Schedule K lines.

    Note:

    See IRM 3.11.15.2.1 for General Editing Procedures.

    Schedule K is missing or incomplete, The Schedule K-1 attached reports only Ordinary Income, Do not correspond.
    Schedule K is missing or blank and can not be perfected or dummied from attachments, The return is not a Final or Short Record return, (See IRM 3.11.15.5.6) Correspond using Letter 1355C when the partnership is required to complete and file Schedule K.

3.11.15.24.1  (01-01-2015)
Line 2, Schedule K

  1. The partnership reports Net Rental Real Estate income or loss on Line 2 of Schedule K.

  2. Form 8825 is used to report Rental Real Estate income on Line 2 of Schedule K.

  3. If there is an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ on Schedule K, Line 2 then Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, must be attached.

    Exception:

    Form 8825 is not required on a "Final" or Short Record return.

  4. Edit Schedule K, Line 2 and Form 8825 as follows:

    If... And... Then...
    Schedule K, Line 2 has an amount present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Multiple Forms 8825 are attached,
    1. Combine Line 18a (Line 17 on 2006 or prior) from all Forms 8825 and edit the resulting amount on Line 18a (Line 17 on 2006 or prior) of the first Form 8825.

    2. Combine Line 21 from all Forms 8825 and edit the resulting amount on Line 21 of the first Form 8825.

    3. "X" remaining Forms 8825.

    4. Continue editing per instructions below.

    Schedule K, Line 2 has an amount present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8825, Line 21 agrees with Schedule K, Line 2,
    1. No action required.

    2. Continue editing the return.

    Schedule K, Line 2 has an amount present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8825, Line 21 is smaller than the amount on Schedule K, Line 2,
    1. No action required.

    2. Continue editing the return.

    Schedule K, Line 2 has an amount present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8825, Line 21 is greater than the amount on Schedule K, Line 2,
    1. Edit the amount from Form 8825, Line 21 to Schedule K, Line 2.

    2. Continue editing the return.

    Schedule K, Line 2 has an amount present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8825 is not attached, Correspond with the partnership to request Form 8825 using Letter 1355C or other approved local correspondence procedure.

    Note:

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

    Also correspond for missing or incomplete Schedules K-1 and number of partners, if relevant.
    Exception:If the partnership attaches a statement in lieu of Form 8825, prepare Form 8825 and attach to the return.
    Schedule K, Line 2 has an amount present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Schedule E is attached,
    1. Correspond with the partnership to request Form 8825 using Form 3696 or other approved Correspondence Action Sheet.

    2. Notate on the Form 3696 or other approved Correspondence Action Sheet, "SCHEDULE E CANNOT BE FILED WITH FORM 1065 (OR Form 1065-B)"
      Exception: Do not correspond on a Final return. Edit Line 26, Schedule E to Line 2, Schedule K.

    The amount on Line 21 of Form 8825 is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Line 2, Schedule K is blank,
    1. Edit the amount from Form 8825, Line 21, to Schedule K, Line 2, See Figure 3.11.15-29 below.

    2. Continue editing the return.

    The amount on Line 21 Form 8825 is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ more, The same income is shown on page 1 for Form 1065.
    1. "X" amounts shown on page 1, Form 1065.

    2. Edit Form 8825, Line 21, to Schedule K, Line 2.

    Form 8825, Line 18a (Line 17 on 2009 or prior) is negative,
    1. "X" the negative amount.

    2. Continue editing the return.

     
    Form 8825, Line 18a (Line 17 on 2009 or prior) is blank,
    1. Compute Line 18a (Line 17 on 2009 or prior) by adding gross rents, Line 2, Columns A through H.

    2. Edit the combined total to Form 8825, Line 18a (Line 17 on 2009 or prior).

     
    Form 8825, Line 21 is blank,
    1. Compute Line 21 by combining Lines 18a (Line 17 on 2009 or prior) through Line 20a.

    2. Edit the computed Line 21 amount to Schedule K, Line 2.

    3. Continue editing the return.

     
    The partnership replies,
    1. Edit the return using the information provided.

    2. Continue editing the return.

     

    Figure 3.11.15-29
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.15.24.2  (01-01-2015)
Line 3a, Schedule K

  1. The partnership reports other Gross Rental income or loss on Line 3a of Schedule K.

    Caution:

    The partnership may report a gain or loss from the sale/exchange or involuntary conversion of an asset used in rental activity other than a Rental Real Estate activity from Line 17 of Form 4797 on Line 3c of Schedule K. If the amount from Line 17 of Form 4797 is included in Line 3c of Schedule K or Line 19 of Form 8825, do not edit the amount to Line 6 of Form 1065.

  2. Accept the partnership entry.

3.11.15.24.3  (01-01-2015)
Line 3c, Schedule K

  1. The partnership reports other Net Rental income on Line 3c of Schedule K.

  2. Accept the partnership entry.

3.11.15.24.4  (01-01-2015)
Line 5, Schedule K

  1. The partnership reports Interest Income on Line 5 of Schedule K.

  2. Accept the partnership entry.

3.11.15.24.5  (01-01-2015)
Line 6a, Ordinary Dividends

  1. The partnership reports Ordinary Dividends on Line 6a of Schedule K.

  2. Accept the partnership entry.

3.11.15.24.6  (01-01-2015)
Line 6b, Qualified Dividends

  1. The partnership reports Qualified Dividends on Line 6b of Schedule K.

  2. Accept the partnership entry.

3.11.15.24.7  (01-01-2015)
Line 7, Schedule K

  1. The partnership reports Royalties on Line 7 of Schedule K.

    Caution:

    Oil or gas lease income is not the same as oil or gas royalties.
    • Oil or gas lease income is considered Rental Real Estate and the amount is edited to Line 2, Schedule K.

  2. Oil or gas royalties is edited to Line 7, Schedule K.

  3. If Form 8825 includes oil or gas Royalty Income, edit Form 8825 to exclude the income.

    1. Edit Royalty Income from Line 2, Form 8825 to Line 7, Schedule K.

    2. Subtract Royalty Income (Line 2, Form 8825) from Line 18a (Line 17 on 2009 or prior), Form 8825 and edit to the left of the entry.

    3. Subtract Royalty Expenses (Line 16, Form 8825) from Line 18b (Line 18 on 2009 or prior), Form 8825.

    4. Recompute total on Line 21, Form 8825 and edit to Line 2, Schedule K. See Figure 3.11.15-30 below.

    Figure 3.11.15-30
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.15.24.8  (01-01-2015)
Line 8, Schedule K

  1. The partnership reports Net Short-Term Capital Gain or Loss on Line 8 of Schedule K.

    1. Check the top margin of Schedule D for the literals "LIKE-KIND EXCHANGE" , "RELATED PARTY EXCHANGE" or "RELATED PARTY LIKE-KIND EXCHANGE" .

    If... Then...
    A literal is present on Schedule D, Check the return for Form 8824.
    Form 8824 is attached, Edit CCC "1" .
    Form 8824 is not attached, Correspond for Form 8824 using Form 3696 or other approved Correspondence Action Sheet. Edit Action Code 211 (IRM 3.11.15.2.2).

3.11.15.24.9  (01-01-2015)
Line 9a, Schedule K

  1. The partnership reports Net Long-Term Capital Gain or Loss on Line 9a of Schedule K.

    1. If Schedule D is attached and Line 9a of Schedule K is blank, edit the amount from Line 15, (Line 13 on Tax Year 2011; Line 11 on tax years 2008 and Prior) Schedule D to Line 9a of Schedule K.

    2. Check the top margin for the literals "LIKE-KIND EXCHANGE" , "RELATED PARTY EXCHANGE" or "RELATED PARTY LIKE-KIND EXCHANGE" .

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    If... Then...
    A literal is present on Schedule D, Check the return for Form 8824.
    Form 8824 is attached, Edit CCC "1" . See Figure 3.11.15-31
    Form 8824 is not attached, Correspond for Form 8824 using Form 3696 or other approved Correspondence Action Sheet. Edit Action Code 211 (See IRM 3.11.15.2.2).

    Figure 3.11.15-31
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.11.15.24.10  (01-01-2015)
Line 10, Schedule K

  1. The partnership reports the net Section 1231 gain or loss on Line 10 of Schedule K from Line 7 of Form 4797.

  2. Edit Line 10 of Schedule K as follows:

    If... Then...
    There is an entry on Line 7 of Form 4797 and Line 10 of Schedule K is blank,
    1. Edit the Line 7 amount to Line 10 of Schedule K. See Figure 3.11.15-32.

    2. Continue editing the return.

    The entry on Line 7 of Form 4797 is reported on either:
    • Line 6 of Form 1065, or

    • Line 3c of Schedule K,

    1. Edit the Line 7 amount to Line 10 of Schedule K.

    2. "X" the amount on Line 6 of Form 1065 or Line 3c of Schedule K.

    3. Continue editing the return.

    Multiple Forms 4797 are attached,
    1. Add all the Line 7 amounts together.

      Note:

      Disregard any Form 4797 annotated "ALT MIN TAX" , "ALTERNATIVE MINIMUM TAX" , or "AMT" , etc.

    2. Edit the computed amount to Line 10 of Schedule K.

    3. Continue editing the return.

    Multiple Forms 4797 are attached and the partnership reported Line 7 on either:
    • Line 6 of Form 1065, or

    • Line 3c of Schedule K,

    1. Add all the Line 7 amounts together.

      Note:

      Disregard any Form 4797 annotated "ALT MIN TAX" , "ALTERNATIVE MINIMUM TAX" , or "AMT" , etc.

    2. Edit the computed amount to Line 10 of Schedule K.

    3. "X" the amount on Line 6 of Form 1065 or Line 3c of Schedule K.

    4. Continue editing the return.

    The top margin of Form 4797 has the literals "LIKE-KIND EXCHANGE" , "RELATED PARTY EXCHANGE" , or "RELATED PARTY LIKE-KIND EXCHANGE" , See IRM 3.11.15.24.8, Line 8, Schedule K, and IRM 3.11.15.24.9, Line 9a, Schedule K, for more information on Like-Kind Exchanges (including Form 8824, Like-Kind Exchanges).

    Note:

    If the amount on Schedule D, Line 13 (Line 11 on tax year 2008 and prior) and Form 4797, Line 7 are the same, then edit the amount from Schedule D, Line 15 to Schedule K, Line 9a, and also edit the amount from Form 4797, Line 7 to Schedule K, Line 10.

    Figure 3.11.15-32

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

3.11.15.24.11  (01-01-2015)
Line 11, Schedule K

  1. The partnership reports Ordinary Income or Loss on Line 11 of Schedule K.

  2. Accept the partnership entry.

3.11.15.24.12  (01-01-2015)
Line 15a, Schedule K

  1. The partnership reports Low-Income Housing Credit (Section 42(j)(5)) on Line 15a of Schedule K. For tax years 200512 and subsequent, partnership are instructed to complete and attach:

    • Form 8586, Low-Income Housing Credit

    • Form 8609-A, Annual Statement for Low Income Housing Credit

      For tax years 200412 and prior, partnerships are instructed to complete and attach:

      • Form 8586, Low-Income Housing Credit

      • Form 8609, Low-Income Housing Credit Allocation Certification

      • Schedule A (Form 8609), Annual Statement

  2. Follow the procedures below for Line 15a, Schedule K, and Form 8586:

    If ... And ... Then ...
    Line 15a, Schedule K, entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , "X" to the left of the entry.  
    Line 15a, Schedule K, entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8586 is not attached, Correspond for Form 8586 and Form 8609-A. (For 200412 or prior: Form 8586, Form 8609, and Schedule A (Form 8609)).

    Exception:

    If Form 8825 is attached and Line 20a has a significant entry, then Form 8609-A does not have to be attached.

    Line 15a, Schedule K, entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Line 3 or Line 10, Form 8586, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , (Line 3 for 2005 or 2006. Lines 2, 3a, or 4 for 200412 or prior) Correspond for Form 8609-A if not attached. (For tax years 200412 or prior: Form 8609 and Schedule A (Form 8609) if not attached).

3.11.15.24.13  (01-01-2015)
Line 15b, Schedule K

  1. The partnership reports other Low-Income Housing Credit on Line 15b of Schedule K. For tax years 200512 and subsequent, partnerships are instructed to complete and attach:

    • Form 8586, Low-Income Housing Credit

    • Form 8609-A, Annual Statement for Low Income Housing Credit

    For tax years 200412 and prior, partnerships are instructed to compete and attach:

    • Form 8586, Low-Income Housing Credit

    • Form 8609, Low-Income Housing Credit Allocation Certification

    • Schedule A (Form 8609), Annual Statement

  2. Follow the procedures below for Line 15b, Schedule K, and Form 8586:

    If ... And ... Then ...
    Line 15b, Schedule K, entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , "X" to the left of the entry  
    Line 15b, Schedule K, entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Form 8586 is not attached, Correspond for Form 8586 and Form 8609-A. (For 200412 or prior: Form 8586, Form 8609, and Schedule A (Form 8609)).

    Exception:

    If Form 8825 is attached and Line 20a has a significant entry, then Form 8609-A does not have to be attached.

    Line 15b, Schedule K, entry is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Line 3 or Line 10, Form 8586, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , (Line 3 for 2005 or 2006. Lines 2, 3a, or 4 for 200412 or prior). Correspond for Form 8609-A if not attached (For tax years 200412 or prior: Form 8609 and Schedule A (Form 8609) if not attached).

3.11.15.24.14  (01-01-2015)
Line 15c, Schedule K

  1. The partnership reports qualified rehabilitation expenditures for rental real estate on Line 15c of Schedule K.

  2. Accept the partnership entry.

  3. "X" to the left of the entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

3.11.15.24.15  (01-01-2015)
Line 15f, Schedule K

  1. No editing is required for Line 15f.

  2. Line 15f may contain an amount from Form 6478 (Alcohol and Cellulosic Biofuel Fuels Credit). If Form 6478 is attached with a significant amount on *Line 5(c) or Line 8, edit Action Code "343" .

    Note:

    *Line 5(c) or Line 7 on 2009 Form 6478. Line 7(c) or Line 9 on 2008 Form 6478.


  3. IMPORTANT: Form 6478 has restrictions: these instructions apply to 2009 tax year only, including fiscal year filers (200901 through 201011). Do not edit AC 343 for Tax Period 201012 and subsequent.

3.11.15.25  (01-01-2015)
Lines 16d to 16m, Schedule K

  1. The partnership reports Foreign Income, deductions and taxes on Lines 16d through 16m of Schedule K.

  2. Accept the partnership entry.

  3. Edit Audit Code 2 or 7 if there is an entry on Line 16(l) edit as follows:

    If... Then...
    The amount on Line 16(l) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Edit Audit Code 2.
    The amount on Line 16(l) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , Edit Audit Code 7.

3.11.15.26  (01-01-2015)
Lines 19a and 19b, Schedule K

  1. Edit Audit Code 3 if either Line 19a or 19b has an entry ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .


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