Schedule K-1 - Line 20 (Form 1065) Code Definition
For 2004, schedule K-1 (1065) has been redesigned. Each amount on schedule K-1 now has a code next to it, with a list of codes being attached to the prepared K-1. The information below is from the schedule K-1 partners instructions that should be distributed to each partner.
Line 20 - Other Information
Code A - Investment Income = Report on line 4a of form (Form 4952) "Investment Interest Expense Deduction"
Code B - Investment Expenses = Report on line 5 of form (Form 4952) "Investment Interest Expense Deduction"
Code C - Fuel Tax Credit Information = Partnership will report the number of gallons sold of each fuel type sold or used during the tax year for a nontaxable use qualifying for the credit for taxes paid on fuel. Use this information to complete (Form 4136) "Credit for federal tax paid on fuels".
Code D - Look back interest - Completed long term contracts = The partnership will include any information you need to figure the interest due or to be refunded under the look-back method of section 460(b)(2) on certain long-term contracts. Use form (Form 8697) and (instructions), "Interest computation under the look-back method for completed long-term contracts", to report any such interest.
Code E - Income forecast method - Completed long term contracts = The partnership will include any information you need to figure the interest due or to be refunded under the look-back method of section 167(g)(2) on certain property placed in service after September 13, 1995 and depreciated under the income forecast method.Use form (Form 8866) and (instructions), "Interest computation under the look-back method for property depreciated under the forecast method", to report any such interest.
Code F - Disposition of property with section 179 deduction = When the partnership sales or disposes of an asset on which 179 expense was previously taken, it does not report the resulting gain or loss on the partnership return. Instead, it passes out the information needed to compute the gain or loss to each partner. This information should be used to report the gain or loss on the partners tax return.
Code G - Recapture of Section 179 deduction = The partnership will report the distributive share of section 179 expense if business use drops below 50%. The partnership will report to the partner their distributive share of depreciation allowed or allowable (not including 179 expense) and the partners distributive share of 179 expense passed through for the property and the year the amount was passed through. The amount of 179 expense should be reduced by any unused 179 expense (carryover).
Code H - Special basis adjustment = If you acquired an interest in an oil and gas partnership, you are required to attach a statement to your return for the year of transfer showing your computation of any section 743(b) basis adjustment and your allocation of the basis adjustment to specific properties. The partnership will provide information required to prepare this statement. See Regulation 1.743(b)-1(k)(1)(ii) and (iii) for more information.
Code I - Section 453(I)(3) information = The partnership will report to you any information you need to figure the interest due under section 453(I)(3) with respect to certain timeshares and residential lots on the installment method. If you are an individual, report the interest on form 1040, line 62. Write "453(I)(3)" and the amount of the interest on the dotted line to the left of line 62.
Code J - Section 453A(c) information = The partnership will report to you any information you need to figure the interest due under section 453(A)(c) with respect to certain installment sales. If you are an individual, report the interest on form 1040, line 62. Write "453A(c)" and the amount of the interest on the dotted line to the left of line 62. See (Form 6252) instructions for more information. Also see section 453A(c) for more details on making the computation.
Code K - Section 1260(b) information = The partnership will report to you any information you need to figure the interest due under section 1260(b). If the partnership had gain from certain constructive ownership transactions, the taxpayers tax liability must be increased by the interest charge on any deferral of gain recognition under section 1260(b). Report the interest on form 1040, line 62. Write "1260(b)" and the amount of the interest on the dotted line to the left of line 62.
Code L - Interest allocable to production expenditures = The partnership will report any information the taxpayer needs relating to interest expense that is required to be capitalized under section 263A for production expenditures. See regulations 1.263A-8 through 1.263A-15 for more information.
Code M - CCF nonqualified withdrawals = The partnership will report to the partner their share of the partnerships nonqualified withdrawals from a capital construction fund. (CCF). These withdrawals are taxed seperately from other gross income at the highest marginal ordinary income or capital gain tax rate. Attach a statement to the federal return for a computation of both the tax and interest. Include tax and interest on form 1040 line 62. To the left of line 62 write "CCF". (See Section 7518(g)(4) and (6) for more information)
Code N - Information to compute depletion (Oil and Gas) = This is the partners share of gross income from the property, share of production tax for the year, etc. needed to figure the partners depletion deduction for oil and gas. The partnership should also have allocated to the partner their share of the adjusted basis of each partnership oil and gas property. See (publication 535) for more information.
Code O - Amortization of reforestation = The partnership will provide the partner with a statement identifying their share of the amortizable basis of reforestation expenditures paid or incurred before October 23, 2004. The partnership will seperately report expenditures for the current year and the prior 7 years. The taxpayers amortizable basis for reforestation expenditures for each tax year from all properties is limited to $10,000 ($5,000 if married filing seperately) including the taxpayers distributive share of the partnerships expenditures and any qualified reforestation expenditures you seperately paid or incurred. To figure the allowable amortization see section 194 and (publication 535). See form 8582 if the amortization is from a passive activity.
Code P - Unrelated business taxable income = The partnership will report any information needed to report unrelated business taxable income under section 512(a)(1). This information is only relevant to tax-exempt organizations. Individual taxpayers can disregard the information.