This article focuses solely on the entry of the Tax Exempt Income, Non-Deductible Expenses, Distributions and Other Information. Learn more.
These items are found on Box 18, Box 19 and Box 20 of the Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. For additional information regarding the requirements for Schedule K-1 (Form 1065), see: Partner's Instructions for Schedule K-1 (Form 1065).
To enter the Tax Exempt, Non-Deductible Expenses, Distributions and Other Information Items from a K-1 (Form 1065) in TaxSlayer Pro from the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input - Select New and double-click Form 1065 K-1 Partnership which will take you to the K-1 Heading Information Entry Menu. If the initial K-1 entry was previously keyed in, double-click the entry in the K-1 pick list.
After entering all of the information required on the K-1 Heading Information screen, select OK. The K-1 1065 Edit Screen has two distinct sections entitled Heading Information and Income, Deductions, Credits, and Other Items.
The K-1 1065 Edit Screen in TaxSlayer Pro has an entry for each box on found on the Schedule K-1 (Form 1065) that the taxpayer received. A description of the Tax Exempt Income and Non-Deductible Expenses contained in Box 18, the Distribution items contained in Box 19 and the Other Information contained in Box 20 can be found below. The amounts shown in Box 18, Box 19 and Box 20 reflect only the taxpayer's share of the transaction from the partnership.
Tax Exempt Income and Nondeductible Items
Line 18A - Tax-Exempt Interest Income - This amount represents the taxpayer's share of tax-exempt interest. This amount will automatically pull to Form 1040, line 2a.
Line 18B - Other Tax-Exempt Income - This amount represents the taxpayer's other tax-exempt income. This amount is not reported on Form 1040. Instead the taxpayer should increase their adjusted basis in the partnership by this amount. The partnership should provide the taxpayer with a statement describing the nature of the tax exempt income and the reason for treating it as tax exempt.
Line 18C - Non Deductible Expenses - This amount represents the taxpayer's non-deductible expenses incurred by the partnership. This amount is not reported on Form 1040. Instead, the taxpayer should decrease their adjusted basis in the partnership by this amount.
Distributions
Line 19A - Cash & Marketable Securities - The amount reported in Box 19, Code A is the cash and marketable securities distributed in kind to the taxpayer by the partnership. These items reduce the basis that the taxpayer has in the partnership and no items contained in this field will flow to Form 1040.
Line 19B - Distributions subject to section 737 - The amount reported in Box 19, Code B is Section 737 property which is property that was contributed to the partnership by another partner and in addition to a basis reduction there may be a requirement to recognize a gain on any distribution of property designated as section 737 property. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 19C - Other Property - Amounts reported in Box 19, Code C include any property distributed to the taxpayer that is not cash, marketable securities or property that was contributed to the partnership by another partner. These items reduce the basis that the taxpayer has in the partnership and no items contained in this field will flow to Form 1040. See the partner's instructions provided by the partnership for further information on the type of property distributed and the treatment that these items will receive.
Other Information
Line 20A - Investment Income - The amount reported in Box 20, Code A is the taxpayer's share of investment income (interest, dividends, etc.) from the partnership. This income should have been recognized elsewhere on this K-1 in the Income items. The amount in Box 20, code A is provided for informational reasons only. No amount entered in this field will flow to Form 4952 or to Form 1040, Schedule B. However, the amounts entered elsewhere for interest, dividends, etc., will flow to Form 4952.
Line 20B - Investment Expense - The amount reported in Box 20, Code B may need to be reported on Form 4952, Line 5. No amount entered in this field will automatically flow to the Form 4952. To access Form 4952, Line 5 from the Main Menu of TaxSlayer Pro select Itemized Deductions Menu, Interest You Paid, Investment Interest (4952), Amount of Investment Expenses.
Line 20C - Fuel tax credit information - Amounts reported in Box 20, Code C may need to be reported on Form 4136. No amount entered in this field will flow to the Form 4136. To access Form 4136, from the Main Menu of TaxSlayer Pro select Payments, Estimates & EIC, Federal Tax Paid on Fuels Credit. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20D - Qualified Rehabilitation Expenditures (other than rental real estate) - The partnership will report the taxpayer's share of qualified rehabilitation expenditures and other information needed to complete Form 3468 for property not related to rental real estate activities in Box 20, Code D. The taxpayer's share of qualified rehabilitation expenditures related to rental real estate activities is reported in Box 15, Code E. See: Instructions for Form 3468. If the partnership is reporting expenditures from more than one activity, the partnership should provide a statement that will separately identify the expenditure. No amount entered in this field will flow to the Form 3468. Form 3468can be accessed from the Main Menu of TaxSlayer Pro by selecting, Credits Menu, General Business Credit (3800), Current Year Business Credits, Form (3468).
Line 20E - Basis of Energy Property - The amount reported in Box 20, Code E may be needed to calculate the Investment Credit available on Form 3468. See: Instructions for Form 3468. No amount entered in this field will flow to the Form 3468. Form 3468 can be accessed from the Main Menu of TaxSlayer Pro by selecting, Credits, General Business Credit (3800), Current Year Business Credits, Form 3468.
Line 20F - Recapture of Low-Income Housing Credit (section 42(j)(5)) - Amounts reported in Box 20, Code F represent the Low-Income Housing Credit recapture amount due to a disposition or basis change, typically for a partnership that has more than 35 partners, and this amount may be reported on Form 8611. No amount entered in this field will flow to the Form 8611. Form 8611 can be accessed from the Main Menu of TaxSlayer Pro by selecting, Other Taxes Menu, Other Taxes, Recapture of Low-Income Housing Credit - 8611. See: Instructions for Form 8611.
Line 20G - Recapture of Low Income Housing Credit (other) - Amounts reported in Box 20, Code G represent the Low-Income Housing Credit recapture amount due to a disposition or basis change typically for a partnership that has less than 35 partners and this amount may be reported on Form 8611. No amount entered in this field will flow to the Form 8611. Form 8611 can be accessed from the Main Menu of TaxSlayer Pro by selecting, Other Taxes Menu, Other Taxes, Recapture of Low-Income Housing Credit - 8611. See: Instructions for Form 8611.
Line 20H - Recapture of investment credit - The amount reported in Box 20, Code H may need to be reported on Form 4255. No amount entered in this field will flow to the Form 4255. To access Form 4255, from the Main Menu of TaxSlayer Pro select Other Taxes Menu, Other Taxes, Recapture of Investment Credit - 4255. See: Instructions for Form 4255.
Line 20I - Recapture of other credits - The amount reported in Box 20, Code I represents the recapture of other business credits that may need to be reported on Form 1040. No amount entered in this field will automatically flow to the Form 1040. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20J - Look back interest - completed long-term contracts - Amounts reported in Box 20, Code J are reported on Form 8697. No amount entered in this field will flow to the Form 8697 and the tax program does not currently support Form 8697. However, if additional tax is due, Form 8697 can be attached to the tax return as a PDF file. See: Form 8697; The appropriate entry can be made in TaxSlayer Pro on the Other Taxes line of the Form 1040. See: Instructions for Form 8697. To enter any additional tax from Form 8697 on Form 1040, from the Main Menu of TaxSlayer Pro select, Other Taxes Menu, Other Taxes, Interest Computed Under the Look Back Method.
If after the completion of Form 8697 a refund is due to the taxpayer, Form 8697 is NOT filed with Form 1040. Instead, the taxpayer must file Form 8697 separately with the IRS consistent with the Instructions for Form 8697.
Line 20K - Look back interest - income forecast method - Amounts reported in Box 20, Code K are reported on Form 8866. No amount entered in this field will flow to the Form 8866 and TaxSlayer Pro does not currently support Form 8866. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20L - Disposition of property with section 179 deductions - Amounts reported in Box 20, Code L may need to be reported on Form 4797. No amount entered in this field will flow to the Form 4797. Form 4797 can be accessed from the Main Menu of TaxSlayer Pro by selecting Income Menu, Other Gains/Loss (4797, 8824), Form 4797. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20M - Recapture of Section 179 deduction - The amount reported in Box 20, Code M is the taxpayer's share of any recapture of section 179 expense deduction if the business use of the property dropped to 50% or less. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20N - Interest expense for corporate partners. - Amounts reported in Box 20, Code N are not reported on Form 1040. This amount is reported elsewhere on the Schedule K-1 and the total amount is reported here for information only.
Line 20O - Section 453(l)(3) Information. - The amount reported in Box 20, Code O is the taxpayer's share of taxes as a result of the sale of certain class of assets (residential lots and timeshares) on an installment basis. This is reported on Form 1040, Line 62 with box c checked and "453(l)(3)" and the amount entered to the left of line 62. To enter this tax on Form 1040, from the Main Menu of TaxSlayer Pro select, Other Taxes Menu, Other Taxes, Other Taxes #1, 453(I)(3) - Interest on Tax Due on Certain Installment Income.
Line 20P - Section 453(A)(c) Information. - The amount reported in Box 20, Code P is the taxpayer's share of taxes as a result of the gain on sale of certain assets (property with a sales price over $150,000) on an installment basis. This is reported on Form 1040, Line 62 with box c checked and "453(A)(c)" and the amount of the tax entered to the left of line 62. To enter this tax on Form 1040, from the Main Menu of TaxSlayer Pro select, Other Taxes Menu, Other Taxes, Other Taxes #1, then 453(A)(c) - Interest on Tax Due on Deferred Tax on Certain Installment Sales Gain.
Line 20Q - Section 1260(b) Information. - The amount reported in Box 20, Code Q is the taxpayer's share of taxes as a result of the gain on the sale of assets on an installment basis. This is reported on Form 1040, Line 62 with box c checked and "1260(B)" and the amount of the tax entered to the left of line 62. To enter this tax on Form 1040, from the Main Menu of TaxSlayer Pro select Other Taxes Menu, Other Taxes, Other Taxes #1, 1260(B) - Interest Charged on Deferral of Gain.
Line 20R - Interest Allocable to Production Expenditures. - The amount reported in Box 20, Code R is the information that the taxpayer needs to capitalize any interest related to production expenditures under Section 263A. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20S - CCF Nonqualified Withdrawals. - The amount reported in Box 20, Code S is the taxpayer's share of nonqualified withdrawals from a capital construction fund (CCF). These withdrawals are taxed separately from the taxpayer's other gross income at the highest marginal ordinary income or capital gains tax rate. The taxpayer is required to attach a statement to Form 1040 to show the computation of both the tax and interest for a nonqualified withdrawal. The tax and interest should be added to the total other taxes calculation on Schedule 2 Line 10, with "CCF" notated in the margin. TaxSlayer Pro does not currently support both the calculation and the Schedule 2 entry.
Line 20T - Depletion Information - Oil & Gas. - Amounts reported in Box 20, Code T is information the taxpayer needs to figure their share of any depletion deduction. See Publication 535 - Business Expenses.
Line 20U - Reserved by the Internal Revenue Service and is not currently in use. No entry should be made in this field for tax years after 2013. (Prior to 2014 Line 20, Code U was used to report the taxpayer's share of Amortization of Reforestation Cost.)
Line 20V - Unrelated Business Taxable Income. - The amount reported in Box 20, Code V is the information that is provided to tax-exempt organizations. This section is not applicable to Form 1040.
Line 20W - Precontribution gain (loss). - The amounts reported in Box 20, Code W is information regarding any property that was distributed to a partner, other than the original contributing partner. In this event, the contributing partner (taxpayer) must recognize any gain or loss on Form 8949/Schedule D or Form 4797 in accordance with information provided by the partnership. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20X - Section 108(I) Information. - If the partnership made a section 108(I) election, it will provide the taxpayer with a statement identifying the taxpayer's share of affected items. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive.
Line 20Y- Net Investment Income. - Amounts reported in Box 20, Code Y is the information that is provided to the taxpayer to determine their net investment income tax under section 1411. See the partner's instructions provided by the partnership for further information on the treatment that these items will receive and the Instructions for Form 8960 - Net Investment Income Tax.
Line 20Z – Section 199 Information – Amounts reported in Box 20, Code Z is the information needed by a partner/taxpayer to claim the Qualified Business Income Deduction. The information reported may consist of some or all of the following items. (In 2018 these items were reported separately in Box 20 with unique codes ranging from Code Z through Code AD):
- Section 199A income –This is the Qualified Business Income (QBI) which is generally defined as income that is related to the partnerships business activities and it does not include investment income or guaranteed payments to partners for services rendered to the partnership. The amount entered will automatically pull to the applicable Qualified Business Income Deduction (QBID) form (Form 8995 or Form 8995-A) under the Tax Computation Menu and used to calculate any QBID.
- Section 199A W-2 Wages – are the wages paid by the partnership that were reported to the Social Security Administration on a W-2. The amount entered as W-2 Wages does not carry to Form 8995 - Qualified Business Income Deduction Simplified Computation because W-2 Wages are not used to calculate the QBID for taxpayers that are permitted to use Form 8995 because the taxpayer's income is below certain thresholds. This amount will automatically pull to Form 8995-A - Qualified Business Income Deduction under the Tax Computation Menu and is used in the calculation of the QBID for taxpayers above the taxable income thresholds.
- Section 199A unadjusted basis - This is the unadjusted basis of qualified property held by the partnership. Qualified property is generally defined as the original cost of assets that were placed in service by the partnership in the past ten years and still used by the partnership and the original cost of assets still being depreciated by the partnership because the recovery period is greater than ten years. The amount entered as unadjusted basis of Qualified Property does not carry to Form 8995 - Qualified Business Income Deduction Simplified Computation because it is not used on that worksheet to calculate the QBID for taxpayers that are permitted to use Form 8995. This amount will automatically pull to Form 8995-A - Qualified Business Income Deduction under the Tax Computation Menu and is used in the calculation of the QBID for taxpayers above the taxable income thresholds.
- Section 199A REIT dividends - This is the REIT dividends received by the partnership. This amount will automatically pull to the applicable QBID form under the Tax Computation Menu and is used in the calculation of the QBID.
- Section 199A PTP income - This is the Publicly Traded Partnership income reported by the partnership. This amount will automatically pull to the applicable QBID form under the Tax Computation Menu and is used in the calculation of the QBID.
Line 20AA – Section 704(c) information - Amounts reported in Box 20, Code AA is informational. It represents the net income or loss effect that a partner who has contributed property with a built-in gain or loss bears. This amount is not pulled to the tax return, and for additional information see the partner's instructions.
Line 20AB –Section 751 gain (loss) - Amounts reported in Box 20, Code AB represents the partner's share of gain or loss on the sale of the partnership interest that is subject to being taxed at ordinary income rates and not capital gain rates. This amount is not automatically pulled to the tax return, and for additional information see the partner's instructions.
Line 20AC – Section 1(h)(5) gain (loss) - Amounts reported in Box 20, Code AC represents the partner's share of gain or loss on the sale of the partnership interest that is subject to being taxed at the rate for collectible assets. This amount is not automatically pulled to the tax return, and for additional information see the partner's instructions.
Line 20AD – Deemed section 1250 unrecaptured gain -Amounts reported in Box 20, Code AD represents the partner's share of gain or loss on the sale of the partnership interest that is subject to being taxed at the rate for unrecaptured section 1250 gain. This amount is not automatically pulled to the tax return, and for additional information see the partner's instructions.
Line 20AE – Excess taxable income - Amounts reported in Box 20, Code AE is the excess taxable income determined by the partnership for the purpose of the limitation placed on the partnerships ability to deduct business interest. See Form 8990, Limitation on Business Interest Expense Under Section 163(j).
Line 20AF - Excess business interest - Amounts reported in Box 20, Code AF represent the business interest that was subject to a business interest limitation at the partnership level.
Line 20AG:
- 2018 - 2019: Gross receipts for section 59A(e) - Amounts reported in Box 20, Code AG represent the partner's share of gross receipts under section 59A(e). which is used to determine the tax on base erosion payments for corporate taxpayers. (If the partner is a foreign person, only take into account gross receipts effectively connected with the conduct of a trade or business within the United States.)
- 2020 and forward: The amount shown represents the partner's distributive share of the partnership's current year gross receipts. See here for more information about what this number is for.
Line 20AH - Non Cash Charitable Contributions - Amounts reported in Box 20, Code AH represent the partners portion of noncash charitable contribution, partner's adjusted basis in the property is limited to basis and is reported here. Additionally, the partner's share of the excess of the FMV over the adjusted basis of noncash and capital gain property contributions is reported here.
Line 20AI - Interest and tax on deferred compensation - Amounts reported in Box 20, Code AI represent the partner's interest and additional tax on compensation deferred under a section 409A nonqualified deferred compensation plan that doesn't meet the requirements of section 409A. See section 409A(a)(1)(B) to figure the interest and additional tax on this income. Report this interest and tax on Schedule 2 (Form 1040), line 17h. This income is included in the amount in either box 4a or
box 4b.
Line 20AJ - Excess business loss limitation - Amounts reported in box 20, Code AJ represent the partners deductions attributable to a business activity, it'll provide a statement showing partner's distributive share of the aggregate gross income or gain, and aggregate deductions, from the business activity of all of the partnership's trades or businesses. Use this to figure any excess business loss limitation that may apply. See section 461(l) and Form 461 and its instructions for details.
Line 20AK - Gain from mark-to-market election - Amounts reported in box 20, Code AK represent the partners trade in securities, commodities, or both, and indicates the partner has properly elected under section 475(f) to mark to market the securities, the commodities, or both. The partnership reports ordinary gain or loss from the securities or commodities (or both securities and commodities) trading activities separately from any other ordinary gain or loss.
Line 20AL - Section 721(c) partnership - Amounts reported in box 20, Code AL represent the partners section 721(c) portion and should include the amounts relating to any remedial items made under the remedial allocation method (described in Regulations sections 1.704-3(d) and 1.704-3(d)(5)(iii)) with respect to section 721(c) property allocable to each partner. The partnership will include a separate code AL for the total remedial income, if any, allocated to the U.S. transferor; total gain recognized due to an acceleration event; or total gain recognized due to a section 367 transfer reflected on Schedule G (Form 8865), Part II, columns (c), (d), and (e), respectively.
Line 20AM - Section 1061 information - Amounts reported in box 20, Code AM represent the partners information needed to figure their capital gains with respect to an applicable partnership interest. See Section 1061 Reporting Instructions in Pub. 541.
Line 20AN - Farming and fishing business - Amounts reported in box 20, Code AN represent the partners distributive share of gross income and gains, as well as the losses and deductions attributable to a farming or fishing business.
Line 20AO - PTP information - Amounts reported in box 20, Code AO represent the partners portion of PTP needed to determine whether it meets the 90% qualifying income test of section 7704(c)(2).
Line 20AP - Inversion gain - Amounts reported in box 20, Code AP represent the amounts of each type of income or gain that's included in inversion gain.
Line 20AQ - Conservation reserve program payments - Amounts reported in box 20, Code AR represent the partner's amount of social security retirement or disability benefits if they are partners in farm partnerships that receive conservation reserve program payments, don't pay self-employment tax on partners portion of the payments. See Schedule SE (Form 1040) for information on excluding the payment from your calculation of self-employment tax.
Line 20AR - IRA disclosure - If the partnership reported an amount in box 20, code V, the partnership also reported an IRA partner's unique EIN in box 20, code AR. See the Instructions for Form 990-T; and Pub. 598, Tax on Unrelated Business Income of Exempt Organizations.
Line 20AS - Qualifying advanced coal project property & qualifying gasification project property -Amounts reported in box 20, Code AS represent the amounts the partnership provides the partner to figure the amounts to report on Form 3468, Part II.
Line 20AT - Qualifying advanced energy project property - Amounts reported in Box 20, Code AT are used by the partner to figure the amount to report on Form 3468, Part III.
Line 20AT - Advanced manufacturing investment property - Amounts reported in Box 20, Code AU represents the partners portion to figure the amount to report on Form 3468, Part IV.
Line 20AW - Reportable transactions - Amounts reported in Box 20, Code AW represent the partners reportable transactions in which the partnership participates. If the partnership participates in a transaction that must be disclosed on Form 8886, Reportable Transaction Disclosure Statement, the partner and the partnership may be required to file Form 8886 for the transaction. The determination of whether you're required to disclose a transaction of the partnership is based on the category(ies) under which the transaction qualifies for disclosure and is determined by the partner and the partnership. The partner may need to pay a penalty if required to file Form 8886 and don't. See the Instructions for Form 8886 for details.
Line 20AY - Foreign partners, Form 8990, Schedule A - Amounts in Box 20, Code AY represent the partner's information needed to complete Form 8990, Schedule A, for foreign partners which are required to report their allocable share of EBIE, excess taxable income, and excess business interest income, if any, that's attributable to income effectively connected with a U.S. trade or business. When required, the partnership will make this report on an attached statement to partners that are a foreign corporation or a nonresident alien or partners that are a partnership (domestic or foreign) in which the reporting partnership knows, or has a reason to know, that one or more of the partners is a foreign corporation or nonresident alien.
Line 20ZZ - Other Information - Box 20, Code ZZ are other items of information not found elsewhere on the Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. The taxpayer should receive instructions from the partnership needed to address the items contained in this box.
Note: This is a guide on entering the Tax Exempt Income, Non-Deductible Expenses, Distributions and Other items from Schedule K-1 (Form 1065) into TaxSlayer Pro. It is not intended as tax advice.
Additional Information:
Partner's Instructions for Schedule K-1 (Form 1065)
Schedule K-1 (Form 1065) - Overview
Schedule K-1 (Form 1065) - Heading Information
Schedule K-1 (Form 1065) - Income (Loss) Items
Schedule K-1 (Form 1065) - Deductions
Schedule K-1 (Form 1065) - Self-Employment Earnings (Loss)
Schedule K-1 (Form 1065) - Credits & Foreign Transaction Items
Schedule K-1 (Form 1065) - Alternative Minimum Tax (AMT) Items