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                                                                                                        Department of the Treasury
                                                                                                        Internal Revenue Service
2023

Shareholder's Instructions 

for Schedule K-1

(Form 1120-S)

Shareholder's Share of Income, Deductions, Credits, etc.
(For Shareholder's Use Only)

Section references are to the Internal Revenue Code                          Future Developments
unless otherwise noted.
                                                                             For the latest information about developments related to 
Contents                                                              Page
                                                                             Schedule K-1 (Form 1120-S) and its instructions, such as 
General Instructions  . . . . . . . . . . . . . . . . . . . . . . . . .   1
                                                                             legislation enacted after they were published, go to 
Purpose of Schedule K-1             . . . . . . . . . . . . . . . . . .   1  IRS.gov/Form1120S.
Inconsistent Treatment of Items             . . . . . . . . . . . . . .   1
Errors   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
                                                                             General Instructions
Decedent's Schedule K-1             . . . . . . . . . . . . . . . . . .   2
Sale of S Corporation Stock           . . . . . . . . . . . . . . . . .   2  Purpose of Schedule K-1
International Boycotts . . . . . . . . . . . . . . . . . . . . .          2  The corporation uses Schedule K-1 to report your share of 
Elections     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2  the corporation's income, deductions, credits, and other 
Additional Information . . . . . . . . . . . . . . . . . . . . .          2  items. Keep it for your records. Don't file it with your tax 
                                                                             return unless backup withholding is reported in box 13 
Limitations on Losses, Deductions, and 
                                                                             using code O. (See the instructions for Code O. Backup 
Credits       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
                                                                             withholding, later.) The corporation files a copy of 
Basis Limitations             . . . . . . . . . . . . . . . . . . . . .   2  Schedule K-1 with the IRS.
At-Risk Limitations             . . . . . . . . . . . . . . . . . . . .   3
                                                                             For your protection, Schedule K-1 may show only the 
Passive Activity Limitations                . . . . . . . . . . . . . .   3  last four digits of your identifying number (social security 
Excess Business Loss Limitations                      . . . . . . . . .   6  number (SSN), employer identification number (EIN), or 
Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . . .   6  individual taxpayer identification number (ITIN)). However, 
Box 1. Ordinary Business Income (Loss)                    . . . . . . .   6  the corporation has reported your complete identifying 
Box 2. Net Rental Real Estate Income (Loss)                     . . . .   6  number to the IRS.
Box 3. Other Net Rental Income (Loss) . . . . . . . . .                   7  You may be liable for tax on your share of the 
Box 4. Interest Income          . . . . . . . . . . . . . . . . . . . .   7  corporation's income, whether or not distributed. Include 
Boxes 5a and 5b. Dividends              . . . . . . . . . . . . . . . .   7  your share on your tax return if a return is required. Use 
Box 6. Royalties      . . . . . . . . . . . . . . . . . . . . . . . . .   7  these instructions to help you report the items shown on 
                                                                             Schedule K-1 on your tax return.
Box 7. Net Short-Term Capital Gain (Loss)                   . . . . . .   7
Box 8a. Net Long-Term Capital Gain (Loss)                     . . . . .   7  Your share of S corporation income isn't 
                                                                             self-employment income and it isn't subject to 
Box 9. Net Section 1231 Gain (Loss)                 . . . . . . . . . .   8
                                                                             self-employment tax.
Box 10. Other Income (Loss) . . . . . . . . . . . . . . . .               8
Box 11. Section 179 Deduction               . . . . . . . . . . . . . .   9          The amount of loss and deduction you may claim 
                                                                                     on your tax return may be less than the amount 
Box 12. Other Deductions . . . . . . . . . . . . . . . . .                10 CAUTION!
                                                                                     reported on Schedule K-1. It is the shareholder's 
Box 13. Credits . . . . . . . . . . . . . . . . . . . . . . . . .         12 responsibility to consider and apply any applicable 
Box 14. International Transactions              . . . . . . . . . . .     14 limitations. See Limitations on Losses, Deductions, and 
Box 15. AMT Items . . . . . . . . . . . . . . . . . . . . . .             14 Credits, later, for more information.
Box 16. Items Affecting Shareholder Basis                   . . . . .     14
                                                                             Schedule K-1 doesn't show actual dividend 
Box 17. Other Information           . . . . . . . . . . . . . . . . .     15
                                                                             distributions the corporation made to you. The corporation 
Box 18. More Than One Activity for At-Risk                                   must report such amounts totaling $10 or more for the 
Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . .            18 calendar year on Form 1099-DIV, Dividends and 
Box 19. More Than One Activity for Passive                                   Distributions.
Activity Purposes           . . . . . . . . . . . . . . . . . . . . .     18
List of Codes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   19 Inconsistent Treatment of Items
                                                                             Generally, you must report corporate items shown on your 
                                                                             Schedule K-1 (and any attached statements) the same 
                                                                             way that the corporation treated the items on its return.

Jan 9, 2024                                                         Cat. No. 11521O

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  If the treatment on your original or amended return is     Elections
inconsistent with the corporation's treatment, or if the 
corporation hasn't filed a return, file Form 8082, Notice of Generally, the corporation decides how to figure taxable 
Inconsistent Treatment or Administrative Adjustment          income from its operations. However, certain elections are 
Request (AAR), with your original or amended return to       made by you separately on your income tax return and not 
identify and explain any inconsistency (or to note that a    by the corporation. These elections are made under the 
corporate return hasn't been filed).                         following code sections.
                                                             • Section 59(e) (deduction of certain qualified 
  If you are required to file Form 8082 but don't do so, you expenditures ratably over the period of time specified in 
may be subject to the accuracy-related penalty. This         that section). For details, see the instructions for code J in 
penalty is in addition to any tax that results from making   box 12.
your amount or treatment of the item consistent with that    • Section 263A(d) (preproductive expenses). See the 
shown on the corporation's return. Any deficiency that       instructions for code M in box 12.
results from making the amounts consistent may be            • Section 617 (deduction and recapture of certain mining 
assessed immediately.                                        exploration expenditures).
                                                             • Section 901 (foreign tax credit).
Errors
If you believe the corporation has made an error on your     Additional Information
Schedule K-1, notify the corporation and ask for a           For more information on the treatment of S corporation 
corrected Schedule K-1. Don't change any items on your       income, deductions, credits, and other items, see Pub. 
copy of Schedule K-1. Be sure that the corporation sends     550, Investment Income and Expenses; and Pub. 925, 
a copy of the corrected Schedule K-1 to the IRS. If you are  Passive Activity and At-Risk Rules.
unable to reach an agreement with the corporation              To get forms and publications, see the instructions for 
regarding the inconsistency, file Form 8082.                 your tax return or visit the IRS website at IRS.gov.

Decedent's Schedule K-1                                      Limitations on Losses, Deductions, 
If you are the executor of an estate and you have received 
a decedent's Schedule K-1, then you have the                 and Credits
responsibility to notify the S corporation of the name and   There are potential limitations on corporate losses that 
tax identification number (TIN) of the decedent’s estate if  you can deduct on your return. These limitations and the 
the S corporation stock is part of a decedent’s estate. This order in which you must apply them are as follows: the 
is information that the S corporation must have to properly  basis limitations, the at-risk limitations, the passive activity 
determine its eligibility to maintain status as a subchapter limitations, and the excess business loss limitations. 
S corporation. If a decedent died in a prior year and the S  These limitations are discussed below.
corporation continues to send the decedent a Schedule K-       Other limitations may apply to specific deductions (for 
1 after being notified of the decedent’s death, then you     example, the section 179 expense deduction). Specific 
should request that the S corporation send a corrected       limitations generally apply before at-risk and passive loss 
Schedule K-1. If you receive an interest in an S             limitations.
corporation by reason of a former shareholder’s death, 
you must provide the S corporation with your name and        Basis Limitations
TIN. For treatment of S corporation income upon the          Generally, the deduction for your share of aggregate 
death of a shareholder, see Pub. 559, Survivors,             losses and deductions reported on Schedule K-1 is 
Executors, and Administrators.                               limited to the basis of your stock and loans from you to the 
Sale of S Corporation Stock                                  corporation. For details and exceptions, see section 
                                                             1366(d). The basis of your stock is generally figured at the 
Gain or loss from the disposition of your S corporation      end of the corporation's tax year. Any losses and 
stock may be net investment income under section 1411        deductions not allowed this year because of the basis limit 
and could be subject to the net investment income tax.       can be carried forward indefinitely and deducted in a later 
See Form 8960, Net Investment Income Tax—Individuals,        year subject to the basis limit for that year.
Estates, and Trusts, and its instructions for information 
about how to figure and report the tax.                        You are responsible for keeping the information needed 
                                                             to figure the basis of your stock in the corporation. 
International Boycotts                                       Schedule K-1 provides information to help you figure your 
Every corporation that had operations in, or related to, a   stock basis at the end of each corporate tax year. The 
boycotting country, company, or a national of a boycotting   basis of your stock (generally, its cost) is adjusted 
country must file Form 5713, International Boycott Report.   annually as follows and, except as noted, in the order 
                                                             listed. In addition, basis may be adjusted under other 
  If the corporation cooperated with an international        provisions of the Internal Revenue Code. You should 
boycott, it must give you a copy of its Form 5713. You       generally use Form 7203, S Corporation Shareholder 
must file your own Form 5713 to report the corporation's     Stock and Debt Basis Limitations, to figure your aggregate 
activities and any other boycott operations that you may     stock and debt basis.
have. You may lose certain tax benefits if the corporation     1. Basis is increased by (a) all income (including 
participated in, or cooperated with, an international        tax-exempt income) reported on Schedule K-1, and (b) 
boycott. See Form 5713 and its instructions for details.     the excess of the deduction for depletion (other than oil 

2                                                                   Instructions for Schedule K-1 (Form 1120-S) (2023)

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and gas depletion) over the basis of the property subject production of income by the corporation, and (b) amounts
to depletion. in the activity for which you aren't at risk, you will have to
complete Form 6198, At-Risk Limitations, to figure your
You must report on your return (if you are required
allowable loss for the activity.
! to file one) any amount required to be included in
CAUTION gross income for it to increase your basis.
The at-risk rules generally limit the amount of loss and
2. Basis is decreased (but not below zero) by (a) other deductions that you can claim to the amount you
property distributions (including cash) made by the could actually lose in the activity. These losses and
corporation reported on Schedule K-1, box 16, code D, deductions include a loss on the disposition of assets and
minus (b) the amount of such distributions in excess of the the section 179 expense deduction. However, if you
basis in your stock. acquired your stock before 1987, the at-risk rules don't
apply to losses from an activity of holding real property
3. Basis is decreased (but not below zero) by (a) placed in service before 1987 by the corporation. The
nondeductible expenses, and (b) the depletion deduction activity of holding mineral property doesn't qualify for this
for any oil and gas property held by the corporation, but exception.
only to the extent your share of the property's adjusted
basis exceeds that deduction. Generally, you aren't at risk for amounts such as the
4. Basis is decreased (but not below zero) by all following.
losses and deductions reported on Schedule K-1. • The basis of your stock in the corporation or the basis of
your loans to the corporation if the cash or other property
You may elect to decrease your basis under (4) prior to used to purchase the stock or make the loans was from a
decreasing your basis under (3). If you make this election, source (a) covered by nonrecourse indebtedness (except
any amount described under (3) that exceeds the basis of for certain qualified nonrecourse financing, as defined in
your stock and debt owed to you by the corporation is section 465(b)(6)); (b) protected against loss by a
treated as an amount described under (3) for the following guarantee, stop-loss agreement, or other similar
tax year. arrangement; or (c) that is covered by indebtedness from
To make the election, attach a statement to your timely a person who has an interest in the activity or from a
filed original or amended return that states you agree to person related to a person (except you) having such an
the carryover rule of Regulations section 1.1367-1(g) and interest, other than a creditor.
the name of the S corporation to which the rule applies. • Any cash or property contributed to a corporate activity,
Once made, the election applies to the year for which it is or your interest in the corporate activity, that is (a) covered
made and all future tax years for that S corporation, unless by nonrecourse indebtedness (except for certain qualified
the IRS agrees to revoke your election. nonrecourse financing, as defined in section 465(b)(6));
The basis of each share of stock is increased or (b) protected against loss by a guarantee, stop-loss
decreased (but not below zero) based on its pro rata agreement, or other similar arrangement; or (c) covered
share of the above adjustments. If the total decreases in by indebtedness from a person who has an interest in the
basis attributable to a share exceed that share's basis, the activity or from a person related to a person (except you)
excess reduces (but not below zero) the remaining bases having such an interest, other than a creditor.
of all other shares of stock in proportion to the remaining Any loss from a section 465 activity not allowed for this
basis of each of those shares. tax year will be treated as a deduction allocable to the
Basis of loans. The basis of your loans to the activity in the next tax year.
corporation is generally the balance the corporation owes
you, adjusted for any reductions and restorations of loan Since at-risk limitations apply for each activity, you
basis (see the instructions for box 16, code E). Any should get a separate statement of income, expenses,
amounts described in (3) and (4), earlier, not used to and other items, for each activity from the corporation.
offset amounts in (1), earlier, or to reduce your stock
Note. Schedule K-1, box 18, will be checked when a
basis, are used to reduce your loan basis (to the extent of
statement is attached.
such basis prior to such reduction).
When determining your basis in loans to the Passive Activity Limitations
! corporation, remember that: Section 469 provides rules that limit the deduction of
CAUTION certain losses and credits. These rules apply to
• Distributions don't reduce loan basis, and shareholders who:
• Loans that a shareholder guarantees or co-signs aren't • Are individuals, estates, or trusts; and
part of a shareholder's loan basis. Shareholders only • Have a passive activity loss or credit for the tax year.
obtain basis from acting as a guarantee or in a similar
capacity to the extent the shareholder makes a payment Generally, passive activities include:
pursuant to the guarantee. 1. Trade or business activities in which you didn't
materially participate, and
See the Instructions for Form 7203 for more details.
2. Activities that meet the definition of rental activities
At-Risk Limitations under Temporary Regulations section 1.469-1T(e)(3) and
Regulations section 1.469-1(e)(3).
Generally, if you have (a) a loss or other deduction from
any activity carried on as a trade or business or for the Passive activities don't include the following.

Instructions for Schedule K-1 (Form 1120-S) (2023) 3

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1. Trade or business activities in which you materially certain retired or disabled farmers and to the surviving
participated. spouses of farmers. See the Instructions for Form 8582 for
2. Rental real estate activities in which you materially details.
participated if you were a real estate professional for the Individuals. If you are an individual, you materially
tax year. You were a real estate professional only if you participated in an activity only if one or more of the
met both of the following conditions. following apply.
a. More than half of the personal services you 1. You participated in the activity for more than 500
performed in trades or businesses were performed in real hours during the tax year.
property trades or businesses in which you materially 2. Your participation in the activity for the tax year
participated. constituted substantially all the participation in the activity
b. You performed more than 750 hours of services in of all individuals (including individuals who aren't owners
real property trades or businesses in which you materially of interests in the activity).
participated. 3. You participated in the activity for more than 100
hours during the tax year, and your participation in the
If you are married filing jointly, either you or your spouse
activity for the tax year wasn't less than the participation in
must separately meet both (a) and (b) of the above
the activity of any other individual (including individuals
conditions, without taking into account services performed
who weren’t owners of interests in the activity) for the tax
by the other spouse.
year.
A real property trade or business is any real property
4. The activity was a significant participation activity
development, redevelopment, construction,
for the tax year, and you participated in all significant
reconstruction, acquisition, conversion, rental, operation,
management, leasing, or brokerage trade or business. participation activities (including activities outside the
corporation) during the year for more than 500 hours. A
Services you performed as an employee aren't treated as
significant participation activity is any trade or business
performed in a real property trade or business unless you
activity in which you participated for more than 100 hours
owned more than 5% of the stock (or more than 5% of the
during the year and in which you didn't materially
capital or profits interest) in the employer.
participate under any of the material participation tests
3. The rental of a dwelling unit any shareholder used (other than this test).
for personal purposes during the year for more than the
5. You materially participated in the activity for any 5
greater of 14 days or 10% of the number of days that the
tax years (whether or not consecutive) during the 10 tax
residence was rented at fair rental value.
years that immediately precede the tax year.
4. Activities of trading personal property for the
6. The activity was a personal service activity and you
account of owners of interests in the activities.
materially participated in the activity for any 3 tax years
If you have a passive activity loss or credit, use Form (whether or not consecutive) preceding the tax year. A
8582, Passive Activity Loss Limitations, to figure your personal service activity involves the performance of
allowable passive losses, and Form 8582-CR, Passive personal services in the fields of health, law, engineering,
Activity Credit Limitations, to figure your allowable passive architecture, accounting, actuarial science, performing
credits. See the instructions for these forms for details. arts, consulting, or any other trade or business in which
capital isn't a material income-producing factor.
If the corporation has more than one activity, it will
attach a statement to your Schedule K-1 that identifies 7. Based on all the facts and circumstances, you
each activity (trade or business activity, rental real estate participated in the activity on a regular, continuous, and
activity, rental activity other than rental real estate, substantial basis during the tax year.
portfolio income) and specifies the income (loss), Work counted toward material participation.
deductions, and credits from each activity. Generally, any work that you or your spouse does in
connection with an activity held through an S corporation
Note. Schedule K-1, box 19, will be checked when a
(where you own your stock at the time the work is done) is
statement is attached.
counted toward material participation. However, work in
Material participation. You must determine if you connection with the activity isn't counted toward material
materially participated (a) in each trade or business participation if either of the following applies.
activity held through the corporation, and (b) if you were a 1. The work isn't the type of work that owners of the
real estate professional (defined earlier), in each rental activity would usually do, and one of the principal
real estate activity held through the corporation. purposes of the work that you or your spouse does is to
Each interest in rental real estate is a separate activity, avoid the passive loss or credit limitations.
unless you elect to treat all interests in rental real estate as 2. You do the work in your capacity as an investor and
one activity. For details on making this election, see the you aren't directly involved in the day-to-day operations of
Instructions for Schedule E (Form 1040), Supplemental the activity. Examples of work done as an investor that
Income and Loss. wouldn't count toward material participation include:
All determinations of material participation are based a. Studying and reviewing financial statements or
on your participation during the corporation's tax year. reports on operations of the activity,
Material participation standards for shareholders who
are individuals are listed below. Special rules apply to

4 Instructions for Schedule K-1 (Form 1120-S) (2023)

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b. Preparing or compiling summaries or analyses of participation include approving new tenants, deciding
the finances or operations of the activity for your own use, rental terms, approving capital or repair expenditures, and
and other similar decisions.
c. Monitoring the finances or operations of the activity Modified adjusted gross income (MAGI) limitation.
in a nonmanagerial capacity. The maximum special allowance that single individuals
and married individuals filing a joint return can qualify for
Effect of determination. Income (loss), deductions, is $25,000. The maximum is $12,500 for married
and credits from an activity are nonpassive if you individuals who file separate returns and who lived apart
determine that: at all times during the year. The maximum special
• You materially participated in a trade or business allowance for which an estate can qualify is $25,000
activity of the corporation, or reduced by the special allowance for which the surviving
• You were a real estate professional (defined earlier) in a spouse qualifies.
rental real estate activity of the corporation.
If your MAGI (defined below) is $100,000 or less
If you determine that you didn't materially participate in ($50,000 or less if married filing separately), your loss is
a trade or business activity of the corporation or if you deductible up to the maximum special allowance referred
have income (loss), deductions, or credits from a rental to in the preceding paragraph. If your MAGI is more than
activity of the corporation (other than a rental real estate $100,000 (more than $50,000 if married filing separately),
activity in which you materially participated as a real the special allowance is limited to 50% of the difference
estate professional), the amounts from that activity are between $150,000 ($75,000 if married filing separately)
passive. Report passive income (losses), deductions, and and your MAGI. When MAGI is $150,000 or more
credits as follows. ($75,000 or more if married filing separately), there is no
1. If you have an overall gain (the excess of income special allowance.
over deductions and losses, including any prior year MAGI is your adjusted gross income figured without
unallowed loss) from a passive activity, report the income, taking into account the following amounts, if applicable.
deductions, and losses from the activity as indicated in • Any passive activity loss.
these instructions. • Any rental real estate loss allowed under section 469(c)
2. If you have an overall loss (the excess of deductions (7) to real estate professionals (defined earlier).
and losses, including any prior year unallowed loss, over • Any overall loss from a publicly traded partnership.
income) or credits from a passive activity, report the • Any taxable social security or equivalent railroad
income, deductions, losses, and credits from all passive retirement benefits.
activities using the Instructions for Form 8582 or Form • Any deductible contributions to an IRA or certain other
8582-CR, to see if your deductions, losses, and credits qualified retirement plans under section 219.
are limited under the passive activity rules. • The student loan interest deduction.
• The deductible part of self-employment taxes.
Special allowance for a rental real estate activity. If • The exclusion from income of interest from Series EE or
you actively participated in a rental real estate activity, you I U.S. Savings Bonds used to pay higher education
may be able to deduct up to $25,000 of the loss (or credit expenses.
equivalent to a $25,000 deduction) from the activity from • The exclusion of amounts received under an employer's
nonpassive income. This “special allowance” is an adoption assistance program.
exception to the general rule disallowing losses in excess
of income from passive activities. The special allowance Special rules for certain other activities. If you have
isn't available if you were married, file a separate return for net income (loss), deductions, or credits from any activity
the year, and didn't live apart from your spouse at all times to which special rules apply, the corporation will identify
during the year. the activity and all amounts relating to it on Schedule K-1
or on an attached statement.
Only individuals can actively participate in a rental real
estate activity. However, a decedent's estate (including a If you have net income subject to recharacterization
qualified revocable trust for which a section 645 election under Temporary Regulations section 1.469-2T(f) and
has been made) is treated as actively participating for its Regulations section 1.469-2(f), report such amounts
tax years ending less than 2 years after the decedent's according to the Instructions for Form 8582.
death, if the decedent would have satisfied the active If you have net income (loss), deductions, or credits
participation requirement for the activity for the tax year from either of the following activities, treat such amounts
the decedent died. as nonpassive and report them as indicated in these
You aren't considered to actively participate in a rental instructions.
real estate activity if, at any time during the tax year, your 1. The rental of a dwelling unit any shareholder used
interest (including your spouse's interest) in the activity for personal purposes during the year for more than the
was less than 10% (by value) of all interests in the activity. greater of 14 days or 10% of the number of days that the
Active participation is a less stringent requirement than residence was rented at fair rental value.
material participation. You may be treated as actively 2. Trading personal property for the account of owners
participating if you participated, for example, in making of interests in the activity.
management decisions or arranging for others to provide
services (such as repairs) in a significant and bona fide Self-charged interest. The corporation will report any
sense. Management decisions that can count as active “self-charged” interest income or expense that resulted

Instructions for Schedule K-1 (Form 1120-S) (2023) 5

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from loans between you and the corporation (or between limitations, take them into account in determining your
the corporation and another S corporation or partnership if income, loss, or credits for this year. However, except for
both entities have the same owners with the same passive activity losses and credits, don't combine the prior
proportional interest in each entity). If there was more than year amounts with any amounts shown on this
one activity, the corporation will provide a statement Schedule K-1 to get a net figure to report on your return.
allocating the interest income or expense with respect to Instead, report the amounts on your return on a
each activity. The self-charged interest rules don't apply to year-by-year basis.
your interest in the S corporation if the corporation made
If you have amounts other than those shown on
an election under Regulations section 1.469-7(g) to avoid
Schedule K-1 to report on Schedule E (Form
the application of these rules. See the Instructions for CAUTION!
1040), enter each item separately on Schedule E
Form 8582 for details.
(Form 1040), line 28.
Excess Business Loss Limitations
Codes. In boxes 10, 12, 13, and boxes 15 through 17, the
Losses attributable to your trade or business may be corporation will identify each item by entering a code in
limited, pursuant to section 461(l). See Form 461, the column to the left of the dollar amount entry space.
Limitation on Business Losses, and its instructions for See List of Codes, later.
more information.
Attached statements. The corporation will enter an
asterisk (*) after the code, if any, in the column to the left of
Specific Instructions the dollar amount entry space for each item for which it
has attached a statement providing additional information.
Part III. Shareholder's Share of For those informational items that can't be reported as a
Current Year Income, Deductions, single dollar amount, the corporation will enter an asterisk
in the left column and enter “STMT” in the dollar amount
Credits, and Other Items entry space to indicate the information is provided on an
The amounts shown in boxes 1 through 17 reflect your attached statement.
share of income, loss, deductions, credits, and other
items, from corporate business or rental activities without Income (Loss)
reference to limitations on losses, credits, or other items
that may have to be adjusted because of: Box 1. Ordinary Business Income (Loss)
1. The adjusted basis of your stock and debt in the The amount reported in box 1 is your share of the ordinary
corporation, income (loss) from trade or business activities of the
corporation. Generally, where you report this amount on
2. The at-risk limitations,
Form 1040 or 1040-SR depends on whether the amount is
3. The passive activity limitations, and from an activity that is a passive activity to you. If you are
4. The excess business loss limitations. an individual shareholder filing a 2023 Form 1040 or
1040-SR, find your situation below and report your box 1
For information on these provisions, see Limitations on
income (loss) as instructed after applying the basis and
Losses, Deductions, and Credits, earlier.
at-risk limitations on losses. See Limitations on Losses,
Other limitations may apply to specific deductions (for Deductions, and Credits, earlier. If the corporation had
example, the section 179 expense deduction). Generally, more than one trade or business activity, it will attach a
specific limitations apply before the at-risk and passive statement identifying the income or loss from each activity.
loss limitations. 1. Report box 1 income (loss) from corporate trade or
If you are an individual, and the above limitations don't business activities in which you materially participated on
apply to the amounts shown on your Schedule K-1, take Schedule E (Form 1040), line 28, column (i) or (k).
the amounts shown and report them on the appropriate 2. Report box 1 income (loss) from corporate trade or
lines of your tax return. If any of the above limitations business activities in which you didn't materially
apply, adjust the amounts on Schedule K-1 before you participate, as follows.
report them on your return. a. If income is reported in box 1, report the income on
When applicable, the passive activity limitations on Schedule E (Form 1040), line 28, column (h).
losses are applied after the limitations on losses for a b. If a loss is reported in box 1, follow the Instructions
shareholder's basis in stock and debt and the for Form 8582 to figure how much of the loss can be
shareholder's at-risk amount. reported on Schedule E (Form 1040), line 28, column (g).

If you file your tax return on a calendar year basis, but Box 2. Net Rental Real Estate Income (Loss)
the corporation files a return for a fiscal year, report the
Generally, the income (loss) reported in box 2 is a passive
amounts on your tax return for the year in which the
activity amount for all shareholders. However, the income
corporation's fiscal year ends. For example, if the
(loss) in box 2 isn't from a passive activity if you were a
corporation's tax year ends in February 2024, report the
real estate professional (defined earlier) and you
amounts on your 2024 tax return.
materially participated in the activity. If the corporation had
If you have losses, deductions, or credits from a prior more than one rental real estate activity, it will attach a
year that weren’t deductible or usable because of certain statement identifying the income or loss from each activity.
limitations, such as the basis limitations or the at-risk

6 Instructions for Schedule K-1 (Form 1120-S) (2023)

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If you are filing a 2023 Form 1040 or 1040-SR, use the gain or loss on the sale of property that produces such
following instructions to determine where to report a box 2 income or is held for investment.
amount after applying the basis and at-risk limitations on
losses. See Limitations on Losses, Deductions, and Box 4. Interest Income
Credits, earlier. Report interest income on Form 1040 or 1040-SR, line 2b.
1. If you have a loss from a passive activity in box 2
and you meet all the following conditions, report the loss Box 5a. Ordinary Dividends
on Schedule E (Form 1040), line 28, column (g). Report ordinary dividends on Form 1040 or 1040-SR,
a. You actively participated in the corporate rental real line 3b. The amount in box 5a may be attributable to
estate activities. See Special allowance for a rental real previously taxed earnings and profits (PTEP) in annual
estate activity, earlier. PTEP accounts that you have with respect to a foreign
corporation. You will need to determine the amount of the
b. Rental real estate activities with active participation ordinary dividends that are attributable to PTEP in your
were your only passive activities. annual PTEP accounts.
c. You have no prior year unallowed losses from these
activities. Box 5b. Qualified Dividends
d. If you are a married person filing separately, you Report any qualified dividends on Form 1040 or 1040-SR,
lived apart from your spouse all year. line 3a. The amount in box 5b may be attributable to PTEP
in annual PTEP accounts that you have with respect to a
e. Your total loss from the rental real estate activities
foreign corporation. You will need to determine the amount
wasn't more than $25,000 (not more than $12,500 if
of the qualified dividends that are attributable to PTEP in
married filing separately).
your annual PTEP accounts.
f. You have no current or prior year unallowed credits
from a passive activity. Qualified dividends are excluded from investment
TIP income, but you may elect to include part or all of
g. Your MAGI wasn't more than $100,000 (not more
these amounts in investment income. See the
than $50,000 if married filing separately and you lived
instructions for line 4g of Form 4952, Investment Interest
apart from your spouse all year).
Expense Deduction, for important information on making
2. If you have a loss from a passive activity in box 2 this election.
and you don't meet all the conditions in (1) above, follow
the Instructions for Form 8582 to figure how much of the
Box 6. Royalties
loss you can report on Schedule E (Form 1040), line 28,
column (g). Report royalties on Schedule E (Form 1040), line 4.

3. If you were a real estate professional and you Box 7. Net Short-Term Capital Gain (Loss)
materially participated in the activity, report box 2 income
After applying the limitations on losses and deductions,
(loss) on Schedule E (Form 1040), line 28, column (i) or
report the net short-term capital gain (loss) on Schedule D
(k).
(Form 1040), Capital Gains and Losses, line 5. See
4. If you have income from a passive activity in box 2, Limitations on Losses, Deductions, and Credits, earlier.
report the income on Schedule E (Form 1040), line 28,
column (h). Box 8a. Net Long-Term Capital Gain (Loss)
After applying the limitations on losses and deductions,
Box 3. Other Net Rental Income (Loss) report the net long-term capital gain (loss) on Schedule D
The amount in box 3 is a passive activity amount for all (Form 1040), line 12. See Limitations on Losses,
shareholders. If the corporation had more than one rental Deductions, and Credits, earlier.
activity, it will attach a statement identifying the income or
loss from each activity. After applying the limitations on Box 8b. Collectibles (28%) Gain (Loss)
losses and deductions, report the income or loss as After applying the limitations on losses and deductions,
follows. report collectibles gain or loss on line 4 of the 28% Rate
1. If box 3 is a loss, follow the Instructions for Form Gain Worksheet—Line 18 in the Instructions for
8582 to figure how much of the loss can be reported on Schedule D (Form 1040). See Limitations on Losses,
Schedule E (Form 1040), line 28, column (g). Deductions, and Credits, earlier.
2. If income is reported in box 3, report the income on
Schedule E (Form 1040), line 28, column (h). Box 8c. Unrecaptured Section 1250 Gain
There are three types of unrecaptured section 1250 gain.
See Limitations on Losses, Deductions, and Credits, Report your share of this unrecaptured gain on the
earlier. Unrecaptured Section 1250 Gain Worksheet—Line 19 in
the Instructions for Schedule D (Form 1040) as follows.
Portfolio Income Report unrecaptured section 1250 gain from the sale or
•
Portfolio income or loss (shown in boxes 4 through 8b and exchange of the corporation's business assets on line 5.
in box 10, code A) isn't subject to the passive activity • Report unrecaptured section 1250 gain from the sale or
limitations. Portfolio income includes income (not derived exchange of an interest in a partnership on line 10.
in the ordinary course of a trade or business) from
interest, ordinary dividends, annuities, or royalties, and

Instructions for Schedule K-1 (Form 1120-S) (2023) 7

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• Report unrecaptured section 1250 gain from an estate,        If there was a gain (loss) from a casualty or theft to 
trust, regulated investment company (RIC), or real estate      property not used in a trade or business or for 
investment trust (REIT) on line 11.                            income-producing purposes, the corporation will provide 
  If the corporation reports only unrecaptured section         you with the information you need to complete Form 4684.
1250 gain from the sale or exchange of its business            Code C. Section 1256 contracts and straddles.             The 
assets, it will enter a dollar amount in box 8c. If it reports corporation will report any net gain or loss from section 
the other two types of unrecaptured gain, it will provide an   1256 contracts. Report this amount on Form 6781, Gains 
attached statement that shows the amount for each type         and Losses From Section 1256 Contracts and Straddles.
of unrecaptured section 1250 gain.
                                                               Code D. Mining exploration costs recapture.               The 
Box 9. Net Section 1231 Gain (Loss)                            corporation will give you a statement that shows the 
                                                               information needed to recapture certain mining 
The amount in box 9 is generally passive if it is from a:      exploration costs (section 617).
• Rental activity, or
• Trade or business activity in which you didn't materially    Code E. Section 951A(a) income inclusions.                If the 
participate.                                                   corporation (and its shareholders, as applicable) has 
                                                               elected under Proposed Regulations section 1.958-1(e)
  However, an amount from a rental real estate activity        (2) to be treated as an entity for purposes of section 951A, 
isn't from a passive activity if you were a real estate        this is your share of the corporation's global intangible 
professional (defined earlier) and you materially              low-taxed income amount. Report this amount on 
participated in the activity.                                  Schedule 1 (Form 1040), Additional Income and 
  If the amount is either (a) a loss that isn't from a passive Adjustments to Income, line 8o, or the comparable line of 
activity, or (b) a gain, report it on Form 4797, Sales of      your income tax return, as an addition to any amount of 
Business Property, line 2, column (g), after applying the      global intangible low-taxed income (GILTI) under section 
basis and at-risk limitations on losses. See Limitations on    951A otherwise computed on Form 8992, U.S. 
Losses, Deductions, and Credits, earlier. Don't complete       Shareholder Calculation of Global Intangible Low-Taxed 
columns (b) through (f) on line 2 of Form 4797. Instead,       Income (GILTI).
enter “From Schedule K-1 (Form 1120-S)” across these 
                                                                        This information will be provided in box 10 using 
columns.
                                                                        code E only if the corporation (and its 
  If the amount is a loss from a passive activity, see         CAUTION! shareholders, if applicable) has elected to be 
Passive Loss Limitations in the Instructions for Form 4797.    treated as an entity for purposes of section 951A under 
After applying the limitations on losses and deductions,       Proposed Regulations section 1.958-1(e)(2). If no election 
report the loss following the Instructions for Form 8582 to    has been made under the proposed regulations, see the 
figure how much of the loss is allowed on Form 4797. If        instructions for Part V of Schedule K-3 (Form 1120-S), 
the corporation had net section 1231 gain (loss) from          Shareholder's Share of Income, Deductions, Credits, 
more than one activity, it will attach a statement that will   etc.—International.
identify the section 1231 gain (loss) from each activity.
                                                               Code F. Inclusions of subpart F income. The 
Box 10. Other Income (Loss)                                    corporation will provide your share of its section 951(a)(1)
See List of Codes, later.                                      (A) inclusions. Report this amount on your Form 1040, 
                                                               1040-SR, or relevant income tax return.
        Losses reported in box 10 may be limited. See 
                                                               Code G. Section 951(a)(1)(B) inclusions. The 
  !     Limitations on Losses, Deductions, and Credits, 
CAUTION earlier.                                               corporation will provide your share of its section 951(a)(1)
                                                               (B) inclusions. Report this amount on your Form 1040, 
Code A. Other portfolio income (loss). The                     1040-SR, or relevant income tax return.
corporation will report portfolio income other than interest,           If Regulations section 1.958-1(d) applies for the 
ordinary dividend, royalty, and capital gain (loss) income,    !        tax year (for example, if the corporation did not 
and attach a statement to tell you what kind of portfolio      CAUTION  elect to be treated as an entity under Proposed 
income is reported.                                            Regulations section 1.958-1(e)(2)), no information will be 
  If the corporation held a residual interest in a real estate provided in box 10 using codes F or G. Instead, the 
mortgage investment conduit (REMIC), it will report on the     corporation will provide information needed to figure your 
statement your share of REMIC taxable income (net loss)        section 951(a) inclusions in Part V of Schedule K-3 (Form 
that you report on Schedule E (Form 1040), line 38,            1120-S).
column (d). The statement will also report your share of 
any “excess inclusion” that you report on Schedule E           Code H.  Reserved for future use.
(Form 1040), line 38, column (c), and your share of 
                                                               Code I. Gain (loss) from disposition of oil, gas, geo-
section 212 expenses that you report on Schedule E 
                                                               thermal, or other mineral properties.  The corporation 
(Form 1040), line 38, column (e).
                                                               will attach a statement that provides a description of the 
Code B. Involuntary conversions.    This is your net loss      property, your share of the amount realized from the 
from involuntary conversions due to casualty or theft. The     disposition, your share of the corporation's adjusted basis 
corporation will give you a statement that shows the           in the property (for other than oil or gas properties), and 
amounts to be reported on Form 4684, Casualties and            your share of the total intangible drilling costs, 
Thefts, line 34, columns (b)(i), (b)(ii), and (c).

8                                                                       Instructions for Schedule K-1 (Form 1120-S) (2023)

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development costs, and mining exploration costs (section • You must purchase other QSB stock (as defined in the
59(e) expenditures) passed through for the property. You Instructions for Schedule D (Form 1040)) during the
must figure your gain or loss from the disposition by 60-day period that began on the date the QSB stock was
increasing your share of the adjusted basis by the sold by the corporation.
intangible drilling costs, development costs, or mine See Form 8949, Schedule D (Form 1040), and the
exploration costs for the property that you capitalized (that related instructions for details on how to report the gain
is, costs that you didn't elect to deduct under section and the amount of the allowable postponed gain.
59(e)). Report a loss in Part I of Form 4797. Report a gain
in Part III of Form 4797 in accordance with the instructions Code O. Sale or exchange of QSB stock with section
for line 28. See Regulations section 1.1254-4 for details. 1202 exclusion. Gain from the sale or exchange of QSB
stock eligible for the section 1202 exclusion. The
Code J. Recoveries of tax benefit items. A tax benefit corporation should also give you (a) the name of the
item is an amount you deducted in a prior tax year that corporation that issued the QSB stock, (b) your share of
reduced your income tax. Report income from recoveries the corporation's adjusted basis and sales price of the
of tax benefit items on Schedule 1 (Form 1040), line 8z, to QSB stock, and (c) the dates the QSB stock was bought
the extent it reduced your tax in the prior year. and sold. The following additional limitations apply at the
Code K. Gambling gains and losses. shareholder level.
• If the corporation wasn't engaged in the trade or • You must have held an interest in the corporation when
business of gambling, (a) report gambling winnings on the corporation acquired the QSB stock and at all times
Schedule 1 (Form 1040), line 8b, and (b) deduct gambling thereafter until the corporation disposed of the QSB stock.
losses to the extent of winnings on Schedule A (Form • Your share of the eligible section 1202 gain can't
1040), Itemized Deductions, line 16. exceed the amount that would have been allocated to you
• If the corporation was engaged in the trade or business based on your interest in the corporation at the time the
of gambling, (a) report gambling winnings on Schedule E QSB stock was acquired.
(Form 1040), line 28, column (k), and (b) deduct gambling See Form 8949, Sales and Other Dispositions of
losses (to the extent of winnings) on Schedule E (Form Capital Assets, Schedule D (Form 1040), and the related
1040), line 28, column (i). instructions for details on how to report the gain and the
Code L. Reserved for future use. amount of the allowable exclusion.
Code M. Gain eligible for section 1045 rollover (re- Codes P through R. Reserved for future use.
placement stock purchased by the corporation). The Code S. Non-portfolio capital gain (loss). Net
corporation should give you (a) the name of the short-term capital gain (loss) and net long-term capital
corporation that issued qualified small business (QSB) gain (loss) from Schedule D (Form 1120-S), Capital Gains
stock (as defined in the Instructions for Schedule D (Form and Losses and Built-in Gains that isn't portfolio income.
1040)), (b) your share of the corporation's adjusted basis An example is gain or loss from the disposition of
and sales price of the QSB stock, and (c) the dates the nondepreciable personal property used in a trade or
QSB stock was bought and sold. To qualify for the section business activity of the corporation. Report total net
1045 rollover: short-term gain (loss) on Schedule D (Form 1040), line 5.
• You must have held an interest in the corporation during Report the total net long-term gain (loss) on Schedule D
the entire period in which the corporation held the QSB (Form 1040), line 12.
stock (more than 6 months prior to the sale), and
Codes T through X. Reserved for future use.
• Your share of the gain eligible for the section 1045
rollover can't exceed the amount that would have been Code ZZ. Other income (loss). Amounts with code ZZ
allocated to you based on your interest in the corporation are other items of income, gain, or loss not included in
at the time the QSB stock was acquired. boxes 1 through 9 or in box 10 using codes A through S.
See Form 8949, Sales and Other Dispositions of The corporation should give you a description and the
Capital Assets, Schedule D (Form 1040), and the related amount of your share for each of these items.
instructions for details on how to report the gain and the Report loss items that are passive activity amounts to
amount of the allowable postponed gain. you following the Instructions for Form 8582.

Code N. Gain eligible for section 1045 rollover (re- Deductions
placement stock not purchased by the corporation).
The corporation should also give you (a) the name of the There are potential limitations on corporate losses
corporation that issued the QSB stock, (b) your share of ! you can deduct on your return. These limitations
the corporation's adjusted basis and sales price of the CAUTION and the order in which you must apply them are as
QSB stock, and (c) the dates the QSB stock was bought follows: the basis limitations, the at-risk limitations, the
and sold. To qualify for the section 1045 rollover: passive activity limitations, and the excess business loss
• You must have held an interest in the corporation during limitations. See Limitations on Losses, Deductions, and
the entire period in which the corporation held the QSB Credits, earlier.
stock (more than 6 months prior to the sale),
• Your share of the gain eligible for the section 1045 Box 11. Section 179 Deduction
rollover can't exceed the amount that would have been Use this amount, along with the total cost of section 179
allocated to you based on your interest in the corporation property placed in service during the year from other
at the time the QSB stock was acquired, and

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sources, to complete Part I of Form 4562, Depreciation If the corporation claims a qualified conservation
and Amortization. The corporation will report on an contribution, the corporation will provide you with your
attached statement your share of the cost of any qualified relevant basis. You must report this on your own Form
enterprise zone property or qualified real property it 8283, line 3, column (h). The corporation may need
placed in service during its tax year. Report the amount information from you to calculate relevant basis.
from line 12 of Form 4562 allocable to a passive activity If the corporation is the entity where the noncash
using the Instructions for Form 8582. If the amount isn't a charitable contribution was originally reported, you input
passive activity deduction, report it on Schedule E (Form the entity name and identifying number on your own Form
1040), line 28, column (j), after applying the basis and 8283. See the Instructions for Form 8283 for more details.
at-risk limitations on losses. See Limitations on Losses, If the corporation is not the entity where the noncash
Deductions, and Credits, earlier. charitable contribution was originally reported, the
corporation will provide you the entity name and
Box 12. Other Deductions identifying number that the noncash charitable
See List of Codes, later. contribution was originally reported. Input this information
Deductions reported in box 12 may be limited. on your own Form 8283.
! See Limitations on Losses, Deductions, and Code A. Cash contributions (60%). Report this
CAUTION Credits, earlier.
amount, subject to the 60% AGI limitation, on Schedule A
(Form 1040), line 11.
Contributions. Codes A through G. The corporation
will give you a statement that shows charitable Code B. Cash contributions (30%). Report this
contributions subject to the 100%, 60%, 50%, 30%, and amount, subject to the 30% AGI limitation, on Schedule A
20% adjusted gross income (AGI) limitations. (Form 1040), line 11.
If the corporation made a property contribution, it will Code C. Noncash contributions (50%). Report this
report on an attached statement your share of both the fair amount, subject to the 50% AGI limitation, on Schedule A
market value (FMV) and adjusted basis of the property. (Form 1040), line 12.
Use these amounts to adjust your stock basis. If the Food inventory contributions. The corporation will
corporation made a qualified conservation contribution, it report on an attached statement your share of qualified
will report the FMV of the underlying property before and food inventory contributions. The food inventory
after the donation, the type of legal interest contributed, contribution isn't included in the amount reported in
and a description of the conservation purpose furthered box 12 using code C. The corporation will also report your
by the donation. If the corporation made a contribution of share of the corporation's net income from the business
real property located in a registered historic district, it will activities that made the food inventory contribution(s).
report any information you will need to take a deduction. Your deduction for food inventory contributions made
For more details, see Pub. 526, Charitable during 2023 can't exceed 15% of your aggregate net
Contributions, and the Instructions for Schedule A (Form income for the tax year from the business activities from
1040). If your contributions are subject to more than one which the food inventory contribution was made (including
of the AGI limitations, see Pub. 526. your share of net income from partnership or
S corporation businesses that made food inventory
Charitable contribution deductions aren't taken into
contributions). Amounts that exceed the 15% limitation
account in figuring your passive activity loss for the year.
may be carried over for up to 5 years. Report this amount,
Don't enter them on Form 8582.
subject to the 50% AGI limitation, on Schedule A (Form
The corporation will report your share of qualified 1040), line 12.
conservation contributions of property. A corporation’s
charitable conservation contribution (or a corporation’s Code D. Noncash contributions (30%). Report this
distributive share of a charitable conservation contribution amount, subject to the 30% AGI limitation, on Schedule A
from a lower-tier partnership) is not treated as a qualified (Form 1040), line 12.
conservation contribution if the amount of such Code E. Capital gain property to a 50% limit organi-
contribution (or such distributive share) exceeds 2.5 times zation (30%). Report this amount, subject to the 30%
the sum of each shareholder’s relevant basis in the AGI limitation, on Schedule A (Form 1040), line 12. See
corporation. See Qualified Conservation Contribution in Worksheet 2. Applying the Deduction Limits in Pub. 526.
Pub. 526 and Disallowance of Conservation Contribution
deductions by certain pass-through entities in the Code F. Capital gain property (20%). Report this
Instructions for Form 8283. amount, subject to the 20% AGI limitation, on Schedule A
(Form 1040), line 12.
Form 8283. If you received a copy of Form 8283,
Noncash Charitable Contributions, from the corporation, Code G. Contributions (100%). The corporation will
attach the copy to your tax return. Use the amount shown report on an attached statement your share of qualified
on your Schedule K-1, not the amount shown on the Form conservation contributions of property used in agriculture
8283, to figure your deduction. or livestock production. This contribution isn't included in
the amount reported in box 12 using code C. If you are a
You must fill out your own Form 8283 with the farmer or rancher, you qualify for a 100% AGI limitation for
information the corporation provides you and attach the this contribution. Otherwise, your deduction for this
Form 8283 the corporation provides you to your return. contribution is subject to a 50% AGI limitation. Report this
See the Instructions for Form 8283 for more details. amount, subject to your applicable limitation, on

10 Instructions for Schedule K-1 (Form 1120-S) (2023)

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Schedule A (Form 1040), line 12. See Pub. 526 for more Schedule A (Form 1040), line 16. See the instructions for
information on qualified conservation contributions. Schedule A (Form 1040), line 16, for details.
Code H. Investment interest expense. Report this These deductions aren't taken into account in figuring
amount on Form 4952, line 1. your passive activity loss for the year. Don't enter them on
Form 8582.
If the corporation has investment income or other
investment expense, it will report your share of these Code M. Preproductive period expenses. You may be
items in box 17 using codes A and B. Include investment able to deduct these expenses currently or you may need
income and expenses from other sources to figure how to capitalize them under section 263A. See Pub. 225,
much of your total investment interest is deductible. Farmer's Tax Guide, and Regulations section 1.263A-4 for
For more information on the special provisions that details.
apply to investment interest expense, see Form 4952 and Code N. Reserved for future use.
Pub. 550.
Code O. Reforestation expense deduction. The
Code I. Deductions—Royalty income. Report corporation will provide a statement that describes the
deductions allocable to royalties on Schedule E (Form qualified timber property for these reforestation expenses.
1040), line 19. For this type of expense, enter “From The expense deduction is limited to $10,000 ($5,000 if
Schedule K-1 (Form 1120-S).” married filing separately) for each qualified timber
These deductions aren't taken into account in figuring property, including your share of the corporation's
your passive activity loss for the year. Don't enter them on expense and any reforestation expenses you separately
Form 8582. paid or incurred during the tax year.
Code J. Section 59(e)(2) expenditures. The If you didn't materially participate in the activity, use
corporation will show on an attached statement the type Form 8582 to figure the amount to report on Schedule E
and the amount of qualified expenditures for which you (Form 1040), line 28, column (g). If you materially
may make a section 59(e) election. The statement will participated in the reforestation activity, report the
also identify the property for which the expenditures were deduction on Schedule E (Form 1040), line 28, column (i).
paid or incurred. If there is more than one type of Codes P through V. Reserved for future use.
expenditure, the amount of each type will also be listed.
Code W. Soil and water conservation. Soil and water
If you deduct these expenditures in full in the current conservation expenditures and endangered species
year, they are treated as adjustments or tax preference recovery expenditures. See section 175 for limitations on
items for purposes of alternative minimum tax. However, the amount you are allowed to deduct.
you may elect to amortize these expenditures over the
number of years in the applicable period rather than Code X. Film, television, and theatrical production
deduct the full amount in the current year. If you make this expenditures. The corporation will provide a statement
election, these items aren't treated as adjustments or tax that describes the film, television, or live theatrical
preference items. production generating these expenses. If you didn't
materially participate in the activity, use Form 8582 to
Under the election, you can deduct circulation
determine the amount that can be reported on Schedule E
expenditures ratably over a 3-year period. Research and
(Form 1040), line 28, column (g). If you materially
experimental expenditures and mining exploration and
participated in the production activity, report the deduction
development costs can be amortized over a 10-year
on Schedule E (Form 1040), line 28, column (i).
period. Intangible drilling and development costs can be
amortized over a 60-month period. The amortization Code Y. Expenditures for removal of barriers.
periods begin with the month in which such costs were Expenditures for the removal of architectural and
paid or incurred. transportation barriers to the elderly and disabled that the
Make the election on Form 4562. If you make the corporation elected to treat as a current expense. The
election, report the current year amortization of section deductions are limited by section 190(c) to $15,000 per
59(e) expenditures from Part VI of Form 4562 on year from all sources.
Schedule E (Form 1040), line 28. If you don't make the Code Z. Itemized deductions. Itemized deductions that
election, report the section 59(e)(2) expenditures on Form 1040 or 1040-SR filers report on Schedule A (Form
Schedule E (Form 1040), line 28, and figure the resulting 1040).
adjustment or tax preference item (see Form 6251,
Alternative Minimum Tax—Individuals). Whether you Code AA. Contributions to a capital construction
deduct the expenditures or elect to amortize them, report fund (CCF). The deduction for a CCF investment isn't
the amount on a separate line in column (i) of line 28 if you taken on Schedule E (Form 1040). Instead, you subtract
materially participated in the activity. If you didn't the deduction from the amount that would normally be
materially participate, follow the Instructions for Form 8582 entered as taxable income on Form 1040 or 1040-SR,
to figure how much of the deduction can be reported in line 15. In the margin to the left of line 15, enter “CCF” and
column (g). the amount of the deduction.
Code K. Reserved for future use. Code AB. Penalty on early withdrawal of savings.
Report this amount on Schedule 1 (Form 1040), line 18.
Code L. Deductions—Portfolio income (other).
Generally, you should report these amounts on Code AC. Interest expense allocated to debt financed
distributions. The manner in which you report such

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interest expense depends on your use of the distributed Keep a separate record of the low-income housing
debt proceeds. If the proceeds were used in a trade or credit from each separate source so that you can correctly
business activity, report the interest on Schedule E (Form figure any recapture of low-income housing credit that
1040), line 28. In column (a), enter the name of the may result from the disposition of all or part of your stock
corporation and “interest expense.” If you materially in the corporation. For more information on recapture, see
participated in the trade or business activity, enter the the Instructions for Form 8611, Recapture of Low-Income
interest expense in column (i). If you didn't materially Housing Credit.
participate in the activity, follow the Instructions for Form
Code E. Qualified rehabilitation expenditures (rental
8582 to figure the interest expense you can report in
real estate). The corporation will report your share of the
column (g). Material participation is defined earlier under
qualified rehabilitation expenditures and other information
Passive Activity Limitations. If the proceeds were used in
you need to complete Form 3468 related to rental real
an investment activity, report the interest on Form 4952. If
estate activities using code E. Your share of qualified
the proceeds are used for personal purposes, the interest
rehabilitation expenditures from property not related to
is generally not deductible.
rental real estate activities will be reported in box 17 using
Codes AD through AJ. Reserved for future use. code C. See the Instructions for Form 3468 for details. If
the corporation is reporting expenditures from more than
Code ZZ. Other deductions. Amounts with code ZZ are
one activity, an attached statement will separately identify
other deductions not included in box 12 using codes A
the expenditures from each activity.
through AC. The corporation will give you a description
and the amount of your share for each of these items. Combine the expenditures (for Form 3468 reporting)
from box 13, code E, and from box 17, code C. The
Box 13. Credits expenditures related to rental real estate activities (box 13,
See List of Codes, later. code E) are reported on Schedule K-1 separately from
other qualified rehabilitation expenditures (box 17, code
If you have credits that are passive activity credits to C) because they are subject to different passive activity
you, you must complete Form 8582-CR in addition to the limitation rules. See the Instructions for Form 8582-CR for
credit forms identified below. See Passive Activity details.
Limitations, earlier, and the Instructions for Form 8582-CR
for details. Code F. Other rental real estate credits. The
corporation will identify the type of credit and any other
In general, shareholders whose only sources for a information you need to figure these credits from rental
TIP credit listed on Form 3800, General Business real estate activities (other than the low-income housing
Credit, Part III, are partnerships, S corporations, credit and qualified rehabilitation expenditures). These
estates, trusts, and cooperatives, aren't required to credits may be limited by the passive activity limitations. If
complete the applicable credit form or attach it to their the credits are from more than one activity, the corporation
return. Instead, they can report the credit amounts will identify the credits from each activity on an attached
reported to them by these pass-through entities directly on statement. See Passive Activity Limitations, earlier, and
Form 3800, Part III, and enter the EIN of the entity in the Instructions for Form 8582-CR for details.
column (d) of Part III. However, when applicable, all
shareholders must complete and attach the following Code G. Other rental credits. The corporation will
credit forms to their return. identify the type of credit and any other information you
need to figure these rental credits. These credits may be
• Form 3468, Investment Credit (Form 3800, Part III, limited by the passive activity limitations. If the credits are
line 1a). from more than one activity, the corporation will identify
• Form 8864, Biodiesel, Renewable Diesel, or the credits from each activity on an attached statement.
Sustainable Aviation Fuels Credit (Form 3800, Part III, See Passive Activity Limitations, earlier, and the
line 1l). Instructions for Form 8582-CR for details.
Code H. Undistributed capital gains credit. Code H
See the Instructions for Form 3800 for more details.
represents taxes paid on undistributed capital gains by a
Code A. Zero-emission nuclear power production regulated investment company or real estate investment
credit. Report this amount in Part II of Form 7213, trust. Report these taxes on Schedule 3 (Form 1040),
Nuclear Power Production Credit, or Form 3800, Part III, Additional Credits and Payments, line 13a. Reduce the
line 1u (see TIP, earlier). basis of your stock by this tax.
Code B. Production from advanced nuclear power fa- Code I. Biofuel producer credit. Report this amount on
cilities credit. Report this amount in Part I of Form 7213, line 3 of Form 6478, Biofuel Producer Credit, or Form
or Form 3800, Part III, line 1cc (see TIP, earlier). 3800, Part III, line 4c (see TIP, earlier).
Codes C and D. Low-income housing credit. If section Code J. Work opportunity credit. Report this amount
42(j)(5) applies, the corporation will report your share of on line 3 of Form 5884, Work Opportunity Credit, or Form
the low-income housing credit using code C. If section 3800, Part III, line 4b (see TIP, earlier).
42(j)(5) doesn't apply, your share of the credit will be
Code K. Disabled access credit. Report this amount on
reported using code D. Any allowable low-income housing
line 7 of Form 8826, Disabled Access Credit, or Form
credit reported using code C or code D is reported on
3800, Part III, line 1e (see TIP, earlier).
Form 8586, Low-Income Housing Credit, line 4, or Form
3800, Part III, line 4d (see TIP, earlier).

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Code L. Empowerment zone employment credit. Code Z. Orphan drug credit. Report this amount on
Report this amount on line 3 of Form 8844, Empowerment Form 8820, Orphan Drug Credit, or Form 3800, Part III,
Zone Employment Credit, or Form 3800, Part III, line 3 line 1h (see TIP, earlier).
(see TIP, earlier).
Code AA. Enhanced oil recovery credit. Report this
Code M. Credit for increasing research activities. amount on Form 8830, Enhanced Oil Recovery Credit, or
Report this amount on line 37 of Form 6765, Credit for Form 3800, Part III, line 1t (see TIP, earlier).
Increasing Research Activities, or Form 3800, Part III,
Code AB. Renewable electricity production credit.
line 1c (see TIP, earlier) as follows.
The corporation will provide a statement showing the
• The S corporation will provide information necessary to
allocation of the credit for production during the 4-year
determine if it is an eligible small business under section
period beginning on the date the facility was placed in
38(c)(5)(A). If you and the S corporation are eligible small
service and for production after that period. Report this
businesses, report the credit on line 4i. For more
amount on Form 8835, Renewable Electricity Production
information, see the Instructions for Form 3800.
Credit, or Form 3800, Part III, line 1f (see TIP, earlier).
• All others, report the credit on line 1c.
Code AC. Biodiesel, renewable diesel, or sustainable
Code N. Credit for employer social security and Med-
aviation fuels credit. If this credit includes the small
icare taxes. Report this amount on line 5 of Form 8846, agri-biodiesel producer credit or the sustainable aviation
Credit for Employer Social Security and Medicare Taxes fuels credit, the corporation will provide additional
Paid on Certain Employee Tips, or Form 3800, Part III,
information on an attached statement. If no statement is
line 4f (see TIP, earlier).
attached, report this amount on Form 8864, line 10. If a
Code O. Backup withholding. This is your share of the statement is attached, see the instructions for Form 8864,
credit for backup withholding on dividends, interest line 10.
income, and other types of income. Include this amount in
Code AD. New markets credit. Report this amount on
the total you enter on Form 1040 or 1040-SR, line 25c,
Form 8874, New Markets Credit, or Form 3800, Part III,
and attach a copy of your Schedule K-1 to your tax return.
line 1i (see TIP, earlier).
Instead of attaching a copy of your Schedule K-1 to your
tax return, you can include a statement with your return Code AE. Credit for small employer pension plan
that provides the corporation's name, address, EIN, and startup costs. Report this amount on Form 8881, Credit
backup withholding amount. for Small Employer Pension Plan Startup Costs,
Auto-Enrollment, and Military Spouse Retirement Plan,
Code P. Unused investment credit from the qualifying
Part I, or Form 3800, Part III, line 1j (see TIP, earlier).
advanced coal project credit or qualifying gasifica-
tion project credit allocated from cooperatives. Code AF. Credit for small employer auto-enrollment.
Report this amount on Form 3468, Part II, line 6. Report this amount on Form 8881, Part II, or Form 3800,
Part III, line 1dd (see TIP, earlier).
Code Q. Unused investment credit from the qualify-
ing advanced energy project credit allocated from Code AG. Credit for military spouse participation.
cooperatives. Report this amount on Form 3468, Part III, Report this amount on Form 8881, Part III, or Form 3800,
line 2. Part III, line 1ee (see TIP, earlier).
Code R. Unused investment credit from the ad- Code AH. Credit for employer-provided childcare fa-
vanced manufacturing investment credit allocated cilities and services. Report this amount on Form 8882
from cooperatives. Report this amount on Form 3468, or Form 3800, Part III, line 1k (see TIP, earlier).
Part IV, line 2. Code AI. Low sulfur diesel fuel production credit.
Code S. Reserved for future use. Report this amount on Form 8896, Low Sulfur Diesel Fuel
Production Credit, or Form 3800, Part III, line 1m (see TIP,
Code T. Unused investment credit from the energy
earlier).
credit allocated from cooperatives. Report this amount
on Form 3468, Part VI, line 31. Code AJ. Qualified railroad track maintenance credit.
Report this amount on Form 8900, Qualified Railroad
Code U. Unused investment credit from the rehabili-
Track Maintenance Credit, or Form 3800, Part III, line 4g
tation credit allocated from cooperatives. Report this
(see TIP, earlier).
amount on Form 3468, Part VII, line 2.
Code AK. Credit for oil and gas production from mar-
Code V. Advanced manufacturing production credit.
ginal wells. Report this amount on Form 8904, Credit for
Report on Form 7207, Advanced Manufacturing
Oil and Gas Production From Marginal Wells, or Form
Production Credit, or Form 3800, Part III, line 1b (see TIP,
3800, Part III, line 1bb (see TIP, earlier).
earlier).
Code AL. Distilled spirits credit. Report this amount on
Codes W and X. Reserved for future use.
Form 8906, Distilled Spirits Credit, or Form 3800, Part III,
Code Y. Clean hydrogen production credit. Report line 1n (see TIP, earlier).
this amount on Form 7210, Clean Hydrogen Production
Code AM. Energy efficient home credit. Report this
Credit, or Form 3800, Part III, line 1g (see TIP, earlier).
amount on Form 8908, Energy Efficient Home Credit, or
Form 3800, Part III, line 1p (see TIP, earlier).

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Code AN. Alternative motor vehicle credit. Report this credit and any other information you need to figure credits
amount on Form 8910, Alternative Motor Vehicle Credit, or other than those reported with codes A through BC. Most
Form 3800, Part III, line 1r (see TIP, earlier). credits identified by code ZZ will be reported on Form
3800, Part III (see TIP, earlier).
Code AO. Alternative fuel vehicle refueling property
credit. Report this amount on Form 8911, Alternative Box 14. International Transactions
Fuel Vehicle Refueling Property Credit, Part II, or Form If the S corporation checked the box, see the attached
3800, Part III, line 1s (see TIP, earlier). Schedule K-3 with respect to items of international tax
Code AP. Clean renewable energy bond credit. relevance. If the S corporation did not check the box, the S
Report this amount on Form 8912, Credit to Holders of corporation attached a statement to the Schedule K-1 (or
Tax Credit Bonds. issued a statement prior to furnishing the Schedule K-1)
notifying the shareholder that the shareholder will not
Code AQ. New clean renewable energy bond credit.
receive Schedule K-3 from the S corporation unless the
Report this amount on Form 8912.
shareholder requests the schedule.
Code AR. Qualified energy conservation bond credit.
Report this amount on Form 8912. For additional information, see the Shareholder's
Instructions for Schedule K-3 (Form 1120-S).
Code AS. Qualified zone academy bond credit.
Report this amount on Form 8912. Box 15. Alternative Minimum Tax (AMT) Items
Code AT. Qualified school construction bond credit. See List of Codes, later.
Report this amount on Form 8912.
Use the information reported in box 15 (as well as your
Code AU. Build America bond credit. Report this adjustments and tax preference items from other sources)
amount on Form 8912. to prepare your Form 6251, Alternative Minimum
Code AV. Credit for employer differential wage pay- Tax—Individuals, or Schedule I (Form 1041), Alternative
ments. Report this amount on Form 8932, Credit for Minimum Tax—Estates and Trusts.
Employer Differential Wage Payments, or Form 3800, Part Code A. Post-1986 depreciation adjustment. This
III, line 1w (see TIP, earlier). amount is your share of the corporation's post-1986
Code AW. Carbon oxide sequestration credit. Report depreciation adjustment. If you are an individual
this amount on Form 8933, Carbon Oxide Sequestration shareholder, report this amount on Form 6251, line 2l.
Credit, or Form 3800, Part III, line 1x (see TIP, earlier). Code B. Adjusted gain or loss. This amount is your
Code AX. Carbon oxide sequestration credit recap- share of the corporation's adjusted gain or loss. If you are
ture. The corporation will provide any information you an individual shareholder, report this amount on Form
need to figure your recapture tax. Report the carbon oxide 6251, line 2k.
sequestration credit recapture amount on Form 8933, Part Code C. Depletion (other than oil & gas). This amount
III, Section D, line 22. is your share of the corporation's depletion adjustment. If
Code AY. New clean vehicle credit. Report this amount you are an individual shareholder, report this amount on
on Form 8936, Clean Vehicle Credits, Part II, or Form Form 6251, line 2d.
3800, Part III, line 1y (see TIP, earlier). Codes D and E. Oil, gas, & geothermal proper-
Code AZ. Qualified commercial clean vehicle credit. ties—Gross income and deductions. The amounts
Report this amount on Form 8936, Part V, or Form 3800, reported on these lines include only the gross income
Part III, line 1aa (see TIP, earlier). (code D) from, and deductions (code E) allocable to, oil,
gas, and geothermal properties included in box 1 of
Code BA. Credit for small employer health insurance Schedule K-1. The corporation should have attached a
premiums. Report this amount on Form 8941, Credit for statement that shows any income from, or deductions
Small Employer Health Insurance Premiums, or Form allocable to, such properties that are included in boxes 2
3800, Part III, line 4h (see TIP, earlier). through 12, 16, and 17 of Schedule K-1. Use the amounts
Code BB. Employer credit for paid family and medi- reported here and any other reported amounts to help you
cal leave. Report in Form 8994, Employer Credit for Paid figure the net amount to enter on Form 6251, line 2t.
Family and Medical Leave, or Form 3800, Part III, line 4j Code F. Other AMT items. Report the information on the
(see TIP, earlier). statement attached by the corporation on the applicable
Code BC. Eligible credits from transferor(s) under lines of Form 6251 or Schedule I (Form 1041).
section 6418. On a statement attached to Schedule K-1,
the corporation will identify the type of transferred credits Box 16. Items Affecting Shareholder Basis
and any other information you need to file your tax returns. See List of Codes, later.
Report this amount on Form 3800. See the Instructions for
Code A. Tax-exempt interest income. Report on your
Form 3800, Parts III and V, for additional information.
return, as an item of information, your share of the
Codes BD through BG. Reserved for future use. tax-exempt interest received or accrued by the corporation
Code ZZ. Other credits. On a statement attached to during the year. Individual shareholders include this
Schedule K-1, the corporation will identify the type of amount on Form 1040 or 1040-SR, line 2a. Generally, you
must increase the basis of your stock by this amount.

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Code B. Other tax-exempt income. Generally, you must information on the statement to complete the applicable
increase the basis of your stock by the amount shown, but energy credit in Part VI of Form 3468. See the Instructions
don't include it in income on your tax return. for Form 3468 for details.
Code C. Nondeductible expenses. The nondeductible Codes E and F. Recapture of low-income housing
expenses paid or incurred by the corporation aren't credit. The corporation will identify by code E your share
deductible on your tax return. Generally, you must of any recapture of a low-income housing credit from its
decrease the basis of your stock by this amount. investment in partnerships to which the provisions of
section 42(j)(5) apply. All other recapture of low-income
Code D. Distributions. Reduce the basis of your stock housing credits will be identified by code F.
(as explained earlier) by distributions, not reported on
Keep a separate record of each type of recapture so
Form 1099-DIV, of property or money. This amount will
that you will be able to correctly figure any credit recapture
include any amounts included in income with respect to
that may result from the disposition of all or part of your
new clean renewable energy, qualified energy
corporate stock. For details, see Form 8611.
conservation, qualified school construction, build
America, or (for bonds issued after October 3, 2008) Code G. Recapture of investment credit. The
qualified zone academy bonds. If these distributions corporation will provide any information you need to figure
exceed the basis of your stock, the excess is treated as your recapture tax on Form 4255, Recapture of Investment
capital gain from the sale or exchange of property and is Credit. See the Form 3468 on which you took the original
reported on Form 8949 and Schedule D (Form 1040). credit for other information you need to complete Form
4255.
Code E. Repayment of loans from shareholders. If
these payments are made on a loan with a reduced basis, You may also need Form 4255 if your proportionate
the repayments must be allocated in part to a return of stock interest in the corporation is reduced by more than
your basis in the loan and in part to the receipt of income. one-third after you were allocated part of an investment
See Regulations section 1.1367-2 for information on credit.
reduction in basis of a loan and restoration in basis of a Code H. Recapture of other credits. On a statement
loan with a reduced basis. See Rev. Rul. 64-162, 1964-1 attached to Schedule K-1, the corporation will report any
(Part 1) C.B. 304, and Rev. Rul. 68-537, 1968-2 C.B. 372, information you need to figure the recapture of other
for details. credits including the new markets credit, Indian
Code F. Foreign taxes paid or accrued. Report this employment credit, credit for employer-provided childcare
amount on Form 7203, line 46(a). Do not use this amount facilities and services, alternative motor vehicle credit,
to complete your Form 1116. See Schedule K-3 to alternative fuel vehicle refueling property credit, and
complete your Form 1116. qualified plug-in electric drive motor vehicle credit.
Code I. Look-back interest—Completed long-term
Box 17. Other Information contracts. The corporation will report any information
See List of Codes, later. you need to figure the interest due or to be refunded under
Code A. Investment income. Report this amount on the look-back method of section 460(b)(2) on certain
Form 4952, line 4a. long-term contracts. Use Form 8697, Interest Computation
Under the Look-Back Method for Completed Long-Term
Code B. Investment expenses. Report this amount on Contracts, to report any such interest.
Form 4952, line 5.
Code J. Look-back interest—Income forecast meth-
Code C. Qualified rehabilitation expenditures (other od. The corporation will report any information you need
than rental real estate). The corporation will report your to figure the interest due or to be refunded under the
share of qualified rehabilitation expenditures and other look-back method of section 167(g)(2) for certain property
information you need to complete Form 3468 for property placed in service after September 13, 1995, and
not related to rental real estate activities in box 17 using depreciated under the income forecast method. Use Form
code C. Your share of qualified rehabilitation expenditures 8866, Interest Computation Under the Look-Back Method
related to rental real estate activities is reported in box 13 for Property Depreciated Under the Income Forecast
using code E. See the Instructions for Form 3468 for Method, to report any such interest.
details. If the corporation is reporting expenditures from
more than one activity, the attached statement will Code K. Dispositions of property with section 179
separately identify the expenditures from each activity. deductions. The corporation will report your share of
gain or loss on the sale, exchange, or other disposition of
Combine the expenditures (for Form 3468 reporting)
property for which a section 179 expense deduction was
from box 13, code E, and from box 17, code C. The
passed through to shareholders with code K. If the
expenditures related to rental real estate activities (box 13,
corporation passed through a section 179 expense
code E) are reported on Schedule K-1 separately from
deduction for the property, you must report the gain or
other qualified rehabilitation expenditures (box 17, code
loss, if any, and any recapture of the section 179 expense
C) because they are subject to different passive activity
deduction for the property on your income tax return (see
limitation rules. See the Instructions for Form 8582-CR for
the Instructions for Form 4797 for details). The corporation
details.
will provide all the following information.
Code D. Basis of energy property. If the corporation 1. Description of the property.
provides an attached statement for code D, use the

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2. Date the property was acquired and placed in • Mortgages, debts, and other liabilities the buyer
service. assumed or took the property subject to.
3. Date of the sale or other disposition of the property. • Gross profit.
• Contract price.
4. Your share of the gross sales price or amount
• Gross profit percentage.
realized.
• Current year payments and deemed payments received
5. Your share of the cost or other basis plus the during the year, not including interest whether stated or
expense of sale. unstated.
6. Your share of the depreciation allowed or allowable. • Origination year payments and deemed payments
7. Your share of the section 179 expense deduction (if received during the year, not including interest whether
any) passed through for the property and the corporation's stated or unstated.
tax year(s) in which the amount was passed through. • Payments received in prior years, not including interest
whether stated or unstated.
To figure the depreciation allowed or allowable for Form Installment sale income.
•
4797, line 22, add to the amount from item (6) above the Character of the income—capital or ordinary.
•
amount of your share of the section 179 expense
deduction, reduced by any unused carryover of the See section 453A(c) for information on how to compute
deduction for this property. This amount may be different the interest charge on the deferred tax liability. The section
than the amount of section 179 expense you deducted for 453A interest charge is reported on the Other taxes line of
the property if your interest in the corporation has your tax returns. See Interest on Deferred Tax in Pub. 537
changed. for additional details on how to compute the section
453A(c) interest.
8. If the disposition is due to a casualty or theft, any
information you need to complete Form 4684. Code O. Section 1260(b) information. The corporation
9. If the sale was an installment sale, any information will report any information you need to figure the interest
you need to complete Form 6252, Installment Sale due under section 1260(b). If the corporation had gain
Income. The corporation will separately report your share from certain constructive ownership transactions, your tax
of all payments received for the property in the following liability must be increased by the interest charge on any
tax years. See the Instructions for Form 6252 for details. deferral of gain recognition under section 1260(b). Report
the interest on Schedule 2 (Form 1040), line 17z. Enter
Code L. Recapture of section 179 deduction. The “1260(b)” and the amount of the interest in the space to
corporation will report your share of any recapture of the left of line 17z. See section 1260(b) for details on how
section 179 expense deduction if business use of any to figure the interest.
property for which the section 179 expense deduction was Code P. Interest allocable to production expendi-
passed through to shareholders dropped to 50% or less tures. The corporation will report any information you
before the end of the recapture period. If this occurs, the need relating to interest you are required to capitalize
corporation must provide the following information. under section 263A for production expenditures. See
1. Your share of the depreciation allowed or allowable Regulations sections 1.263A-8 through 1.263A-15 for
(not including the section 179 expense deduction). details.
2. Your share of the section 179 expense deduction (if Code Q. Capital construction fund (CCF) nonquali-
any) passed through for the property and the corporation's fied withdrawals. The corporation will report your share
tax year(s) in which the amount was passed through. of nonqualified withdrawals from a CCF. These
Reduce this amount by the portion, if any, of your unused withdrawals are taxed separately from your other gross
(carryover) section 179 expense deduction for this income at the highest marginal ordinary income or capital
property. gains tax rate. Attach a statement to your federal income
tax return to show your computation of both the tax and
Code M. Section 453(l)(3) information. The interest for a nonqualified withdrawal. Include the tax and
corporation will report any information you need to figure interest on Schedule 2 (Form 1040), line 21. In the space
the interest due under section 453(l)(3) with respect to the to the left of line 21, enter the amount of tax and interest
disposition of certain timeshares and residential lots on and “CCF.” See Pub. 595 for details.
the installment method. Report the interest on Schedule 2
(Form 1040), line 14. See section 453(l)(3) for details on Code R. Depletion information—Oil and gas. This is
how to figure the interest. your share of gross income from the property, share of
production for the tax year, and other information needed
Code N. Section 453A(c) information. The corporation to figure your depletion deduction for oil and gas wells.
will report any information you need to figure the interest The corporation should also allocate to you a
charge under section 453A(c) with respect to certain proportionate share of the adjusted basis of each
installment sales. See Pub. 537, Installment Sales. This corporate oil or gas property.
information will include the following from each Form 6252
where line 5 is greater than $150,000. Reduce the basis of your stock by the amount of this
• Description of property. deduction up to the extent of your adjusted basis in the
• Date acquired. property.
• Date property sold. Codes S and T. Reserved for future use.
• Selling price, including mortgages and other debts (not
including interest, whether stated or unstated).

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Code U. Net investment income. The corporation may information on where to report them, see the instructions
use code U to report information you may need to for Form 8995 or Form 8995-A.
determine your net investment income tax under section W-2 wages. The amounts reported reflect your pro rata
1411, including information regarding income from share of the S corporation’s W-2 wages allocable to the
controlled foreign corporations (CFCs) and passive QBI of each qualified trade or business, or aggregation.
foreign investment companies (PFICs), the stock of which See the instructions for Form 8995 or Form 8995-A.
is owned by the corporation. Any information not provided Unadjusted basis immediately after acquisition
elsewhere on Schedule K-3 (or an attachment to (UBIA) of qualified property. The amounts reported
Schedule K-3) is provided using code U. For CFCs and reflect your pro rata share of the S corporation’s UBIA of
PFICs that you treat as qualified electing funds (QEFs), qualified property of each qualified trade or business, or
the information that is relevant to you will depend on aggregation. See the instructions for Form 8995 or Form
whether you, the corporation, or a subsidiary 8995-A.
pass-through entity has made an election under Section 199A dividends. The amount reported
Regulations section 1.1411-10(g) with respect to the CFC reflects your pro rata share of the S corporation’s net
or QEF. For example, if the corporation made an election section 199A dividends. See the instructions for Form
under Regulations section 1.1411-10(g) for a CFC, the 8995 or Form 8995-A.
stock of which is owned by the corporation, and the Patrons of specified agricultural and horticultural
relevant income and deduction items derived from that cooperatives. If the S corporation was a patron of an
CFC are reported elsewhere on Schedule K-1, you will not agricultural or horticultural cooperative (specified
need the information provided using code U to complete cooperative), you must use Form 8995-A to figure your
your Form 8960. QBI deduction. In addition, you must complete
Follow the Instructions for Form 8960 to figure and Schedule D (Form 8995-A), Special Rules for Patrons of
report your net investment income and adjusted gross Agricultural or Horticultural Cooperatives, to determine
income or modified adjusted gross income. See your patron reduction.
Regulations sections 1.1411-1 through 1.1411-10 for QBI items allocable to qualified payments from
more details. specified cooperatives subject to
shareholder-specific determinations. The amounts
Code V. Section 199A information. Generally, you may
reported to you reflect your pro rata share of items from
be allowed a deduction of up to 20% of your net qualified
the S corporation’s trade(s) or business(es), or
business income (QBI) plus 20% of your qualified REIT
aggregation(s), and include items that may not be
dividends, also known as section 199A dividends, and
includible in your calculation of the QBI deduction and
qualified publicly traded partnership (PTP) income from
patron reduction. When determining QBI items allocable
your S corporation. The S corporation will provide the
to qualified payments, you must include only qualified
information you need to figure your deduction. You will use
items that are included or allowed in determining taxable
one of these two forms to figure your QBI deduction.
income for the tax year. To determine your QBI items
1. Use Form 8995, Qualified Business Income allocable to qualified payments, see the Instructions for
Deduction Simplified Computation, if: Form 8995-A.
a. You have QBI, section 199A dividends, or PTP W-2 wages allocable to qualified payments from
income (defined below); specified cooperatives. The amounts reported reflect
b. Your 2023 taxable income before the QBI deduction your pro rata share of the S corporation’s W-2 wages
is equal to or less than $182,100 ($364,200 if married allocable to qualified payments of each qualified trade or
filing jointly); and business, or aggregation. See the Instructions for Form
8995-A.
c. You aren’t a patron in a specified agricultural or
horticultural cooperative. Section 199A(g) deduction from specified
cooperatives. The amount reported reflects your pro rata
2. Use Form 8995-A, Qualified Business Income share of the S corporation’s net section 199A(g)
Deduction, if you don’t meet all three of these deduction. See the Instructions for Form 8995-A.
requirements.
Codes W through Z. Reserved for future use.
QBI pass-through entity reporting information. Use
the information provided to you by your S corporation to Code AA. Excess taxable income. If the S corporation
complete the appropriate form identified above. is required to file Form 8990, Limitation on Business
QBI or qualified PTP items subject to Interest Expense Under Section 163(j), it may determine it
shareholder-specific determinations. The amounts has excess taxable income. Report this amount of excess
reported to you reflect your pro rata share of items from taxable income on Form 8990, Schedule B, line 45(c), if
the S corporation’s trade(s) or business(es), or you are required to file Form 8990. See the Instructions for
aggregation(s), and may include items that aren’t Form 8990 for details.
includible in your calculation of the QBI deduction. When Code AB. Excess business interest income. If the S
determining QBI or qualified PTP income, you must corporation is required to file Form 8990, it may determine
include only those items that are qualified items of it has excess business interest income. Report this
income, gain, deduction, and loss included or allowed in amount of excess business interest income on Form 8990,
determining taxable income for the tax year. To determine Schedule B, line 45(d), if you are required to file Form
your QBI or your qualified PTP income amounts and for 8990. See the Instructions for Form 8990 for details.

Instructions for Schedule K-1 (Form 1120-S) (2023) 17

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Code AC. Gross receipts for section 448(c). Use the amounts to report on Form 3468, Part II, Section B, lines
gross receipts amount to figure the business interest 4a and 5a.
expense you can deduct, if applicable. See section 163(j) Code AT. Qualifying advanced energy project proper-
and the Instructions for Form 8990 for details. ty. Use the amounts the corporation provides you to
Codes AD through AI. Reserved for future use. figure the amounts to report on Form 3468, Part III, line 1a.
Code AJ. Excess business loss limitation. If the Code AU. Advanced manufacturing investment prop-
corporation has deductions attributable to a business erty. Use the amounts the corporation provides you to
activity, it will provide a statement showing the aggregate figure the amount to report on Form 3468, Part IV, line 1b.
gross income or gain and the aggregate deductions from Code AV. Reserved for future use.
the business activity that you need to figure any excess
business loss limitation. See section 461(l) and the Code AW. Reportable transactions. Any information
Instructions for Form 461 for details. you need to complete a disclosure statement for
reportable transactions in which the corporation
Codes AK through AM. Reserved for future use. participates. If the corporation participates in a transaction
Code AN. Farming and fishing income. If you are an that must be disclosed on Form 8886, Reportable
individual shareholder, report this income, as an item of Transaction Disclosure Statement, both you and the
information, on Schedule E (Form 1040), Part V, line 42. corporation may be required to file Form 8886 for the
Don't report this income elsewhere on Form 1040 or transaction. The determination of whether you are
1040-SR. required to disclose a transaction of the corporation is
based on the category(ies) under which the transaction
For a shareholder that is an estate or trust, report this
qualifies for disclosure and is determined by you and the
income to the beneficiaries, as an item of information, on
corporation. You may have to pay a penalty if you are
Schedule K-1 (Form 1041), Beneficiary’s Share of
required to file Form 8886 and don't do so. See the
Income, Deductions, Credits, etc. Don't report it elsewhere
Instructions for Form 8886 for details.
on Form 1041.
Codes AX through BD. Reserved for future use.
Code AO. Reserved for future use.
Code ZZ. Other information. Any other information you
Code AP. Inversion gain. The corporation will provide a
may need to file your return not shown elsewhere on
statement showing the amounts of each type of income or
Schedule K-1 or Schedule K-3.
gain that is included in inversion gain. The corporation has
included inversion gain in income elsewhere on The corporation should give you a description and the
Schedule K-1. Inversion gain is also reported under code amount of your share for each of these items.
AP because your taxable income and alternative minimum
taxable income can't be less than the inversion gain. Also, Box 18. More Than One Activity for At-Risk
your inversion gain (a) isn't taken into account in figuring Purposes
the net operating loss (NOL) for the tax year or the NOL When the corporation has more than one activity for
that can be carried over to each tax year, (b) may limit your at-risk purposes, it will check this box and attach a
credits, and (c) is treated as income from sources within statement. Use the information in the attached statement
the United States for the foreign tax credit. See section to correctly determine your at-risk limitations. For more
7874 for details. information, see At-Risk Limitations, earlier.

Codes AQ and AR. Reserved for future use. Box 19. More Than One Activity for Passive
Code AS. Qualifying advanced coal project property Activity Purposes
and qualifying gasification project property. When the corporation has more than one activity for
• For qualified investment in qualifying advanced coal passive activity purposes, it will check this box and attach
project property, use the amounts the corporation a statement. Use the information in the attached
provides you to figure the amounts to report on Form statement to correctly determine your passive activity
3468, Part II, Section A, lines 1a, 2a, and 3a. limitations. For more information, see Passive Activity
• For qualified investment in qualifying gasification, use Limitations, earlier.
the amounts the corporation provides you to figure the

18 Instructions for Schedule K-1 (Form 1120-S) (2023)

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List of Codes

This list identifies the codes used on  L       Deductions—Portfolio income      Q     Unused investment credit from 
Schedule K-1 for all shareholders.              (other)                                the qualifying advanced 
For detailed reporting and filing       M       Preproductive period                   energy project credit allocated 
information, see the specific line              expenses                               from cooperatives 
instructions, earlier, and the          N       Reserved for future use          R     Unused investment credit from 
instructions for your income tax        O       Reforestation expense                  the advanced manufacturing 
return.                                         deduction                              investment credit allocated 
                                        P – V   Reserved for future use                from cooperatives 
Box 10. Other income (loss)             W       Soil and water conservation      S     Reserved for future use
                                        X       Film, television, and theatrical T     Unused investment credit from 
Code                                                                                   the energy credit allocated 
                                                production expenditures
A       Other portfolio income (loss)                                                  from cooperatives 
                                        Y       Expenditures for removal of 
B       Involuntary conversions                 barriers                         U     Unused investment credit from 
C       Section 1256 contracts and      Z       Itemized deductions                    the rehabilitation credit 
        straddles                                                                      allocated from cooperatives 
                                        AA      Contributions to a capital 
D       Mining exploration costs                construction fund (CCF)          V     Advanced manufacturing 
        recapture                                                                      production credit 
                                        AB      Penalty on early withdrawal of 
E       Section 951A(a) income                  savings                          W – X Reserved for future use 
        inclusions                                                               Y     Clean hydrogen production 
                                        AC      Interest expense allocated to 
F       Inclusions of subpart F income          debt financed distributions            credit 
G       Section 951(a)(1)(B)            AD – AJ Reserved for future use          Z     Orphan drug credit 
        inclusions                                                               AA    Enhanced oil recovery credit 
                                        ZZ      Other deductions
H       Reserved for future use                                                  AB    Renewable electricity 
I       Gain (loss) from disposition of                                                production credit 
        oil, gas, geothermal, or other  Box 13. Credits                          AC    Biodiesel, renewable diesel, 
        mineral properties              A       Zero-emission nuclear power            or sustainable aviation fuels 
J       Recoveries of tax benefit items         production credit                      credit 
K       Gambling gains and losses       B       Production from advanced         AD    New markets credit
L       Reserved for future use                 nuclear power facilities credit  AE    Credit for small employer 
M       Gain eligible for section 1045  C       Low-income housing credit              pension plan startup costs 
        rollover (replacement stock             (section 42(j)(5)) from          AF    Credit for small employer 
        purchased by the corporation)           post-2007 buildings                    auto-enrollment 
N       Gain eligible for section 1045  D       Low-income housing credit        AG    Credit for military spouse 
        rollover (replacement stock             (other) from post-2007                 participation
        not purchased by the                    buildings                        AH    Credit for employer-provided 
        corporation)                    E       Qualified rehabilitation               childcare facilities and services 
O       Sale or exchange of QSB                 expenditures (rental real        AI    Low sulfur diesel fuel 
        stock with section 1202                 estate)                                production credit
        exclusion                       F       Other rental real estate credits AJ    Qualified railroad track 
P – R   Reserved for future use         G       Other rental credits                   maintenance credit 
S       Non-portfolio capital gain      H       Undistributed capital gains      AK    Credit for oil and gas 
        (loss)                                  credit                                 production from marginal wells 
T – X   Reserved for future use         I       Biofuel producer credit          AL    Distilled spirits credit
ZZ      Other income (loss)             J       Work opportunity credit          AM    Energy efficient home credit
                                        K       Disabled access credit           AN    Alternative motor vehicle credit
Box 12. Other deductions                L       Empowerment zone                 AO    Alternative fuel vehicle 
                                                employment credit                      refueling property credit
A       Cash contributions (60%)                                                 AP    Clean renewable energy bond 
                                        M       Credit for increasing research 
B       Cash contributions (30%)                activities                             credit
C       Noncash contributions (50%)     N       Credit for employer social       AQ    New clean renewable energy 
D       Noncash contributions (30%)             security and Medicare taxes            bond credit 
E       Capital gain property to a 50%  O       Backup withholding               AR    Qualified energy conservation 
        limit organization (30%)        P       Unused investment credit from          bond credit 
F       Capital gain property (20%)             the qualifying advanced coal     AS    Qualified zone academy bond 
G       Contributions (100%)                    project credit or qualifying           credit
H       Investment interest expense             gasification project credit      AT    Qualified school construction 
I       Deductions—Royalty income               allocated from cooperatives            bond credit 
J       Section 59(e)(2) expenditures                                            AU    Build America bond credit
K       Reserved for future use

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AV      Credit for employer differential B Other tax-exempt income        P       Interest allocable to 
        wage payments                    C Nondeductible expenses                 production expenditures
AW      Carbon oxide sequestration       D Distributions                  Q       Capital construction fund 
        credit                           E Repayment of loans from                (CCF) nonqualified 
AX      Carbon oxide sequestration         shareholders                           withdrawals
        credit recapture                 F Foreign taxes paid or accrued  R       Depletion information—Oil 
AY      New clean vehicle credit                                                  and gas
AZ      Qualified commercial clean       Box 17. Other information        S – T   Reserved for future use
        vehicle credit                                                    U       Net investment income
BA      Credit for small employer        A Investment income              V       Section 199A information
        health insurance premiums        B Investment expenses            W – Z   Reserved for future use
BB      Employer credit for paid family  C Qualified rehabilitation       AA      Excess taxable income
        and medical leave                  expenditures (other than       AB      Excess business interest 
BC      Eligible credits from              rental real estate)                    income
        transferor(s) under section      D Basis of energy property       AC      Gross receipts for section 
        6418                             E Recapture of low-income                448(c)
BD – BG Reserved for future use            housing credit (section 42(j)  AD – AI Reserved for future use
ZZ      Other credits                      (5))                           AJ      Excess business loss limitation 
                                         F Recapture of low-income        AK – AM Reserved for future use
Box 15. Alternative minimum tax            housing credit (other)         AN      Farming and fishing income
(AMT) items                              G Recapture of investment credit AO      Reserved for future use
                                         H Recapture of other credits     AP      Inversion gain 
A       Post-1986 depreciation           I Look-back                      AQ – AR Reserved for future use
        adjustment                         interest—Completed             AS      Qualifying advanced coal 
B       Adjusted gain or loss              long-term contracts                    project property and qualifying 
C       Depletion (other than oil & gas) J Look-back interest—Income              gasification project property 
D       Oil, gas, & geothermal—Gross       forecast method                AT      Qualifying advanced energy 
        income                           K Dispositions of property with          project property 
E       Oil, gas, &                        section 179 deductions         AU      Advanced manufacturing 
        geothermal—Deductions            L Recapture of section 179               investment property
F       Other AMT items                    deduction                      AV      Reserved for future use
                                         M Section 453(l)(3) information  AW      Reportable transactions 
Box 16. Items affecting share-           N Section 453A(c) information    AX – BD Reserved for future use
holder basis                             O Section 1260(b) information    ZZ      Other information
A       Tax-exempt interest income

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