Purpose of Schedule K-1

The partnership uses Schedule K-1 to report your share of the partnership's income, deductions, credits, etc. Keep it for your records. Do not file it with your tax return. The partnership has filed a copy with the IRS.

Although the partnership generally is not subject to income tax, you are liable for tax on your share of the partnership income, whether or not distributed. Include your share on your tax return if a return is required. Use these instructions to help you report the items shown on Schedule K-1 on your tax return.

The amount of loss and deduction that you may claim on your tax return may be less than the amount reported on Schedule K-1. It is the partner's responsibility to consider and apply any applicable limitations. See Limitations on Losses, Deductions, and Credits beginning on page 2 for more information.

What's New for 2007

Tax credits.   

The work opportunity credit and tax credit for taxes paid on employee cash tips are no longer reported on Form 3800. Report your share of the work opportunity credit on Form 5884. Report your share of the tax credit for taxes paid on employee cash tips on Form 8846.

Sale of qualified small business stock.   

New reporting requirements may apply if the partnership sells qualified small business stock. For details, see page 7.