Travel, meals, and entertainment.

Subject to limitations and restrictions discussed below, a corporation can deduct ordinary and necessary travel and meal expenses paid or incurred in its trade or business. Generally, entertainment expenses, membership dues, and facilities used in connection with these activities can't be deducted. Generally, no deduction is allowed for qualified transportation fringe benefits. Also, special rules apply to deductions for gifts, luxury water travel, and convention expenses. See section 274 and Pub. 463 for details.

Fines and similar penalties.

Generally, no deduction is allowed for fines or similar penalties paid to or at the direction of a government or governmental entity for violating any law except:

No deduction is allowed unless the amounts are specifically identified in the order or agreement and the taxpayer establishes that the amounts were paid for a purpose mentioned above. Also, any amount paid or incurred as reimbursement to the government for the costs of any investigation or litigation are not eligible for the exceptions and are nondeductible. See section 162(f). Also see Regulations section 1.162-21.

Lobbying expenses.

Generally, lobbying expenses aren't deductible. Report nondeductible expenses on Schedule K, line 16c. These expenses include:

Dues and other similar amounts paid to certain tax-exempt organizations may not be deductible. If certain in-house lobbying expenditures don't exceed $2,000, they are deductible. For information on contributions to charitable organizations that conduct lobbying activities, see section 170(f)(9).

Certain corporations engaged in farming.

Section 464(d) limits the deduction for certain expenditures of S corporations engaged in farming if they use the cash method of accounting, and their prepaid farm supplies are more than 50% of other deductible farming expenses.

Prepaid farm supplies include expenses for feed, seed, fertilizer, and similar farm supplies not used or consumed during the year. They also include the cost of poultry that would be allowable as a deduction in a later tax year if the corporation were to (a) capitalize the cost of poultry bought for use in its farm business and deduct it ratably over the lesser of 12 months or the useful life of the poultry, and (b) deduct the cost of poultry bought for resale in the year it sells or otherwise disposes of it.

If the limit applies, the corporation can deduct prepaid farm supplies that don't exceed 50% of its other deductible farm expenses in the year of payment. The excess is deductible only in the year the corporation uses or consumes the supplies (other than poultry, which is deductible, as explained above). For exceptions and more details on these rules, see Pub. 225.

Termination of shareholder's interest.

If a shareholder terminates shareholder’s interest in a corporation during the tax year, the corporation, with the consent of all affected shareholders (including those whose interest is terminated), may elect to allocate income and expenses, etc., as if the corporation's tax year consisted of 2 separate tax years, the first of which ends on the date of the shareholder's termination.

To make the election, the corporation must attach a statement to a timely filed original or amended Form 1120-S for the tax year for which the election is made. In the statement, the corporation must state that it is electing under section 1377(a)(2) and Regulations section 1.1377-1(b) to treat the tax year as if it consisted of 2 separate tax years. The statement must also explain how the shareholder's entire interest was terminated (for example, sale or gift), and state that the corporation and each affected shareholder consent to the corporation making the election. A single statement may be filed for all terminating elections made for the tax year. If the election is made, enter “Section 1377(a)(2) Election Made” at the top of each affected shareholder's Schedule K-1.

For more details, see Regulations section 1.1377-1(b).

Qualifying dispositions.

If a qualifying disposition takes place during the tax year, the corporation may make an irrevocable election to allocate income and expenses, etc., as if the corporation's tax year consisted of 2 tax years, the first of which ends on the close of the day the qualifying disposition occurs.

A qualifying disposition is:

To make the election, the corporation must attach a statement to a timely filed original or amended Form 1120-S for the tax year for which the election is made. In the statement, the corporation must state that it is electing under Regulations section 1.1368-1(g)(2)(i) to treat the tax year as if it consisted of 2 separate tax years, give the facts relating to the qualifying disposition (for example, sale, gift, stock issuance, or redemption), and state that each shareholder who held stock in the corporation during the tax year consents to the election. A single election statement may be filed for all qualifying disposition elections for the tax year.

For more details, see Regulations section 1.1368-1(g)(2).

Codes.

In boxes 10, 12, 13, and boxes 15 through 17, identify each item by entering a code in the left column of the entry space. These codes are identified in these instructions and on the List of Codes in the Shareholder's Instructions for Schedule K-1 (Form 1120-S).

Attached statements.

When attaching statements to Schedule K-1 to report additional information to the shareholder, indicate there is a statement depending upon the following.

More than one attached statement can be placed on the same sheet of paper. The information included in the statement should be identified in alphanumeric order by box number followed by the letter code (if any), description, and dollar amount. For example: “Box 13, code J—Work opportunity credit—$1,000.” This can be followed with any additional information that the shareholder needs to determine the proper tax treatment of the item.

Schedule K-1.

Enter each shareholder's pro rata share of ordinary business income (loss) in box 1 of Schedule K-1. Identify on statements attached to Schedule K-1 any additional information the shareholder needs to correctly apply the passive activity limitations. For example, if the corporation has more than one trade or business activity, identify the amount from each activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Enter each shareholder's pro rata share of net rental real estate income (loss) in box 2 of Schedule K-1. Identify on statements attached to Schedule K-1 any additional information the shareholder needs to correctly apply the passive activity limitations. For example, if the corporation has more than one rental real estate activity, identify the amount from each activity. Also, for example, identify certain items from any rental real estate activities that may be subject to the recharacterization rules. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Enter in box 3 of Schedule K-1 each shareholder's pro rata share of other net rental income (loss) reported on line 3c of Schedule K. Identify on statements attached to Schedule K-1 any additional information the shareholder needs to correctly apply the passive activity limitations. For example, if the corporation has more than one rental activity reported in box 3, identify the amount from each activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Enter each shareholder's pro rata share of interest income in box 4 of Schedule K-1.

Schedule K-1.

Enter each shareholder's pro rata share of ordinary dividends in box 5a of Schedule K-1.

Exceptions.

The following dividends aren't qualified dividends.

See Pub. 550, Investment Income and Expenses, for more details.

Qualified foreign corporation.

A foreign corporation is a qualified foreign corporation if it is:

If the foreign corporation doesn't meet either (1) or (2), then it may be treated as a qualified foreign corporation for any dividend paid by the corporation if the stock associated with the dividend paid is readily tradable on an established securities market in the United States.

However, qualified dividends don't include dividends paid by an entity that was a passive foreign investment company (defined in section 1297) in either the tax year of the distribution or the preceding tax year.

See Notice 2004-71, 2004-45 I.R.B. 793, and Notice 2006-3, 2006-3 I.R.B. 306, for more details.

Schedule K-1.

Enter each shareholder's pro rata share of qualified dividends in box 5b of Schedule K-1.

If any amounts from line 5b are from foreign sources, see the instructions for Schedule K-2 (Form 1120-S) and Schedule K-3 (Form 1120-S).

Schedule K-1.

Enter each shareholder's pro rata share of royalties in box 6 of Schedule K-1.

Schedule K-1.

Enter each shareholder's pro rata share of net short-term capital gain (loss) in box 7 of Schedule K-1.

Schedule K-1.

Enter each shareholder's pro rata share of net long-term capital gain (loss) in box 8a of Schedule K-1.

Schedule K-1.

Report each shareholder's pro rata share of the collectibles (28%) gain (loss) in box 8b of Schedule K-1.

From the sale or exchange of the corporation's business assets.

Figure this amount in Part III of Form 4797 for each section 1250 property (except property for which gain is reported using the installment method on Form 6252) for which you had an entry in Part I of Form 4797. Subtract line 26g of Form 4797 from the smaller of line 22 or line 24. Figure the total of these amounts for all section 1250 properties. Generally, the result is the corporation's unrecaptured section 1250 gain. However, if the corporation is reporting gain on the installment method for a section 1250 property held more than 1 year, see the next paragraph.

The total unrecaptured section 1250 gain for an installment sale of section 1250 property held more than 1 year is figured in a manner similar to that used in the preceding paragraph. However, the total unrecaptured section 1250 gain must be allocated to the installment payments received from the sale. To do so, the corporation must generally treat the gain allocable to each installment payment as unrecaptured section 1250 gain until all such gain has been used in full. Figure the unrecaptured section 1250 gain for installment payments received during the tax year as the smaller of (a) the amount from line 26 or line 37 of Form 6252 (whichever applies), or (b) the total unrecaptured section 1250 gain for the sale reduced by all gain reported in prior years (excluding section 1250 ordinary income recapture).

If the corporation chose not to treat all of the gain from payments received after May 6, 1997, and before August 24, 1999, as unrecaptured section 1250 gain, use only the amount the corporation chose to treat as unrecaptured section 1250 gain for those payments to reduce the total unrecaptured section 1250 gain remaining to be reported for the sale. See Regulations section 1.453-12.

From the sale or exchange of an interest in a partnership.

Also report as a separate amount any gain from the sale or exchange of an interest in a partnership attributable to unrecaptured section 1250 gain. See Regulations section 1.1(h)-1 and attach the statement required under Regulations section 1.1(h)-1(e).

From an estate, trust, REIT, or RIC.

If the corporation received a Schedule K-1 or Form 1099-DIV from an estate, a trust, a real estate investment trust (REIT), or a regulated investment company (RIC) reporting “unrecaptured section 1250 gain,” don't add it to the corporation's own unrecaptured section 1250 gain. Instead, report it as a separate amount. For example, if the corporation received a Form 1099-DIV from a REIT with unrecaptured section 1250 gain, report it as “Unrecaptured section 1250 gain from a REIT.”

Schedule K-1.

Report each shareholder's pro rata share of unrecaptured section 1250 gain from the sale or exchange of the corporation's business assets in box 8c of Schedule K-1. If the corporation is reporting unrecaptured section 1250 gain from an estate, trust, REIT, or RIC, or from the corporation's sale or exchange of an interest in a partnership (as explained above), enter “STMT” in box 8c and an asterisk (*) in the left column of the box and attach a statement that separately identifies the amount of unrecaptured section 1250 gain from:

If any amounts from line 8c are from foreign sources, see the instructions for Schedule K-2 (Form 1120-S) and Schedule K-3 (Form 1120-S).

Schedule K-1.

Report each shareholder's pro rata share of net section 1231 gain (loss) in box 9 of Schedule K-1. If the corporation has more than one rental, trade, or business activity, identify on an attachment to Schedule K-1 the amount of section 1231 gain (loss) from each separate activity. See Passive Activity Reporting Requirements , earlier.

If any amounts from line 9 are from foreign sources, see the instructions for Schedule K-2 (Form 1120-S) and Schedule K-3 (Form 1120-S).

Other portfolio income (loss) (code A).

Portfolio income not reported on lines 4 through 8.

Report and identify other portfolio income or loss on an attachment for line 10.

If the corporation holds a residual interest in a Real Estate Mortgage Investment Conduit (REMIC), report on an attachment the shareholder's share of the following.

Because Schedule Q (Form 1066) is a quarterly statement, the corporation must follow the Schedule Q instructions to figure the amounts to report to shareholders for the corporation's tax year.

Involuntary conversions (code B).

Report net loss from involuntary conversions due to casualty or theft. The amount for this item is shown on Form 4684, Casualties and Thefts, line 38a or 38b.

Each shareholder's pro rata share must be entered on Schedule K-1.

Enter the net gain from involuntary conversions of property used in a trade or business (line 39 of Form 4684) on line 3 of Form 4797.

If there was a gain (loss) from a casualty or theft to property not used in a trade or business or for income-producing purposes, notify the shareholder. The corporation shouldn't complete Form 4684 for this type of casualty or theft. Instead, each shareholder will complete the shareholder's own Form 4684.

Section 1256 contracts and straddles (code C).

Report any net gain or loss from section 1256 contracts from Form 6781, Gains and Losses From Section 1256 Contracts and Straddles.

Mining exploration costs recapture (code D).

Provide the information shareholders need to recapture certain mining exploration expenditures. See Regulations section 1.617-3.

Section 951A(a) income inclusions (code E).

If the S corporation elected to be treated as owning stock of a CFC within the meaning of section 958(a) under Proposed Regulations section 1.958-1(e)(2), and the S corporation is a U.S. shareholder of a CFC, then the S corporation determines its section 951A inclusion amount. Report the corporation's section 951A inclusion and its shareholders' pro rata shares of the section 951A inclusions using code E. See Form 8992, Part II, line 5.

Provide information on line 10 using code E only if the corporation (and its shareholders, if applicable) has elected to be treated as owning stock of a foreign corporation within the meaning of section 958(a) under Proposed Regulations section 1.958-1(e)(2). If no election has been made, see instructions for Part V of the Schedule K-2 (Form 1120-S).

Inclusions of subpart F income (code F).

The S corporation should report its subpart F income inclusions and its shareholders’ pro rata shares of its subpart F income inclusions. An S corporation does not have subpart F income inclusions with respect to a foreign corporation for tax years of the foreign corporation beginning on or after January 25, 2022, under Regulations section 1.958-1(d)(1) if the S corporation did not make an election to be treated as owning stock of the foreign corporation within the meaning of section 958(a) under Proposed Regulations section 1.958-1(e)(2). An S corporation does not have subpart F income inclusions with respect to a foreign corporation for tax years of the foreign corporation beginning before January 25, 2022, if the S corporation did not make an election to be treated as owning stock of a foreign corporation within the meaning of section 958(a) under Proposed Regulations section 1.958-1(e)(2) and, pursuant to Regulations section 1.958-1(d)(4)(i), applies Regulations section 1.958-1(d)(1) through (3) to such tax years.

Section 951(a)(1)(B) inclusions (code G).

The S corporation should report its section 951(a)(1)(B) inclusions and its shareholders’ pro rata shares of its section 951(a)(1)(B) inclusions. An S corporation does not have section 951(a)(1)(B) inclusions with respect to a foreign corporation for tax years of the foreign corporation beginning on or after January 25, 2022, under Regulations section 1.958-1(d)(1) if the S corporation did not make an election to be treated as owning stock of the foreign corporation within the meaning of section 958(a) under Proposed Regulations section 1.958-1(e)(2). An S corporation does not have section 951(a)(1)(B) inclusions with respect to a foreign corporation for tax years of the foreign corporation beginning before January 25, 2022, if the S corporation did not make an election to be treated as owning stock of a foreign corporation within the meaning of section 958(a) under Proposed Regulations section 1.958-1(e)(2) and, pursuant to Regulations section 1.958-1(d)(4)(i), applies Regulations section 1.958-1(d)(1) through (3) to such tax years.

If the corporation does not have subpart F income inclusions or section 951(a)(1)(B) inclusions with respect to a foreign corporation, stock of which it owns within the meaning of section 958(a) and without regard to Regulations section 1.958-1(d), see instructions for Part V of the Schedule K-2 (Form 1120-S) for reporting of information related to subpart F income inclusions and section 951(a)(1)(B) inclusions of shareholders with respect to the foreign corporation.

Code H.

Reserved for future use.

Gain (loss) from disposition of oil, gas, geothermal, or other mineral properties (code I).

Report the following information on a statement attached to Schedule K-1: (a) a description of the property; (b) the shareholder's share of the amount realized on the sale, exchange, or involuntary conversion of each property (fair market value of the property for any other disposition, such as a distribution); (c) the shareholder's share of the corporation's adjusted basis in the property (except for oil or gas properties); and (d) total intangible drilling costs, development costs, and mining exploration costs (section 59(e) expenditures) passed through to the shareholder for the property. See Regulations section 1.1254-4 for more information.

Recoveries of tax benefit items (code J).

Recoveries of tax benefit items (section 111).

Gambling gains and losses (code K).

Gambling gains and losses subject to the limitations in section 165(d). Indicate on an attached statement whether or not the corporation is in the trade or business of gambling.

Code L.

Reserved for future use.

Gain eligible for section 1045 rollover (replacement stock purchased by the corporation) (code M).

Include only gain from the sale or exchange of QSB stock (as defined in the Instructions for Schedule D) that was deferred by the corporation under section 1045 and reported on Schedule D. See the Instructions for Schedule D for more details. Additional limitations apply at the shareholder level. Report each shareholder's share of the gain eligible for section 1045 rollover on Schedule K-1. Each shareholder will determine if they qualify for the rollover. Report on an attachment to Schedule K-1 for each sale or exchange (a) the name of the corporation that issued the QSB stock, (b) the shareholder's pro rata share of the corporation's adjusted basis and sales price of the QSB stock, and (c) the dates the QSB stock was bought and sold.

Gain eligible for section 1045 rollover (replacement stock not purchased by the corporation) (code N).

Include only gain from the sale or exchange of QSB stock (as defined in the Instructions for Schedule D) the corporation held for more than 6 months but that wasn't deferred by the corporation under section 1045. See the Instructions for Schedule D for more details. A shareholder may be eligible to defer the shareholder’s pro rata share of this gain under section 1045 if the shareholder purchases other QSB stock during the 60-day period that began on the date the QSB stock was sold by the corporation. Additional limitations apply at the shareholder level. Report on an attachment to Schedule K-1 for each sale or exchange (a) the name of the corporation that issued the QSB stock, (b) the shareholder's pro rata share of the corporation's adjusted basis and sales price of the QSB stock, and (c) the dates the QSB stock was bought and sold.

Sale or exchange of QSB stock with section 1202 exclusion (code O).

Gain from the sale or exchange of qualified small business (QSB) stock (as defined in the Instructions for Schedule D) that is eligible for the section 1202 exclusion. The section 1202 exclusion applies only to QSB stock held by the corporation for more than 5 years. Additional limitations apply at the shareholder level. Report each shareholder's share of section 1202 gain on Schedule K-1. Each shareholder will determine if they qualify for the exclusion. Report on an attachment to Schedule K-1 for each sale or exchange (a) the name of the corporation that issued the QSB stock, (b) the shareholder's pro rata share of the corporation's adjusted basis and sales price of the QSB stock, and (c) the dates the QSB stock was bought and sold.

Codes P through R.

Reserved for future use.

Non-portfolio capital gain (loss) (code S).

Any gain or loss from line 7 or 15 of Schedule D that isn't portfolio income (for example, gain or loss from the disposition of nondepreciable personal property used in a trade or business).

Codes T through X.

Reserved for future use.

Other income (loss) (code ZZ).

Include any other type of income (loss) not reported using codes A through S.

Schedule K-1.

Enter each shareholder's pro rata share of the other income categories listed above in box 10 of Schedule K-1. Enter the applicable code A through ZZ (as shown earlier).

If you are reporting each shareholder's pro rata share of only one type of income under code ZZ, enter the code with an asterisk (ZZ*) and the dollar amount in the entry space in box 10 and attach a statement that shows “Box 10, code ZZ,” and the type of income. If you are reporting multiple types of income under code ZZ, enter the code with an asterisk (ZZ*) and enter “STMT” in the entry space in box 10 and attach a statement that shows “Box 10, code ZZ,” and the dollar amount of each type of income.

If the corporation has more than one trade or business or rental activity (for codes B through ZZ), identify on an attachment to Schedule K-1 the amount from each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Report each shareholder's pro rata share of the section 179 expense deduction in box 11 of Schedule K-1.

If the corporation has more than one rental, trade, or business activity, identify on an attachment to Schedule K-1 the amount of section 179 deduction from each separate activity. See Passive Activity Reporting Requirements , earlier.

Don't complete box 11 of Schedule K-1 for any shareholder that is an estate or trust; estates and trusts aren't eligible for the section 179 expense deduction.

Cash contributions (60%) (code A).

Enter cash contributions subject to the 60% AGI limitation.

Cash contributions (30%) (code B).

Enter cash contributions subject to the 30% AGI limitation.

Noncash contributions (50%) (code C).

Enter noncash contributions subject to the 50% AGI limitation. Don't include food inventory contributions reported separately on an attached statement.

Food inventory contributions.

Provide the following information on a statement attached to Schedule K-1.

Qualified conservation contributions.

The AGI limit for qualified conservation contributions under section 170(h) is generally 50%. However, if the corporation is a qualified farmer or rancher (farm income is more than 50% of gross income), the AGI limit for qualified conservation contributions of property used in agriculture or livestock production (or available for such production) is 100%. The carryover period is 15 tax years. See section 170(b) and Notice 2007-50, 2007-25 I.R.B. 1430, for details. Report qualified conservation contributions with a 50% AGI limitation on Schedule K-1 in box 12 using code C. Report qualified conservation contributions with a 100% AGI limitation on a statement attached to Schedule K-1 using code G. See Contributions of property, later, for special rules applicable to qualified conservation contributions.

Noncash contributions (30%) (code D).

Enter noncash contributions subject to the 30% AGI limitation.

Capital gain property to a 50% limit organization (30%) (code E).

Enter capital gain property contributions subject to the 30% AGI limitation.

Capital gain property (20%) (code F).

Enter capital gain property contributions subject to the 20% AGI limitation.

Contributions of property.

See Contributions of Property in Pub. 526 and Pub. 561, Determining the Value of Donated Property, for information on noncash contributions and contributions of capital gain property. If the deduction claimed for noncash contributions exceeds $500, complete Form 8283 and attach it to Form 1120-S.

Shareholders may deduct their pro rata share of the FMV of property contributions, but will only need to adjust their stock basis by their pro rata share of the property's adjusted basis. Give each shareholder a statement identifying their pro rata share of both the FMV and adjusted basis of the property.

If the corporation made a qualified conservation contribution under section 170(h), also include the FMV of the underlying property before and after the donation, as well as the type of legal interest contributed, and describe the conservation purpose furthered by the donation. Give a copy of this information to each shareholder.

If the corporation made a qualified conservation contribution for the preservation of an historic building, there are additional requirements that may apply to obtain a charitable deduction. This charitable deduction may be reduced if rehabilitation credits were claimed for the historic building. This charitable deduction may be denied if the corporation does not comply with section 170(f)(19). A $500 filing fee may apply to certain deductions over $10,000. See the Instructions for Form 8283 and Pub. 526 for details.

A corporation's charitable conservation contribution (or a corporation's distributive share of a charitable conservation contribution from a lower-tier partnership) is not treated as a qualified conservation contribution if the amount of such contribution (or such distributive share) exceeds 2.5 times the sum of each shareholder's relevant basis in the corporation. In an attachment to each Schedule K-1 issued to a shareholder, report the shareholder's relevant basis allocable to the portion of the real property or historic building on which the qualified conservation contribution was made. The corporation should coordinate with each shareholder in calculating relevant basis. See Qualified Conservation Contribution in Pub. 526 and Disallowance of Conservation Contribution deductions by certain pass-through entities in the Instructions for Form 8283.

Nondeductible contributions.

Certain contributions made to an organization conducting lobbying activities aren't deductible. See section 170(f)(9) for more details. Also see Contributions You Can’t Deduct in Pub. 526 for more examples of nondeductible contributions.

Contributions (100%) (code G).

If the corporation is a qualified farmer or rancher (farm income is more than 50% of gross income), attach a statement to Schedule K-1 that shows the shareholder's pro rata share of qualified conservation contributions of property used in agriculture or livestock production (or available for such production). Don’t include these contributions in the amounts reported in box 12 of Schedule K-1 because shareholders must separately determine if they qualify for the 50% or 100% AGI limitation for these contributions. The contribution must be subject to a restriction that the property remain available for such production. See section 170(b) for details.

Schedule K-1.

Report each shareholder's pro rata share of charitable contributions in box 12 of Schedule K-1 using codes A through G for each of the contribution categories shown earlier. See Contributions of property , earlier, for information on statements you may be required to attach to Schedule K-1. The corporation must attach a copy of its Form 8283 to the Schedule K-1 of each shareholder receiving an allocation of the contribution deduction shown in Section A or Section B of its Form 8283.

Schedule K-1.

Report each shareholder's pro rata share of investment interest expense in box 12 of Schedule K-1 using code H.

Schedule K-1.

Report each shareholder's pro rata share of section 59(e) expenditures in box 12 of Schedule K-1 using code J. Identify the following information on an attached statement.

If there is more than one type of expenditure or the expenditures are for more than one property, provide each shareholder's pro rata share of the amounts (and the months paid or incurred for oil and gas properties) for each type of expenditure separately for each property.

Deductions—Royalty income (code I).

Enter deductions related to royalty income.

Code K.

Reserved for future use.

Deductions—Portfolio income (other) (code L).

Enter any other deductions related to portfolio income.

No deduction is allowed under section 212 for expenses allocable to a convention, seminar, or similar meeting. Because these expenses aren't deductible by shareholders, the corporation doesn't report these expenses on line 12d of Schedule K. The expenses are nondeductible and are reported as such on line 16c of Schedule K and in box 16 of Schedule K-1 using code C.

Preproductive period expenses (code M).

If the corporation is required to use an accrual method of accounting under section 448(a)(3), it must capitalize these expenses. If the corporation is permitted to use the cash method, enter the amount of preproductive period expenses that qualify under section 263A(d). An election not to capitalize these expenses must be made at the shareholder level. See Uniform Capitalization Rules in Pub. 225.

Code N.

Reserved for future use.

Reforestation expense deduction (code O).

The corporation can elect to deduct a limited amount of its reforestation expenditures paid or incurred during the tax year. The amount the corporation can elect to deduct is limited to $10,000 for each qualified timber property. See section 194(c) for a definition of reforestation expenditures and qualified timber property. See Notice 2006-47, 2006-20 I.R.B. 892, for details on making the election. The corporation must amortize over 84 months any amount not deducted. See Reforestation expenditures , earlier.

Codes P through V.

Reserved for future use.

Soil and water conservation (code W).

Enter amounts for soil and water conservation expenditures, and endangered species recovery expenditures. See Pub. 225.

Film, television, and theatrical production expenditures (code X).

Film, television, and live theatrical production expenses. The corporation can elect to deduct certain costs of a qualified film, television, or live theatrical production commencing before January 1, 2026 (after December 31, 2015, and before January 1, 2026, for a live theatrical production), limited to $15 million of the aggregate production cost of the production. There is a higher dollar limitation for productions in certain areas. A live theatrical performance commences on the date of its first public performance for a paying audience. Provide a description of the film, television, or live theatrical production on an attached statement. If the corporation makes the election for more than one production, attach a statement to Schedule K-1 that shows each shareholder's pro rata share of the qualified expenditures separately for each production. The deduction is subject to recapture under section 1245 if the election is voluntarily revoked or the production fails to meet the requirements for the deduction. See section 181 and the related regulations.

Expenditures for removal of barriers (code Y).

Enter expenditures paid or incurred for the removal of architectural and transportation barriers to the elderly and disabled that the corporation has elected to treat as a current expense. See section 190.

Itemized deductions (code Z).

Enter amounts paid by the corporation that would be allowed as itemized deductions on any of the shareholders' income tax returns if they were paid directly by a shareholder for the same purpose. These amounts include, but aren't limited to, expenses under section 212 for the production of income other than from the corporation's trade or business. However, don't enter expenses related to portfolio income or investment interest expense reported on line 12b of Schedule K on this line.

Contributions to a capital construction fund (CCF) (code AA).

Enter amount of contributions made to a capital construction fund. See Pub. 595, Capital Construction Fund for Commercial Fishermen.

Penalty on early withdrawal of savings (code AB).

Enter any penalty on early withdrawal of savings because the corporation withdrew funds from its time savings deposit before its maturity.

Interest expense allocated to debt financed distributions (code AC).

Enter interest expense allocated to debt-financed distributions. See Notice 89-35, 1989-1 C.B. 675 for more information.

Codes AD through AJ.

Reserved for future use.

Other deductions (code ZZ).

Include any other deductions not reported using codes A through AC.

Schedule K-1.

Enter each shareholder's pro rata share of the deduction categories listed above in box 12 of Schedule K-1 or provide the required information on an attached statement. Enter the applicable code shown above.

If you are reporting only one type of deduction under code ZZ, enter code ZZ with an asterisk (ZZ*) and the dollar amount in the entry space in box 12 and attach a statement that shows the box number, code, and type of deduction. If you are reporting multiple types of deductions under code ZZ, enter the code with an asterisk (ZZ*), enter “STMT” in the dollar amount entry space in box 12, and attach a statement that shows the box number, code, and dollar amount of each type of deduction.

If the corporation has more than one trade or business activity, identify on an attachment to Schedule K-1 the amount for each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Report in box 13 of Schedule K-1 each shareholder's pro rata share of the low-income housing credit reported on line 13a of Schedule K. Use code C to report the portion of the credit attributable to buildings placed in service after 2007. If the corporation has credits from more than one activity, identify on an attachment to Schedule K-1 the amount for each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Report in box 13 of Schedule K-1 each shareholder's pro rata share of the low-income housing credit reported on line 13b of Schedule K. Use code D to report the portion of the credit attributable to buildings placed in service after 2007. If the corporation has credits from more than one rental activity, identify on an attachment to Schedule K-1 the amount for each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Report each shareholder's pro rata share of qualified rehabilitation expenditures related to rental real estate activities in box 13 of Schedule K-1 using code E. Attach a statement to Schedule K-1 that provides the information and the shareholder's pro rata share of the basis and expenditure amounts the shareholder will need to figure the amounts to report in Part VII of Form 3468, Investment Credit. See the Instructions for Form 3468 for details. If the corporation has expenditures from more than one rental real estate activity, identify on an attachment to Schedule K-1 the information and amounts for each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Report in box 13 of Schedule K-1 each shareholder's pro rata share of other rental real estate credits using code F. If you are reporting each shareholder's pro rata share of only one type of rental real estate credit under code F, enter the code with an asterisk (F*) and the dollar amount in the entry space in box 13 and attach a statement that shows “Box 13, code F” and the type of credit. If you are reporting multiple types of rental real estate credit under code F, enter the code with an asterisk (F*) and enter “STMT” in the entry space in box 13 and attach a statement that shows “Box 13, code F” and the dollar amount of each type of credit. If the corporation has credits from more than one rental real estate activity, identify on the attached statement the amount of each type of credit for each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Report in box 13 of Schedule K-1 each shareholder's pro rata share of other rental credits using code G. If you are reporting each shareholder's pro rata share of only one type of rental credit under code G, enter the code with an asterisk (G*) and the dollar amount in the entry space in box 13 and attach a statement that shows “Box 13, code G” and the type of credit. If you are reporting multiple types of rental credit under code G, enter the code with an asterisk (G*) and enter “STMT” in the entry space in box 13 and attach a statement that shows “Box 13, code G” and the dollar amount of each type of credit. If the corporation has credits from more than one rental activity, identify on the attached statement the amount of each type of credit for each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

Report in box 13 of Schedule K-1 each shareholder's pro rata share of the biofuel producer credit reported on line 13f using code I. If the corporation has credits from more than one activity, identify on an attachment to Schedule K-1 the amount for each separate activity. See Passive Activity Reporting Requirements, earlier.

Zero-emission nuclear power production credit (code A).

Complete Form 7213, Nuclear Power Production Credit, Part II, to figure the credit. Attach it to Form 1120-S.

Production from advanced nuclear power facilities credit (code B).

Complete Form 7213, Part I, to figure the credit. Attach it to Form 1120-S.

Undistributed capital gains credit (code H).

This credit represents taxes paid on undistributed capital gains by a regulated investment company (RIC) or a real estate investment trust (REIT). As a shareholder of a RIC or REIT, the corporation will receive notice of the amount of tax paid on undistributed capital gains on Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains.

Work opportunity credit (code J).

Complete Form 5884 to figure the credit. Attach it to Form 1120-S.

Disabled access credit (code K).

Complete Form 8826 to figure the credit. Attach it to Form 1120-S.

Empowerment zone employment credit (code L).

Complete Form 8844 to figure the credit. Attach it to Form 1120-S.

Credit for increasing research activities (code M).

Complete Form 6765 to figure the credit. Attach it to Form 1120-S. For more information, see the Instructions for Form 6765.

The corporation should provide the information necessary for the shareholder to determine whether the corporation is an eligible small business under section 38(c)(5)(A). If the shareholder and the corporation meet the requirements of section 38(c)(5)(A), the research credit may be treated as a specified credit.

Credit for employer social security and Medicare taxes paid on certain employee tips (code N).

Complete Form 8846 to figure the credit. Attach it to Form 1120-S.

Backup withholding (code O).

This credit is for backup withholding on dividends, interest, and other types of income of the corporation.

Unused investment credit from the qualifying advanced coal project credit or qualifying gasification project credit allocated from cooperatives (code P).

See the Instructions for Form 3468.

Unused investment credit from the qualifying advanced energy project credit allocated from cooperatives (code Q).

See the Instructions for Form 3468.

Unused investment credit from the advanced manufacturing investment credit allocated from cooperatives (code R).

See the Instructions for Form 3468.

Code S.

Reserved for future use.

Unused investment credit from the energy credit allocated from cooperatives (code T).

See the Instructions for Form 3468.

Unused investment credit from the rehabilitation credit allocated from cooperatives (code U).

See the Instructions for Form 3468.

Advanced manufacturing production credit (code V).

Complete Form 7207, Advanced Manufacturing Production Credit, to figure the credit. Attach it to Form 1120-S.

Codes W and X.

Reserved for future use.

Clean hydrogen production credit (code Y).

Complete Form 7210, Clean Hydrogen Production Credit, to figure the credit. Attach it to Form 1120-S.

Orphan drug credit (code Z).

Complete Form 8820, Orphan Drug Credit, to figure the credit. Attach it to Form 1120-S.

Enhanced oil recovery credit (code AA).

Complete Form 8830, Enhanced Oil Recovery Credit, to figure the credit. Attach it to Form 1120-S.

Renewable electricity production credit (code AB).

Complete Form 8835, Renewable Electricity Production Credit, if applicable. Attach a statement to Form 1120-S and Schedule K-1 showing the allocation of the credit for production during the 4-year period beginning on the date the facility was placed in service and for production after that period.

Biodiesel, renewable diesel, or sustainable aviation fuels credit (code AC).

Complete Form 8864, Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credit. Include any amount from line 10 of Form 8864 in the corporation's income on line 5 of Form 1120-S. If this credit includes the small agri-biodiesel producer credit, identify on a statement attached to Schedule K-1 (a) the small agri-biodiesel producer credit included in the total credit allocated to the shareholder, (b) the number of gallons for which the corporation claimed the small agri-biodiesel producer credit, and (c) the corporation's productive capacity for agri-biodiesel. Also report separately on an attached statement the amount of any sustainable aviation fuel credit.

New markets credit (code AD).

Complete Form 8874, New Markets Credit.

Credit for small employer pension plan startup costs (code AE).

Complete Form 8881, Credit for Small Employer Pension Plan Startup Costs, Auto-Enrollment, and Military Spouse Participation, Part I.

Credit for small employer auto-enrollment (code AF).

Complete Form 8881, Part II.

Credit for military spouse participation (code AG).

Complete Form 8881, Part III.

Credit for employer-provided childcare facilities and services (code AH).

Complete Form 8882, Credit for Employer-Provided Childcare Facilities and Services.

Low sulfur diesel fuel production credit (code AI).

Complete Form 8896, Low Sulfur Diesel Fuel Production Credit.

Qualified railroad track maintenance credit (code AJ).

Complete Form 8900, Qualified Railroad Track Maintenance Credit.

Credit for oil and gas production from marginal wells (code AK).

Complete Form 8904, Credit for Oil and Gas Production From Marginal Wells, if applicable.

Distilled spirits credit (code AL).

Complete Form 8906, Distilled Spirits Credit.

Energy efficient home credit (code AM).

Complete Form 8908, Energy Efficient Home Credit.

Alternative motor vehicle credit (code AN).

Complete Form 8910, Alternative Motor Vehicle Credit, if applicable.

Alternative fuel vehicle refueling property credit (code AO).

Complete Form 8911, Alternative Fuel Vehicle Refueling Property Credit.

Clean renewable energy bond credit (code AP).

The amount of this credit (excluding any credits from partnerships, estates, and trusts) is reported as interest income on line 4 of Schedule K. In addition, the amount of this credit is reported on line 16d of Schedule K. See the Instructions for Form 8912.

New clean renewable energy bond credit (code AQ).

The amount of this credit (excluding any credits from partnerships, estates, and trusts) is reported as interest income on line 4 of Schedule K. In addition, the amount of this credit is reported as a property distribution on line 16d of Schedule K. See the Instructions for Form 8912.

Qualified energy conservation bond credit (code AR).

The amount of this credit (excluding any credits from partnerships, estates, and trusts) is reported as interest income on line 4 of Schedule K. In addition, the amount of this credit is reported as a property distribution on line 16d of Schedule K. See the Instructions for Form 8912.

Qualified zone academy bond credit (code AS).

The amount of this credit (excluding any credits from partnerships, estates, and trusts) is reported as interest income on line 4 of Schedule K. In addition, the amount of this credit is reported on line 16d of Schedule K. See the Instructions for Form 8912.

Qualified school construction bond credit (code AT).

The amount of this credit (excluding any credits from partnerships, estates, and trusts) is reported as interest income on line 4 of Schedule K. In addition, the amount of this credit is reported as a property distribution on line 16d of Schedule K. See the Instructions for Form 8912.

Build America bond credit (code AU).

The amount of this credit (excluding any credits from partnerships, estates, and trusts) is reported as interest income on line 4 of Schedule K. In addition, the amount of this credit is reported as a property distribution on line 16d of Schedule K. See the Instructions for Form 8912.

Credit for employer differential wage payments (code AV).

Complete Form 8932, Credit for Employer Differential Wage Payments.

Carbon oxide sequestration credit (code AW).

Complete Form 8933, Carbon Oxide Sequestration Credit, to figure the credit. Attach it to Form 1120-S.

Carbon oxide sequestration credit recapture (code AX).

Complete Form 8933 to figure the credit recapture. Attach it to Form 1120-S. Report the carbon oxide sequestration credit recapture amount from Form 8933, line 22.

New clean vehicle credit (code AY).

Complete Form 8936, Clean Vehicle Credits, Part II.

Qualified commercial clean vehicle credit (code AZ).

Complete Form 8936, Part V.

Credit for small employer health insurance premiums (code BA).

Complete Form 8941, Credit for Small Employer Health Insurance Premiums.

Employer credit for paid family and medical leave (code BB).

Complete Form 8994, Employer Credit for Paid Family and Medical Leave.

Eligible credits from transferor(s) under section 6418 (code BC).

Enter the total amount of eligible credits received from transferor(s) included in Part III, line 6, column (g), of your Form 3800. Also, enter the total of the shareholder’s pro rata share of all eligible credits received from transferor(s) that were received from another pass-through entity. See required statement below.

Partnership and S corporation pass-through entities that transferred eligible credits from an unrelated person for cash under section 6418 must use Form 3800, Part III and Part V (if applicable), to report such credits. See the Instructions for Form 3800 for reporting and other requirements.

Codes BD through BG.

Reserved for future use.

Other credits (code ZZ)

Include any other type of credits not listed on lines 13a through 13f, or reported using codes A, B, H through BC.

Schedule K-1.

Enter in box 13 of Schedule K-1 each shareholder's pro rata share of the credits listed above. See additional Schedule K-1 reporting information provided in the instructions above. Enter the applicable code, A, B, H, J through BC, in the column to the left of the dollar amount entry space.

If you are reporting each shareholder's pro rata share of only one type of credit under code ZZ, enter the code with an asterisk (ZZ*) and the dollar amount in the entry space in box 13 and attach a statement that shows “Box 13, code ZZ” and the type of credit. If you are reporting multiple types of credit under code ZZ, enter the code with an asterisk (ZZ*) and enter “STMT” in the entry space in box 13 and attach a statement that shows “Box 13, code ZZ” and the dollar amount of each type of credit. If the corporation has credits from more than one activity, identify on an attachment to Schedule K-1 the amount of each type of credit for each separate activity. See Passive Activity Reporting Requirements , earlier.

Schedule K-1.

If you are reporting each shareholder's pro rata share of only one type of AMT item under code F, enter the code with an asterisk (F*) and the dollar amount in the entry space in box 15 and attach a statement that shows the type of AMT item. If you are reporting multiple types of AMT items under code F, enter the code with an asterisk (F*) and enter “STMT” in the entry space in box 15 and attach a statement that shows the dollar amount of each type of AMT item.

Tax-exempt income from transfer election.

Enter the total consideration received by the transferor S corporation as a result of a transfer election under section 6418. If the S corporation is allocated tax-exempt income from a pass-through entity (or lower-tier pass-through entity) making a transfer election to transfer its credits, include those amounts in code B as well.

Tax-exempt income from elective payment election.

Enter the amount from page 1, line 24d. This is the total amount of credits determined by the S corporation for which an elective payment election is being made.

Paycheck Protection Program (PPP) reporting.

Report tax-exempt income resulting from the forgiveness of a PPP loan on this line. Attach a statement to the S corporation return for each tax year in which the S corporation is applying Rev. Proc. 2021-48, sections 3.01(1), (2), or (3). The statement should also include the following information for each PPP loan.

An S corporation that didn’t report tax-exempt income from a PPP loan on its 2020 return may file an amended return to apply Rev. Proc. 2021-48 and should do so according to these instructions. An S corporation that reported tax-exempt income from a PPP loan on its 2020 return, the timing of which corresponds to one of the options presented in Rev. Proc. 2021-48, need not file an amended return solely to attach the statement that is described in the instructions for Schedule K, line 16(b).

As explained in section 3.03 of Rev. Proc. 2021-48, if an S corporation treats tax-exempt income resulting from a PPP loan as received or accrued prior to when forgiveness of the PPP loan is granted and the amount of forgiveness granted is less than the amount of tax-exempt income that was previously treated as received or accrued, the S corporation must make appropriate adjustments (if any) on an amended return for the tax year in which the S corporation treated the tax-exempt income as received or accrued. The S corporation should attach a statement to such amended return that includes the following information.

Schedule K-1.

Report each shareholder's pro rata share of amounts reported on lines 17a and 17b (investment income and expenses) in box 17 of Schedule K-1 using codes A and B, respectively.

If there are other items of investment income or expense included in the amounts that are required to be passed through separately to the shareholders on Schedule K-1, such as net short-term capital gain or loss, net long-term capital gain or loss, and other portfolio gains or losses, give each shareholder a statement identifying these amounts.

Qualified rehabilitation expenditures (other than rental real estate) (code C).

Enter total qualified rehabilitation expenditures from activities other than rental real estate activities. See the Instructions for Form 3468 for details on qualified rehabilitation expenditures.

Report qualified rehabilitation expenditures related to rental real estate activities on line 13c.

Basis of energy property (code D).

In box 17 of Schedule K-1, enter code D followed by an asterisk and enter “STMT” in the entry space for the dollar amount. Attach a statement to Schedule K-1 that provides the shareholder's pro rata share of the basis and capacity amounts the shareholder will need to figure the amounts to report on Part VI, lines 1a, 3a, 3e, 5a, 5f, 5o, 7a, 7j, 9a, 9b, 11a, 11d, 11h, 13a, 15a, 17a, 17e, 19a, 21a, 23a, 23e, 25a, 25d, 25g, 25j, and 29a of Form 3468. See the Instructions for Form 3468 for details.

Recapture of low-income housing credit (codes E and F).

If recapture of part or all of the low-income housing credit is required because (a) the prior year qualified basis of a building decreased, or (b) the corporation disposed of a building or part of its interest in a building, see Form 8611, Recapture of Low-Income Housing Credit. Complete lines 1 through 7 of Form 8611 to figure the amount of the credit to recapture.

Use code E on Schedule K-1 to report recapture of the low-income housing credit from a section 42(j)(5) partnership. Use code F to report recapture of any other low-income housing credit. See the instructions for lines 13a and 13b, earlier, for more information.

If a shareholder's ownership interest in a building decreased because of a transaction at the shareholder level, the corporation must provide the necessary information to the shareholder to enable the shareholder to figure the recapture.

The disposal of a building or an interest therein will generate a credit recapture unless it is reasonably expected that the building will continue to be operated as a qualified low-income building for the remainder of the building's compliance period.

See Form 8586, Form 8611, and section 42 for more information.

Recapture of investment credit (code G).

Complete and attach Form 4255 if, before the end of the recapture period, investment credit property is disposed of or no longer qualifies for the credit or if credit recapture is otherwise required. See the Instructions for Form 4255 for details about when credit recapture is required. State the type of property at the top of Form 4255, and complete lines 2, 3, 4, 10, and 11, whether or not any shareholder is subject to recapture of the credit.

Attach to each Schedule K-1 a separate statement providing the information the corporation is required to show on Form 4255, but list only the shareholder's pro rata share of the basis of the property subject to recapture. Also indicate the lines of Form 4255 on which the shareholders should report these amounts.

The corporation itself is liable for investment credit recapture in certain cases. See Investment credit recapture tax , earlier, for details.

Recapture of other credits (code H).

On an attached statement to Schedule K-1, provide any information shareholders will need to report recapture of credits (other than recapture of low-income housing credit and investment credit reported on Schedule K-1 using codes E, F, and G). The following are examples of credits subject to recapture and reported using code H.

Look-back interest—Completed long-term contracts (code I).

If the corporation is closely held (defined in section 460(b)(4)(C)(iii)) and it entered into any long-term contracts after February 28, 1986, that are accounted for under either the percentage of completion-capitalized cost method or the percentage of completion method, it must attach a statement to Form 1120-S showing the information required in items (a) and (b) of the instructions for lines 1 and 3 of Part II of Form 8697. It must also report the amounts for Part II, lines 1 and 3, to its shareholders. See the Instructions for Form 8697 for more information.

Look-back interest—Income forecast method (code J).

If the corporation is closely held (defined in section 460(b)(4)(C)(iii)) and it depreciated certain property placed in service after September 13, 1995, under the income forecast method, it must attach to Form 1120-S the information specified in the instructions for Form 8866, line 2, for the 3rd and 10th tax years beginning after the tax year the property was placed in service. It must also report the line 2 amounts to its shareholders. See the Instructions for Form 8866 for more details.

Dispositions of property with section 179 deductions (code K).

This represents gain or loss on the sale, exchange, or other disposition of property for which a section 179 deduction has been passed through to shareholders. The corporation must provide all the following information with respect to such dispositions (see the instructions for Form 1120-S, line 4, earlier).

Recapture of section 179 deduction (code L).

This amount represents recapture of the section 179 deduction if business use of the property dropped to 50% or less before the end of the recapture period. If the business use of any property for which a section 179 deduction was passed through to shareholders dropped to 50% or less (for a reason other than disposition), the corporation must provide all the following information.

See Regulations section 1.179-1(e) for details.

Section 453(l)(3) information (code M).

Supply any information needed by a shareholder to figure the interest due under section 453(l)(3). If the corporation elected to report the dispositions of certain timeshares and residential lots on the installment method, each shareholder's tax liability must be increased by the shareholder's pro rata share of the interest on tax attributable to the installment payments received during the tax year.

Section 453A(c) information (code N).

Supply any information shareholders need to figure the interest charge under section 453A(c). See Pub. 537, Installment Sales. This information must include the following from each Form 6252 where the shareholder's pro rata share of the selling price, including mortgages and other debts, is greater than $150,000.

See section 453A(c) for information on how to compute the interest charge on the deferred tax liability. The section 453A interest charge is reported on the other tax line of the shareholder's tax return. See Interest on Deferred Tax in Pub. 537 for additional details on how to compute the section 453A(c) interest.

Section 1260(b) information (code O).

Supply any information needed by a shareholder to figure the interest due under section 1260(b). If the corporation had gain from certain constructive ownership transactions, each shareholder's tax liability must be increased by the shareholder's pro rata share of interest due on any deferral of gain recognition. See section 1260(b) for details, including how to figure the interest.

Interest allocable to production expenditures (code P).

Supply any information needed by a shareholder to properly capitalize interest as required by section 263A(f). See Section 263A uniform capitalization rules , earlier, for more information.

CCF nonqualified withdrawals (code Q).

Report nonqualified withdrawals by the corporation from a capital construction fund. Attach a statement to the shareholder's Schedule K-1 providing details of the withdrawal. See Pub. 595.

Depletion information—Oil and gas (code R).

Report gross income and other information relating to oil and gas well properties to shareholders to allow them to figure the depletion deduction for oil and gas well properties. Allocate to each shareholder a proportionate share of the adjusted basis of each corporate oil or gas well property. See section 613A(c)(11) for details.

The corporation can't deduct depletion on oil and gas wells. Each shareholder must determine the allowable amount to report on the shareholder's return.

Codes S and T.

Reserved for future use.

Net investment income (code U).

Use code U to report any information that may be relevant for shareholders to figure their net investment income tax when the information isn't otherwise identifiable elsewhere on Schedule K-1 or Schedule K-3. Attach a statement that shows a description and dollar amount of each relevant item.

Examples of items reported using code U may include the following.

In addition, Regulations section 1.1411-10 provides special rules with respect to stock of CFCs and passive foreign investment companies (PFICs) owned by the corporation. If the corporation owns, directly or indirectly, stock of a CFC or PFIC, then additional reporting may be required under code U.

Section 199A information (code V).

The qualified business income (QBI) deduction may be taken by eligible taxpayers, including individuals and some trusts and estates. The deduction is determined at the shareholder level. S corporations are required to report information necessary for their shareholders to figure the deduction. Use the code with an asterisk (V*) in box 17 on each shareholder’s Schedule K-1 and enter “STMT” in the entry space to indicate that the information is provided on an attached statement separately identifying the shareholder’s pro rata share of:

Don’t add amounts into a single number and report it in box 17 on Schedule K-1. The section 199A information must be separately identified for each trade or business the S corporation directly conducts, including specified service trades or businesses.

The S corporation must make an initial determination of which items are qualified items of income, gain, deduction, and loss at its level and report to each shareholder their pro rata share of all items that may be qualified items at the shareholder level. These items must be separately stated where necessary for the shareholder to figure the deduction. See Determining the S corporation’s QBI or qualified PTP items , later. The shareholder must then determine whether each item is includible in its QBI.

In addition, the S corporation must also report whether any of its trades or businesses are specified service trades or businesses (SSTBs) and identify on the statement any trades or businesses that are aggregated.

S corporations should use Statement A—QBI Pass-Through Entity Reporting , or a substantially similar statement, to report each shareholder’s pro rata information from each trade or business, including QBI items, W-2 wages, UBIA of qualified property, qualified PTP items, and section 199A dividends by attaching the completed statement(s) to each shareholder’s Schedule K-1. The S corporation should also use Statement A to report each shareholder’s pro rata share of QBI items, W-2 wages, UBIA of qualified property, qualified PTP items, and section 199A dividends reported to the S corporation by another entity.

S corporations should use Statement B—QBI Pass-Through Entity Aggregation Election(s) , or a substantially similar statement, to report aggregated trades or businesses and provide supporting information to shareholders on each Schedule K-1.

S corporations should use Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives , or a substantially similar statement, to report pro rata QBI and W-2 wages allocable to qualified payments from a specified agricultural or horticultural cooperative for each trade or business. This statement should also be used to report each shareholder’s pro rata section 199A(g) deduction reported to the S corporation by the specified cooperative.

The S corporation must also report all QBI information reported to it by any entity in which the S corporation has an ownership interest.

Specific instructions for Statement A—QBI Pass-Through Entity Reporting.

Specific instructions for Statement B—QBI Pass-Through Entity Aggregation Election(s).

If the S corporation elects to aggregate more than one trade or business that meets all the requirements to aggregate, the S corporation must report the aggregation to shareholders on Statement B, or a substantially similar statement, and attach it to each Schedule K-1. The S corporation must indicate trades or businesses that were aggregated by checking the appropriate box on Statement A for each aggregated trade or business. The S corporation must also provide a description of the aggregated trade or business and an explanation of the factors met that allow the aggregation.

The aggregation statement must be completed each year to show the S corporation's trade or business aggregations. Failure to disclose the aggregations may cause them to be disaggregated. The S corporation's aggregations must be reported consistently for all subsequent years, unless there is a change in facts and circumstances that changes or disqualifies the aggregation. The S corporation must provide a written explanation for any changes to prior year aggregations that describes the change in facts and circumstances.

If the S corporation holds a direct or indirect interest in an RPE that aggregates multiple trades or businesses, the S corporation must also include a copy of the RPE’s aggregations with each shareholder’s Schedule K-1. The S corporation can’t break apart the aggregation of another RPE, but it may add trades or businesses to the aggregation, assuming the aggregation requirements are satisfied.

Specific instructions for Statement C—QBI Pass-Through Entity Reporting—Patrons of Specified Agricultural and Horticultural Cooperatives.

Codes W through Z.

Reserved for future use.

Excess taxable income (code AA).

If the S corporation is required to file Form 8990, Limitation on Business Interest Expense Under Section 163(j), it may determine it has excess taxable income. If so, enter the amount from Form 8990, Part III, line 41, for excess taxable income on Schedule K. Report the shareholder's pro rata share in box 17 of Schedule K-1.

Excess business interest income (code AB).

If the S corporation is required to file Form 8990, it may determine it has excess business interest income. If so, enter the amount from Form 8990, Part III, line 42, for excess taxable income on Schedule K. Report the shareholder's pro rata share in box 17 of Schedule K-1.

Gross receipts for section 448(c) (code AC).

Provide information shareholders need to complete the gross receipts test for section 448(c) purposes. See the Instructions for Form 8990 for details.

Codes AD through AI.

Reserved for future use.

Excess business loss limitation (code AJ).

If the corporation has deductions attributable to a business activity, provide a statement showing the aggregate gross income or gain and the aggregate deductions from the business activity that shareholders need to figure any excess business loss limitation. See section 461(l) and the Instructions for Form 461 for details.

Codes AK through AM.

Reserved for future use.

Farming and fishing business (code AN).

In box 17 of Schedule K-1, enter code AN followed by an asterisk and enter “STMT” in the entry space for the dollar amount. Attach a statement to Schedule K-1 that provides the shareholder's pro rata share of the following amounts.

Code AO.

Reserved for future use.

Inversion gain (code AP).

Any income or gain reported on lines 1 through 10 of Schedule K that qualifies as inversion gain, if the corporation is an expatriated entity or is a partner in an expatriated entity. For details, see section 7874. Attach a statement to Form 1120-S that shows the amount of each type of income or gain included in the inversion gain. The corporation must report each shareholder's pro rata share of the inversion gain in box 17 of Schedule K-1 using code AP. Attach a statement to Schedule K-1 that shows the shareholder's pro rata share of the amount of each type of income or gain included in the inversion gain.

Codes AQ and AR.

Reserved for future use.

Qualifying advanced coal project property and qualifying gasification project property (code AS).

Basis in qualifying advanced coal project property and qualifying gasification or advanced energy project property. Attach a statement to Schedule K-1 that provides the shareholder's pro rata share of the basis amounts the shareholder will need to figure the amounts to report on Part II, lines 1a, 2a, and 3a; or lines 4a and 5a of Form 3468. See the Instructions for Form 3468 for details.

Qualifying advanced energy project property (code AT).

Basis in qualifying advanced energy project property. Attach a statement to Schedule K-1 that provides the shareholder's pro rata share of the basis amounts the shareholder will need to figure the amounts to report on Part III, line 1a, of Form 3468. See the Instructions for Form 3468 for details.

Advanced manufacturing investment property (code AU).

Basis in advanced manufacturing investment facility property. Attach a statement to Schedule K-1 that provides the shareholder's pro rata share of the basis amounts the shareholder will need to figure the amounts to report on Part IV, line 1b, of Form 3468. See the Instructions for Form 3468 for details.

Code AV.

Reserved for future use.

Reportable transactions (code AW).

If the corporation participates in a transaction that must be disclosed on Form 8886 (discussed earlier), both the corporation and its shareholders may be required to file Form 8886. The corporation must determine if any of its shareholders are required to disclose the transaction and provide those shareholders with information they will need to file Form 8886. This determination is based on the category(ies) under which a transaction qualified for disclosures. See the Instructions for Form 8886 for details.

Codes AX through BD.

Reserved for future use.

Other information (code ZZ).

Any other information the shareholders need to prepare their tax returns, including information needed to prepare state and local tax returns.