Schedule B. — Instruction 1065 — Instructions for Form

Question 1 Check box 1f for any other type of entity and state the type.

Maximum Percentage Owned for Purposes of Questions 2 and 3 To determine the maximum percentage owned in the partnership’s profit, loss, or capital for the purposes of questions 2a, 2b, and 3b, determine separately the partner’s percentage of interest in profit, loss, and capital at the end of the partnership’s tax year. This determination must be based on the partnership agreement and it must be made using the constructive ownership rules described below. The maximum percentage is the highest of these three percentages (determined at the end of the tax year).

See Item J. Partner’s Profit, Loss, and Capital , later, for more information on ownership percentages.

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Questions 2 and 3

Constructive ownership of the partnership. For purposes of question 2, except for foreign governments within the meaning of section 892, in determining an ownership interest in the profit, loss, or capital of the partnership, the constructive ownership rules of section 267(c) (excluding section 267(c)(3)) apply to ownership of interests in the partnership as well as corporate stock. An interest in the partnership that is owned directly or indirectly by or for another entity (corporation, partnership, estate, trust, or tax-exempt organization) is considered to be owned proportionately by the owners (shareholders, partners, or beneficiaries) of the owning entity.

Also, under section 267(c), an individual is considered to own an interest owned directly or indirectly by or for the individual’s family. The family of an individual includes only that individual’s spouse, brothers, sisters, ancestors, and lineal descendants. An interest will be attributed from an individual under the family attribution rules only if the person to whom the interest is attributed owns a direct interest in the partnership or an indirect interest under section 267(c)(1) or (5). For purposes of these instructions, an individual won’t be considered to own, under section 267(c)(2), an interest in the partnership owned, directly or indirectly, by a family member of the individual unless the individual also owns an interest in the partnership either directly or indirectly through a corporation, partnership, or trust.

For purposes of question 2, the term “foreign government” has the same meaning as it does under section 892. In determining a foreign government’s ownership interest in the profit, loss, or capital of the partnership, the constructive ownership rules of Temporary Regulations section 1.892-5T(c) (1)(i) apply to ownership of interests in the partnership as well as corporate stock. An interest in the partnership that is owned directly or indirectly by an integral part or controlled entity of a foreign sovereign (within the meaning of Temporary Regulations section 1.892-2T(a)) is considered to be owned proportionately by such foreign sovereign.

Constructive ownership examples for questions 2 and 3 are included below. For the purposes of questions 2 and 3, add an owner’s direct percentage ownership and indirect percentage ownership in an entity to determine if the owner owns, directly or indirectly, 50% or more of the entity.

Example for question 2a. Corporation A owns, directly, an interest of 50% in the profit, loss, or capital of Partnership B. Corporation A also owns, directly, an interest of 15% in the profit, loss, or capital of Partnership C. Partnership B owns, directly, an interest of 70% in the profit, loss, or capital of Partnership C. Therefore, Corporation A owns, directly or indirectly, an interest of 50% in the profit, loss, or capital of Partnership C (15% directly and 35% indirectly through Partnership B). On Partnership C’s Form 1065, it must answer “Yes” to question 2a of Schedule B. See Example 1 in the instructions for Schedule B-1 (Form 1065) for guidance on providing the rest of the information required of entities answering “Yes” to this question.

Example for question 2b. A owns, directly, 50% of the profit, loss, or capital of Partnership X. B, the daughter of A, doesn’t own, directly, any interest in Partnership X and doesn’t own, indirectly, any interest in Partnership X through any entity (corporation, partnership, trust, or estate). Because family attribution rules apply only when an individual (in this example, B) owns a direct interest in the partnership or an indirect interest through another entity, A’s interest in Partnership X isn’t attributable to B. On Partnership X’s Form 1065, it must answer “Yes” to question 2b of Schedule B. See Example 2 in the instructions for Schedule B-1 (Form 1065) for guidance on providing the rest of the information required of entities answering “Yes” to this question.

Constructive ownership of other entities by the partner- ship. For purposes of determining the partnership’s constructive ownership of other entities, the constructive ownership rules of section 267(c) (excluding section 267(c)(3)) apply to ownership of interests in partnerships and trusts as well as corporate stock. Generally, if an entity (a corporation, partnership, or trust) is owned, directly or indirectly, by or for another entity (corporation, partnership, estate, or trust), the owned entity is considered to be owned proportionally by or for the owners (shareholders, partners, or beneficiaries) of the owning entity.

Question 3a. List each corporation in which the partnership, at the end of the tax year, owns, directly, 20% or more, or owns, directly or indirectly, 50% or more, of the total voting power of all classes of stock entitled to vote. Indicate the name, EIN, country of incorporation, and percentage interest owned, directly or indirectly, in the total voting power. List the parent corporation of an affiliated group filing a consolidated tax return rather than the subsidiary members except for subsidiary members in which an interest is owned, directly or indirectly, independent of the interest owned, directly or indirectly, in the parent corporation. If a corporation is owned through a DE, list the information for the corporation rather than the DE.

Question 3b. List each partnership in which the partnership, at the end of the tax year, owns, directly, an interest of 20% or more, or owns, directly or indirectly, an interest of 50% or more, in the profit, loss, or capital of the partnership. List each trust in which the partnership, at the end of the tax year, owns, directly, an interest of 20% or more, or owns, directly or indirectly, an interest of 50% or more, in the trust beneficial interest. For each partnership or trust listed, indicate the name, EIN, type of entity (partnership or trust), and country of origin. If the listed entity is a partnership, enter in column (v) the maximum of percentage interests owned, directly or indirectly, in the profit, loss, or capital of the partnership at the end of the partnership’s tax year. If the entity is a trust, enter in column (v) the percentage of the partnership’s beneficial interest in the trust owned, directly or indirectly, at the end of the tax year. List a partnership or trust owned through a DE rather than the DE.

Question 4 Answer “Yes” if the partnership meets all four of the requirements shown on the form. “Total receipts” is defined as the sum of gross receipts or sales (page 1, line 1a); all other income (page 1, lines 4 through 7); income reported on Schedule K, lines 3a, 5, 6a, and 7; income or net gain reported on Schedule K, lines 8, 9a, 10, and 11; and income or net gain reported on Form 8825, lines 2, 21, and 22a. “Total assets” is defined as the amount that would be reported in item F on page 1 of Form 1065.

Question 5 Answer “Yes” if interests in the partnership are traded on an established securities market or are readily tradable on a secondary market (or its substantial equivalent).

Question 6 Generally, the partnership will have income if debt is canceled or forgiven. The determination of the existence and amount of cancellation of debt income is determined at the partnership level. Partnership cancellation of indebtedness income is separately stated on Schedule K and Schedule K-1. The extent to which such income is taxable is usually determined by each individual partner under rules found in section 108. For more information, see Pub. 334, Tax Guide for Small Business.

Question 7 Answer “Yes” if the partnership filed, or is required to file, a return under section 6111 to provide information on any reportable

26 Instructions for Form 1065 (2025)

transaction by a material advisor. Use Form 8918, Material Advisor Disclosure Statement, to provide the information. For details, see the Instructions for Form 8918.

Question 8 Answer “Yes” if either (1) or (2) below applies to the partnership. Otherwise, answer “No.”

At any time during calendar year 2025, the partnership had an interest in or signature or other authority over a bank account, securities account, or other financial account in a foreign country (see FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)); and

a. The combined value of the accounts was more than

$10,000 at any time during the calendar year; and

b. The accounts were not with a U.S. military banking

facility operated by a U.S. financial institution.

The partnership owns more than 50% of the stock in any corporation that would answer “Yes” based on item (1) above.

If “Yes,” do the following.

Enter the name of the foreign country or countries. Attach a separate sheet if more space is needed.
File FinCEN Form 114 electronically at the FinCEN website, BSAefiling.fincen.gov .

Question 9 The partnership may be required to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, if any of the following apply.

It directly or indirectly transferred property or money to a foreign trust. For this purpose, any U.S. person who created a foreign trust is considered a transferor.
It’s treated as the owner of any part of the assets of a foreign trust under the grantor trust rules.
It received a distribution, a loan of cash or other marketable securities, or uncompensated use of trust property from a foreign trust, or a foreign trust holds an outstanding qualified obligation of the partnership.

For more information, see the Instructions for Form 3520.

An owner of a foreign trust must ensure that the trust files an annual information return on Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner.

Questions 10a, 10b, 10c, and 10d

Tip: You must answer “Yes” or “No” for each question.

Question 10a. Answer “Yes” if the partnership is making, or has made (and hasn’t revoked), a section 754 election. For information about the election, see item 4 under Elections Made by the Partnership, earlier.

Question 10b. Answer “Yes” if either of the following has occurred.

The partnership made an optional basis adjustment under section 743(b) or 734(b) for the tax year.
The partnership has made a section 754 election (and it hasn’t been revoked) and a basis adjustment under section 743(b) is made on a sale or exchange of a partnership interest or a transfer of a partnership interest on the death of a partner. See question 10c if the partnership has a substantial built-in loss immediately after such a transfer.

For partnerships other than PTPs, enter the total aggregate positive amount (in the appropriate space provided) resulting from all section 743(b) adjustments. “Aggregate positive amount from all section 743(b) adjustments” means the increase in the

partners’ shares of basis in partnership property from all section 743(b) adjustments allocated to all the partners. Enter the total aggregate negative amount (in the appropriate space provided) resulting from all section 743(b) adjustments. “Aggregate negative amount from all section 743(b) adjustments” means the decrease in the partners’ shares of basis in partnership property from all section 743(b) adjustments allocated to all the partners.

Section 743(b) basis adjustment. The basis adjustment affects only the transferee’s basis in partnership property. The partnership must attach a statement to the return for the tax year in which the transfer occurred. The statement must include:

The name of the transferee partner,
The EIN or SSN of the transferee partner,
The computation of the adjustment, and
The identity of the partnership properties to which the adjustment has been allocated.

For details, see section 743 and Regulations section 1.743-1. For details on allocating the basis adjustment to partnership properties, see section 755 and Regulations section 1.755-1.

Question 10c. Answer “Yes” if the partnership made an optional basis adjustment under section 734(b) for the tax year. If the partnership has made a section 754 election (and it hasn’t been revoked), the partnership must make a basis adjustment under section 734(b). Enter the total aggregate positive amount and the total aggregate negative amount in the appropriate space provided. “Aggregate positive amount from all section 734(b) adjustments” means the increase in the basis of partnership property from all section 734(b) adjustments. Enter the total aggregate negative amount (in the appropriate space provided) resulting from all section 734(b) adjustments. “Aggregate negative amount from all section 734(b) adjustments” means the decrease in basis of partnership property from all section 734(b) adjustments.

Section 734(b) basis adjustment. For a section 734(b) basis adjustment, attach a statement that includes:

The computation of the adjustment,
The class of property distributed (ordinary income property or capital gain property), and
The partnership properties to which the adjustment has been allocated.

Question 10d. Answer “Yes” if the partnership had to make a basis reduction under section 743(b) because of a substantial built-in loss (as defined in section 743(d)) or under section 734(b) because of a substantial basis reduction (as defined in section 734(d)).

Enter the total aggregate amount of such section 743(b) adjustments and/or section 734(b) adjustments for all partners and/or partnership property made in the tax year in the space provided as a positive number.

Section 743(d)(1) provides that, for purposes of section 743, a partnership has a substantial built-in loss resulting from a transfer of a partnership interest if the partnership’s adjusted basis in the partnership’s property exceeds by more than $250,000 the FMV of the property or the transferee partner would be allocated a loss of more than $250,000 if the partnership assets were sold for cash equal to their FMV immediately after such transfer. Under section 734(d), there’s a substantial basis reduction resulting from a distribution if the sum of the following amounts exceeds $250,000.

The amount of loss recognized by the distributee partner on a distribution in liquidation of the partner’s interest in the partnership (see section 731(a)(2)).
The excess of the basis of the distributed property to the distributee partner (determined under section 732) over the adjusted basis of the distributed property to the partnership immediately before the distribution (as adjusted by section 732(d)).

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Section 734(b) basis adjustment. For a section 734(b) basis adjustment, for partnerships other than PTPs, attach a statement that includes:

The computation of the adjustment,
The class of property distributed (ordinary income property or capital gain property), and
The partnership properties to which the adjustment has been allocated.

Question 11 Check the box if the partnership engaged in a like-kind exchange during the current or immediately preceding tax year and received replacement property that it distributed during the current tax year. For purposes of this question, the partnership is considered to have distributed replacement property if the partnership contributed such property to any entity other than a DE. The distribution of its ownership interest in a DE is considered a distribution of the underlying property.

Question 12 If a partnership distributed property to its partners to be jointly owned, whether such distribution is direct or through the formation of an intermediate entity, the question must be answered “Yes.” For purposes of question 12, an “undivided interest in partnership property” means property that was owned by the partnership either directly or through a DE and which was distributed to partners as fractional ownership interests. A tenancy-in-common interest is a type of undivided ownership interest in property which provides each owner the right to transfer property to a third party without destroying the tenancy in common. Partners may agree to partition property held as tenants in common or may seek a court order to partition the property (usually dividing the property into fractional interests in accordance with each partner’s ownership interest in the partnership).

Example. Partnership P is a partnership that files Form 1065. Partnership P holds title to land held for investment. Partnership P converts its title to the land to fractional interests in the name of the partners and distributes such interests to its partners. Partnership P must answer “Yes” to question 12.

Questions 13a and 13b

Question 13a. Enter the number of Forms 8858, Information Return of U.S. Persons With Respect To Foreign Disregarded Entities (FDEs) and Foreign Branches (FBs), that are attached to the return. Form 8858 and its schedules are used by certain U.S. persons (including domestic partnerships) that own an FDE or FB directly (or, in certain cases, indirectly or constructively) to satisfy the reporting requirements of sections 6011, 6012, 6031, and 6038, and the related regulations. See Form 8858 (and its separate instructions) for information on completing the form and the information that the partnership may need to provide to certain partners for them to complete their Forms 8858 relating to that FDE or FB.

Question 13b. Reserved for future use.

Question 14 Answer “Yes” if the partnership had any foreign partners (for purposes of section 1446(a)) at any time during the tax year. Otherwise, answer “No.”

If the partnership had gross income effectively connected with a trade or business in the United States and foreign partners, it may be required to withhold tax under section 1446(a) on income allocable to foreign partners (without regard to distributions) and file Forms 8804, 8805, and 8813. See Regulations sections 1.1446-1 through -7 and the Instructions for Forms 8804, 8805, and 8813 for more information.

Questions 16a and 16b If the partnership made any payment in 2025 that would require the partnership to file any Form(s) 1099, answer “Yes” for question 16a and answer question 16b. Otherwise, answer “No” for question 16a and skip question 16b. Go to IRS.gov/ Businesses/Small-Businesses-Self-Employed/Am-I-required-to- file-a-Form-1099-or-other-information-return for more information.

Question 20 For tax years beginning after 2015, domestic partnerships that are formed or availed of to hold specified foreign financial assets (specified domestic entities) must file Form 8938, Statement of Specified Foreign Financial Assets, with its Form 1065 for the tax year. Form 8938 must be filed each year the value of the partnership’s specified foreign financial assets meets or exceeds the reporting threshold. For more information on domestic partnerships that are specified domestic entities and the types of foreign financial assets that must be reported, see the Instructions for Form 8938.

A domestic partnership required to file Form 8938 with its Form 1065 for the tax year should answer “Yes” to this question.

Question 22 Section 267A disallows a deduction for certain interest or royalty paid or accrued pursuant to a hybrid arrangement, to the extent that, under the foreign tax law, there isn’t a corresponding income inclusion (including long-term deferral). On the entry line for question 22, report the total amount of interest and royalty paid or accrued by the partnership for which the partnership knows, or has reason to know, that one or more partners’ distributive shares of deductions are disallowed under section 267A. For additional information, see FAQs at IRS.gov/ Businesses/Partnerships/FAQs-for-Form-1065-Schedule-B- Other-Information-Question-22 .

Question 23 The limitation on BIE applies to every taxpayer with a trade or business, unless the taxpayer meets certain specified exceptions. A partnership may elect out of the limitation for certain businesses otherwise subject to the BIE limitation.

Certain real property trades or businesses and farming businesses qualify to make an election not to limit BIE. This is an irrevocable election. If you make this election, you’re required to use the alternative depreciation system to depreciate certain property. Also, you aren’t entitled to the special depreciation allowance for that property. For a partnership with more than one qualifying business, the election is made with respect to each business. Answer “Yes” if the partnership has an election in effect to exclude a real property trade or business or a farming business from section 163(j). For more information, see section 163(j) and the Instructions for Form 8990.

Question 24 Generally, a taxpayer with a trade or business must file Form 8990 to claim a deduction for business interest. BIE is interest that is properly allocable to a non-excepted trade or business or that is floor plan financing interest. In addition, Form 8990 must be filed by any taxpayer that owns an interest in a partnership with current-year, or prior-year carryover, excess business interest expense (EBIE) allocated from the partnership. A pass-through entity allocating excess taxable income or excess business interest income to its owners (that is, a pass-through entity that isn’t a small business taxpayer) must file Form 8990, regardless of whether it has any interest expense.

Exclusions from filing. A taxpayer isn’t required to file Form 8990 if the taxpayer is a small business taxpayer and doesn’t

28 Instructions for Form 1065 (2025)

have EBIE from a partnership. A taxpayer is also not required to file Form 8990 if the taxpayer only has BIE from the following excepted trades or businesses.

The trade or business of providing services as an employee.
An electing real property trade or business.
An electing farming business.
Certain utility businesses.

Small business taxpayer. A small business taxpayer isn’t subject to the BIE limitation and isn’t required to file Form 8990. A small business taxpayer is a taxpayer that (a) isn’t a tax shelter (as defined in section 448(d)(3)); and (b) meets the gross receipts test of section 448(c), discussed next.

Gross receipts test. A taxpayer meets the gross receipts test if the taxpayer has average annual gross receipts of $31 million or less for the 3 prior tax years. A taxpayer’s average annual gross receipts for the 3 prior tax years is determined by adding the gross receipts for the 3 prior tax years and dividing the total by 3. Gross receipts include the aggregate gross receipts from all persons treated as a single employer, such as a controlled group of corporations, commonly controlled partnerships, or proprietorships, and affiliated service groups. See section 448(c) and the Instructions for Form 8990 for additional information.

Question 25 To be certified as a QOF, the partnership must file Form 1065 and attach Form 8996, even if the partnership had no income or expenses to report. If the partnership is attaching Form 8996, answer “Yes” to question 25. On the line following the dollar sign, enter the amount from Form 8996, Part III, line 15.

Question 26 Provide the number of foreign partners subject to section 864(c) (8) as a result of transferring all or a portion of an interest in the partnership if the partnership is engaged in a U.S. trade or business. Section 864(c)(8) provides that gain or loss of a foreign transferor from the transfer of a partnership interest is treated as effectively connected with the conduct of a trade or business within the United States to the extent that the transferor would have had effectively connected gain or loss if the partnership sold all of its assets at FMV on the date of transfer. For purposes of section 864(c)(8), a “transfer of a partnership interest” means a sale, an exchange, or other disposition, and includes a distribution from a partnership to a partner to the extent that gain or loss is recognized on the distribution, as well as a transfer treated as a sale or an exchange under section 707(a)(2)(B). Section 864(c)(8) applies to foreign partners that directly or indirectly transfer an interest in a partnership that is engaged in a U.S. trade or business. The partnership should include in its response any transfer for which it has received notification or otherwise knows about. If the partnership is a PTP as defined in section 469(k)(2) and has properly answered “Yes” to question 5 on Form 1065, Schedule B, then it’s not required to answer the question.

If a partnership had any foreign partners subject to section 864(c)(8), the partnership must complete Schedule K-3 (Form 1065), Part XIII, for each foreign partner subject to section 864(c) (8) on a transfer or distribution. The partnership may also be required to withhold under section 1446(f)(1) on the distribution to the transferor partner and under section 1446(f)(4) on its future distributions to the transferee partner if the transferor partner failed to withhold on the transfer under section 1446(f) (1). See Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for more information.

Question 27 Answer “Yes” if at any time during the tax year there were transfers between the partnership and its partners subject to the

disclosure requirements of Regulations section 1.707-8. For certain transfers that are presumed to be sales, the partnership or the partners must comply with the disclosure requirements in Regulations section 1.707-8. Generally, disclosure is required when:

Certain transfers to a partner are made within 2 years of a transfer of property by the partner to the partnership;
Certain debt is incurred by a partner within 2 years of the earlier of (a) a written agreement to transfer, or (b) a transfer of the property that secures the debt, if the debt is treated as a qualified liability; or
Transfers from a partnership to a partner occur which are the equivalent to those listed in (1) or (2) above.

The disclosure must be made on the transferor partner’s return using Form 8275, Disclosure Statement, or on an attached statement providing the same information. When more than one partner transfers property to a partnership under a plan, the disclosure may be made by the partnership rather than by each partner.

Question 28 Section 7874 applies in certain cases in which a foreign corporation directly or indirectly acquires substantially all of the properties constituting a trade or business of a domestic partnership. Answer “Yes” if, since December 22, 2017, a foreign corporation directly or indirectly acquired substantially all of the properties constituting a trade or business of your partnership (and you’re a domestic partnership), and the ownership with respect to the acquisition was greater than 50% (by vote or value). If “Yes,” list the ownership percentage by both vote and value.

The information must be reported even if you conclude that section 7874 doesn’t apply.

Section 7874 generally applies when the following three requirements are met.

Pursuant to a plan or series of related transactions, a foreign corporation must acquire directly or indirectly substantially all of the properties constituting a trade or business of a domestic partnership.
After the acquisition, the ownership percentage (by vote or value) must be at least 60%.
After the acquisition, the expanded affiliate that includes the foreign acquiring corporation must not have substantial business activities in the foreign country in which the foreign acquiring corporation is created or organized.

When section 7874 applies, the tax treatment of the acquisition depends on the ownership percentage. If the ownership percentage is at least 80%, the foreign acquiring corporation is treated as a domestic corporation for all purposes of the Code. See section 7874(b). If the ownership percentage is at least 60% but less than 80%, the foreign acquiring corporation is considered a foreign corporation but the domestic partnership and certain other persons are subject to special rules that reduce the tax benefits of the acquisition. See section 7874(a) (1).

The Tax Cuts and Jobs Act of 2017 provides additional special rules for certain cases in which section 7874 applies. See sections 59A(d)(4) and 965(l).

Ownership percentage. The ownership percentage is the percentage described in section 7874(a)(2)(B)(ii). See the regulations under section 7874 for rules regarding the computation of the ownership percentage.

In general, the ownership percentage measures the percentage of stock of the foreign acquiring corporation that is held by partners of the domestic partnership by reason of

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holding a capital or profits interest in the domestic partnership, with certain adjustments (for example, disregarding certain stock of the foreign acquiring corporation attributable to passive assets or assets of other domestic entities that were recently acquired by the foreign acquiring corporation). The ownership percentage is measured separately by vote and value.

Multiple reportable acquisitions. If there are multiple acquisitions that must be reported, list on the lines for question 28 the ownership percentage by vote and value for the most recent acquisition. Attach a statement reporting the ownership percentage by vote and value for the other acquisitions.

Question 29 Under section 4501, the partnership may be required to file Form 7208, Excise Tax on Repurchase of Corporate Stock, and pay the stock repurchase excise tax if, during the partnership’s tax year, (a) the partnership is a specified affiliate of an applicable foreign corporation, or (b) the partnership is an expatriated entity with respect to a covered surrogate foreign corporation. See the Instructions for Form 7208. For additional information, see section 4501.

Question 30 Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins. If a particular asset has the characteristics of a digital asset, it will be treated as a digital asset for federal income tax purposes.

Answer “Yes” if at any time during 2025, the partnership (a) received (as a reward, award, or payment for property or services); or (b) sold, exchanged, or otherwise disposed of a digital asset (or any financial interest in any digital asset).

For example, answer “Yes” if at any time during 2025 the partnership:

Received digital assets as payment for property or services provided;
Received digital assets as a result of a reward or award;
Received new digital assets as a result of mining, staking, and similar activities;
Received digital assets as a result of a hard fork;
Disposed of digital assets in exchange for property or services;
Disposed of a digital asset in exchange or trade for another digital asset;
Sold a digital asset; or
Otherwise disposed of any other financial interest in a digital asset.

The partnership has a financial interest in a digital asset if it’s the owner of record of a digital asset, or has an ownership stake in an account that holds one or more digital assets, including the rights and obligations to acquire a financial interest, or it owns a wallet that holds digital assets.

The following actions or transactions in 2025, alone, generally don’t require the partnership to answer “Yes.”

Holding a digital asset in a wallet or account.
Transferring a digital asset from one wallet or account it owns or controls to another wallet or account that it owns or controls.
Purchasing digital assets using U.S. or other real currency, including through the use of electronic platforms such as PayPal and Venmo.

Don’t leave the question unanswered. You must answer “Yes” or “No” by checking the appropriate box. For more information, go to IRS.gov/VirtualCurrencyFAQs .

Question 32 A qualifying syndicate, pool, joint venture, or similar organization may elect under section 761(a) not to be treated as a partnership for federal income tax purposes and won’t be required to file Form 1065 except for the year of election. If an election out of subchapter K is being made for the tax year, answer “Yes” and attach a statement that contains:

The names, addresses, and identification numbers of all the members of the organization;
A statement that the organization qualifies under Regulations section 1.761-2(a), paragraph (1), and either paragraph (2) or (3);
A statement that all members of the organization elect to exclude the organization from all of subchapter K; and
A statement indicating the availability of the agreement under which the organization operates (or for an oral agreement, from whom the provisions of the agreement may be obtained).

For calendar-year organizations, Form 1065 must be filed by March 15 following the close of the first calendar year for which the section 761(a) election is being made. The filing date for fiscal-year organizations is the 15th day of the 3rd month following the close of the 1st fiscal year. These dates are subject to filing extensions. See Regulations section 1.761-2 for more information concerning making the election out of subchapter K.

Question 33 Answer “Yes” if an eligible partnership chooses to elect out of the centralized partnership audit regime for the tax year and enter the total from Schedule B-2, Part III, line 3. If making the election, attach a completed Schedule B-2 to Form 1065. An election out of the centralized partnership audit regime can only be made on a timely filed return (including extensions). A partnership is an eligible partnership for the tax year if it has 100 or fewer eligible partners in that year. Eligible partners are individuals, C corporations, S corporations, foreign entities that would be C corporations if they were domestic entities, and estates of deceased partners. The determination as to whether the partnership has 100 or fewer partners is made by adding the number of Schedules K-1 required to be issued by the partnership for the tax year to the number of Schedules K-1 required to be issued by any partner that is an S corporation to its shareholders for the tax year of the S corporation ending with or within the partnership tax year. A partnership isn’t eligible to elect out of the centralized partnership audit regime if it’s required to issue a Schedule K-1 to any of the following partners.

A partnership.
A trust.
A foreign entity that would not be treated as a C corporation if it were a domestic entity.
A DE described in Regulations section 301.7701-2(c)(2)(i).
An estate of an individual other than a deceased partner.
Any person that holds an interest in the partnership on behalf of another person.

Designated Partnership Representative (PR) Section 6223 provides that unless the partnership has made a valid election out of the centralized partnership audit regime, each partnership must designate, in the manner prescribed by the Secretary, a partner or other person with a substantial presence in the United States as the PR who shall have the sole authority to act on behalf of the partnership. On Form 1065, provide the name, address, and phone number of the PR. If an entity is designated as the PR, the partnership must also appoint an individual to act on the entity’s behalf (a DI). To be a DI, the appointed person must also have a substantial presence in the United States.

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How to designate. A designation of a PR must be made for each respective year on the partnership’s Form 1065. The partnership can revoke a designation of a PR or DI, and the PR or DI can resign, by submitting Form 8979, Partnership Representative Designation or Resignation.

Caution: See the Instructions for Form 8979 for information concerning how and when Form 8979 can be submitted to the IRS.

PR authority. Under section 6223, the partnership and all its partners (and any other person whose tax liability is determined in whole or in part by taking into account directly or indirectly adjustments determined under the centralized partnership audit regime) are bound by the actions of the PR in dealings with the IRS. A designation for a partnership tax year remains in effect until the designation is terminated by (a) a valid resignation of the PR or DI, (b) a valid revocation of the PR (with designation of successor PR), or (c) a determination by the IRS that the designation isn’t in effect.

Substantial presence. In order for either a PR or a DI to have substantial presence, they must make themselves available to meet in person with the IRS in the United States at a reasonable time and place as determined by the IRS, and must have a street address in the United States, a U.S. TIN, and a telephone number with a U.S. area code.