Income (Loss) — Instruction 1120-S (Schedule K-1)

Box 1. Ordinary Business Income (Loss) The amount reported in box 1 is your share of the ordinary income (loss) from trade or business activities of the corporation. Generally, where you report this amount on Form 1040 or 1040-SR depends on whether the amount is from an activity that is a passive activity to you. If you are an individual shareholder filing a 2025 Form 1040 or 1040-SR, find your situation below and report your box 1 income (loss) as instructed after applying the basis and at-risk limitations on losses. See Limitations on Losses, Deductions, and Credits , earlier. If the corporation had more than one trade or business activity, it will attach a statement identifying the income or loss from each activity.

The adjusted basis of your stock and debt in the corporation,
The at-risk limitations,
The passive activity limitations, and
The excess business loss limitations.

For information on these provisions, see Limitations on Losses, Deductions, and Credits , earlier.

Other limitations may apply to specific deductions (for example, the section 179 expense deduction). Generally, specific limitations apply before the at-risk and passive loss limitations.

If you are an individual, and the above limitations don’t apply to the amounts shown on your Schedule K-1, take the amounts shown and report them on the appropriate lines of your tax return. If any of the above limitations apply, adjust the amounts on Schedule K-1 before you report them on your return.

When applicable, the passive activity limitations on losses are applied after the limitations on losses for a shareholder’s basis in stock and debt and the shareholder’s at-risk amount.

If you file your tax return on a calendar-year basis, but the corporation files a return for a fiscal year, report the amounts on your tax return for the year in which the corporation’s fiscal year ends. For example, if the corporation’s tax year ends in February 2026, report the amounts on your 2026 tax return.

If you have losses, deductions, or credits from a prior year that weren’t deductible or usable because of certain limitations, such as the basis limitations or the at-risk limitations, take them into account in determining your income, loss, or credits for this year. However, except for passive activity losses and credits, don’t combine the prior-year amounts with any amounts shown on this Schedule K-1 to get a net figure to report on your return. Instead, report the amounts on your return on a year-by-year basis.

Caution: If you have amounts other than those shown on Schedule K-1 to report on Schedule E (Form 1040), enter each item separately on Schedule E (Form 1040), line 28.

Report box 1 income (loss) from corporate trade or business activities in which you materially participated in column (i) or (k) of Schedule E (Form 1040), line 28.
Report box 1 income (loss) from corporate trade or business activities in which you didn’t materially participate as follows.

a. If income is reported in box 1, report the income in column (h) of Schedule E (Form 1040), line 28.

b. If a loss is reported in box 1, follow the Instructions for Form 8582 to figure how much of the loss can be reported in column (g) of Schedule E (Form 1040), line 28.

Box 2. Net Rental Real Estate Income (Loss) Generally, the income (loss) reported in box 2 is a passive activity amount for all shareholders. However, the income (loss) in box 2 isn’t from a passive activity if you were a real estate professional (defined earlier) and you materially participated in the activity. If the corporation had more than one rental real estate activity, it will attach a statement identifying the income or loss from each activity.

If you are filing a 2025 Form 1040 or 1040-SR, use the following instructions to determine where to report a box 2 amount after applying the basis and at-risk limitations on losses. See Limitations on Losses, Deductions, and Credits , earlier.

If you have a loss from a passive activity in box 2 and you meet all the following conditions, report the loss in column (g) of Schedule E (Form 1040), line 28.

a. You actively participated in the corporate rental real estate activities. See Special allowance for a rental real estate activity , earlier.

6 Instructions for Schedule K-1 (Form 1120-S) (2025)

b. Rental real estate activities with active participation were your only passive activities.

c. You have no prior-year unallowed losses from these activities.

d. If you are a married person filing separately, you lived apart from your spouse all year.

e. Your total loss from the rental real estate activities wasn’t more than $25,000 (not more than $12,500 if married filing separately).

f. You have no current- or-prior year unallowed credits from a passive activity.

ordinary dividends that are attributable to PTEP in your annual PTEP accounts.

Box 5b. Qualified Dividends Report any qualified dividends on Form 1040 or 1040-SR, line 3a. The amount in box 5b may be attributable to PTEP in annual PTEP accounts that you have with respect to a foreign corporation. You will need to determine the amount of the qualified dividends that are attributable to PTEP in your annual PTEP accounts.

Tip: Qualified dividends are excluded from investment income, but you may elect to include part or all of these amounts in investment income. See the instructions for line 4g of Form 4952, Investment Interest Expense Deduction, for important information on making this election.

Box 6. Royalties Report royalties on Schedule E (Form 1040), line 4.

Box 7. Net Short-Term Capital Gain (Loss) After applying the limitations on losses and deductions, report the net short-term capital gain (loss) on Schedule D (Form 1040), Capital Gains and Losses, line 5. See Limitations on Losses, Deductions, and Credits , earlier.

Box 8a. Net Long-Term Capital Gain (Loss) After applying the limitations on losses and deductions, report the net long-term capital gain (loss) on Schedule D (Form 1040), line 12. See Limitations on Losses, Deductions, and Credits , earlier.

Box 8b. Collectibles (28%) Gain (Loss) After applying the limitations on losses and deductions, report collectibles gain or loss on line 4 of the 28% Rate Gain Worksheet—Line 18 in the Instructions for Schedule D (Form 1040). See Limitations on Losses, Deductions, and Credits , earlier.

g. Your MAGI wasn’t more than $100,000 (not more than $50,000 if married filing separately and you lived apart from your spouse all year).

If you have a loss from a passive activity in box 2 and you don’t meet all the conditions in (1) above, follow the Instructions for Form 8582 to figure how much of the loss you can report in column (g) of Schedule E (Form 1040), line 28.
If you were a real estate professional and you materially participated in the activity, report box 2 income (loss) in column (i) or (k) of Schedule E (Form 1040), line 28.
If you have income from a passive activity in box 2, report the income in column (h) of Schedule E (Form 1040), line 28.

Box 3. Other Net Rental Income (Loss) The amount in box 3 is a passive activity amount for all shareholders. If the corporation had more than one rental activity, it will attach a statement identifying the income or loss from each activity. After applying the limitations on losses and deductions, report the income or loss as follows.

If box 3 is a loss, follow the Instructions for Form 8582 to figure how much of the loss can be reported in column (g) of Schedule E (Form 1040), line 28.
If income is reported in box 3, report the income in column (h) of Schedule E (Form 1040), line 28.

See Limitations on Losses, Deductions, and Credits, earlier.

Portfolio Income Portfolio income or loss (shown in boxes 4 through 8b and in box 10, code A) isn’t subject to the passive activity limitations. Portfolio income includes income (not derived in the ordinary course of a trade or business) from interest, ordinary dividends, annuities, or royalties, and gain or loss on the sale of property that produces such income or is held for investment.

Box 4. Interest Income Report interest income on Form 1040 or 1040-SR, line 2b.

Box 5a. Ordinary Dividends Report ordinary dividends on Form 1040 or 1040-SR, line 3b. The amount in box 5a may be attributable to previously taxed earnings and profits (PTEP) in annual PTEP accounts that you have with respect to a foreign corporation. You will need to determine the amount of the

Box 8c. Unrecaptured Section 1250 Gain There are three types of unrecaptured section 1250 gain. Report your share of this unrecaptured gain on the Unrecaptured Section 1250 Gain Worksheet—Line 19 in the Instructions for Schedule D (Form 1040) as follows.

Report unrecaptured section 1250 gain from the sale or exchange of the corporation’s business assets on line 5.
Report unrecaptured section 1250 gain from the sale or exchange of an interest in a partnership on line 10.
Report unrecaptured section 1250 gain from an estate, trust, regulated investment company (RIC), or real estate investment trust (REIT) on line 11.

If the corporation reports only unrecaptured section 1250 gain from the sale or exchange of its business assets, it will enter a dollar amount in box 8c. If it reports the other two types of unrecaptured gain, it will provide an attached statement that shows the amount for each type of unrecaptured section 1250 gain.

Box 9. Net Section 1231 Gain (Loss) The amount in box 9 is generally passive if it is from a:

Rental activity, or

Instructions for Schedule K-1 (Form 1120-S) (2025) 7

Trade or business activity in which you didn’t materially participate.

However, an amount from a rental real estate activity isn’t from a passive activity if you were a real estate professional (defined earlier) and you materially participated in the activity.

If the amount is either (a) a loss that isn’t from a passive activity, or (b) a gain, report it in column (g) of Form 4797, Sales of Business Property, line 2, after applying the basis and at-risk limitations on losses. See Limitations on Losses, Deductions, and Credits, earlier. Don’t complete columns (b) through (f), of Form 4797, line 2. Instead, enter “From Schedule K-1 (Form 1120-S)” across these columns.

If the amount is a loss from a passive activity, see Passive Loss Limitations in the Instructions for Form 4797. After applying the limitations on losses and deductions, report the loss following the Instructions for Form 8582 to figure how much of the loss is allowed on Form 4797. If the corporation had net section 1231 gain (loss) from more than one activity, it will attach a statement that will identify the section 1231 gain (loss) from each activity.

Box 10. Other Income (Loss) See List of Codes, later.

Caution: Losses reported in box 10 may be limited. See Limitations on Losses, Deductions, and Credits , earlier.

Code A. Other portfolio income (loss). The corporation will report portfolio income other than interest, ordinary dividend, royalty, and capital gain (loss) income, and attach a statement to tell you what kind of portfolio income is reported.

If the corporation held a residual interest in a real estate mortgage investment conduit (REMIC), it will report on the statement your share of REMIC taxable income (net loss) that you report in column (d) of Schedule E (Form 1040), line 38. The statement will also report your share of any “excess inclusion” that you report in column (c) of Schedule E (Form 1040), line 38, and your share of section 212 expenses that you report in column (e) of Schedule E (Form 1040), line 38.

Code B. Involuntary conversions. This is your net loss from involuntary conversions due to casualty or theft. The corporation will give you a statement that shows the amounts to be reported in columns (b)(i), (b)(ii), and (c) of Form 4684, Casualties and Thefts, line 34.

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, the corporation will provide you with the information you need to complete Form 4684.

Code C. Section 1256 contracts and straddles. The corporation will report any net gain or loss from section 1256 contracts. Report this amount on Form 6781, Gains and Losses From Section 1256 Contracts and Straddles.

Code D. Mining exploration costs recapture. The corporation will give you a statement that shows the information needed to recapture certain mining exploration costs (section 617).

Code E. Section 951A(a) income inclusions. If the corporation (and its shareholders, as applicable) had elected under Proposed Regulations section 1.958-1(e) (2) to be treated as an entity for purposes of section 951A, this is your share of the corporation’s global intangible low-taxed income (GILTI) amount. Report this amount on Schedule 1 (Form 1040), Additional Income and Adjustments to Income, line 8o, or the comparable line of your income tax return, as an addition to any amount of GILTI under section 951A otherwise computed on Form 8992, U.S. Shareholder Calculation of Global Intangible Low-Taxed Income (GILTI).

Caution: This information will be provided in box 10 using code E only if the corporation (and its shareholders, if applicable) had elected to be treated as an entity for purposes of section 951A under Proposed Regulations section 1.958-1(e)(2). If no election had been made under the proposed regulations, see the instructions for Part V of Schedule K-3 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc.—International.

Code F. Inclusions of subpart F income. The corporation will provide your share of its section 951(a)(1) (A) inclusions. Report this amount on your Form 1040, Form 1040-SR, or relevant income tax return.

Code G. Section 951(a)(1)(B) inclusions. The corporation will provide your share of its section 951(a)(1) (B) inclusions. Report this amount on your Form 1040, Form 1040-SR, or relevant income tax return.

Caution: If Regulations section 1.958-1(d) applies for the tax year (for example, if the corporation did not elect to be treated as an entity under Proposed Regulations section 1.958-1(e)(2)), no information will be provided in box 10 using code F or G. Instead, the corporation will provide information needed to figure your section 951(a) inclusions in Part V of Schedule K-3 (Form 1120-S).

Code H. Reserved for future use.

Code I. Gain (loss) from disposition of oil, gas, geo- thermal, or other mineral properties. The corporation will attach a statement that provides a description of the property, your share of the amount realized from the disposition, your share of the corporation’s adjusted basis in the property (for other than oil or gas properties), and your share of the total intangible drilling costs, development costs, and mining exploration costs (section 59(e) expenditures) passed through for the property. You must figure your gain or loss from the disposition by increasing your share of the adjusted basis by the intangible drilling costs, development costs, or mine exploration costs for the property that you capitalized (that is, costs that you didn’t elect to deduct under section 59(e)). Report a loss in Part I of Form 4797. Report a gain in Part III of Form 4797 in accordance with the instructions for line 28. See Regulations section 1.1254-4 for details.

Code J. Recoveries of tax benefit items. A tax benefit item is an amount you deducted in a prior tax year that reduced your income tax. Report income from recoveries of tax benefit items on Schedule 1 (Form 1040), line 8z, to the extent it reduced your tax in the prior year.

Code K. Gambling gains and losses.

8 Instructions for Schedule K-1 (Form 1120-S) (2025)

If the corporation wasn’t engaged in the trade or business of gambling, (a) enter gambling winnings on Schedule 1 (Form 1040), line 8b; and (b) deduct gambling losses to the extent of winnings on Schedule A (Form 1040), Itemized Deductions, line 16.
If the corporation was engaged in the trade or business of gambling, (a) enter gambling winnings in column (k) of Schedule E (Form 1040), line 28; and (b) deduct gambling losses (to the extent of winnings) in column (i) of Schedule E (Form 1040), line 28.

Code L. Reserved for future use.

Code M. Gain eligible for section 1045 rollover (re- placement stock purchased by the corporation). The corporation should give you (a) the name of the corporation that issued qualified small business (QSB) stock (as defined in the Instructions for Schedule D (Form 1040)), (b) your 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. To qualify for the section 1045 rollover:

You must have held an interest in the corporation during the entire period in which the corporation held the QSB stock (more than 6 months prior to the sale), and
Your share of the gain eligible for the section 1045 rollover can’t exceed the amount that would have been allocated to you based on your interest in the corporation at the time the QSB stock was acquired.

See Form 8949, Sales and Other Dispositions of Capital Assets, Schedule D (Form 1040), and the related instructions for details on how to report the gain and the amount of the allowable postponed gain.

Code N. Gain eligible for section 1045 rollover (re- placement stock not purchased by the corporation). The corporation should also give you (a) the name of the corporation that issued the QSB stock, (b) your 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. To qualify for the section 1045 rollover:

You must have held an interest in the corporation during the entire period in which the corporation held the QSB stock (more than 6 months prior to the sale),
You must have held an interest in the corporation when the corporation acquired the QSB stock and at all times thereafter until the corporation disposed of the QSB stock.
Your share of the eligible section 1202 gain can’t exceed the amount that would have been allocated to you based on your interest in the corporation at the time the QSB stock was acquired.

See Form 8949, Schedule D (Form 1040), and the related instructions for details on how to report the gain and the amount of the allowable exclusion.

Codes P through R. Reserved for future use.

Code S. Non-portfolio capital gain (loss). Net short-term capital gain (loss) and net long-term capital gain (loss) from Schedule D (Form 1120-S), Capital Gains and Losses and Built-in Gains, that isn’t portfolio income. An example is gain or loss from the disposition of nondepreciable personal property used in a trade or business activity of the corporation. Report total net short-term gain (loss) on Schedule D (Form 1040), line 5. Report the total net long-term gain (loss) on Schedule D (Form 1040), line 12.

Codes T through X. Reserved for future use.

Code ZZ. Other income (loss). Amounts with code ZZ are other items of income, gain, or loss not included in boxes 1 through 9 or in box 10 using codes A through S. The corporation should give you a description and the amount of your share for each of these items.

Report loss items that are passive activity amounts to you following the Instructions for Form 8582.