SECTION 5. DRAFTING

INFORMATION

The principal author of this Notice is Azeka J. Abramoff of the Office of Associate Chief Counsel (International). For further information regarding this Notice, contact Azeka J. Abramoff at (202) 3176938 (not a toll-free number).

December 23, 2019 1508 Bulletin No. 2019–52

ported. The final instructions for the 2019 Forms 1065, Schedule K-1, Item L and 8865, Schedule K-1, Item F, are expected to include additional details on how such reporting should be done.

For 2019 partnership taxable years, partner “tax basis capital” must be calculated as provided in the 2018 Form 1065 and Schedule K-1 instructions. Beginning with the 2018 partnership taxable year, if a partner’s tax basis capital was negative at the beginning or end of a partnership’s taxable year, a partnership or other person is required to report on line 20 of a partner’s Schedule K-1, using Code AH, such partner’s beginning and ending tax basis capital. Partnerships and other persons who follow this notice and report partner capital accounts for 2019 in Item L of the Form 1065, Schedule K-1, or in Item F of the Form 8865, Schedule K-1, by using a method other than the tax basis method must continue to comply with the requirement in the 2018 forms and instructions with respect to negative tax basis capital accounts.

The IRS website for Form 1065 Frequently Asked Questions (FAQs), “Negative Tax Basis Capital Account Reporting Requirements,” provides guidance on the calculation of a partner’s tax basis capital account in FAQ 2, and, for clarity, the definition of tax basis capital includes (A)(v) and (B)(vii) of FAQ 2. Additionally, in lieu of following the definition of tax basis capital in FAQ 2, partnerships and other persons may instead use the partner outside basis safe harbor approach referenced in FAQ 6. If a partnership or other person uses the safe harbor approach, the partnership or other person must attach a statement to the partner’s Schedule K-1 with the information described in (2)(d)(iii) of FAQ 8. Other than the information described in (2)(d) (iii) of FAQ 8, the remainder of FAQ 8 is inapplicable for 2019, including the penalty relief and extension of time to file described therein, which applied only for 2018. The FAQs are found at: https:// www.irs.gov/businesses/partnerships/ form-1065-frequently-asked-questions. In preparation for filing partnership tax returns for the 2020 taxable year, further guidance will be published that provides, and requests comments on, the definition of partner tax basis capital.

Reporting of Positive Tax Basis Capital Accounts not Required Until 2020 Partnership Taxable Years; Net Unrecognized Section 704(c) Gain or Loss Defined; Publicly Traded Partnerships not Required to Report Net Unrecognized Section 704(c) Gain or Loss; Certain Reporting of Section 465 At-Risk Activities not Required Until 2020 Partnership Taxable Years; Penalty Relief