Part III — Publication 5346 — Instructions for Form

Under section 6225(c)(4), a portion of the adjustment included in the imputed underpayment will be determined with a lower rate of tax if such rate is lower than the highest rate of tax in effect for the reviewed year, and if the portion of the imputed underpayment is allocable to a partner which:

Is a C corporation ; or
In the case of an adjustment consisting of a capital gain or qualified dividend, a partner that is an individual, or a S corporation .

In general, except in the case of rate modifications involving special allocations, the portion of the adjustment to which a lower rate of tax applies is determined by reference to a partner’s distributive share of items to which the imputed underpayment relates.

Caution: For capital gains and qualified dividend rates, the tax rate requested for an individual or an S corporation partner cannot be lower than the maximum rate in effect for the type of income for the reviewed year. For example, if the maximum capital gain tax rate for net capital gains and qualified dividends for a reviewed year is 20%, but an individual relevant partner happens to be in a lower tax bracket based on taxable income (such as the 15% bracket), the partnership cannot request tax rate modification for a 15% tax rate for the relevant partner’s capital gain adjustment allocation, since the maximum rate in effect for such capital gain item is 20% for the reviewed year. Instead, so that the relevant partner can benefit from a rate lower than the maximum capital gain tax rate in effect for the reviewed year, the modification type requested by the partnership could be partner modification amended return (PMAR) or partner alternative procedure (PAP), which are requested using Form 8980, Item E, Part I (along with Form 8982). Under the PMAR or PAP modification type, the partner would fully recalculate taxable income inclusive of the partner’s allocable share of the partnership adjustments (including any capital gain or qualified dividend adjustments) and pay any resulting increase to tax, penalties, and interest when the partner files the PMAR or chooses the PAP modification.

Rate Modification Involving Special Allocations . If an imputed underpayment is calculated based on more than one adjustment and the determination of a partner’s distributive share of such adjustments differs among adjustment items, the partnership must select which method it will use for determining each partner’s distributive share to which the lower rate applies. You must check one box indicating which method, in Line B, below. See Line B, for further information .

Make sure the relevant modifcation type is checked in Item B, otherwise the felds in this part will not be unlocked for completion. Once the relevant box in Item B is checked, you will be able to complete this part.

A. Total number of direct and indirect reviewed year partners for which tax rate modification is requested . Enter the total number of relevant partners for which tax rate modification is requested. This is a required feld when this type of modification is requested . When the number of relevant partners is entered, the form will populate with the correct number of lines needed for completion.

B. Special Allocations of Adjustments Within a Partner’s Distributive Share Subject to Rate Modification . If any rate modification is being requested with respect to any relevant partner that has more than one adjustment within a distributive share that is specially allocated, check the special allocation box next to column 4 for the relevant partner. In addition, the partnership must check one of the boxes on Line B, to select one of the following methods for which it is using to determine the distributive share item which is subject to a lower rate:

Check the box on Line B for which method the partnership is using to determine the partner’s distributive share to which the lower rate applies:

Alternative Option per section 6225(c)(4)(B)(i) : Check the box for this option if the total distributive share amount that is subject to a lower rate is determined based on the actual special allocations of the various adjustments within the distributive share item. For each relevant partner with a special allocation, be sure to check the box within column 4. For the total amount to be listed in column 4 for each relevant partner, Form 8980, Item C should contain the allocation detail for each adjustment behind the total listed in column 4. If more than one rate is being requested for a relevant partner, only list the relevant partner once in Part III and attach a schedule detailing each allocation amount subject to a lower rate, the alpha code relating to the income type for each such allocation, and the associated lower rate pertaining to each allocation.

Reviewed Year liquidation rule per section 6225(c)(4)(B)(ii) : Check the box for this option if the total distributive share amount that is subject to a lower rate is determined based on the amount of net gain or loss to the partner that would have resulted if the partnership had sold all of its assets at their fair market value as of the close of the partnership’s reviewed year, appropriately adjusted to reflect any modification with respect to any relevant partner that has an approved modification other than rate modification. For each relevant partner with a special allocation, be sure to check the box within column 4. If more than one rate is being requested for a relevant partner, only list the relevant partner once in Part III, and attach a schedule detailing each allocation amount subject to a lower rate, the alpha code relating to the income type for each such allocation, and the associated lower rate pertaining to each allocation. In order to support the total amount listed in column 4, the following information must be provided with the modification request:

For each relevant partner, a schedule detailing the specially allocated adjustments within the distributive share subject to rate modification;
The partnership’s calculation of the partners’ book capital accounts through the end of the reviewed year (tax year ended date entered on

Form 8980, Line 3); and

The partnership’s calculation of the asset liquidation gain or loss.

Columns (1) and (2): Name of Partner & TIN of Partner . Both column (1) and column (2) are required fields for each relevant partner . List the name and Taxpayer Identification Number (TIN) of each direct or indirect relevant partner for which the partnership is requesting modification under this section.

Column (3): Total Share of Reallocation & Residual Grouping Adjustments (net positive adjustments only) . Enter in the appropriate subcolumn of column 3 (General or Specific – depending on which imputed underpayment the adjustments were included in), the total of each partner’s distributive share of all net positive adjustments (resulting after subgrouping per the NOPPA) within the Reallocation and Residual groupings. Do not include adjustments to Creditable Expenditures or Credits in this column. Any amounts entered in column 3 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments. This is a required feld .

Column (4): Amounts in column (3) subject to rate reduction . This is a required feld . For any special allocations, check the box and see instructions. Enter in the appropriate subcolumn of column 4 (General or Specific – depending on which imputed underpayment the adjustments are applied to), the amount of an adjustment from column (3) that is subject to an alternative lower rate of tax than the highest rate in effect. For example, for individual or S corporation partners this is long-term capital gains subject to lower capital gains rates or qualified dividends subject to the qualified dividends rate. For C corporation partners this is income subject to lower corporate income tax rate when the highest rate in effect is greater than the highest corporate tax rate. If such amount entered in column 4 includes a specially-allocated adjustment, check the “special allocation” box within column 4 for the relevant partner. Be sure to attach the required information for each relevant partner, depending on which method the partnership is selecting for the determination of the distributive share amounts subject to the lower rate. See Line B, Special Allocations of Adjustments Within a Partner’s Distributive Share Subject to Rate Modification, above for further information on what to attach to Form 8980. Also, make sure that each specially allocated adjustment detailed on Form 8980, Item C has the box for “Special Allocation” checked on the line for the relevant partner.

Column (5): Income Code : This is a required feld . For each amount listed in Column 4, enter the alpha code associated with the type of income listed. Use the following alpha codes :

General long-term capital gains, enter code: CG-GEN
Sec. 1250 capital gains, enter code: CG-1250
Capital gains on collectibles, enter code: CG-COLL
Qualified dividends, enter code: QDIV
Ordinary income, enter code: ORDINC
Other income, enter code: = OTHER, and attach a statement detailing the type of income

Column (6): Reduced tax rate applicable to amount(s) in column (6) . This is a required feld . Include in column 6 the tax rate(s) that should be applied to the amounts listed in column 4. Note: If more than one rate is being requested for a relevant partner, only list the relevant partner once in Part III, and attach a schedule detailing each allocation amount subject to a lower rate, the alpha code relating to the income type for each such allocation, and the associated lower rate pertaining to each allocation. This field allows numeric characters with a decimal (if applicable).

Important Note about the Reduced Rate For Capital Gains and Qualifed Dividend Rates: The tax rate requested for an individual or S corporation partner cannot be lower than the maximum rate in effect for the type of income for the reviewed year. For example, if the maximum capital gain tax rate for net capital gains and qualified dividends for a reviewed year is 20%, but an individual relevant partner happens to be in a lower tax bracket in the reviewed year based on taxable income (such as the 15% bracket), the partnership cannot request tax rate modification for a 15% tax rate for the relevant partner’s capital gain adjustment allocation, since the maximum rate in effect for such capital gain item is 20% for the reviewed year. Instead, so that the relevant partner can benefit from a rate lower than the maximum capital gain tax rate in effect for the reviewed year, the modification type requested by the partnership could be partner modification amended return (PMAR) or partner alternative procedure (PAP), which are requested using Form 8980, Item E, Part I (along with Form 8982). Under the PMAR or PAP modification type, the partner would fully recalculate taxable income inclusive of the partner’s allocable share of the partnership adjustments (including any capital gain or qualified dividend adjustments) and pay any resulting increase to tax, penalties, and interest when the partner files the PMAR(s) or chooses the PAP modification.

Part IV – Passive Activity Losses of Publicly Traded Partnerships (PTPs) Under IRC Section 6225(c)(5) Under section 6225(c)(5), in the case of a publicly traded partnership (PTP), the imputed underpayment may be determined without regard to the portion of the adjustment that the partnership demonstrates would be reduced by a specified passive activity loss that is allocable to a specified partner or qualified relevant partner. If a PTP requests this type of modification, Form 15028 must be completed and signed by the PR and must be submitted as a related form to Form 8980 when Form 8980 is submitted.

A publicly traded partnership is defined under section 469(k)(2) as a partnership if interests in such partnership are traded on an established securities market, or interests in such partnership are readily tradable on a secondary market (or the substantial equivalent thereof).

See “Definitions” in these instructions for the definition of other terms used in this part.

Notification Requirement to Specified Partners and Qualified Relevant Partners to Reduce Suspended Passive Loss Carryovers . The source partnership must complete and sign Form 15028 (Certification of Publicly Traded Partnership to Notify Specified Partners and Qualified Relevant Partners for Approved Modifications Under Section 6225(c)(5)), and it must be submitted as a related form to Form 8980 when Form 8980 is submitted. Form 15028 is used by the source partnership to certify to the IRS that the source partnership will report to each specified partner or qualified relevant partner the amount of the relevant partner’s reduction to its suspended passive loss carryover, based on the source partnership’s approved modification that takes such specified and qualified relevant partner suspended losses into account. Both Form 8980, Item E, Part IV and Form 15028 are completed as if the IRS will approve the modification based on the relevant partner amounts entered on Form 8980, Part IV, column 9 (and Form 15028, Part II, column 7). See the instructions to Form 15028 for additional information.

A. Total number of specified partners or qualified relevant partners under this modification request . Enter the total number of specified partners or qualified relevant partners for which the partnership is requesting modification under this section. This is a required feld when this type of modification is requested . When the number of partners is entered, the form will populate with the correct number of lines needed for completion.

Columns (1) and (2): Name of Partner & TIN of Partner. Both column (1) and column (2) are required fields for each relevant partner . List the name and Taxpayer Identification Number (TIN) of each specified or qualified relevant partner for which the partnership is requesting modification under this section.

Section 469 Specified Passive Activity Loss Carryover TIN of Partner : Re-enter the TIN of the relevant partner that was entered in column 2. This column is a continuation of requested information for the partner. Therefore, make sure the TIN entered here is the same TIN entered in column (2). Once the TIN is entered, continue entering the appropriate information for the partner in columns (4) through (8), as applicable. This is a required feld .

Column (4): Affected Year Loss . Enter in column 4, the partner’s section 469(k) passive activity loss at the end of the first affected year (affected year loss). This amount is the section 469(k) loss calculated without taking into account the partner’s distributive share of partnership adjustments for the reviewed year. The amount entered in column 4 should be consistent with the amount entered on Form 15028, Part II, column 3. All numbers entered in this column must be entered as negative numbers .

Column (5a) through (5c): Utilization of Affected Year Loss- Year and Amount . Enter in Columns 5a through 5c the partner’s taxable year(s) and the respective portion of the affected year loss (reported in column 4) that was utilized in a taxable year after the first affected year to offset income or gain relating to ownership disposition of its interest in the PTP during the adjustment year or any other year. All numbers entered in this column must be entered as positive numbers .

Column (5d): Balance . If any amounts are entered in columns 5a, 5b, or 5c, subtract such amounts from the amount in column 4 and enter the result in column 5d. The amount entered in column 5d should be consistent with the amount from Form 15028, Part II, column 4. All numbers entered in this column must entered as negative numbers or zero .

Column (5e): Specified Passive Activity Loss at the End of the Most Recent Year for Which PTP has filed a return . Enter in column 5e, the partner’s section 469(k) passive activity loss at the end of the most recent taxable year for which the PTP has filed a return. The amount entered in column 5e should be consistent with the amount from Form 15028, Part II, column 5. All numbers entered in this column must be entered as negative numbers .

Column (6): Specified Passive Activity Loss . Enter the lesser of column 4 or column 5e. The amount entered in column 6 should be consistent with the amount from Form 15028, Part II, column 6. All numbers entered in this column must be entered as negative numbers . This is a required feld .

Effect of Modification Columns 7 and 8 should be completed under the assumption that the IRS will approve the requested modification.

Column (7): Reduction in Carryover . Enter in column 7, the reduction to the partner’s carryover as a result of the modification under section 6225(c)(5) whereby the partnership’s imputed underpayment was determined without regard to the partner’s distributive share of partnership adjustments that would be reduced by a specified passive activity loss. The amount entered should generally be the amount entered in column 3, unless the amount in column 3 exceeds the amount in column 6. In that case, only enter the amount from column 6 in column 7. The amount entered in column 7 cannot exceed the amount entered in column 6. The amount entered in column 7 should be consistent with the amount from Form 15028, Part II, column 5. All numbers entered in this column must be entered as positive numbers . This is a required feld .

Column (8): Adjusted Balance in Carryover . Subtract the amount in column 7 from the amount in column 6 and enter the result in column 8. The amount entered in column 8 should be consistent with the amount from Form 15028, Part II, B, column 8. All numbers entered in this column must entered as negative numbers or zero . This is a required feld .

Part V – Modification of the Number and Composition of Imputed Underpayments Under Applicable Regulations The imputed underpayment is determined, in general, according to section 6225(b). Rules on grouping, subgrouping and netting are provided in the applicable Regulations.

Under Treas. Reg. section 301.6225-2(d)(6), a partnership may request that the IRS:

Include one or more partnership adjustments in the general imputed underpayment, per the NOPPA, be placed into one or more specific

imputed underpayments (for example, see Treas. Reg. section 301.6225-2(f)(7), Example 7) ;

Include one or more partnership adjustments in a particular grouping or subgrouping different from the NOPPA;
Not apply certain restrictions and limitations (by proving that such restrictions or limitations do not apply) so that one or more partnership

adjustments per the NOPPA can be subgrouped with other adjustments (for example, see Treas. Reg. section 301.6225-2(f)(8) Example 8) .

Use Part V of Form 8980 to request any modifications to the number and composition of the imputed underpayment(s). For all requests in Part V, you must provide supporting documents to substantiate your request.

Request for Particular Treatment Regarding Limitations or Restrictions . The subgrouping rules provide that an adjustment is subgrouped according to how the adjustment would be required to be taken into account separately under section 702(a) or any other provision of the Code or regulations applicable to the partnership-related item. Therefore, if any adjustment could be subject to any preference, limitation, or restriction under the Code (or not allowed, in whole or in part, against ordinary income) if taken into account by any person, the adjustment is placed in a separate subgrouping from all other adjustments within the grouping. However, if a partnership can substantiate to the satisfaction of the IRS that such limitations or restrictions do not apply, then one or more partnership adjustments may be treated as if no limitations or restrictions apply, resulting in such adjustments being subgrouped with other adjustments. See Treas. Reg. section 301.6225-2(f)(8), Example 8, for an example. Use Part V of Form 8980 to request this type of modification. Attach a statement detailing the adjustments and relevant partners relative to the request, and provide documents supporting the claim that such restrictions or limitations do not apply for each relevant partner . You must provide documentation substantiating your request.

See the “Definitions” section earlier in these instruction for the definition of partnership adjustments, groupings, subgroupings, general imputed underpayment, and specific imputed underpayment.

Requests Relating to a Future Push Out Election by the Audited Partnership . Form 8980 should not be used to request allocation of partnership adjustments to partners relating to a future push-out election. If the partnership eventually wants to make a push out election under section 6226 for an imputed underpayment (which can only be done after the Notice of Final Partnership Adjustment (FPA) is issued to the partnership), then such an election, will require the partnership to issue push out statements (Form 8985 and Forms 8986) to its partners for the adjustments included in the imputed underpayment, and any relating adjustments that do not result in an imputed underpayment, relative to the imputed underpayment for which the section 6226 election was made. In this case, the push out statements issued by the partnership to its partners would reflect the proper allocation(s) of partnership adjustment(s), and no modification request is needed.

A. Explanation of Modifications requested regarding the number and composition of imputed underpayments . For each modification requested in Part V, provide a detailed explanation of the requested modification including which partnership adjustments, relevant partners, grouping and subgrouping information, per the NOPPA and the request. Attach additional schedules, in order to adequately explain the requested modifications. Be sure to also provide supporting documents substantiating your request .

Attach a statement if additional space is needed.

B. Total Number of adjustments affected by this modification request . Enter the total number of adjustments that are involved in this modification request.

C. Enter the total number of specific imputed underpayments being requested . This is a required feld . Note: If a specific imputed underpayment is not being requested, then enter the number of partners affected by the requested modification . When the number of specific imputed underpayments is entered, the form will populate with the correct number of lines needed for completion. In general, each line entered in Part V pertains to each specific imputed underpayment being requested. Refer to the example on the fillable PDF before completing the lines and columns in Part V .

Columns (1) through (4) - Adjustments & Imputed Underpayments per NOPPA Each line entered in Part V pertains to each specific imputed underpayment being requested. If no specific imputed underpayment is being requested, then enter “See attached” under column (1). See the example before completing the lines and columns in Part V.

Column (1): Adjustments : This is a required feld . Enter a description of the partner or group of partners pertaining to the adjustments that were included in the NOPPA, for which you are requesting one or more specific imputed underpayments. Note: If no specific imputed underpayment is being requested, then enter “See attached” under column (1) for each relevant partner, and attach a schedule detailing the requested modification. Be sure to also provide supporting documents substantiating your request .

Column (2): General : For all adjustments described in column 1, enter the amount of such adjustments which were included in the general imputed underpayment per the NOPPA.

Column (3): Specific : For all adjustments described in column 1, enter the amount of such adjustments, if any, which were already included in a specific imputed underpayment per the NOPPA.

Column (4): Negative adjustments : Enter the total amount of net negative adjustments per the NOPPA, which resulted after groupings, subgroupings and netting. Enter all numbers in this column as a negative amount.

Columns (5) through (8) - Groupings/Subgroupings per NOPPA Column (5) Reallocation; Column (6) Residual; Column (7) Creditable Expenditures; and Column (8) Credits : For the adjustments listed in columns 2, 3, or 4, enter the amount of such adjustments in the appropriate grouping column 5, 6, 7, and 8 (Reallocation, Residual, Creditable Expenditure, or Credits), as grouped per the NOPPA. For each amount listed per grouping column, detail the amount and the subgrouping description next to the amount. (See example in this section for an illustration). All fields in columns 5 through 8 are text type fields. Therefore, you may enter both numeric and alpha characters.

Columns (9) through (12) - Specific Imputed Underpayments Requested for Adjustment Amounts in Column (2), (3), and (4) Column (9) Reallocation; Column (10) Residual; Column (11) Creditable Expenditures; Column (12) Residual : For the adjustments detailed in columns 5, 6, 7 and 8, similarly detail the adjustments being requested to be placed in a specific imputed underpayment. For each amount listed per grouping columns 9, 10, 11 and 12, detail the amount and the subgrouping description next to the amount. (See example in this section for an illustration). Note that if more than one specific imputed underpayment is being requested, each specific imputed underpayment should be entered on a separate line. All fields in columns 5 through 8 are text type fields. Therefore, you may enter both numeric and alpha characters. Attach additional schedules if necessary. Note: If no specific imputed underpayment is being requested, then enter “N/A” See attached” under column (1) for each relevant partner, and attach a schedule detailing the requested modification and provide supporting documents.

Part VI – IRC Section 860(b) Qualified Investment Entity (QIE) Partners Under Treas. Reg. Sec. 301.6225-2(d)(7) Under applicable Regulations, a partnership may request modification based on partnership adjustments allocated to a relevant partner where the modification is based on deficiency dividends distributed as described in section 860(f) by a relevant partner that is a qualified investment entity (QIE) defined under section 860(b). Such modification is only available to the extent that the deficiency dividends take into account the partnership adjustments that are also adjustments within the meaning of section 860(d)(1) or (d)(2) (whichever applies).

Qualified Investment Entity (QIE) Partner Defined . A QIE is defined under section 860(b) and includes both a regulated investment company (RIC), and a real estate investment trust (REIT).

Substantiation of QIE Partner’s Determination Under IRC Section 860(e)(4) and Documentation of Deficiency Dividends . The partnership must provide substantiation of the determination described in section 860(e)(4) either by providing:

A copy of a closing agreement entered into by the QIE partner pursuant to section 7121 and applicable regulations (modification for partner

closing agreements); or

A copy of Form 8927 (Determination Under Section 860(e)(4) by a Qualified Investment Entity) that was properly completed and filed by the RIC or REIT partner pursuant to section 860(e)(4).

In the case of a closing agreement, the determination date is the date in which the closing agreement is approved by the IRS. In the case of Form 8927, the determination date and the amount of the deficiency dividends actually paid, will be substantiated by the partnership providing a copy of Form 976 (Claim for Deficiency Dividends Deduction by a Personal Holding Company, Regulated Investment Company, or Real Estate Investment Trust) properly completed by or on behalf of the QIE pursuant to section 860(g), together with a copy of each of the required attachments to Form 976.

A. Total number of relevant Qualified Investment Entity partners for this modification request . Enter the total number of relevant QIE partners for which the partnership is requesting modification. This is a required feld when this type of modification is requested . When the number of partners is entered, the form will populate with the correct number of lines needed for completion.

Columns (1) and (2): Name of Each RIC or REIT (QIE) Partner & TIN of Partner. Both column (1) and column (2) are required fields for each relevant partner . List the name and Taxpayer Identification Number (TIN) of each direct or indirect QIE partner for which the partnership is requesting modification under this section. Both Columns 1 and 2 are required felds .

Column (3): Type of QIE Partner : Use the drop-down menu to select the type of qualified investment entity (“RIC” or “REIT”) for the relevant partner entered in column 1.

Column (4): Total Share of Reallocation & Residual Grouping Adjustments (net positive adjustments only) . Enter in the appropriate subcolumn of column 4 (General or Specific – depending on which imputed underpayment the adjustments were included in), the total of each partner’s distributive share of all net positive adjustments (resulting after subgrouping per the NOPPA) within the Reallocation and Residual groupings. Do not include adjustments to Creditable Expenditures or Credits in this column. Any amounts entered in column 4 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments.

Column (5): Total Share of Creditable Expenditure Grouping Adjustments (net positive adjustments only) . Enter in the appropriate subcolumn of column 5 (General or Specific – depending on which imputed underpayment the adjustments were included in), the total of each partner’s distributive share of all net positive adjustments (resulting after subgrouping per the NOPPA) within the Creditable Expenditure grouping. This includes decreases to creditable expenditures (including decreases to Creditable Foreign Tax Expenditures (CFTEs)) that were included in the subgroupings within the Creditable Expenditures grouping. Any amounts entered in column 5 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments.

Column (6): Total Share of Credit Grouping Adjustments (positive and negative adjustments) . Enter in the appropriate subcolumn of column 6 (General or Specific – depending on which imputed underpayment such adjustments were included in), the total of each partner’s distributive share of all credit adjustments (positive and negative) that were included in the Credit Grouping per the NOPPA. Any amounts entered in column 6 should be consistent with the allocation information provided on Form 8980, Item C for such adjustments.

Column (7): Amount of Tax Deficiency . Enter the amount from Form 976, Line 1 relative to the QIE partner’s allocable share of partnership adjustments. If a Form 976 was not filed by the QIE partner, enter the amount of tax deficiency per the QIE partner’s closing agreement. Note: See “ BBA Partner Payments Related to Requested Modifications ” under the General Instructions for information on how partner payments must be identified at the time payments are made.

Column (8): Tax Deficiency Amount Paid . Enter the amount from Form 976, Line 3a. If a Form 976 was not filed by the QIE partner, enter the amount of tax paid under the partner’s closing agreement.

Column (9): Deficiency Dividend Distributed: Cash . For QIE partners that filed Form 976, enter the amount from Form 976, Line 8a.

Column (10): Deficiency Dividend Distributed: FMV of Other Property . For QIE partners that filed Form 976, enter the amount from Form 976, Line 8b(1).

Column (11): Amount Claimed as a Deduction for Deficiency Dividends . For QIE partners that filed Form 976, enter the amount from Form 976, Line 9a.