Shareholder’s Instructions

2025

Shareholder’s Instructions

for Schedule K-1

(Form 1120-S)

Shareholder’s Share of Income, Deductions, Credits, etc.

(For Shareholder’s Use Only)

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Schedule K-1 (Form 1120-S) and its instructions, such as

legislation enacted after they were published, go to

IRS.gov/Form1120S.

What’s New

Schedule K-1, box 12, code X. P.L. 119-21, enacted

July 4, 2025, and commonly known as the One Big

Beautiful Bill Act, expanded section 181 to include certain

qualified sound recording production expenses. Code X

has been updated to include the additional expense. See

Code X under Box 12, later.

Schedule K-1, box 17, code BA. Code BA is added to

report domestic research and experimental expenditures

needed when making a section 59(e) election. See Code

BA under Box 17, later.

P.L. 119-21 added section 174A, which pertains to

domestic research and experimental expenditures.

Section 174A(a) allows a deduction for domestic research

and experimental expenditures paid or incurred during the

tax year for tax years beginning after 2024.

Section 174A(c) allows an election to charge research

and experimental expenditures to a capital account.

Under section 174A(c), you may elect to charge such

expenditures to a capital account rather than deducting

them and be allowed an amortization deduction of such

expenditures ratably over a period of not less than 60

months.

P.L. 119-21, section 70302(f)(1), allows an election by

small business taxpayers to retroactively claim a

deduction for amounts expended or incurred after 2021

and before 2025. P.L. 119-21, section 70302(f)(2), allows

an election to deduct certain unamortized amounts paid or

incurred in tax years beginning after 2021 and before

2025.

For more information about section 174A, and the

provisions contained in P.L. 119-21, sections 70302(f)(1)

and (2), see Rev. Proc. 2025-28.

Schedule K-1, box 17, code ZZ. P.L. 119-21 added

section 1062, Gain from the sale or exchange of qualified

farmland property to qualified farmers. For tax years

beginning after July 4, 2025, an S corporation must

Jan 6, 2026

complete a separate Schedule A (Form 1062) for each

sale or exchange of qualified farmland property to

qualified farmers as defined under section 1062 and

attach the form(s) to Form 1120-S and provide

shareholders with a copy of the convenant and information

regarding the gain from the sale or exchange of qualified

farmland property. See Code ZZ under Box 17, later.

Section 139L allows a partial exclusion from the gross

income of interest received by qualified lenders on loans

secured by rural or agricultural real property. See section

139L and Code ZZ under Box 17, later. Also, see Notice

2025-71.

General Instructions

Purpose of Schedule K-1

The corporation uses Schedule K-1 to report your share of

the corporation’s income, deductions, credits, and other

items. Keep it for your records. Don’t file it with your tax

return unless backup withholding is reported in box 13

using code O. (See the instructions for Code O, later.) The

corporation files a copy of Schedule K-1 with the IRS.

For your protection, Schedule K-1 may show only the

last four digits of your identifying number (social security

number (SSN), employer identification number (EIN), or

individual taxpayer identification number (ITIN)). However,

the corporation has reported your complete identifying

number to the IRS.

You may be liable for tax on your share of the

corporation’s income, whether or not distributed. Include

your share on your tax return if a return is required. Use

these instructions to help you report the items shown on

Schedule K-1 on your tax return.

Your share of S corporation income isn’t

self-employment income and it isn’t subject to

self-employment tax.

Caution: The amount of loss and deduction you may

claim on your tax return may be less than the amount

reported on Schedule K-1. It is the shareholder’s

responsibility to consider and apply any applicable

limitations. See Limitations on Losses, Deductions, and

Credits, later.

Schedule K-1 doesn’t show actual dividend

distributions the corporation made to you. The corporation

must report such amounts totaling $10 or more for the

calendar year on Form 1099-DIV, Dividends and

Distributions.

Instructions for Schedule K-1 (Form 1120-S) (2025) Catalog Number 11521O

Department of the Treasury Internal Revenue Service www.irs.gov

Inconsistent Treatment of Items

Generally, you must report corporate items shown on your

Schedule K-1 (and any attached statements) the same

way that the corporation treated the items on its return.

If the treatment on your original or amended return is

inconsistent with the corporation’s treatment, or if the

corporation hasn’t filed a return, file Form 8082, Notice of

Inconsistent Treatment or Administrative Adjustment

Request (AAR), with your original or amended return to

identify and explain any inconsistency (or to note that a

corporate return hasn’t been filed).

If you are required to file Form 8082 but don’t do so, you

may be subject to the accuracy-related penalty. This

penalty is in addition to any tax that results from making

your amount or treatment of the item consistent with that

shown on the corporation’s return. Any deficiency that

results from making the amounts consistent may be

assessed immediately.

Errors

If you believe the corporation has made an error on your

Schedule K-1, notify the corporation and ask for a

corrected Schedule K-1. Don’t change any items on your

copy of Schedule K-1. Be sure that the corporation sends

a copy of the corrected Schedule K-1 to the IRS. If you are

unable to reach an agreement with the corporation

regarding the inconsistency, file Form 8082.

Decedent’s Schedule K-1

If you are the executor of an estate and you have received

a decedent’s Schedule K-1, then you have the

responsibility to notify the S corporation of the name and

tax identification number (TIN) of the decedent’s estate if

the S corporation stock is part of a decedent’s estate. This

is information that the S corporation must have to properly

determine its eligibility to maintain status as a subchapter

S corporation. If a decedent died in a prior year and the S

corporation continues to send the decedent a Schedule K1 after being notified of the decedent’s death, then you

should request that the S corporation send a corrected

Schedule K-1. If you receive an interest in an S

corporation by reason of a former shareholder’s death,

you must provide the S corporation with your name and

TIN. For treatment of S corporation income upon the

death of a shareholder, see Pub. 559, Survivors,

Executors, and Administrators.

Sale of S Corporation Stock

Gain or loss from the disposition of your S corporation

stock may be net investment income under section 1411

and could be subject to the net investment income tax.

See Form 8960, Net Investment Income Tax—Individuals,

Estates, and Trusts, and its instructions for information

about how to figure and report the tax.

International Boycotts

Every corporation that had operations in, or related to, a

boycotting country, a boycotting company, or a national of

a boycotting country must file Form 5713, International

Boycott Report.

If the corporation cooperated with an international

boycott, it must give you a copy of its Form 5713. You

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must file your own Form 5713 to report the corporation’s

activities and any other boycott operations that you may

have. You may lose certain tax benefits if the corporation

participated in, or cooperated with, an international

boycott. See Form 5713 and its instructions for details.

Elections

Generally, the corporation decides how to figure taxable

income from its operations. However, certain elections are

made by you separately on your income tax return and not

by the corporation. These elections are made under the

following code sections.

• Section 59(e) (deduction of certain qualified

expenditures ratably over the period of time specified in

that section). For details, see the instructions for code J

under Box 12, later.

• Section 263A(d) (preproductive expenses). See the

instructions for code M under Box 12, later.

• Section 617 (deduction and recapture of certain mining

exploration expenditures).

• Section 901 (foreign tax credit).

Additional Information

For more information on the treatment of S corporation

income, deductions, credits, and other items, see Pub.

550, Investment Income and Expenses; and Pub. 925,

Passive Activity and At-Risk Rules.

To get forms and publications, see the instructions for

your tax return or go to IRS.gov.

Limitations on Losses, Deductions,

and Credits

There are potential limitations on corporate losses that

you can deduct on your return. These limitations and the

order in which you must apply them are as follows: the

basis limitations, the at-risk limitations, the passive activity

limitations, and the excess business loss limitations.

These limitations are discussed below.

Other limitations may apply to specific deductions (for

example, the section 179 expense deduction). Specific

limitations generally apply before at-risk and passive loss

limitations.

Basis Limitations

Generally, the deduction for your share of aggregate

losses and deductions reported on Schedule K-1 is

limited to the basis of your stock and loans from you to the

corporation. For details and exceptions, see section

1366(d). The basis of your stock is generally figured at the

end of the corporation’s tax year. Any losses and

deductions not allowed this year because of the basis limit

can be carried forward indefinitely and deducted in a later

year subject to the basis limit for that year.

You are responsible for keeping the information needed

to figure the basis of your stock in the corporation.

Schedule K-1 provides information to help you figure your

stock basis at the end of each corporate tax year. The

basis of your stock (generally, its cost) is adjusted

annually as follows and, except as noted, in the order

listed. In addition, basis may be adjusted under other

provisions of the Internal Revenue Code. You should

generally use Form 7203, S Corporation Shareholder

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

Stock and Debt Basis Limitations, to figure your aggregate

stock and debt basis.

1. Basis is increased by (a) all income (including

tax-exempt income) reported on Schedule K-1, and (b)

the excess of the deduction for depletion (other than oil

and gas depletion) over the basis of the property subject

to depletion.

Caution: You must report on your return (if you are

required to file one) any amount required to be included in

gross income for it to increase your basis.

2. Basis is decreased (but not below zero) by (a)

property distributions (including cash) made by the

corporation reported in box 16, code D, of Schedule K-1,

minus (b) the amount of such distributions in excess of the

basis in your stock.

3. Basis is decreased (but not below zero) by (a)

nondeductible expenses; and (b) the depletion deduction

for any oil and gas property held by the corporation, but

only to the extent your share of the property’s adjusted

basis exceeds that deduction.

4. Basis is decreased (but not below zero) by all

losses and deductions reported on Schedule K-1.

You may elect to decrease your basis under (4) prior to

decreasing your basis under (3). If you make this election,

any amount described under (3) that exceeds the basis of

your stock and debt owed to you by the corporation is

treated as an amount described under (3) for the following

tax year.

To make the election, attach a statement to your timely

filed original or amended return that states you agree to

the carryover rule of Regulations section 1.1367-1(g) and

the name of the S corporation to which the rule applies.

Once made, the election applies to the year for which it is

made and all future tax years for that S corporation, unless

the IRS agrees to revoke your election.

The basis of each share of stock is increased or

decreased (but not below zero) based on its pro rata

share of the above adjustments. If the total decreases in

basis attributable to a share exceed that share’s basis, the

excess reduces (but not below zero) the remaining bases

of all other shares of stock in proportion to the remaining

basis of each of those shares.

Basis of loans. The basis of your loans to the

corporation is generally the balance the corporation owes

you, adjusted for any reductions and restorations of loan

basis (see the instructions for box 16, code E). Any

amounts described in (3) and (4), earlier, not used to

offset amounts in (1), earlier, or to reduce your stock

basis, are used to reduce your loan basis (to the extent of

such basis prior to such reduction).

Caution: When determining your basis in loans to the

corporation, remember that:

• Distributions don’t reduce loan basis, and

• Loans that a shareholder guarantees or co-signs aren’t

part of a shareholder’s loan basis. Shareholders only

obtain basis from acting as a guarantee or in a similar

capacity to the extent the shareholder makes a payment

pursuant to the guarantee.

See the Instructions for Form 7203 for more details.

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

At-Risk Limitations

Generally, if you have (a) a loss or other deduction from

any activity carried on as a trade or business or for the

production of income by the corporation, and (b) amounts

in the activity for which you aren’t at risk, you will have to

complete Form 6198, At-Risk Limitations, to figure your

allowable loss for the activity.

The at-risk rules generally limit the amount of loss and

other deductions that you can claim to the amount you

could actually lose in the activity. These losses and

deductions include a loss on the disposition of assets and

the section 179 expense deduction. However, if you

acquired your stock before 1987, the at-risk rules don’t

apply to losses from an activity of holding real property

placed in service before 1987 by the corporation. The

activity of holding mineral property doesn’t qualify for this

exception.

Generally, you aren’t at risk for amounts such as the

following.

• The basis of your stock in the corporation or the basis of

your loans to the corporation if the cash or other property

used to purchase the stock or make the loans was from a

source (a) covered by nonrecourse indebtedness (except

for certain qualified nonrecourse financing, as defined in

section 465(b)(6)); (b) protected against loss by a

guarantee, stop-loss agreement, or other similar

arrangement; or (c) that is covered by indebtedness from

a person who has an interest in the activity or from a

person related to a person (except you) having such an

interest, other than a creditor.

• Any cash or property contributed to a corporate activity,

or your interest in the corporate activity, that is (a) covered

by nonrecourse indebtedness (except for certain qualified

nonrecourse financing, as defined in section 465(b)(6));

(b) protected against loss by a guarantee, stop-loss

agreement, or other similar arrangement; or (c) covered

by indebtedness from a person who has an interest in the

activity or from a person related to a person (except you)

having such an interest, other than a creditor.

Any loss from a section 465 activity not allowed for this

tax year will be treated as a deduction allocable to the

activity in the next tax year.

Since at-risk limitations apply for each activity, you

should get a separate statement of income, expenses,

and other items for each activity from the corporation.

Note: Box 18 of Schedule K-1 will be checked when a

statement is attached.

Passive Activity Limitations

Section 469 provides rules that limit the deduction of

certain losses and credits. These rules apply to

shareholders who:

• Are individuals, estates, or trusts; and

• Have a passive activity loss or credit for the tax year.

Generally, passive activities include:

1. Trade or business activities in which you didn’t

materially participate, and

2. Activities that meet the definition of rental activities

under Temporary Regulations section 1.469-1T(e)(3) and

Regulations section 1.469-1(e)(3).

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Passive activities don’t include the following.

1. Trade or business activities in which you materially

participated.

2. Rental real estate activities in which you materially

participated if you were a real estate professional for the

tax year. You were a real estate professional only if you

met both of the following conditions.

a. More than half of the personal services you

performed in trades or businesses were performed in real

property trades or businesses in which you materially

participated.

b. You performed more than 750 hours of services in

real property trades or businesses in which you materially

participated.

If you are married filing jointly, either you or your spouse

must separately meet both (a) and (b) of the above

conditions, without taking into account services performed

by the other spouse.

A real property trade or business is any real property

development, redevelopment, construction,

reconstruction, acquisition, conversion, rental, operation,

management, leasing, or brokerage trade or business.

Services you performed as an employee aren’t treated as

performed in a real property trade or business unless you

owned more than 5% of the stock (or more than 5% of the

capital or profits interest) in the employer.

3. The rental of a dwelling unit any shareholder used

for personal purposes during the year for more than the

greater of 14 days or 10% of the number of days that the

residence was rented at fair rental value.

4. Activities of trading personal property for the

account of owners of interests in the activities.

If you have a passive activity loss or credit, use Form

8582, Passive Activity Loss Limitations, to figure your

allowable passive losses, and Form 8582-CR, Passive

Activity Credit Limitations, to figure your allowable passive

credits. See the instructions for these forms for details.

If the corporation has more than one activity, it will

attach a statement to your Schedule K-1 that identifies

each activity (trade or business activity, rental real estate

activity, rental activity other than rental real estate,

portfolio income, etc.) and specifies the income (loss),

deductions, and credits from each activity.

Note: Box 19 of Schedule K-1 will be checked when a

statement is attached.

Material participation. You must determine if you

materially participated (a) in each trade or business

activity held through the corporation; and (b) if you were a

real estate professional (defined earlier), in each rental

real estate activity held through the corporation.

Each interest in rental real estate is a separate activity,

unless you elect to treat all interests in rental real estate as

one activity. For details on making this election, see the

Instructions for Schedule E (Form 1040), Supplemental

Income and Loss.

All determinations of material participation are based

on your participation during the corporation’s tax year.

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Material participation standards for shareholders who

are individuals are listed below. Special rules apply to

certain retired or disabled farmers and to the surviving

spouses of farmers. See the Instructions for Form 8582 for

details.

Individuals. If you are an individual, you materially

participated in an activity only if one or more of the

following apply.

1. You participated in the activity for more than 500

hours during the tax year.

2. Your participation in the activity for the tax year

constituted substantially all the participation in the activity

of all individuals (including individuals who aren’t owners

of interests in the activity).

3. You participated in the activity for more than 100

hours during the tax year, and your participation in the

activity for the tax year wasn’t less than the participation in

the activity of any other individual (including individuals

who weren’t owners of interests in the activity) for the tax

year.

4. The activity was a significant participation activity

for the tax year, and you participated in all significant

participation activities (including activities outside the

corporation) during the year for more than 500 hours. A

significant participation activity is any trade or business

activity in which you participated for more than 100 hours

during the year and in which you didn’t materially

participate under any of the material participation tests

(other than this test).

5. You materially participated in the activity for any 5

tax years (whether or not consecutive) during the 10 tax

years that immediately precede the tax year.

6. The activity was a personal service activity and you

materially participated in the activity for any 3 tax years

(whether or not consecutive) preceding the tax year. A

personal service activity involves the performance of

personal services in the field of health, law, engineering,

architecture, accounting, actuarial science, performing

arts, or consulting, or any other trade or business in which

capital isn’t a material income-producing factor.

7. Based on all the facts and circumstances, you

participated in the activity on a regular, continuous, and

substantial basis during the tax year.

Work counted toward material participation.

Generally, any work that you or your spouse does in

connection with an activity held through an S corporation

(where you own your stock at the time the work is done) is

counted toward material participation. However, work in

connection with the activity isn’t counted toward material

participation if either of the following applies.

1. The work isn’t the type of work that owners of the

activity would usually do, and one of the principal

purposes of the work that you or your spouse does is to

avoid the passive loss or credit limitations.

2. You do the work in your capacity as an investor and

you aren’t directly involved in the day-to-day operations of

the activity. Examples of work done as an investor that

wouldn’t count toward material participation include:

a. Studying and reviewing financial statements or

reports on operations of the activity,

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

b. Preparing or compiling summaries or analyses of

the finances or operations of the activity for your own use,

and

c. Monitoring the finances or operations of the activity

in a nonmanagerial capacity.

Effect of determination. Income (loss), deductions,

and credits from an activity are nonpassive if you

determine that:

• You materially participated in a trade or business

activity of the corporation, or

• You were a real estate professional (defined earlier) in a

rental real estate activity of the corporation.

If you determine that you didn’t materially participate in

a trade or business activity of the corporation or if you

have income (loss), deductions, or credits from a rental

activity of the corporation (other than a rental real estate

activity in which you materially participated as a real

estate professional), the amounts from that activity are

passive. Report passive income (losses), deductions, and

credits as follows.

1. If you have an overall gain (the excess of income

over deductions and losses, including any prior-year

unallowed loss) from a passive activity, report the income,

deductions, and losses from the activity as indicated in

these instructions.

2. If you have an overall loss (the excess of deductions

and losses, including any prior-year unallowed loss, over

income) or credits from a passive activity, report the

income, deductions, losses, and credits from all passive

activities using the Instructions for Form 8582 or the

Instructions for Form 8582-CR to see if your deductions,

losses, and credits are limited under the passive activity

rules.

Special allowance for a rental real estate activity. If

you actively participated in a rental real estate activity, you

may be able to deduct up to $25,000 of the loss (or credit

equivalent to a $25,000 deduction) from the activity from

nonpassive income. This “special allowance” is an

exception to the general rule disallowing losses in excess

of income from passive activities. The special allowance

isn’t available if you were married, file a separate return for

the year, and didn’t live apart from your spouse at all times

during the year.

Only individuals can actively participate in a rental real

estate activity. However, a decedent’s estate (including a

qualified revocable trust for which a section 645 election

has been made) is treated as actively participating for its

tax years ending less than 2 years after the decedent’s

death, if the decedent would have satisfied the active

participation requirement for the activity for the tax year

the decedent died.

You aren’t considered to actively participate in a rental

real estate activity if, at any time during the tax year, your

interest (including your spouse’s interest) in the activity

was less than 10% (by value) of all interests in the activity.

Active participation is a less stringent requirement than

material participation. You may be treated as actively

participating if you participated, for example, in making

management decisions or arranging for others to provide

services (such as repairs) in a significant and bona fide

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

sense. Management decisions that can count as active

participation include approving new tenants, deciding

rental terms, approving capital or repair expenditures, and

other similar decisions.

Modified adjusted gross income (MAGI) limitation.

The maximum special allowance that single individuals

and married individuals filing a joint return can qualify for

is $25,000. The maximum is $12,500 for married

individuals who file separate returns and who lived apart

at all times during the year. The maximum special

allowance for which an estate can qualify is $25,000

reduced by the special allowance for which the surviving

spouse qualifies.

If your MAGI is $100,000 or less ($50,000 or less if

married filing separately), your loss is deductible up to the

maximum special allowance referred to in the preceding

paragraph. If your MAGI is more than $100,000 (more

than $50,000 if married filing separately), the special

allowance is limited to 50% of the difference between

$150,000 ($75,000 if married filing separately) and your

MAGI. When MAGI is $150,000 or more ($75,000 or more

if married filing separately), there is no special allowance.

For a definition of “MAGI,” see Special $25,000

allowance in Pub. 925. Also see Line 6 in the Instructions

for Form 8582.

Special rules for certain other activities. If you have

net income (loss), deductions, or credits from any activity

to which special rules apply, the corporation will identify

the activity and all amounts relating to it on Schedule K-1

or on an attached statement.

If you have net income subject to recharacterization

under Temporary Regulations section 1.469-2T(f) and

Regulations section 1.469-2(f), report such amounts

according to the Instructions for Form 8582.

If you have net income (loss), deductions, or credits

from either of the following activities, treat such amounts

as nonpassive and report them as indicated in these

instructions.

1. The rental of a dwelling unit any shareholder used

for personal purposes during the year for more than the

greater of 14 days or 10% of the number of days that the

residence was rented at fair rental value.

2. Trading personal property for the account of owners

of interests in the activity.

Self-charged interest. The corporation will report any

“self-charged” interest income or expense that resulted

from loans between you and the corporation (or between

the corporation and another S corporation or partnership if

both entities have the same owners with the same

proportional interest in each entity). If there was more than

one activity, the corporation will provide a statement

allocating the interest income or expense with respect to

each activity. The self-charged interest rules don’t apply to

your interest in the S corporation if the corporation made

an election under Regulations section 1.469-7(g) to avoid

the application of these rules. See the Instructions for

Form 8582 for details.

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Excess Business Loss Limitations

Losses attributable to your trade or business may be

limited, pursuant to section 461(l). See Form 461,

Limitation on Business Losses, and its instructions for

more information.

Specific Instructions

Part III. Shareholder’s Share of

Current Year Income, Deductions,

Credits, and Other Items

The amounts shown in boxes 1 through 17 reflect your

share of income, loss, deductions, credits, and other items

from corporate business or rental activities without

reference to limitations on losses, credits, or other items

that may have to be adjusted because of:

1. The adjusted basis of your stock and debt in the

corporation,

2. The at-risk limitations,

3. The passive activity limitations, and

4. 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.

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Codes. In boxes 10, 12, 13, and 15 through 17, the

corporation will identify each item by entering a code in

the column to the left of the dollar amount entry space.

See List of Codes, later.

Attached statements. The corporation will enter an

asterisk (*) after the code, if any, in the column to the left of

the dollar amount entry space for each item for which it

has attached a statement providing additional information.

For those informational items that can’t be reported as a

single dollar amount, the corporation will enter an asterisk

in the left column and enter “STMT” in the dollar amount

entry space to indicate the information is provided on an

attached statement.

Income (Loss)

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.

1. 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.

2. 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.

1. 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.

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.

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).

2. 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.

3. 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.

4. 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.

1. 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.

2. 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

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

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.

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

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).

8

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, geothermal, 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.

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 (replacement 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 (replacement 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),

• 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, and

• You must purchase other QSB stock (as defined in the

Instructions for Schedule D (Form 1040)) during the

60-day period that began on the date the QSB stock was

sold by the corporation.

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 postponed gain.

Code O. Sale or exchange of QSB stock with section

1202 exclusion. Gain from the sale or exchange of QSB

stock eligible for the section 1202 exclusion. 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. The following additional limitations apply at the

shareholder level.

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

• 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.

Deductions

Caution: There are potential limitations on corporate

losses you can deduct on your return. These limitations

and the order in which you must apply them are as follows:

the basis limitations, the at-risk limitations, the passive

activity limitations, and the excess business loss

limitations. See Limitations on Losses, Deductions, and

Credits, earlier.

Box 11. Section 179 Deduction

Use this amount, along with the total cost of section 179

property placed in service during the year from other

sources, to complete Part I of Form 4562, Depreciation

and Amortization. The corporation will report on an

attached statement your share of the cost of any qualified

enterprise zone property or qualified real property it

placed in service during its tax year. Report the amount

from line 12 of Form 4562 allocable to a passive activity

using the Instructions for Form 8582. If the amount isn’t a

passive activity deduction, report it in column (j) of

Schedule E (Form 1040), line 28, after applying the basis

and at-risk limitations on losses. See Limitations on

Losses, Deductions, and Credits, earlier.

Box 12. Other Deductions

See List of Codes, later.

Caution: Deductions reported in box 12 may be limited.

See Limitations on Losses, Deductions, and Credits,

earlier.

9

Contributions. Codes A through G. The corporation

will give you a statement that shows charitable

contributions subject to the 100%, 60%, 50%, 30%, and

20% adjusted gross income (AGI) limitations.

If the corporation made a property contribution, it will

report on an attached statement your share of both the fair

market value (FMV) and adjusted basis of the property.

Use these amounts to adjust your stock basis. If the

corporation made a qualified conservation contribution, it

will report the FMV of the underlying property before and

after the donation, the type of legal interest contributed,

and a description of the conservation purpose furthered

by the donation. If the corporation made a contribution of

real property located in a registered historic district, it will

report any information you will need to take a deduction.

For more details, see Pub. 526, Charitable

Contributions, and the Instructions for Schedule A (Form

1040). If your contributions are subject to more than one

of the AGI limitations, see Pub. 526.

Charitable contribution deductions aren’t taken into

account in figuring your passive activity loss for the year.

Don’t enter them on Form 8582.

The corporation will report your share of qualified

conservation contributions of property. Subject to three

exceptions, each S corporation shareholder’s claim of a

charitable contribution deduction for a conservation

contribution is disallowed if the amount of the contribution

exceeds 2.5 times the sum of each ultimate member’s

relevant basis (disallowance rule). See the Instructions for

Form 8283, Noncash Charitable Contributions, and

Regulations sections 1.170A-14(j) through (n) for more

details and information on the three exceptions.

Relevant basis is, with respect to any ultimate member,

the portion of the ultimate member’s modified basis that is

allocable to the portion of the real property with respect to

which the qualified conservation contribution is made. The

ultimate members of an S corporation are the

shareholders that receive a pro rata allocation of a

qualified conservation contribution that is either made by

the S corporation (contributing S corporation) or made by

a partnership (contributing partnership) that allocates an

allocated portion of the qualified conservation

contribution, directly or indirectly through one or more

upper-tier partnerships, to an upper-tier S corporation.

If the amount of a contributing partnership’s

contributing S corporation’s, or upper-tier partnership’s

qualified conservation contribution equals or is less than

2.5 times the sum of each ultimate member’s relevant

basis, then any upper-tier S corporation must still

determine whether the disallowance rule applies to its

allocated portion of the qualified conservation

contribution. Subject to three exceptions, if an upper-tier S

corporation’s allocated portion exceeds 2.5 times the sum

of each ultimate member’s relevant basis, the contribution

is not treated as a qualified conservation contribution with

respect to the upper-tier S corporation, or any ultimate

member. No one may claim a deduction for the allocated

portion attributable to the upper-tier S corporation.

See Qualified Conservation Contribution in Pub. 526

and Disallowance of deduction for certain qualified

conservation contributions by partnerships and S

10

corporations in the Instructions for Form 8283. You must

fill out your own Form 8283 and attach the Form 8283 the

S corporation provides you. See the Instructions for Form

8283 for more details. The S corporation will provide you

your relevant basis. You must report this in column (h) of

line 3 on your own Form 8283. The S corporation may

need information from you to calculate relevant basis.

Form 8283. If you received a copy of Form 8283 from the

corporation, attach the copy to your tax return. Use the

amount shown on your Schedule K-1, not the amount

shown on the Form 8283, to figure your deduction.

You must fill out your own Form 8283 with the

information the corporation provides you and attach the

Form 8283 the corporation provides you to your return.

See the Instructions for Form 8283 for more details.

If the corporation claims a qualified conservation

contribution, the corporation will provide you with your

relevant basis. You must report this in column (h) of your

own Form 8283, line 3. The corporation may need

information from you to calculate relevant basis.

If the corporation is the entity where the noncash

charitable contribution was originally reported, you input

the entity name and identifying number on your own Form

8283. See the Instructions for Form 8283 for more details.

If the corporation is not the entity where the noncash

charitable contribution was originally reported, the

corporation will provide you the entity name and

identifying number where the noncash charitable

contribution was originally reported. Input this information

on your own Form 8283.

Code A. Cash contributions (60%). Report this

amount, subject to the 60% AGI limitation, on Schedule A

(Form 1040), line 11.

Code B. Cash contributions (30%). Report this

amount, subject to the 30% AGI limitation, on Schedule A

(Form 1040), line 11.

Code C. Noncash contributions (50%). Report this

amount, subject to the 50% AGI limitation, on Schedule A

(Form 1040), line 12.

Food inventory contributions. The corporation will

report on an attached statement your share of qualified

food inventory contributions. The food inventory

contribution isn’t included in the amount reported in

box 12 using code C. The corporation will also report your

share of the corporation’s net income from the business

activities that made the food inventory contribution(s).

Your deduction for food inventory contributions made

during 2025 can’t exceed 15% of your aggregate net

income for the tax year from the business activities from

which the food inventory contribution was made (including

your share of net income from partnership or

S corporation businesses that made food inventory

contributions). Amounts that exceed the 15% limitation

may be carried over for up to 5 years. Report this amount,

subject to the 50% AGI limitation, on Schedule A (Form

1040), line 12.

Code D. Noncash contributions (30%). Report this

amount, subject to the 30% AGI limitation, on Schedule A

(Form 1040), line 12.

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

Code E. Capital gain property to a 50% limit organization (30%). Report this amount, subject to the 30%

AGI limitation, on Schedule A (Form 1040), line 12. See

Worksheet 2 in Pub. 526.

Code F. Capital gain property (20%). Report this

amount, subject to the 20% AGI limitation, on Schedule A

(Form 1040), line 12.

Code G. Contributions (100%). The corporation will

report on an attached statement your share of qualified

conservation contributions of property used in agriculture

or livestock production. This contribution isn’t included in

the amount reported in box 12 using code C. If you are a

farmer or rancher, you qualify for a 100% AGI limitation for

this contribution. Otherwise, your deduction for this

contribution is subject to a 50% AGI limitation. Report this

amount, subject to your applicable limitation, on

Schedule A (Form 1040), line 12. See Pub. 526 for more

information on qualified conservation contributions.

Code H. Investment interest expense. Report this

amount on Form 4952, line 1.

If the corporation has investment income or other

investment expense, it will report your share of these

items in box 17 of Schedule K-1 using codes A and B.

Include investment income and expenses from other

sources to figure how much of your total investment

interest is deductible.

For more information on the special provisions that

apply to investment interest expense, see Form 4952 and

Pub. 550.

Code I. Deductions—royalty income. Report

deductions allocable to royalties on Schedule E (Form

1040), line 19. For this type of expense, enter “From

Schedule K-1 (Form 1120-S).”

These deductions aren’t taken into account in figuring

your passive activity loss for the year. Don’t enter them on

Form 8582.

Code J. Section 59(e)(2) expenditures. The

corporation will show on an attached statement the type

and the amount of qualified expenditures for which you

may make a section 59(e) election. The statement will

also identify the property for which the expenditures were

paid or incurred. If there is more than one type of

expenditure, the amount of each type will also be listed.

If you deduct these expenditures in full in the current

year, they are treated as adjustments or tax preference

items for purposes of alternative minimum tax. However,

you may elect to amortize these expenditures over the

number of years in the applicable period rather than

deduct the full amount in the current year. If you make this

election, these items aren’t treated as adjustments or tax

preference items.

Under the election, you can deduct circulation

expenditures ratably over a 3-year period. Research and

experimental expenditures and mining exploration and

development costs can be amortized over a 10-year

period. Intangible drilling and development costs can be

amortized over a 60-month period. The amortization

periods begin with the month in which such costs were

paid or incurred.

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

Make the election on Form 4562. If you make the

election, report the current-year amortization of section

59(e) expenditures from Part VI of Form 4562 on

Schedule E (Form 1040), line 28. If you don’t make the

election, report the section 59(e)(2) expenditures on

Schedule E (Form 1040), line 28, and figure the resulting

adjustment or tax preference item (see Form 6251,

Alternative Minimum Tax—Individuals). Whether you

deduct the expenditures or elect to amortize them, report

the amount on a separate line in column (i) of line 28 if you

materially participated in the activity. If you didn’t

materially participate, follow the Instructions for Form 8582

to figure how much of the deduction can be reported in

column (g).

Code K. Reserved for future use.

Code L. Deductions—portfolio income (other).

Generally, you should report these amounts on

Schedule A (Form 1040), line 16. See the instructions for

Schedule A (Form 1040), line 16, for details.

These deductions aren’t taken into account in figuring

your passive activity loss for the year. Don’t enter them on

Form 8582.

Code M. Preproductive period expenses. You may be

able to deduct these expenses currently or you may need

to capitalize them under section 263A. See Pub. 225,

Farmer’s Tax Guide, and Regulations section 1.263A-4 for

details.

Code N. Reserved for future use.

Code O. Reforestation expense deduction. The

corporation will provide a statement that describes the

qualified timber property for these reforestation expenses.

The expense deduction is limited to $10,000 ($5,000 if

married filing separately) for each qualified timber

property, including your share of the corporation’s

expense and any reforestation expenses you separately

paid or incurred during the tax year.

If you didn’t materially participate in the activity, use

Form 8582 to figure the amount to report in column (g) of

Schedule E (Form 1040), line 28. If you materially

participated in the reforestation activity, report the

deduction in column (i) of Schedule E (Form 1040),

line 28.

Codes P through V. Reserved for future use.

Code W. Soil and water conservation. Soil and water

conservation expenditures and endangered species

recovery expenditures. See section 175 for limitations on

the amount you are allowed to deduct.

Code X. Film, television, theatrical, and qualified

sound recording production expenditures. The

corporation will provide a statement that describes the

film, television, live theatrical, or qualified sound recording

production generating these expenses. See section

181(a)(2) for dollar limitations that may apply. If you didn’t

materially participate in the activity, use Form 8582 to

determine the amount that can be reported in column (g)

of Schedule E (Form 1040), line 28. If you materially

participated in the production activity, report the deduction

in column (i) of Schedule E (Form 1040), line 28.

11

Code Y. Expenditures for removal of barriers.

Expenditures for the removal of architectural and

transportation barriers to the elderly and disabled that the

corporation elected to treat as a current expense. The

deductions are limited by section 190(c) to $15,000 per

year from all sources.

• Form 3468, Investment Credit (Form 3800, Part III,

line 1a).

• Form 8864, Biodiesel, Renewable Diesel, or

Sustainable Aviation Fuels Credit (Form 3800, Part III,

line 1l).

Code Z. Itemized deductions. Itemized deductions that

Form 1040 or 1040-SR filers report on Schedule A (Form

1040).

Code A. Zero-emission nuclear power production

credit. Report this amount in Part II of Form 7213,

Nuclear Power Production Credit, or on Form 3800, Part

III, line 1u (see Tip, earlier).

Code AA. Contributions to a capital construction

fund (CCF). The deduction for a CCF investment isn’t

taken on Schedule E (Form 1040). Instead, you subtract

the deduction from the amount that would normally be

entered as taxable income on Form 1040 or 1040-SR,

line 15. In the margin to the left of line 15, enter “CCF” and

the amount of the deduction.

Code AB. Penalty on early withdrawal of savings.

Report this amount on Schedule 1 (Form 1040), line 18.

Code AC. Interest expense allocated to debt-financed

distributions. The manner in which you report such

interest expense depends on your use of the distributed

debt proceeds. If the proceeds were used in a trade or

business activity, report the interest on Schedule E (Form

1040), line 28. In column (a), enter the name of the

corporation and “interest expense.” If you materially

participated in the trade or business activity, enter the

interest expense in column (i). If you didn’t materially

participate in the activity, follow the Instructions for Form

8582 to figure the interest expense you can report in

column (g). Material participation is defined earlier under

Passive Activity Limitations. If the proceeds were used in

an investment activity, report the interest on Form 4952. If

the proceeds are used for personal purposes, the interest

is generally not deductible.

Codes AD through AJ. Reserved for future use.

Code ZZ. Other deductions. Amounts with code ZZ are

other deductions not included in box 12 using codes A

through AC. The corporation will give you a description

and the amount of your share for each of these items.

Box 13. Credits

See List of Codes, later.

If you have credits that are passive activity credits to

you, you must complete Form 8582-CR in addition to the

credit forms identified below. See Passive Activity

Limitations, earlier, and the Instructions for Form 8582-CR

for details.

Tip: In general, shareholders whose only sources for a

credit listed in Form 3800, General Business Credit, Part

III, are partnerships, S corporations, estates, trusts, and

cooperatives, aren’t required to complete the applicable

credit form or attach it to their return. Instead, they can

report the credit amounts reported to them by these

pass-through entities directly in Form 3800, Part III, and

enter the EIN of the entity in column (c) of Part III.

However, when applicable, all shareholders must

complete and attach the following credit forms to their

return.

12

See the Instructions for Form 3800 for more details.

Code B. Credit for production from advanced nuclear

power facilities. Report this amount in Part I of Form

7213, or on Form 3800, Part III, line 1cc (see Tip, earlier).

Codes C and D. Low-income housing credit. If section

42(j)(5) applies, the corporation will report your share of

the low-income housing credit using code C. If section

42(j)(5) doesn’t apply, your share of the credit will be

reported using code D. Any allowable low-income housing

credit reported using code C or D is reported on Form

8586, Low-Income Housing Credit, line 4, or Form 3800,

Part III, line 4d (see Tip, earlier).

Keep a separate record of the low-income housing

credit from each separate source so that you can correctly

figure any recapture of low-income housing credit that

may result from the disposition of all or part of your stock

in the corporation. For more information on recapture, see

the Instructions for Form 8611, Recapture of Low-Income

Housing Credit.

Code E. Qualified rehabilitation expenditures (rental

real estate). The corporation will report your share of the

qualified rehabilitation expenditures and other information

you need to complete Form 3468 related to rental real

estate activities using code E. Your share of qualified

rehabilitation expenditures from property not related to

rental real estate activities will be reported in box 17 using

code C. See the Instructions for Form 3468 for details. If

the corporation is reporting expenditures from more than

one activity, an attached statement will separately identify

the expenditures from each activity.

Combine the expenditures (for Form 3468 reporting)

from box 13, code E, and from box 17, code C. The

expenditures related to rental real estate activities (box 13,

code E) are reported on Schedule K-1 separately from

other qualified rehabilitation expenditures (box 17, code

C) because they are subject to different passive activity

limitation rules. See the Instructions for Form 8582-CR for

details.

Code F. Other rental real estate credits. The

corporation will identify the type of credit and any other

information you need to figure these credits from rental

real estate activities (other than the low-income housing

credit and qualified rehabilitation expenditures). These

credits may be limited by the passive activity limitations. If

the credits are from more than one activity, the corporation

will identify the credits from each activity on an attached

statement. See Passive Activity Limitations, earlier, and

the Instructions for Form 8582-CR for details.

Code G. Other rental credits. The corporation will

identify the type of credit and any other information you

need to figure these rental credits. These credits may be

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

limited by the passive activity limitations. If the credits are

from more than one activity, the corporation will identify

the credits from each activity on an attached statement.

See Passive Activity Limitations, earlier, and the

Instructions for Form 8582-CR for details.

from cooperatives. Report this amount on Form 3468,

Part IV, line 2.

Code H. Undistributed capital gains credit. Code H

represents taxes paid on undistributed capital gains by a

RIC or REIT. Report these taxes on Schedule 3 (Form

1040), Additional Credits and Payments, line 13a. Reduce

the basis of your stock by this tax.

Code T. Unused investment credit from the energy

credit allocated from cooperatives. Report this amount

on Form 3468, Part VI, line 31.

Code I. Biofuel producer credit. Report this amount on

line 3 of Form 6478, Biofuel Producer Credit, or Form

3800, Part III, line 4c (see Tip, earlier).

Code J. Work opportunity credit. Report this amount

on line 3 of Form 5884, Work Opportunity Credit, or Form

3800, Part III, line 4b (see Tip, earlier).

Code K. Disabled access credit. Report this amount on

line 7 of Form 8826, Disabled Access Credit, or Form

3800, Part III, line 1e (see Tip, earlier).

Code L. Empowerment zone employment credit.

Report this amount on line 3 of Form 8844, Empowerment

Zone Employment Credit, or Form 3800, Part III, line 3

(see Tip, earlier).

Code M. Credit for increasing research activities.

Report this amount on Section C, line 29, of Form 6765,

Credit for Increasing Research Activities, or Form 3800,

Part III, line 1c (see Tip, earlier), as follows.

• The S corporation will provide information necessary to

determine if it is an eligible small business under section

38(c)(5)(A). If you and the S corporation are eligible small

businesses, report the credit on line 4i. For more

information, see the Instructions for Form 3800.

• All others, report the credit on line 1c.

Code N. Credit for employer social security and Medicare taxes. Report this amount on line 5 of Form 8846,

Credit for Employer Social Security and Medicare Taxes

Paid on Certain Employee Tips, or Form 3800, Part III,

line 4f (see Tip, earlier).

Code O. Backup withholding. This is your share of the

credit for backup withholding on dividends, interest

income, and other types of income. Include this amount in

the total you enter on Form 1040 or 1040-SR, line 25c,

and attach a copy of your Schedule K-1 to your tax return.

Instead of attaching a copy of your Schedule K-1 to your

tax return, you can include a statement with your return

that provides the corporation’s name, address, EIN, and

backup withholding amount.

Code P. Unused investment credit from the qualifying

advanced coal project credit or qualifying gasification project credit allocated from cooperatives.

Report this amount on Form 3468, Part II, line 6.

Code Q. Unused investment credit from the qualifying advanced energy project credit allocated from

cooperatives. Report this amount on Form 3468, Part III,

line 2.

Code R. Unused investment credit from the advanced manufacturing investment credit allocated

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

Code S. Unused investment credit from clean electricity credit allocated from cooperatives. Report this

amount on Form 3468, Part V, line 10.

Code U. Unused investment credit from the rehabilitation credit allocated from cooperatives. Report this

amount on Form 3468, Part VII, line 2.

Code V. Advanced manufacturing production credit.

Report on Form 7207, Advanced Manufacturing

Production Credit, or Form 3800, Part III, line 1b (see Tip,

earlier).

Code W. Clean electricity production credit. Report

on Form 7211, Clean Electricity Production Credit, or

Form 3800, Part III, line 1gg (see Tip, earlier).

Code X. Clean fuel production credit. Report on Form

7218, Clean Fuel Production Credit, or Form 3800, Part III,

line 1q (see Tip, earlier).

Code Y. Clean hydrogen production credit. Report

this amount on Form 7210, Clean Hydrogen Production

Credit, or Form 3800, Part III, line 1g (see Tip, earlier).

Code Z. Orphan drug credit. Report this amount on

Form 8820, Orphan Drug Credit, or Form 3800, Part III,

line 1h (see Tip, earlier).

Code AA. Enhanced oil recovery credit. Report this

amount on Form 8830, Enhanced Oil Recovery Credit, or

Form 3800, Part III, line 1t (see Tip, earlier).

Code AB. Renewable electricity production credit.

The corporation will provide a statement showing the

allocation of the credit for production during the 4-year

period beginning on the date the facility was placed in

service and for production after that period. Report this

amount on Form 8835, Renewable Electricity Production

Credit, or Form 3800, Part III, line 1f (see Tip, earlier).

Code AC. Biodiesel, renewable diesel, or sustainable

aviation fuels credit. If this credit includes the small

agri-biodiesel producer credit or the sustainable aviation

fuels credit, the corporation will provide additional

information on an attached statement. If no statement is

attached, report this amount on Form 8864, line 10. If a

statement is attached, see the instructions for Form 8864,

line 10.

Code AD. New markets credit. Report this amount on

Form 8874, New Markets Credit, or Form 3800, Part III,

line 1i (see Tip, earlier).

Code AE. Credit for small employer pension plan

startup costs. Report this amount in Form 8881, Credit

for Small Employer Pension Plan Startup Costs,

Auto-Enrollment, and Military Spouse Retirement Plan,

Part I, or on Form 3800, Part III, line 1j (see Tip, earlier).

Code AF. Credit for small employer auto-enrollment.

Report this amount in Form 8881, Part II, or on Form 3800,

Part III, line 1dd (see Tip, earlier).

13

Code AG. Credit for military spouse participation.

Report this amount in Form 8881, Part III, or on Form

3800, Part III, line 1ee (see Tip, earlier).

Code AY. New clean vehicle credit. Report this amount

on Form 8936, Clean Vehicle Credits, Part II, or Form

3800, Part III, line 1y (see Tip, earlier).

Code AH. Credit for employer-provided childcare facilities and services. Report this amount on Form 8882

or Form 3800, Part III, line 1k (see Tip, earlier).

Code AZ. Qualified commercial clean vehicle credit.

Report this amount on Form 8936, Part V, or Form 3800,

Part III, line 1aa (see Tip, earlier).

Code AI. Low sulfur diesel fuel production credit.

Report this amount on Form 8896, Low Sulfur Diesel Fuel

Production Credit, or Form 3800, Part III, line 1m (see Tip,

earlier).

Code BA. Credit for small employer health insurance

premiums. Report this amount on Form 8941, Credit for

Small Employer Health Insurance Premiums, or Form

3800, Part III, line 4h (see Tip, earlier).

Code AJ. Qualified railroad track maintenance credit.

Report this amount on Form 8900, Qualified Railroad

Track Maintenance Credit, or Form 3800, Part III, line 4g

(see Tip, earlier).

Code BB. Employer credit for paid family and medical leave. Report on Form 8994, Employer Credit for Paid

Family and Medical Leave, or Form 3800, Part III, line 4j

(see Tip, earlier).

Code AK. Credit for oil and gas production from marginal wells. Report this amount on Form 8904, Credit for

Oil and Gas Production From Marginal Wells, or Form

3800, Part III, line 1bb (see Tip, earlier).

Code BC. Eligible credits from transferor(s) under

section 6418. On a statement attached to Schedule K-1,

the corporation will identify the type of transferred credits

and any other information you need to file your tax returns.

Report this amount on Form 3800. See the instructions for

Form 3800, Parts III and V, for additional information.

Code AL. Distilled spirits credit. Report this amount on

Form 8906, Distilled Spirits Credit, or Form 3800, Part III,

line 1n (see Tip, earlier).

Code AM. Energy efficient home credit. Report this

amount on Form 8908, Energy Efficient Home Credit, or

Form 3800, Part III, line 1p (see Tip, earlier).

Code AN. Reserved for future use.

Code AO. Alternative fuel vehicle refueling property

credit. Report this amount on Form 8911, Alternative

Fuel Vehicle Refueling Property Credit, Part I, or Form

3800, Part III, line 1s (see Tip, earlier).

Code AP. Clean renewable energy bond credit.

Report this amount on Form 8912, Credit to Holders of

Tax Credit Bonds.

Code AQ. New clean renewable energy bond credit.

Report this amount on Form 8912.

Code AR. Qualified energy conservation bond credit.

Report this amount on Form 8912.

Code AS. Qualified zone academy bond credit.

Report this amount on Form 8912.

Code AT. Qualified school construction bond credit.

Report this amount on Form 8912.

Code AU. Build America bond credit. Report this

amount on Form 8912.

Code AV. Credit for employer differential wage payments. Report this amount on Form 8932, Credit for

Employer Differential Wage Payments, or Form 3800, Part

III, line 1w (see Tip, earlier).

Code AW. Carbon oxide sequestration credit. Report

this amount on Form 8933, Carbon Oxide Sequestration

Credit, or Form 3800, Part III, line 1x (see Tip, earlier).

Code AX. Carbon oxide sequestration credit recapture. The corporation will provide any information you

need to figure your recapture tax. Report the carbon oxide

sequestration credit recapture amount on Form 8933, Part

III, line 8.

Codes BD through BG. Reserved for future use.

Code ZZ. Other credits. On a statement attached to

Schedule K-1, the corporation will identify the type of

credit and any other information you need to figure credits

other than those reported with codes A through BC. Most

credits identified by code ZZ will be reported in Form

3800, Part III (see Tip, earlier).

Section 6418 transfer election and retained section

48 credit. If the S corporation has made an election

under section 6418 with regard to a section 48 credit and

is using code ZZ to report your share of the credit that was

not transferred by the S corporation, report this amount on

Form 3800, Part III, line 4a.

Section 6418 transfer election and retained section

48C credit. If the S corporation has made an election

under section 6418 with regard to a section 48C credit

and is using code ZZ to report your share of the credit that

was not transferred by the S corporation, report this

amount on Form 3800, Part III, line 1d.

Section 6418 transfer election and retained section

48E credit. If the S corporation has made an election

under section 6418 with regard to a section 48E credit and

is using code ZZ to report your share of the credit that was

not transferred by the S corporation, report this amount on

Form 3800, Part III, line 1v.

Box 14. International Transactions

If the S corporation checked the box, see the attached

Schedule K-3 with respect to items of international tax

relevance. If the S corporation did not check the box, the S

corporation attached a statement to the Schedule K-1 (or

issued a statement prior to furnishing the Schedule K-1)

notifying the shareholder that the shareholder will not

receive Schedule K-3 from the S corporation unless the

shareholder requests the schedule.

For additional information, see the Shareholder’s

Instructions for Schedule K-3 (Form 1120-S).

Box 15. Alternative Minimum Tax (AMT) Items

See List of Codes, later.

14

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

Use the information reported in box 15 (as well as your

adjustments and tax preference items from other sources)

to prepare your Form 6251, Alternative Minimum

Tax—Individuals; or Schedule I (Form 1041), Alternative

Minimum Tax—Estates and Trusts.

Code A. Post-1986 depreciation adjustment. This

amount is your share of the corporation’s post-1986

depreciation adjustment. If you are an individual

shareholder, report this amount on Form 6251, line 2l.

Code E. Repayment of loans from shareholders. If

these payments are made on a loan with a reduced basis,

the repayments must be allocated in part to a return of

your basis in the loan and in part to the receipt of income.

See Regulations section 1.1367-2 for information on

reduction in basis of a loan and restoration in basis of a

loan with a reduced basis. See Rev. Rul. 64-162, 1964-1

(Part 1) C.B. 304; and Rev. Rul. 68-537, 1968-2 C.B. 372,

for details.

Code B. Adjusted gain or loss. This amount is your

share of the corporation’s adjusted gain or loss. If you are

an individual shareholder, report this amount on Form

6251, line 2k.

Code F. Foreign taxes paid or accrued. Report this

amount in column (a) of Form 7203, Part III, line 46 . Do

not use this amount to complete your Form 1116. See

Schedule K-3 to complete your Form 1116.

Code C. Depletion (other than oil & gas). This amount

is your share of the corporation’s depletion adjustment. If

you are an individual shareholder, report this amount on

Form 6251, line 2d.

Box 17. Other Information

Codes D and E. Oil, gas, & geothermal properties—gross income and deductions. The amounts

reported on these lines include only the gross income

(code D) from, and deductions (code E) allocable to, oil,

gas, and geothermal properties included in box 1 of

Schedule K-1. The corporation should have attached a

statement that shows any income from, or deductions

allocable to, such properties that are included in boxes 2

through 12, 16, and 17 of Schedule K-1. Use the amounts

reported here and any other reported amounts to help you

figure the net amount to enter on Form 6251, line 2t.

Code F. Other AMT items. Report the information on the

statement attached by the corporation on the applicable

lines of Form 6251 or Schedule I (Form 1041).

Box 16. Items Affecting Shareholder Basis

See List of Codes, later.

Code A. Tax-exempt interest income. Report on your

return, as an item of information, your share of the

tax-exempt interest received or accrued by the corporation

during the year. Individual shareholders include this

amount on Form 1040 or 1040-SR, line 2a. Generally, you

must increase the basis of your stock by this amount.

Code B. Other tax-exempt income. Generally, you must

increase the basis of your stock by the amount shown, but

don’t include it in income on your tax return.

Code C. Nondeductible expenses. The nondeductible

expenses paid or incurred by the corporation aren’t

deductible on your tax return. Generally, you must

decrease the basis of your stock by this amount.

Code D. Distributions. Reduce the basis of your stock

(as explained earlier) by distributions, not reported on

Form 1099-DIV, of property or money. This amount will

include any amounts included in income with respect to

new clean renewable energy, qualified energy

conservation, qualified school construction, build

America, or (for bonds issued after October 3, 2008)

qualified zone academy bonds. If these distributions

exceed the basis of your stock, the excess is treated as

capital gain from the sale or exchange of property and is

reported on Form 8949 and Schedule D (Form 1040).

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

See List of Codes, later.

Code A. Investment income. Report this amount on

Form 4952, line 4a.

Code B. Investment expenses. Report this amount on

Form 4952, line 5.

Code C. Qualified rehabilitation expenditures (other

than rental real estate). The corporation will report your

share of qualified rehabilitation expenditures and other

information you need to complete Form 3468 for property

not related to rental real estate activities in box 17 using

code C. Your share of qualified rehabilitation expenditures

related to rental real estate activities is reported in box 13

using code E. See the Instructions for Form 3468 for

details. If the corporation is reporting expenditures from

more than one activity, the attached statement will

separately identify the expenditures from each activity.

Combine the expenditures (for Form 3468 reporting)

from box 13, code E, and from box 17, code C. The

expenditures related to rental real estate activities (box 13,

code E) are reported on Schedule K-1 separately from

other qualified rehabilitation expenditures (box 17, code

C) because they are subject to different passive activity

limitation rules. See the Instructions for Form 8582-CR for

details.

Code D. Basis of energy property. If the corporation

provides an attached statement for code D, use the

information on the statement to complete the applicable

energy credit in Part VI of Form 3468. See the Instructions

for Form 3468 for details.

Codes E and F. Recapture of low-income housing

credit. The corporation will identify by code E your share

of any recapture of a low-income housing credit from its

investment in partnerships to which the provisions of

section 42(j)(5) apply. All other recapture of low-income

housing credits will be identified by code F.

Keep a separate record of each type of recapture so

that you will be able to correctly figure any credit recapture

that may result from the disposition of all or part of your

corporate stock. For details, see Form 8611.

Code G. Recapture of investment credit. The

corporation will provide any information you need to figure

your recapture tax on Form 4255, Certain Credit

Recapture, Excessive Payments, and Penalties. See the

15

Form 3468 on which you took the original credit for other

information you need to complete Form 4255.

You may also need Form 4255 if your proportionate

stock interest in the corporation is reduced by more than

one-third after you were allocated part of an investment

credit.

Code H. Recapture of other credits. On a statement

attached to Schedule K-1, the corporation will report any

information you need to figure the recapture of other

credits including the new markets credit (Form 8874),

Indian employment credit (Form 8845), credit for

employer-provided childcare facilities and services (Form

8882), alternative fuel vehicle refueling property credit

(Form 8911), and qualified plug-in electric drive motor

vehicle credit (Form 8936).

Code I. Look-back interest—completed long-term

contracts. The corporation will report any information

you need to figure the interest due or to be refunded under

the look-back method of section 460(b)(2) on certain

long-term contracts. Use Form 8697, Interest Computation

Under the Look-Back Method for Completed Long-Term

Contracts, to report any such interest.

Code J. Look-back interest—income forecast method. The corporation will report any information you need

to figure the interest due or to be refunded under the

look-back method of section 167(g)(2) for certain property

placed in service after September 13, 1995, and

depreciated under the income forecast method. Use Form

8866, Interest Computation Under the Look-Back Method

for Property Depreciated Under the Income Forecast

Method, to report any such interest.

Code K. Dispositions of property with section 179

deductions. The corporation will report your share of

gain or loss on the sale, exchange, or other disposition of

property for which a section 179 expense deduction was

passed through to shareholders with code K. If the

corporation passed through a section 179 expense

deduction for the property, you must report the gain or

loss, if any, and any recapture of the section 179 expense

deduction for the property on your income tax return (see

the Instructions for Form 4797 for details). The corporation

will provide all the following information.

1. Description of the property.

2. Date the property was acquired and placed in

service.

3. Date of the sale or other disposition of the property.

4. Your share of the gross sales price or amount

realized.

5. Your share of the cost or other basis plus the

expense of sale.

6. Your share of the depreciation allowed or allowable.

7. Your share of the section 179 expense deduction (if

any) passed through for the property and the corporation’s

tax year(s) in which the amount was passed through.

To figure the depreciation allowed or allowable for Form

4797, line 22, add to the amount from item 6 above the

amount of your share of the section 179 expense

deduction, reduced by any unused carryover of the

deduction for this property. This amount may be different

16

from the amount of section 179 expense you deducted for

the property if your interest in the corporation has

changed.

8. If the disposition is due to a casualty or theft, any

information you need to complete Form 4684.

9. If the sale was an installment sale, any information

you need to complete Form 6252, Installment Sale

Income. The corporation will separately report your share

of all payments received for the property in the following

tax years. See the Instructions for Form 6252 for details.

Code L. Recapture of section 179 deduction. The

corporation will report your share of any recapture of

section 179 expense deduction if business use of any

property for which the section 179 expense deduction was

passed through to shareholders dropped to 50% or less

before the end of the recapture period. If this occurs, the

corporation must provide the following information.

1. Your share of the depreciation allowed or allowable

(not including the section 179 expense deduction).

2. Your share of the section 179 expense deduction (if

any) passed through for the property and the corporation’s

tax year(s) in which the amount was passed through.

Reduce this amount by the portion, if any, of your unused

(carryover) section 179 expense deduction for this

property.

Code M. Section 453(l)(3) information. The

corporation will report any information you need to figure

the interest due under section 453(l)(3) with respect to the

disposition of certain timeshares and residential lots on

the installment method. Report the interest on Schedule 2

(Form 1040), line 14. See section 453(l)(3) for details on

how to figure the interest.

Code N. Section 453A(c) information. The corporation

will report any information you need to figure the interest

charge under section 453A(c) with respect to certain

installment sales. See Pub. 537, Installment Sales. This

information must include the following from each Form

6252 where the shareholder’s share of the selling price,

including mortgages and other debts, is greater than

$150,000.

• Description of property.

• Date acquired.

• Date property sold.

• Selling price, including mortgages and other debts (not

including interest, whether stated or unstated).

• Mortgages, debts, and other liabilities the buyer

assumed or took the property subject to.

• Gross profit.

• Contract price.

• Gross profit percentage.

• Current-year payments and deemed payments received

during the year, not including interest whether stated or

unstated.

• Origination-year payments and deemed payments

received during the year, not including interest whether

stated or unstated.

• Payments received in prior years, not including interest

whether stated or unstated.

• Installment sale income.

• Character of the income—capital or ordinary.

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

See section 453A(c) for information on how to compute

the interest charge on the deferred tax liability. The section

453A interest charge is reported on the “Other taxes” line

of your tax returns. See Interest on Deferred Tax in Pub.

537 for additional details on how to compute the section

453A(c) interest.

Code O. Section 1260(b) information. The corporation

will report any information you need to figure the interest

due under section 1260(b). If the corporation had gain

from certain constructive ownership transactions, your tax

liability must be increased by the interest charge on any

deferral of gain recognition under section 1260(b). Report

the interest on Schedule 2 (Form 1040), line 17z. Enter

“1260(b)” and the amount of the interest in the space to

the left of line 17z. See section 1260(b) for details on how

to figure the interest.

Code P. Interest allocable to production expenditures. The corporation will report any information you

need relating to interest you are required to capitalize

under section 263A for production expenditures. See

Regulations sections 1.263A-8 through 1.263A-15 for

details.

Code Q. Capital construction fund (CCF) nonqualified withdrawals. The corporation will report your share

of nonqualified withdrawals from a CCF. These

withdrawals are taxed separately from your other gross

income at the highest marginal ordinary income or capital

gains tax rate. Attach a statement to your federal income

tax return to show your computation of both the tax and

interest for a nonqualified withdrawal. Include the tax and

interest on Schedule 2 (Form 1040), line 17z. In the space

to the left of line 17z, enter the amount of tax and interest

and “CCF.” See Pub. 595 for details.

Code R. Depletion information—oil and gas. This is

your share of gross income from the property, share of

production for the tax year, and other information needed

to figure your depletion deduction for oil and gas wells.

The corporation should also allocate to you a

proportionate share of the adjusted basis of each

corporate oil or gas property.

Reduce the basis of your stock by the amount of this

deduction up to the extent of your adjusted basis in the

property.

Codes S and T. Reserved for future use.

Code U. Net investment income. The corporation may

use code U to report information you may need to

determine your net investment income tax under section

1411, including information regarding income from

controlled foreign corporations (CFCs) and passive

foreign investment companies (PFICs), the stock of which

is owned by the corporation. Any information not provided

elsewhere on Schedule K-3 (or an attachment to

Schedule K-3) is provided using code U. For CFCs and

PFICs that you treat as qualified electing funds (QEFs),

the information that is relevant to you will depend on

whether you, the corporation, or a subsidiary

pass-through entity has made an election under

Regulations section 1.1411-10(g) with respect to the CFC

or QEF. For example, if the corporation made an election

under Regulations section 1.1411-10(g) for a CFC, the

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

stock of which is owned by the corporation, and the

relevant income and deduction items derived from that

CFC are reported elsewhere on Schedule K-1, you will not

need the information provided using code U to complete

your Form 8960.

Follow the Instructions for Form 8960 to figure and

report your net investment income and AGI or MAGI. See

Regulations sections 1.1411-1 through 1.1411-10 for

more details.

Code V. Section 199A information. Generally, you may

be allowed a deduction of up to 20% of your net qualified

business income (QBI) plus 20% of your qualified REIT

dividends, also known as section 199A dividends, and

qualified publicly traded partnership (PTP) income from

your S corporation. The S corporation will provide the

information you need to figure your deduction. You will use

one of these two forms to figure your QBI deduction.

1. Use Form 8995, Qualified Business Income

Deduction Simplified Computation, if:

a. You have QBI, section 199A dividends, or PTP

income (defined below);

b. Your 2025 taxable income before the QBI deduction

is equal to or less than $197,300 ($394,600 if married

filing jointly); and

c. You aren’t a patron in a specified agricultural or

horticultural cooperative.

2. Use Form 8995-A, Qualified Business Income

Deduction, if you don’t meet all three of these

requirements.

QBI pass-through entity reporting information. Use

the information provided to you by your S corporation to

complete the appropriate form identified above.

QBI or qualified PTP items subject to

shareholder-specific determinations. The amounts

reported to you reflect your pro rata share of items from

the S corporation’s trade(s) or business(es), or

aggregation(s), and may include items that aren’t

includible in your calculation of the QBI deduction. When

determining QBI or qualified PTP income, you must

include only those items that are qualified items of

income, gain, deduction, and loss included or allowed in

determining taxable income for the tax year. To determine

your QBI or your qualified PTP income amounts and for

information on where to report them, see the instructions

for Form 8995 or 8995-A.

W-2 wages. The amounts reported reflect your pro rata

share of the S corporation’s W-2 wages allocable to the

QBI of each qualified trade or business, or aggregation.

See the instructions for Form 8995 or 8995-A.

Unadjusted basis immediately after acquisition

(UBIA) of qualified property. The amounts reported

reflect your pro rata share of the S corporation’s UBIA of

qualified property of each qualified trade or business, or

aggregation. See the instructions for Form 8995 or

8995-A.

Section 199A dividends. The amount reported

reflects your pro rata share of the S corporation’s net

section 199A dividends. See the instructions for Form

8995 or 8995-A.

17

Patrons of specified agricultural and horticultural

cooperatives. If the S corporation was a patron of an

agricultural or horticultural cooperative (specified

cooperative), you must use Form 8995-A to figure your

QBI deduction. In addition, you must complete

Schedule D (Form 8995-A), Special Rules for Patrons of

Agricultural or Horticultural Cooperatives, to determine

your patron reduction.

QBI items allocable to qualified payments from

specified cooperatives subject to

shareholder-specific determinations. The amounts

reported to you reflect your pro rata share of items from

the S corporation’s trade(s) or business(es), or

aggregation(s), and include items that may not be

includible in your calculation of the QBI deduction and

patron reduction. When determining QBI items allocable

to qualified payments, you must include only qualified

items that are included or allowed in determining taxable

income for the tax year. To determine your QBI items

allocable to qualified payments, see the Instructions for

Form 8995-A.

W-2 wages allocable to qualified payments from

specified cooperatives. The amounts reported reflect

your pro rata share of the S corporation’s W-2 wages

allocable to qualified payments of each qualified trade or

business, or aggregation. See the Instructions for Form

8995-A.

Section 199A(g) deduction from specified

cooperatives. The amount reported reflects your pro rata

share of the S corporation’s net section 199A(g)

deduction. See the Instructions for Form 8995-A.

Codes W through Z. Reserved for future use.

Code AA. Excess taxable income. If the S corporation

is required to file Form 8990, Limitation on Business

Interest Expense Under Section 163(j), it may determine it

has excess taxable income. Report this amount of excess

taxable income in column (c) of Form 8990, Schedule B,

line 45, if you are required to file Form 8990. See the

Instructions for Form 8990 for details.

Code AB. Excess business interest income. If the S

corporation is required to file Form 8990, it may determine

it has excess business interest income. Report this

amount of excess business interest income in column (d)

of Form 8990, Schedule B, line 45, if you are required to

file Form 8990. See the Instructions for Form 8990 for

details.

Code AC. Gross receipts for section 448(c). Use the

gross receipts amount to figure the business interest

expense you can deduct, if applicable. See section 163(j)

and the Instructions for Form 8990 for details.

Codes AD through AI. Reserved for future use.

Code AJ. Excess business loss limitation. If the

corporation has deductions attributable to a business

activity, it’ll provide a statement gain, showing the

aggregate gross income or gain and the aggregate

deductions from the business activity of all the

corporation’s trades or businesses. You can use this,

along with other information, to figure any excess

business loss limitation. See section 461(l) and the

Instructions for Form 461 for details.

18

Codes AK through AM. Reserved for future use.

Code AN. Farming and fishing income. If you are an

individual shareholder, report this income, as an item of

information, on Schedule E (Form 1040), Part V, line 42.

Don’t report this income elsewhere on Form 1040 or

1040-SR.

For a shareholder that is an estate or a trust, report this

income to the beneficiaries, as an item of information, on

Schedule K-1 (Form 1041), Beneficiary’s Share of

Income, Deductions, Credits, etc. Don’t report it

elsewhere on Form 1041.

Code AO. Reserved for future use.

Code AP. Inversion gain. The corporation will provide a

statement showing the amounts of each type of income or

gain that is included in inversion gain. The corporation has

included inversion gain in income elsewhere on

Schedule K-1. Inversion gain is also reported under code

AP because your taxable income and alternative minimum

taxable income can’t be less than the inversion gain. Also,

your inversion gain (a) isn’t taken into account in figuring

the net operating loss (NOL) for the tax year or the NOL

that can be carried over to each tax year, (b) may limit your

credits, and (c) is treated as income from sources within

the United States for the foreign tax credit. See section

7874 for details.

Codes AQ and AR. Reserved for future use.

Code AS. Qualifying advanced coal project property

and qualifying gasification project property.

• For qualified investment in qualifying advanced coal

project property, use the amounts the corporation

provides you to figure the amounts to report on Form

3468, Part II, Section A, lines 1a, 2a, and 3a.

• For qualified investment in qualifying gasification project

property, use the amounts the corporation provides you to

figure the amounts to report on Form 3468, Part II,

Section B, lines 4a and 5a.

Code AT. Qualifying advanced energy project property. Use the amounts the corporation provides you to

figure the amounts to report on Form 3468, Part III, line 1a.

Code AU. Advanced manufacturing investment property. Use the amounts the corporation provides you to

figure the amount to report on Form 3468, Part IV, line 1b.

Code AV. Clean electricity investment. Use the

amounts the corporation provides you to figure the amount

to report on Form 3468, Part V, line 1a.

Code AW. Reportable transactions. Any information

you need to complete a disclosure statement for

reportable transactions in which the corporation

participates. If the corporation participates in a transaction

that must be disclosed on Form 8886, Reportable

Transaction Disclosure Statement, both you and the

corporation may be required to file Form 8886 for the

transaction. The determination of whether you are

required to disclose a transaction of the corporation is

based on the category(ies) under which the transaction

qualifies for disclosure and is determined by you and the

corporation. You may have to pay a penalty if you are

required to file Form 8886 and don’t do so. See the

Instructions for Form 8886 for details.

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

Codes AX through AZ. Reserved for future use.

Code BA. Domestic research or experimental expenditures. P.L. 119-21 added section 174A, which pertains

to domestic research and experimental expenditures.

Section 174A(a) allows a deduction for domestic research

and experimental expenditures paid or incurred during the

tax year for tax years beginning after 2024.

Section 174A(c) allows an election to charge research

and experimental expenditures to a capital account.

Under section 174A(c), you may elect to charge such

expenditures to a capital account rather than deducting

them and be allowed an amortization deduction of such

expenditures proportionately over a period of not less than

60 months.

P.L. 119-21, section 70302(f)(1), allows an election by

small business taxpayers to retroactively claim a

deduction for amounts expended or incurred after 2021

and before 2025. P.L. 119-21, section 70302(f)(2), allows

an election to deduct certain unamortized amounts paid or

incurred in tax years beginning after 2021 and before

2025.

For more information about section 174A, and the

provisions contained in P.L. 119-21, sections 70302(f)(1)

and (2), see Rev. Proc. 2025-28.

Codes BB through BD. Reserved for future use.

Code ZZ. Other. Any other information you may need to

file your return not shown elsewhere on Schedule K-1.

allows a qualified lender to exclude 25% of the interest

income on qualified loans secured by rural or agricultural

real property. Use code ZZ to provide shareholders their

distributable shares. For more information see Notice

2025-71.

Sale of qualified farmland property. The S corporation

will provide the information you need to make an election

under section 1062 to pay tax on the gain from the sale or

exchange of qualified farmland property to qualified

farmers in installments. See section 1062 and the

Instructions for Form 1062 for additional information.

Box 18. More Than One Activity for At-Risk

Purposes

When the corporation has more than one activity for

at-risk purposes, it will check this box and attach a

statement. Use the information in the attached statement

to correctly determine your at-risk limitations. For more

information, see At-Risk Limitations, earlier.

Box 19. More Than One Activity for Passive

Activity Purposes

When the corporation has more than one activity for

passive activity purposes, it will check this box and attach

a statement. Use the information in the attached

statement to correctly determine your passive activity

limitations. For more information, see Passive Activity

Limitations, earlier.

Interest on loans secured by rural or agricultural real

property. P.L.119-21 enacted new section 139L that

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

19

List of Codes

This list identifies the codes used on

Schedule K-1 for all shareholders.

For detailed reporting and filing

information, see the specific line

instructions, earlier, and the

instructions for your income tax

return.

Box 10. Other income (loss)

Code

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P–R

S

T–X

ZZ

Other portfolio income (loss)

Involuntary conversions

Section 1256 contracts and

straddles

Mining exploration costs

recapture

Section 951A(a) income

inclusions

Inclusions of subpart F income

Section 951(a)(1)(B)

inclusions

Reserved for future use

Gain (loss) from disposition of

oil, gas, geothermal, or other

mineral properties

Recoveries of tax benefit items

Gambling gains and losses

Reserved for future use

Gain eligible for section 1045

rollover (replacement stock

purchased by the corporation)

Gain eligible for section 1045

rollover (replacement stock

not purchased by the

corporation)

Sale or exchange of QSB

stock with section 1202

exclusion

Reserved for future use

Non-portfolio capital gain

(loss)

Reserved for future use

Other income (loss)

Box 12. Other deductions

A

B

C

D

E

F

G

H

I

J

K

Cash contributions (60%)

Cash contributions (30%)

Noncash contributions (50%)

Noncash contributions (30%)

Capital gain property to a

50% limit organization (30%)

Capital gain property (20%)

Contributions (100%)

Investment interest expense

Deductions—royalty income

Section 59(e)(2) expenditures

Reserved for future use

20

L

M

N

O

P–V

W

X

Y

Z

AA

AB

AC

AD–AJ

ZZ

Deductions—portfolio income

(other)

Preproductive period

expenses

Reserved for future use

Reforestation expense

deduction

Reserved for future use

Soil and water conservation

Film, television, theatrical,

and qualified sound recording

production expenditures

Expenditures for removal of

barriers

Itemized deductions

Contributions to a capital

construction fund (CCF)

Penalty on early withdrawal of

savings

Interest expense allocated to

debt-financed distributions

Reserved for future use

Other deductions

Box 13. Credits

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Zero-emission nuclear power

production credit

Credit for production from

advanced nuclear power

facilities

Low-income housing credit

(section 42(j)(5)) from

post-2007 buildings

Low-income housing credit

(other) from post-2007

buildings

Qualified rehabilitation

expenditures (rental real

estate)

Other rental real estate credits

Other rental credits

Undistributed capital gains

credit

Biofuel producer credit

Work opportunity credit

Disabled access credit

Empowerment zone

employment credit

Credit for increasing research

activities

Credit for employer social

security and Medicare taxes

Backup withholding

Unused investment credit from

the qualifying advanced coal

project credit or qualifying

gasification project credit

allocated from cooperatives

Q

R

S

T

U

V

W

X

Y

Z

AA

AB

AC

AD

AE

AF

AG

AH

AI

AJ

AK

AL

AM

AN

AO

AP

AQ

AR

AS

Unused investment credit from

the qualifying advanced

energy project credit allocated

from cooperatives

Unused investment credit from

the advanced manufacturing

investment credit allocated

from cooperatives

Unused investment credit from

clean electricity credit

allocated from cooperatives

Unused investment credit from

the energy credit allocated

from cooperatives

Unused investment credit from

the rehabilitation credit

allocated from cooperatives

Advanced manufacturing

production credit

Clean electricity production

credit

Clean fuel production credit

Clean hydrogen production

credit

Orphan drug credit

Enhanced oil recovery credit

Renewable electricity

production credit

Biodiesel, renewable diesel,

or sustainable aviation fuels

credit

New markets credit

Credit for small employer

pension plan startup costs

Credit for small employer

auto-enrollment

Credit for military spouse

participation

Credit for employer-provided

childcare facilities and services

Low sulfur diesel fuel

production credit

Qualified railroad track

maintenance credit

Credit for oil and gas

production from marginal wells

Distilled spirits credit

Energy efficient home credit

Reserved for future use

Alternative fuel vehicle

refueling property credit

Clean renewable energy bond

credit

New clean renewable energy

bond credit

Qualified energy conservation

bond credit

Qualified zone academy bond

credit

AT

Qualified school construction

bond credit

AU

Build America bond credit

AV

Credit for employer differential

wage payments

AW

Carbon oxide sequestration

credit

AX

Carbon oxide sequestration

credit recapture

AY

New clean vehicle credit

AZ

Qualified commercial clean

vehicle credit

BA

Credit for small employer

health insurance premiums

BB

Employer credit for paid family

and medical leave

BC

Eligible credits from

transferor(s) under section

6418

BD–BG Reserved for future use

ZZ

Other credits

Box 15. Alternative minimum tax

(AMT) items

A

B

C

D

E

F

Post-1986 depreciation

adjustment

Adjusted gain or loss

Depletion (other than oil & gas)

Oil, gas, & geothermal—gross

income

Oil, gas, &

geothermal—deductions

Other AMT items

Box 16. Items affecting shareholder basis

A

B

C

D

E

F

Tax-exempt interest income

Other tax-exempt income

Nondeductible expenses

Distributions

Repayment of loans from

shareholders

Foreign taxes paid or accrued

Box 17. Other information

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S–T

U

V

W–Z

AA

AB

AC

AD–AI

AJ

Investment income

Investment expenses

Qualified rehabilitation

expenditures (other than

rental real estate)

Basis of energy property

Recapture of low-income

housing credit (section 42(j)

(5))

Recapture of low-income

housing credit (other)

Recapture of investment credit

Recapture of other credits

Look-back

interest—completed long-term

contracts

Look-back interest—income

forecast method

Dispositions of property with

section 179 deductions

Recapture of section 179

deduction

Section 453(l)(3) information

Section 453A(c) information

Section 1260(b) information

Interest allocable to

production expenditures

Capital construction fund

(CCF) nonqualified

withdrawals

Depletion information—oil and

gas

Reserved for future use

Net investment income

Section 199A information

Reserved for future use

Excess taxable income

Excess business interest

income

Gross receipts for section

448(c)

Reserved for future use

Excess business loss limitation

AK–AM

AN

AO

AP

AQ–AR

AS

Reserved for future use

Farming and fishing income

Reserved for future use

Inversion gain

Reserved for future use

Qualifying advanced coal

project property and qualifying

gasification project property

AT

Qualifying advanced energy

project property

AU

Advanced manufacturing

investment property

AV

Clean electricity investment

property

AW

Reportable transactions

AX–AZ Reserved for future use

BA

Domestic research and

experimental expenditures

BB–BD Reserved for future use

ZZ

Other information

21