Instructions for Form 8986

Instructions for Form 8986

(Rev. December 2024)

Partner’s Share of Adjustment(s) to Partnership-Related Item(s)

(Required Under Sections 6226 and 6227)

Contents

Page

Reminder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Purpose of Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

General Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 2

Who Should Prepare Form 8986 . . . . . . . . . . . . . 2

Where To Submit Form 8986 . . . . . . . . . . . . . . . . 2

Due Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Withholding for Foreign Partners . . . . . . . . . . . . . 2

Instructions for Partners That Receive Form

8986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . . . 3

Part I—Information About the Entity

Submitting This Form . . . . . . . . . . . . . . . . . . . 3

Part II—Information About the Audited

Partnership or the Partnership That Filed

an AAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Part III—Information About the Pass-Through

Partner Issuing and Submitting This Form

8986 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Part IV—Information About the Partner

Receiving This Form 8986 . . . . . . . . . . . . . . . . 3

Part V—Partner’s Total Reviewed Year

Income, Gain, Loss, Deductions, Credits,

and Other Items . . . . . . . . . . . . . . . . . . . . . . . 4

Part VI—Statements . . . . . . . . . . . . . . . . . . . . . . 6

Section references are to the Internal Revenue Code unless

otherwise noted.

Future Developments

For the latest information about developments related to Form

8986 and its instructions, such as legislation enacted after they

were published, go to IRS.gov/Form8986.

Reminder

The Bipartisan Budget Act of 2015 (BBA) created a centralized

partnership audit regime that replaced the partnership audit

procedures under the Tax Equity and Fiscal Responsibility Act of

1982 (TEFRA). Form 8986 was created for partnerships to show

each partner’s share of adjustments to partnership-related items

as a result of a BBA audit or BBA administrative adjustment

request (AAR).

What’s New

The column headings in Part V have been changed, and an "as

corrected" column has been added. These columns require

different figures than the Part V columns in the previous revision

of Form 8986. See Part V; columns (f), (g), and (h).

Purpose of Form

Form 8986 is used by BBA partnerships to furnish and transmit

each partner’s share of adjustments to partnership-related items.

Dec 27, 2024

Definitions

AAR partnership is a BBA partnership (see below) that has

filed an administrative adjustment request (AAR) under section

6227.

AAR partnership’s adjustment year is the partnership tax year

that includes the year the AAR was filed with the IRS.

Affected partner is a partner that held an interest in a

pass-through partner at any time during the tax year of the

pass-through partner to which the adjustments in the statement

relate.

Audited partnership, for purposes of Form 8986, is a BBA

partnership that made the election under section 6226 to have its

partners report their share of adjustments to partnership-related

items.

Audited partnership’s adjustment year is the year that

includes the date the court decision became final, if the

partnership filed a petition under section 6234. Otherwise, it is

the year that includes the date the final partnership adjustment

(FPA) letter was mailed, or the FPA waiver was executed by the

IRS.

Adjustments that do not result in an IU. A partnership

adjustment does not result in an imputed underpayment (IU) if

the result of netting with respect to any grouping or subgrouping

that includes the particular partnership adjustment is zero or less

than zero. Adjustments do not result in an IU if the calculation of

the IU on those adjustments results in an amount that is zero or

less than zero. Any adjustment to an item which is not a

monetary item (for example, an election made by the

partnership) is an adjustment that does not result in an IU.

BBA AAR is an administrative adjustment request filed by a BBA

partnership.

BBA partnership is a partnership that is subject to the

centralized partnership audit regime that was enacted into law by

section 1101 of the Bipartisan Budget Act of 2015 (BBA). The

BBA is generally effective for tax years beginning on or after

January 1, 2018.

Designated individual (DI) is the individual through whom an

entity partnership representative acts.

Extended due date of the partnership’s adjustment year

return is, for purposes of Form 8986, the extended due date of

the AAR or audited partnership’s adjustment year return

regardless of whether the partnership is required to file a return

for the adjustment year or timely filed a request for an extension.

Finally determined. The partnership adjustment(s) becomes

finally determined upon the later of the expiration of the time to

file a petition under section 6234 or, if a petition is filed under

section 6234, the date when the court’s decision becomes final

or the date the closing agreement is entered into between the

IRS and the partnership. The court decision becomes final at the

date the opportunity to appeal has passed as determined under

section 7481.

First affected year is the partner’s tax year that includes the

end of the audited or AAR partnership’s reviewed year(s). Each

reviewed year of an audited partnership should have a

corresponding first affected year for each partner.

Imputed underpayment (IU) is the amount determined under

sections 6225, 6226, and 6227, and the regulations thereunder.

Instructions for Form 8986 (Rev. 12-2024) Catalog Number 69668G

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

Partnership representative (PR) is the person designated by

the partnership or by the IRS under section 6223 and the

regulations thereunder to act on behalf of the BBA partnership.

Pass-through partner is a pass-through entity that holds an

interest, either directly or indirectly, in a partnership.

Pass-through entities include partnerships, S corporations,

trusts, and decedents’ estates. For purposes of Form 8986, a

pass-through entity is not a wholly owned entity disregarded as

separate from its owner for federal tax purposes or a trust that is

wholly owned by only one person.

Pass-through partner’s tax year end to which the

adjustments relate is the end of the pass-through partner's tax

year which includes the audited or AAR partnership's reviewed

year end date.

Note. Certain entity partners can be both a non-pass-through

partner and a pass-through partner. To the extent the

adjustments an entity partner received on a Form 8986 relate to

items that are taxable at the entity level, it is considered a

non-pass-through partner, and with regard to adjustments that

pass through to its owners/beneficiaries it is considered a

pass-through partner.

Reporting year is the partner’s tax year(s) that includes the date

the audited or AAR partnership furnished the Forms 8986 to its

partners.

Reviewed year is the audited or AAR partnership’s tax year to

which the partnership adjustment(s) relates.

Reviewed year adjustments are adjustments originating from

the AAR or audited partnership’s reviewed year(s).

Reviewed year partner is any person that held an interest in

the audited or AAR partnership at any time during the

partnership’s reviewed year.

General Instructions

Who Should Prepare Form 8986

The following persons or entities should prepare Form 8986.

• Audited partnerships that have made an election under

section 6226.

• Direct or indirect pass-through partners that receive a Form

8986 related to an audited partnership if they choose to furnish

statements to their partners to further push out the adjustments.

Direct or indirect pass-through partners that receive a Form 8986

related to an AAR partnership, if the direct or indirect

pass-through partner chooses to furnish statements to its

partners to further push out adjustments or have adjustments

that do not result in an IU.

• Partnerships that file an AAR under section 6227 and either

elect to push out the resulting adjustments to their partners or

have adjustments that do not result in an IU.

Where To Submit Form 8986

Audited partnerships and pass-through partners of audited partnerships. Section 6241(10) gives the IRS authority to

require electronic submission of anything required to be filed or

submitted under section 6226(a). Audited BBA Partnerships and

their pass-through partners are required to submit Forms 8985,

Pass-Through Statement—Transmittal/Partnership Tracking

Report, and 8986 electronically. See IRS.gov/BBAeSubmit for

steps required to register and submit electronically.

AAR partnerships. AAR partnerships that are electing to push

out adjustments to their partners or have adjustments that do not

result in an imputed underpayment must include Form 8985 with

their AAR along with Forms 8986. The Forms 8985 and 8986

must be filed with, and in the same manner as, the AAR.

applicable. This fax number is not for general use. Taxpayers

should not use this for anything besides Forms 8985 and 8986.

Illegible or other submissions received via this fax number will

not be processed. If the 8985/8986 package is over 100 pages, it

must be printed and mailed. For more information, see the

submission chart at IRS.gov/BBAAAR.

Due Dates

Audited partnerships. An audited partnership that has made

an election under section 6226 must furnish Forms 8986 to its

partners and submit them to the IRS, along with Form 8985, no

later than 60 days after the date on which the partnership

adjustments are finally determined. Failure to furnish and submit

by the due date may result in the audited partnership being liable

for the IU.

An audited partnership can submit corrected Forms 8986,

along with Form 8985, within 60 days of the original due date

without IRS permission. If corrected forms need to be submitted

after the 60-day correction period, the audited partnership must

contact the IRS for permission to submit.

AAR partnerships. An AAR partnership that either elects to

push out the resulting adjustments to its partners or has

adjustments that do not result in an IU must furnish Forms 8986

to all partners and include them with their AAR, along with Form

8985.

Pass-through partners. Direct and indirect pass-through

partners must furnish Forms 8986 to their partners and submit

them to the IRS, along with Form 8985, by the extended due

date of the audited partnership’s adjustment year return (or the

extended due date of the AAR partnership’s adjustment year

return). This date can be found in Part II, item F, of the Form 8986

that was received by the pass-through partner. Failure to submit

these forms by the due date results in the pass-through partner

being liable for an IU.

A pass-through partner who receives a Form 8986 related to

an audited partnership can submit corrected Forms 8986, along

with Form 8985, within 60 days of the original due date without

IRS permission. If corrected forms need to be submitted after the

60-day correction period, the pass-through partner must contact

the IRS for permission to submit.

Withholding for Foreign Partners

An audited partnership may have withholding and reporting

obligations if it furnishes a Form 8986 to a reviewed year partner

that includes an adjustment subject to withholding under

chapter 3 (Withholding of Tax on Nonresident Aliens and Foreign

Corporations) or chapter 4 (Taxes To Enforce Reporting on

Certain Foreign Accounts). In those cases, the audited

partnership must pay the amount of tax required to be withheld

under chapter 3 or chapter 4 before the due date of the audited

partnership's adjustment year return (without regard to

extension) or the extended due date of the audited partnership's

adjustment year return in the case of a pass-through partner.

See Instructions for Form 1042, Annual Withholding Tax Return

for U.S. Source Income of Foreign Persons; or Form 8804,

Annual Return for Partnership Withholding Tax (Section 1446),

for deposit procedures. The audited partnership must also file an

applicable withholding tax return, Form 1042 or Form 8804, and

the associated information returns, Forms 1042-S, Foreign

Person's U.S. Source Income Subject to Withholding; or Forms

8805, Foreign Partner's Information Statement of Section 1446

Withholding Tax, for the calendar year (if filing Forms

1042/1042-S) or tax year (if filing Forms 8804/8805) that

includes the date on which the Form 8986 was furnished.

Pass-through partners of an AAR partnership. Pass-through

partners of an AAR partnership must submit Form 8985 to the

IRS by fax at 888-981-6982, with or without Forms 8986, as

2

Instructions for Form 8986 (December 2024)

Instructions for Partners That Receive Form

8986

Pass-through partners. In general, a pass-through partner that

receives a Form 8986 should take into account the adjustments

reflected on the form by either:

• Furnishing Forms 8986 to its own partners and submitting

those forms, along with Form 8985, to the IRS, or

• Figuring and paying an IU and submitting Form 8985 to the

IRS, where the adjustments result in an IU to the pass-through

entity. See Form 8985 and its instructions.

One of these two options must be completed by the extended

due date of the audited partnership’s adjustment year return (or

the extended due date of the AAR partnership’s adjustment year

return).

If a pass-through partner fails to timely furnish and

submit the relevant statements, the pass-through partner

CAUTION may be liable for an IU as well as any penalties and

interest with respect to the adjustments reflected on the Form

8986 received by the pass-through partner.

!

Other partners. All other partners that receive Form 8986

should report the information on Form 8978, Partner’s Additional

Reporting Year Tax, and attach the Form 8978 to the partner’s

reporting year tax return. For more information, see Form 8978

and its instructions.

These partners may pay in advance to stop the running of

interest.

• Pay by EFTPS, debit or credit card, or Direct Pay (Forms 1040

only).

• Select Prepayment on BBA AAR/Exam Push Out as payment

type.

• As applicable, apply payment to the tax form that will have the

Form 8978 attached to it.

Special Instructions for certain entity partners. Certain

entity partners (such as trusts and estates) that receive a Form

8986 may have some adjustments that are taxable at the entity

level, and other adjustments that pass through to the owners and

beneficiaries of the entity partner. The adjustments taxable to the

entity partner should be reported on the Form 8978 attached to

the entity partner’s reporting-year tax return. For all other

adjustments that flow through to its owners or beneficiaries, the

entity partner should follow the above instructions for

“pass-through partners.”

Specific Instructions

Submitting a corrected form due to an incorrect TIN. If

submitting a corrected form due to an incorrect TIN on a

previously submitted and accepted original Form 8986, you will

need to submit two corrected forms:

1. A corrected Form 8986 with the correct TIN, and

2. A corrected Form 8986 with the incorrect TIN and zeros in

Part IV, sections E through G, and in Part V. Anytime a corrected

Form 8986 is submitted, a corrected Form 8985 must also be

included.

Original or corrected (This is a required field). At the top of

the form, check the appropriate box to indicate if the form is

original or corrected.

Tracking number (This is a required field). Enter the

outgoing tracking number shown on the related Form 8985 of a

BBA partnership or a pass through partner of a BBA partnership.

Audit control number. Enter the audit control number that is

provided on correspondence with the IRS. Pass-through

partners can locate this number at the top of the Form 8986 they

Instructions for Form 8986 (December 2024)

received. AAR partnerships, including pass-through partners of

an AAR partnership, should leave this field blank.

Part I—Information About the Entity Submitting

This Form

Item A (This is a required field)—Indicate which entity is

issuing this form by checking one of the boxes.

Item B—Check the box that corresponds to the type of return

normally filed by the entity issuing this form. If “Other,” also

indicate the type of return filed on the line provided.

Part II—Information About the Audited

Partnership or the Partnership That Filed an

AAR

Items A and B—On lines 1–6, enter the name and address of

the partnership. The name must be entered exactly as it appears

on the Form 8985 associated with this Form 8986. For example,

if you entered XYZ LLC on the Form 8985, you must enter XYZ

LLC on the Form 8986. In the state field, enter the two-letter

abbreviation or the full name of the foreign province. U.S.

partnerships leave the country code field blank. Foreign

partnerships enter the country code found at IRS.gov/

CountryCodes.

Item C (This is a required field)—Enter the partnership's tax

identification number. This number must be entered exactly as it

appears on the Form 8985 associated with this Form 8986.

Item D (This is a required field)—Enter the tax year end date

of the reviewed year of the partnership. Each reviewed year

should have a separate Form 8986. This form must be

completed for reviewed years that have adjustments related to

an audit or an AAR.

Item E (This is a required field)—Enter the partnership’s

adjustment year ending date.

Item F (This is a required field)—Enter the extended due date

of the partnership’s adjustment year tax return, regardless of

whether the partnership has filed for an extension. For AAR

partnerships, this will be the extended due date of the tax year

the AAR was filed.

Item G (This is a required field)—Enter the date the

partnership furnished the Forms 8986 to its partners.

Part III—Information About the Pass-Through

Partner Issuing and Submitting This Form 8986

Item A—On lines 1–6, enter the pass-through partner’s name,

address, city, state, country code, and ZIP code. In the state

field, enter the two-letter abbreviation or the full name of the

foreign province. U.S. partnerships leave the country code field

blank. Foreign pass-through partners enter the country code

found at IRS.gov/CountryCodes.

Item B—Enter the pass-through partner’s tax identification

number.

Item C—Enter the pass-through partner’s tax year end to which

the adjustments relate.

Item D—Enter the name of the entity that issued the Form 8986

to the pass-through partner, if different from the audited

partnership or AAR partnership in Part II.

Item E—Enter the tax identification number of the entity that

issued the Form 8986 to the pass-through partner, if different

from the audited partnership or AAR partnership in Part II.

Part IV—Information About the Partner

Receiving This Form 8986

Item A (This is a required field)—On lines 1–6, enter the

partner’s name, address, city, state, country code, and ZIP code.

In the state field, enter the two-letter abbreviation or the full name

of the foreign province. U.S. partners leave the country code field

3

blank. Foreign partners enter the country code found at IRS.gov/

CountryCodes.

Item B (This is a required field)—Enter the partner’s tax

identification number.

Item C (This is a required field)—Indicate by checking box 1

or 2 if the partner is a general partner or LLC member manager,

limited partner, or LLC member, and indicate by checking box 3

or 4 if the partner is a domestic or foreign partner.

Item D (This is a required field)—Indicate if, for tax purposes,

the partner is an individual, S corporation, C corporation,

partnership, or other type of entity by checking one of the boxes

1–5. If “Other,” indicate what type on the line provided. Also

indicate if the partner is a retirement plan or other tax-exempt

entity. Note: If you entered a social security number as the

partner's tax identification number in box B, you should check

box 1. You should only select boxes 2–5 when you have entered

an EIN in box B.

Item E (This is a required field)—Enter the partner’s

percentage share of partnership profits, losses, and capital as

originally reported on Schedule K-1, the change per audit or

AAR (if none, enter zero), and the corrected percentage.

Item F—Enter the partner’s share of total liabilities—recourse

and nonrecourse—as originally reported on Schedule K-1, the

change per audit or AAR (if none, enter zero), and the corrected

amounts.

Item G—Enter the components of the partner’s capital account

as originally reported on Schedule K-1, the change per audit or

AAR (if none, enter zero), and the corrected amounts.

Note. If the partner in the partnership is an entity, such as

single-member limited liability company (LLC), that is a

disregarded entity (DE) for federal income tax purposes, in item

A, enter the name and address of the beneficial owner of the DE

partner. The beneficial owner is the taxpayer who owns the DE

partner. Enter the TIN of the beneficial owner of the DE partner in

item B rather than the TIN of the DE partner. In addition to the

beneficial owner information reported in Part IV, list the name

and TIN of the DE partner in Part VI of the Form 8986.

Part V—Partner’s Total Reviewed Year Income,

Gain, Loss, Deductions, Credits, and Other

Items

Note. Adjustments that increase a Schedule K-1/K-3 item as

originally reported or as corrected should be shown as positive

amounts; adjustments that decrease Schedule K-1/K-3 items

should be shown as negative amounts.

Loans and other items recharacterized as distributions to

partners. If a reviewed year adjustment has been made to

change a partner loan or other item to a partner distribution, this

adjustment should be reported with the column (a) line number

that corresponds to the Schedule K-1 “Distributions” category

and with column (c), code A, for cash distributions if the partner

received money, and as a code C if the partner received property

other than money.

Disguised sale adjustments. Distributions to a partner that

were changed as part of an audit proceeding to disguised sale

4

proceeds under section 707 should be reported with the column

(a) line number that corresponds to the Schedule K-1 “Other”

category and with column (c), code DS. The partnership should

also include a statement in Part VI describing the asset that was

sold, the proceeds, and the tax basis of the asset at the time of

the contribution.

Note. Column (f) amounts should correspond to the partner’s

distributive share of audit adjustments as finally determined (or

AAR adjustments). Column (g) amounts should only include

approved modifications with respect to the partner receiving the

Form 8986. Only approved amended return and closing

agreement modifications should be included in column (g)

above. All other modifications should be included in a separate

statement in Part VI.

Applicable penalties. The applicability of penalties is

determined at the audited partnership or AAR partnership level.

In the penalties section of Part V, enter the penalty code

sections, descriptions, rates, adjustment line numbers, and total

adjustment amount to which the penalty applies.

For columns (a)–(c), refer to the relevant Schedule K-1/K-3

and instructions. See special instructions for changes to

Schedule K-3. For each item that was adjusted, enter the

following.

Column (a), Line number (This is a required field)—The

Schedule K-1 line number that was adjusted. If you have

changes to Schedule K-3, enter “K3” (no dash).

Column (b), Line title (This is a required field)—The title of

the Schedule K-1 item that was adjusted. For adjustments to

Schedule K-3, enter the part, section (if applicable), line, and

column reference.

Column (c), Code (This is a required field)—If applicable,

use the code letters listed in the Schedule K-1 instructions that

correspond to the line number shown in column (a). For

adjustments to Schedule K-3, if applicable, enter the country

code. See the Schedule K-3 instructions. If no specific code

applies, enter “NA.”

Column (d), As reported (This is a required field)—Enter the

original amount reported to the partner on their Schedule K-1 or

as previously corrected by the partnership.

Column (e), Check if statement in Part VI—Check the box in

this column if the item shown in column (a) has a corresponding

statement in Part VI. For adjustments to Schedule K-3, enter an

explanation of the adjustment on Part VI of Form 8986 with

reference to the entry on Part V, column (b).

Column (f), Approved modifications (if applicable)—Enter

the total modifications approved by the IRS corresponding to the

line item in column (a). Enter the totals at the bottom of Part V.

Column (g), Reviewed year adjustments net of approved

modifications (This is a required field)—Enter the partner’s

share of the total reviewed year adjustments net of approved

modifications (from column (f)). Enter the totals at the bottom of

Part V.

Column (h), As corrected (This is a required field)—Enter

the amount in column (d) plus the amount in column (g). This is

the total corrected amount of the partner's share of adjustments.

Enter the totals at the bottom of Part V.

Instructions for Form 8986 (December 2024)

Example 1. Correction by partnership of item originally reported on partner's Schedule K-3.

On its filed 2025 return, partnership ABC reported $1,000 of general category foreign source interest income with respect to

Country Y on Partner A’s Schedule K-3. Partnership ABC later determined that the amount should have been reported as passive

category foreign source interest income on Schedule K-3. To make the correction to the 2025 return, ABC filed an AAR on

November 10, 2026, attaching Forms 8985 and 8986. The two-letter code from the list at IRS.gov/CountryCodes for Country Y is

YY. Partnership ABC includes in Part V of the Form 8986 sent to Partner A the information as follows.

Example 1. Form 8986, Part V. Partner’s Total Reviewed Year Income, Gain, Loss, Deduction, Credits, and

Other Items

Schedule K-1

(a)

Line number

(b)

Line title

(c)

Code*

K-3

Part II, Sec. 1, Line 6A,

column (e)

YY

K-3

Part II, Sec. 1, Line 6A,

column (c)

YY

(d)

As reported

(e)

Check if statement

in Part VI

(g)

Reviewed year

adjustments

net of approved

modifications

Partnership ABC includes in Part VI of the Form 8986 sent to Partner A the information as follows.

Example 1. Form 8986, Part VI. Statements

(a)

Line no./

code

K-3

(b)

Statement

Line title

Code

As reported

Reviewed year

adjustments net of

approved modifications

As corrected

Part II, Sec. 1, Line 6A,

column (e)

YY

$1,000

$(1,000)

$0

Part II, Sec. 1, Line 6A,

column (c)

YY

$0

$1,000

$1,000

Example 2. Correction by partnership of amount originally reported on partner's Schedule K-3.

On its filed return, Partnership ABC reported on Partner A’s Schedule K-3, Part VIII, as follows.

Example 2. Schedule K-3 (Form 1065), Part VIII.

Line

Entry

A

1234

B

PAS

C

iii

Unit

Euro QBU1

1a1i

YY

1a1ii

1000

Instructions for Form 8986 (December 2024)

5

Subsequent to filing its return, Partnership ABC determines that the amount reported on Line 1a1ii of Partner A’s Schedule K-3, Part

VIII, should have been €1,500. Partnership ABC makes the correction by filing an AAR with Forms 8985 and 8986 attached. It

includes the following information in Part V of the Form 8986.

Example 2. Form 8986, Part V. Partner’s Total Reviewed Year Income, Gain, Loss, Deduction, Credits, and

Other Items

Schedule K-1

(a)

Line number

(b)

Line title

(c)

Code*

K-3

Part VIII, Line 1a1

YY

(d)

As reported

(e)

Check If statement

in Part VI

(g)

Reviewed year

adjustments net

of approved

modifications

Partnership ABC must report the adjustment amount with respect to Partner A in Part VI of Form 8986 as follows.

Example 2. Form 8986, Part VI. Statements

(a)

Line number/code

K-3

(b)

Statement

Part VIII, K-3 Line

As reported

A

1234

B

PAS

C

iii

1a1ii

1,000

Reviewed year adjustments

net of approved

modifications

As corrected

500

1,500

Note. Although the first three lines are not adjusted, they are necessary to identify the adjustment line, because there might be more

than one Part VIII.

Part VI—Statements

Column (a), Line no./code—List the corresponding Part V

column (a) Schedule K-1 line number and column (c) code (if

applicable) for each item for which a statement is included.

Column (b), Statement—Include a detailed explanation of the

amount(s) that correspond to the item in column (a).

Supporting schedules and statements should be in a format

that shows the original amount, the net change, and the correct

amount for each item listed in the statement. If any column (b)

statements exceed the space allowable in one box, continue in

the next box with the same information in column (a).

Statements provided in addition to amounts in Part V. To

further explain the effect of any adjustment, the Part VI

statements section can be used to add an “As Corrected”

column to the amounts reported in Part V. If doing so be sure to

complete the line number field in column (a) which is a

mandatory field for all items entered in Part VI (Statements).

Statements related to section 199A information.

Note. Because section 199A dividends are reported as a

cumulative amount and not per qualified trade or business, these

should only be included once in the first section 199A statement

attached to Form 8986, regardless of how many statements may

be necessary.

6

Adjustments that increase or decrease section 199A

information reported to the partners must be shown in a separate

statement for each trade or business or each aggregated trade

or business. See below for an example of the information that

should be included in Part VI of the Form 8986.

Note. Section 199A dividends should only be included in the

first section 199A statement attached to Form 8986.

Each trade or business should indicate if it is a PTP, an

Aggregated, or an SSTB. See the Instructions for Schedule K-1

(Form 1065 or Form 1120-S).

If the partnership is a patron of a specified agricultural or

horticultural cooperative, the partnership must also include a

statement for each trade or business identifying the

adjustment(s) to qualified items of income, gain, deduction, and

loss and W-2 wages allocable to qualified payments.

Note. Because section 199A(g) deductions are reported as a

cumulative amount and not per qualified trade or business, these

should only be included once in the first statement of

adjustments to items allocable to qualified payments attached to

Form 8986, regardless of how many statements may be

necessary.

Example. Assume Partnership ABC has one trade or

business that is an SSTB and is not a patron in a specified

agricultural or horticultural cooperative. On its filed return,

Partnership ABC reported the items shown in Table 1 on

Instructions for Form 8986 (December 2024)

Statement A—QBI Pass-Through Entity Reporting, attached to

Partner A’s Schedule K-1.

Table 1. Example of Section 199A Related Amounts Reported to Partner A on Statement A—QBI

Pass-Through Entity Reporting

EIN:

PTP

Aggregated

■ SSTB

Partner A’s share of:

QBI or qualified PTP items subject to partner-specific determinations:

Ordinary business income (loss)

$200,000

Rental income (loss)

$10,000

Royalty income (loss)

Section 1231 gain (loss)

$50,000

Other deductions

$80,000

W-2 wages

$50,000

UBIA of qualified property

$60,000

Section 199A dividends

$5,000

Assume the adjustments per audit increased Partner A’s share of ordinary income by $10,000 and royalty income by $5,000, and

decreased other deductions by $20,000. Assume that all of the adjustments are determined to be qualified items of income, gain,

deduction, and loss at the partnership level.

Partnership ABC should include in Part VI of the Form 8986 sent to Partner A the information shown in Table 2.

Table 2. Example of Part VI of Form 8986

EIN:

As Reported

Partner’s Share:

Net Adjustments

As Corrected

PTP

PTP

Aggregated

■ SSTB

Aggregated

■ SSTB

QBI or qualified PTP items subject to

partner-specific determinations:

Ordinary business income (loss)

$200,000

Rental income (loss)

$10,000

Royalty income (loss)

$10,000

$10,000

$5,000

Section 1231 gain (loss)

$50,000

Other deductions

$80,000

$210,000

$5,000

$50,000

($20,000)

$60,000

W-2 wages

$50,000

$50,000

UBIA of qualified property

$60,000

$60,000

Section 199A dividends

$5,000

$5,000

Paperwork Reduction Act Notice. We ask for the information

on this form to carry out the Internal Revenue laws of the United

States. You are required to give us the information. We need it to

ensure that you are complying with these laws and to allow us to

figure and collect the right amount of tax.

You are not required to provide the information requested on

a form that is subject to the Paperwork Reduction Act unless the

form displays a valid OMB control number. Books or records

relating to a form or its instructions must be retained as long as

Instructions for Form 8986 (December 2024)

their contents may become material in the administration of any

Internal Revenue law. Generally, tax returns and return

information are confidential, as required by section 6103.

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated burden

for business taxpayers filing this form is approved under OMB

control number 1545-0123 and is included in the estimates

shown in the instructions for their business income tax return.

7

If you have comments concerning the accuracy of these time

estimates or suggestions for making this form simpler, we would

8

be happy to hear from you. See the instructions for the tax return

with which this form is filed.

Instructions for Form 8986 (December 2024)