165 Schedule K-1: SchedK1 Schedule K-1 Resident Partner's Share of Adjustment to Partnership Income (2024)

Who files this form

The 2024 Arizona Form 165 Schedule K-1 reports a resident or part-year resident partner’s share of adjustments to partnership income. The form lists individual, trust, and estate partner types.

Corporate partners must use Form 165 Schedule K-1(NR) instead.

What you'll need

Have these forms and details available to complete the schedule:

• Arizona Form 165, page 1, line 6, for the partnership’s adjustment from federal to Arizona income.
• The partner’s federal Schedule K-1 (Form 1065), for the capital gain or loss information requested in Parts 2, 5, and 6.
• The partner’s name, address, and tax identification number, plus the partnership’s name, address, and EIN.
• The partner’s beginning- and end-of-year profit-sharing, loss-sharing, and capital ownership percentages.
• Information about the partnership’s PTE election and the partner’s consent.
• If applicable, airdrop values, gas fees not already included in virtual currency or non-fungible token basis, and the partner’s share of PTE credits and taxes paid in 2024.

Common mistakes

• Using this schedule for a corporate partner. Corporate partners must use Form 165 Schedule K-1(NR).
• Completing Part 7 without the required consent. Complete it only if the partner consented to the partnership’s PTE election for this year or a prior year. Otherwise, leave it blank.
• Including amounts already excluded or accounted for. Part 3 covers airdrop values only to the extent not already excluded from Arizona gross revenue under the Internal Revenue Code. Part 4 covers gas fees not already included in virtual currency or non-fungible token basis.
• Overlooking amounts already included in Part 6. Lines 9 and 10 identify amounts already included in line 8, column (c).

Questions people ask

How is the partner’s share of the Arizona adjustment calculated?

Enter the adjustment from Form 165, page 1, line 6, on line 1. Enter the partner’s profit or loss percentage as a decimal on line 2. Multiply line 1 by line 2 and enter the result on line 3.

When can the partnership skip the capital gain information sections?

Part 2 is not required if the partner’s federal Schedule K-1 has no net capital gain or loss from investment in a qualified small business as determined by the Arizona Commerce Authority. Part 5 is not required if it has no net capital gain or loss from exchanging legal tender. Part 6 is not required if it has no net long-term capital gain or loss.

Where does an individual partner report the PTE tax credit?

Enter the amount from line 11 on Form 355, Part 1, line 1. Estates and trusts should see the instructions for Form 141AZ, line 19, to claim the credit.

Where are the PTE tax amounts on lines 12 through 15 added back?

Individuals who did not make the Small Business Income election add these amounts back on Form 140, page 5, line P, or Form 140PY, page 5, line O. Individuals who made that election use Form 140-SBI or Form 140PY-SBI, line 25. Estates and trusts use Form 141AZ, Schedule B, line B3.

Can the schedule cover a fiscal year or an amended filing?

Yes. The form has options for calendar year 2024 or a fiscal year beginning in 2024, with spaces for the beginning and ending dates. It also requires a choice between Original and Amended.

Official sources

• https://azdor.gov/forms