165 Schedule K-1: Schedule K-1 Resident Partner's Share of Adjustment to Partnership Income (2025)
Arizona · Arizona DOR · Used for tax years 2025
Arizona Form 165 Schedule K-1 reports a resident or part-year resident partner’s share of adjustments to partnership income from federal to Arizona basis. It also reports specified capital gains or losses, virtual currency and non-fungible token amounts, and the partner’s share o
Who files this form
The 2025 Arizona Form 165 Schedule K-1 is for resident and part-year resident partners. It lists individual, trust, and estate as partner types and reports the partner’s share of adjustments to partnership income.
Corporate partners and partners that are partnerships 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: the partnership’s adjustment from federal to Arizona income.
- The partner’s federal Schedule K-1 (Form 1065): information about applicable capital gains and losses.
- Partner and partnership details: names, addresses, the partner’s tax identification number, and the partnership’s EIN.
- Partner ownership details: beginning- and end-of-year profit-sharing, loss-sharing, and capital ownership percentages, plus the partner type.
- PTE election details, if applicable: whether the partnership elected pass-through entity treatment, whether the partner consented, and the partner’s share of PTE credits and taxes paid in 2025. The form also requests the beneficial owner’s name and TIN for a consenting partner that is a grantor trust or a single-member LLC disregarded to an individual.
- Applicable investment details: capital gains and losses, asset acquisition dates, virtual currency and non-fungible token airdrop values, and gas fees not already included in basis.
Common mistakes
- Using this schedule for the wrong partner type: corporate partners and partners that are partnerships must use 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.
- Counting excluded airdrop values again: Part 3 applies only to the extent the value has not already been excluded from Arizona gross revenue under the Internal Revenue Code.
- Including gas fees already in basis: Part 4 is for gas fees not already included in the partnership’s virtual currency or non-fungible token basis.
- Overlooking PTE tax addbacks: lines 12 through 15 direct partners to add the listed tax amounts back on the applicable individual, small business income, estate, or trust return.
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 those amounts 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 a partner report the PTE tax credit from line 11?
Individuals enter the amount on Form 355, Part 1, line 1. Estates and trusts should see the instructions for Form 141AZ, line 19, to claim the credit.
Can this schedule be marked as amended?
Yes. The form provides checkboxes for “Original” and “Amended” and directs you to check one.