Instructions for Form 1065 (2006)

Instructions for Form 1065 - Introductory Material

This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

Table of Contents

What's New

Partnerships that paid the federal telephone excise tax on long distance or bundled service may be able to request a credit. See the instructions for line 23 on page 19.
The Tax Increase Prevention and Reconciliation Act of 2005 modified the way that an employer's W-2 wages are determined when calculating the domestic production activities deduction. The modification applies to tax years beginning after May 17, 2006. For more information, see page 28 and Form 8903, Domestic Production Activities Deduction.
The Energy Policy Act of 2005 provides for a new credit relating to the manufacture and production of certain qualified energy efficient dishwashers, clothes washers, and refrigerators. For more information, see new Form 8909, Energy Efficient Appliance Credit, and the instructions for line 15f of Schedule K.
Certain partnerships are required to file new Schedule M-3 (Form 1065) instead of Schedule M-1. See Item J. Schedule M-3 on page 14.
The Where To File Instructions have been revised. Foreign partnerships must file at Ogden and partnerships that file Schedule M-3 must file at the Ogden Service Center. See the chart on page 4, for details.
This is the first year partnerships are permitted to use the modernized e-file system but they have the option to continue using the old e-file system for filing year 2007. See the instructions on page 3 for details.
The deduction for contributions of certain food inventory has been extended through December 31, 2007. See Noncash contributions (50%) (code C) on page 26.
For contributions made after July 25, 2006, new rules and restrictions apply to certain contributions of real property located in a registered historic district. For contributions made after August 17, 2006, in general, no deduction is allowed for structures or land, only buildings, and the charitable deduction may be reduced if rehabilitation credits were claimed for the building. For contributions made after February 12, 2007, a $500 filing fee may apply to certain deductions over $10,000. See sections 170(h)(4)(B), 170(h)(4)(C), 170(f)(13), and 170(f)(14).
Cash contributions made in tax years beginning after August 17, 2006, must be supported by a dated bank record or receipt. See Pub. 526, Charitable Contributions, for more information.
For qualified conservation contributions, the adjusted gross income limitation and carryover period has been increased. See Qualified conservation contributions on page 26 for details.
There is a new information item for interest expense needed by corporate partners with regard to limitations on the corporation's deduction for interest expense under section 163(j). See Interest expense for corporate partners (code N) on page 34.
Certain employers can claim a new mine rescue team training credit. See Form 8923, Mine Rescue Team Training Credit.

Photographs of Missing Children

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in instructions on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Unresolved Tax Issues

If the partnership has attempted to deal with an IRS problem unsuccessfully, it should contact the Taxpayer Advocate. The Taxpayer Advocate independently represents the partnership's interests and concerns within the IRS by protecting its rights and resolving problems that have not been fixed through normal channels.

While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that the partnership's case is given a complete and impartial review.

The partnership's assigned personal advocate will listen to its point of view and will work with the partnership to address its concerns. The partnership can expect the advocate to provide:

A “fresh look” at a new or ongoing problem,
Timely acknowledgment,
The name and phone number of the individual assigned to its case,
Updates on progress,
Timeframes for action,
Speedy resolution, and
Courteous service.

When contacting the Taxpayer Advocate, the partnership should be prepared to provide the following information.

The partnership's name, address, and employer identification number.
The name and telephone number of an authorized contact person and the hours he or she can be reached.
The type of tax return and year(s) involved.
A detailed description of the problem.
Previous attempts to solve the problem and the office that was contacted.
A description of the hardship the partnership is facing and supporting documentation (if applicable).

The partnership can contact a Taxpayer Advocate as follows.

Call the Taxpayer Advocate's toll-free number: 1-877-777-4778.
Call, write, or fax the Taxpayer Advocate office in its area (see Pub. 1546 for addresses and phone numbers).
TTY/TDD help is available by calling 1-800-829-4059.
Visit the website at www.irs.gov/advocate.

How To Get Forms and Publications

Internet. You can access the IRS website 24 hours a day, 7 days a week, at
www.irs.gov to:

Download forms, instructions, and publications;
Order IRS products online;
Research your tax questions online;
Search publications online by topic or keyword; and
Sign up to receive local and national tax news by email.

IRS Tax Products CD. You can order Pub. 1796, IRS Tax Products CD, and obtain:

Current year forms, instructions, and publications;
Prior year forms, instructions, and publications;
Bonus Historical Tax Products DVD ships with the final release;
Tax Map: an electronic research tool and finding aid;
Tax law frequently asked questions (FAQs);
Tax Topics from the IRS telephone response system;
Fill-in, print, and save features for most tax forms;
Internal Revenue Bulletins; and
Toll-free and email technical support.

The CD is released twice during the year. The first release will ship the beginning of January and the final release will ship the beginning of March.

Buy the CD from the National Technical Information Service (NTIS) at www.irs.gov/cdorders for $25 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the CD for $25 (plus a $5 handling fee). Price is subject to change.

By phone and in person. You can order forms and publications by calling 1-800-TAX-FORM (1-800-829-3676). You can also get most forms and publications at your local IRS office.