IRS Publication 541 — Partnerships
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“Pub. 555 discusses the community property laws of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, T exas, Washington, and Wisconsin.”
This publication provides supplemental federal income tax information for partnerships and partners. It supplements the information provided in the Instructions for Form 1065, U.S. Return of Partnership Income; the Partner’s Instructions for Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc.; and the instructions for Schedule K-2 and Schedule K -3 (Form 1065). Generally, a partnership doesn’t pay tax on its income but passes through any profits or losses to its partners. Partners must include partnership items on their tax returns. For a discussion of business expenses a partnership can deduct, see the 2022 version of Pub. 535, Business Expenses, at Publication 535, Business Expenses (2022). Partnerships can’t deduct depletion on oil and gas wells. Each partner must determine the allowable amount to report on their return. As such, members of oil and gas partnerships should read about the deduction for depletion in chapter 9 of that publication.
Each partnership must designate a partnership representative unless the partnership has made a valid election out of the centralized partnership audit regime. See Designated Partnership Representative (PR) in the Form 1065 instructions and Regulations section 301.6223-1. Withholding on foreign partner or firm. A partnership that has foreign partners or engages in certain transactions with foreign persons may have one (or more) of the following obligations.
Fixed or determinable annual or periodical (FDAP) income. A partnership may have to withhold tax on distributions to a foreign partner or a foreign partner’s distributive share when it earns income not effectively connected with a U.S. trade or business. A partnership may also have to withhold on payments to a foreign person of FDAP income not effectively connected with a U.S. trade or business. See section 1441 or 1442 for more information. Withholding under the Foreign Investment in Real Property Tax Act (FIRPTA). If a partnership acquires a U.S. real property interest from a foreign person or firm, the partnership may have to withhold tax on the amount it pays for the property (including cash, the fair market value (FMV) of other property, and any assumed liability). See section 1445 for more information.
Publication 541 (Rev. 12-2025) Catalog Number 15071D Dec 18, 2025 Department of the Treasury Internal Revenue Service www.irs.gov
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