Updated October 18, 2026. Quick answer: Schedule B opens with three ownership questions. Question 1 asks what type of entity is filing the return. Question 2 asks who owns 50% or more of the partnership, and question 3 asks which corporations, partnerships and trusts the partnership owns. The answers come from the partnership agreement and the ownership records at the end of the tax year.
Question 1: type of entity
The form asks “What type of entity is filing this return? Check the applicable box:” The boxes include “Domestic general partnership”, “Domestic limited partnership”, “Domestic limited liability company”, “Domestic limited liability partnership” and “Foreign partnership”. The instructions add “Check box 1f for any other type of entity and state the type.”
Question 2: owners of 50% or more
Question 2a asks whether any “foreign or domestic corporation, partnership (including any entity treated as a partnership), trust” or related owner held a large interest, and question 2b asks the same about “any individual or estate”. Both questions turn on 50% or more of profit, loss or capital, tested at the end of the tax year. The form adds “If “Yes,” attach Schedule B-1”.
To find the maximum percentage, the instructions say “determine separately the partner’s percentage of interest in profit, loss, and capital at the end of the partnership’s tax year.” They continue: “The maximum percentage is the highest of these three percentages”. The determination “must be based on the partnership agreement” and uses the constructive ownership rules.
Constructive ownership
For question 2 the instructions say “An interest in the partnership that is owned directly or indirectly by or for another entity (corporation, partnership, estate, trust, or tax-exempt organization) is considered to be owned proportionately by the owners (shareholders, partners, or beneficiaries) of the owning entity.” For individuals: “an individual is considered to own an interest owned directly or indirectly by or for the individual’s family.” The instructions define it: “The family of an individual includes only that individual’s spouse, brothers, sisters, ancestors, and lineal descendants.”
The instructions give an example for question 2a: “Corporation A owns, directly, an interest of 50% in the profit, loss, or capital of Partnership B.” The example ends with “On Partnership C’s Form 1065, it must answer “Yes” to question 2a of Schedule B.” The method is stated this way: “add an owner’s direct percentage ownership and indirect percentage ownership in an entity to determine if the owner owns, directly or indirectly, 50% or more of the entity.”
Question 3: what the partnership owns
Question 3a asks whether the partnership “Own directly 20% or more, or own, directly or indirectly, 50% or more, of the total voting power of all classes of stock entitled to vote of any foreign or domestic corporation?” For the listing the instructions say “Indicate the name, EIN, country of incorporation, and percentage interest owned, directly or indirectly, in the total voting power.”
Question 3b covers partnerships and trusts. The instructions say “For each partnership or trust listed, indicate the name, EIN, type of entity (partnership or trust), and country of origin.” For a partnership, “enter in column (v) the maximum of percentage interests owned, directly or indirectly, in the profit, loss, or capital of the partnership at the end of the partnership’s tax year.” The next questions are on the Schedule B questions 4 and 5 page.
Where the number comes from
Question 1 is a choice among the printed boxes based on how the entity is organized. The ownership percentages for questions 2 and 3 come from the partnership agreement and the capital, profit and loss records at year end, combined under the constructive ownership rules the instructions describe. The partner-level percentages are explained further under Item J of the instructions and in the Schedule K-1 box guide.
Where it goes next
A “Yes” on question 2 sends the filer to Schedule B-1, and the form says “If “Yes,” complete (i) through (iv) below” for question 3a and “If “Yes,” complete (i) through (v) below” for question 3b. Foreign entities may also bring other forms, such as Form 8865 for certain foreign partnerships and Form 5471 for certain foreign corporations. Later Schedule B questions are on the Schedule B questions 13 to 24 page. This page is part of the Form 1065 line-by-line walk-through.
Edition and line numbers
This page reads the 2025 Form 1065, U.S. Return of Partnership Income, and its 2025 instructions, the current files irs.gov served on 2026-10-18. They are the files for the tax year 2025 return, filed in 2026. The form’s title line reads “U.S. Return of Partnership Income” and the period line reads “For calendar year 2025, or tax year beginning”. Check the tax year printed on the form you are filling in and use the line numbers on that year’s form, because a different year’s form can number or word its lines differently.
Common mistakes
- Testing one percentage only. The instructions say “The maximum percentage is the highest of these three percentages”
- Counting an adult child as a family owner automatically. The instructions say “An interest will be attributed from an individual under the family attribution rules only if the person to whom the interest is attributed owns a direct interest in the partnership”
- Listing only direct holdings. The instructions say “add an owner’s direct percentage ownership and indirect percentage ownership in an entity”
Related: Form 1065, Schedule K-1 box guide, Form 8865, Form 5471, and LLC or partnership basics.
Sources
- Instructions for Form 1065, U.S. Return of Partnership Income (2025): https://www.irs.gov/pub/irs-pdf/i1065.pdf
- Form 1065, U.S. Return of Partnership Income (2025): https://www.irs.gov/pub/irs-pdf/f1065.pdf
Read from the IRS documents linked above on October 18, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.