Updated October 18, 2026. Quick answer: Questions 7 to 12 on Schedule B ask about a material advisor disclosure on Form 8918, foreign financial accounts, foreign trusts, section 754 and basis adjustments, like-kind exchange property, and tenancy-in-common distributions. Each answer comes from the partnership’s records for the year, and several questions point to another form.
Question 7: material advisor disclosure
The form asks “Has this partnership filed, or is it required to file, Form 8918, Material Advisor Disclosure Statement, to provide information on any reportable transaction?” The instructions say to answer “Yes” “if the partnership filed, or is required to file, a return under section 6111” to give information on a reportable transaction, and to use Form 8918 for that information.
Question 8: foreign financial accounts
The form asks whether, “At any time during calendar year 2025, did the partnership have an interest in or a signature or other authority over a financial account in a foreign country”. The instructions give two tests and say to answer “Yes” if either applies. The first reads “the partnership had an interest in or signature or other authority over a bank account, securities account, or other financial account in a foreign country”, and its combined value test reads “The combined value of the accounts was more than $10,000 at any time during the calendar year”. The second reads “The partnership owns more than 50% of the stock in any corporation that would answer “Yes” based on item (1) above.”
If “Yes,” the instructions say “Enter the name of the foreign country or countries.” and “File FinCEN Form 114 electronically at the FinCEN website, BSAefiling.fincen.gov.” How that report differs from Form 8938 is explained at FBAR vs Form 8938.
Question 9: foreign trusts
The form asks whether the partnership received a distribution from, or was the grantor of, or transferor to, a foreign trust. The instructions say “The partnership may be required to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, if any of the following apply.” One of the listed cases is “It directly or indirectly transferred property or money to a foreign trust.” More about that form is at Form 3520.
Question 10: section 754 and basis adjustments
Question 10a reads “Is the partnership making, or had it previously made (and not revoked), a section 754 election?” The instructions say “Answer “Yes” if the partnership is making, or has made (and hasn’t revoked), a section 754 election.” The instructions note “You must answer “Yes” or “No” for each question.”
Question 10b asks “did the partnership make an optional basis adjustment under section 743(b)?” For the aggregate amounts the instructions define “”Aggregate positive amount from all section 743(b) adjustments” means the increase in the partners’ shares of basis in partnership property from all section 743(b) adjustments allocated to all the partners.” They also say “The partnership must attach a statement to the return for the tax year in which the transfer occurred.”
Question 10c reads “did the partnership make an optional basis adjustment under section 734(b)?” The instructions say “Answer “Yes” if the partnership made an optional basis adjustment under section 734(b) for the tax year.”
Question 10d covers a required adjustment. The instructions say “Answer “Yes” if the partnership had to make a basis reduction under section 743(b) because of a substantial built-in loss” and, for the statement, “Enter the total aggregate amount of such section 743(b) adjustments and/or section 734(b) adjustments for all partners and/or partnership property made in the tax year in the space provided as a positive number.” The instructions define the threshold in a running paragraph: “Section 743(d)(1) provides that, for purposes of section 743, a partnership has a substantial built-in loss resulting from a transfer of a partnership interest if the partnership’s adjusted basis in the partnership’s property exceeds by more than $250,000 the FMV of the property or the transferee partner would be allocated a loss of more than $250,000 if the partnership assets were sold for cash equal to their FMV immediately after such transfer.” Line 10e is printed on the form as “Reserved for future use”.
Questions 11 and 12: like-kind exchange and undivided interests
Question 11 is a check box. The instructions say “Check the box if the partnership engaged in a like-kind exchange during the current or immediately preceding tax year and received replacement property that it distributed during the current tax year.”
Question 12 asks “At any time during the tax year, did the partnership distribute to any partner a tenancy-in-common or other undivided interest in partnership property?” The instructions say “If a partnership distributed property to its partners to be jointly owned, whether such distribution is direct or through the formation of an intermediate entity, the question must be answered “Yes.”” Their example reads “Partnership P converts its title to the land to fractional interests in the name of the partners and distributes such interests to its partners.”
Where the number comes from
Answers here come from the partnership’s own records: the advisor and transaction file for question 7, the bank and brokerage account list for question 8, the trust file for question 9, the tax basis and election records for question 10, and the distribution records for questions 11 and 12. The aggregate basis amounts on questions 10b to 10d come from the statement the partnership attaches. The ownership questions before these are on the Schedule B questions 4 and 5 page.
Where it goes next
A “Yes” can bring another filing. Question 8 points to FinCEN Form 114, question 9 to Form 3520, and question 7 to Form 8918. After question 12 the schedule continues with the foreign forms, 1099 and interest limitation questions on the Schedule B questions 13 to 24 page. Related foreign reporting for a partnership is at Form 8938. 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
- Answering question 8 on the combined account value alone. The instructions also say “The partnership owns more than 50% of the stock in any corporation that would answer “Yes” based on item (1) above.”
- Leaving out the basis adjustment statement. The instructions say “The partnership must attach a statement to the return for the tax year in which the transfer occurred.”
- Missing the question 12 trigger because the transfer went through another entity. The instructions say “whether such distribution is direct or through the formation of an intermediate entity, the question must be answered “Yes.””
Related: Form 1065, FBAR vs Form 8938, Form 3520, and Form 8938.
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.