Updated October 16, 2026. Quick answer: Box 19 of Schedule K-1 (Form 1065) reports distributions the partnership made to the partner, coded by kind: cash and marketable securities, section 737 property, other property, deemed liability decreases and distributions for services. Cash above basis is gain, and property distributions may require Form 7217.
What box 19 reports
On the form, line 19 of Part III is labelled “Distributions”. The 2025 instructions note a change: “Instructions were updated to explain how the partnership separately coded different categories of distributions reported to you in box 19 of Schedule K-1.” The other boxes are on the Schedule K-1 (Form 1065) boxes overview.
A distribution is not income by itself. For money, marketable securities and deemed distributions (codes A, D and F), the instructions say the amount decreases basis and only the excess over basis is treated as gain. For property distributions (codes B, C and G), the amount decreases basis by the partner’s basis in the distributed property, and code B can add a separate section 737 gain.
Box 19 codes
| Code | Kind | As printed |
|---|---|---|
| A | Cash and marketable securities | “In general, code A is used to report the distributions the partnership made to you of money, that is, cash and certain marketable securities.” |
| B | Distribution subject to section 737 | “you may be required to recognize gain under section 737. This gain is in addition to any gain you recognized under section 731 on the distribution.” |
| C | Other property | “Code C is used to report the partnership’s adjusted basis in property other than money immediately before the property was distributed to you” |
| D | Deemed distributions of money | “Code D is used to report any deemed distributions of money to you resulting from a net decrease in your share of partnership liabilities” |
| E | Reserved | “Code E. Reserved for future use.” |
| F | Cash or securities for services | “Code F is used to report any distribution of cash or marketable securities treated as money made to you for performing services.” |
| G | Property for services | “Code G is used to report any property (other than cash, marketable securities, and section 737 property) that was distributed to you for performing services.” |
Two exceptions keep other payments out of codes F and G: payments for services the partnership made to you acting in a non-partner capacity, which are reported under section 707(a)(1), and guaranteed payments, which the instructions describe this way. “The partnership didn’t use code F or G to report guaranteed payments it made to you for services under section 707(c).” “Instead, the partnership reported the guaranteed payments in box 4a of Schedule K-1.”
Code A: cash, marketable securities and gain
The gain rule is a formula in the instructions. “To the extent the cash and the FMV of the securities (reduced by the reduction amount) received exceed the adjusted basis of your partnership interest immediately before the distribution, the excess is treated as gain from the sale or exchange of your partnership interest.”
Where it goes: “Generally, this gain is treated as gain from the sale of a capital asset and should be reported on Form 8949 and the Schedule D for your return.” Those are covered on the Form 8949 page and the Schedule D (Form 1040) page.
A short illustration of that formula, not an IRS example. A partner’s adjusted basis just before the distribution is $40,000 and the partnership distributes $55,000 in cash. The excess is $55,000 minus $40,000 and equals $15,000 of gain under the quoted rule. The figures are made up and ignore the ordinary income exception below.
There is an ordinary income exception: “if you receive cash or property in exchange for any part of a partnership interest, the amount of the distribution attributable to your share of the partnership’s unrealized receivables or inventory items results in ordinary income.”
Basis effect of codes A, D and F
For money distributions the basis rule is: “The amounts reported using codes A, D, and F decrease the adjusted basis of your interest in the partnership (but not below zero)”. Advances count too: “Advances or drawings of money or property against your share are treated as current distributions made on the last day of the partnership’s tax year.”
The worksheet in the instructions sets out the gain test for the year. Line 11b is described as “The amount reported on this line represents a taxable gain on distributions in excess of basis.” “Report the gain on your tax return.”
Code B, section 737 gain
Code B applies to a partner who earlier contributed built-in gain property. “If you contributed section 704(c) built-in gain property to the partnership within the last 7 years and the partnership during the tax year distributed property other than the previously contributed built-in gain property to you (section 737 property)”. The partnership also attaches a statement. The instructions give a seven-line worksheet to compute the gain:
| Line | As printed |
|---|---|
| 1 | “Enter the FMV of the distributed property (other than money)” |
| 2 | “Enter your adjusted basis in the partnership immediately before the distribution.” |
| 3 | “Enter the amount of money received in the distribution” |
| 4 | “Subtract line 3 from line 2. If zero or less, enter -0-” |
| 5 | “Subtract line 4 from line 1” |
| 6 | “Enter your net precontribution gain” |
| 7 | “Section 737 gain. Enter the lesser of the amount reported on line 5 or line 6” |
Where the result goes: “Accordingly, report the amount from line 7, above, on Form 4797 or Form 8949 and the Schedule D of your tax return.” The sale form is covered on the Form 4797 page.
Code C property and Form 7217
Property distributions bring a separate filing. “Beginning in tax year 2024, partners who received property distributions from the partnership must file with their annual tax return a separate Form 7217”. The scope is narrower than every distribution: “Don’t file Form 7217 if the distribution consisted only of money or marketable securities treated as money.”
Basis in the property received: “Your basis in the distributed property (other than in liquidation of your interest) is the smaller of” the partnership’s adjusted basis, or “The adjusted basis of your partnership interest reduced by any cash distributed in the same transaction.” For codes B, C and G, “The amounts reported using codes B, C, and G decrease the adjusted basis of your interest in the partnership by the amount of your basis in the distributed property.”
Code D, deemed distributions
A drop in the partner’s share of liabilities is treated as money distributed. The same excess rule applies: “To the extent the deemed distribution under section 752(b) received exceeds the adjusted basis of your partnership interest immediately before the distribution, the excess is treated as gain from the sale or exchange of your partnership interest.”
The limits and notice rules around distributions
Credits and losses reach the return only after the partner-level limits. The instructions put them in order: “These limitations and the order in which you must apply them are as follows: the basis limitations, the at-risk limitations, the passive activity limitations, and the excess business loss limitations.” The Part III amounts are shown before any of that: “The amounts shown in boxes 1 through 21 reflect your share of income, loss, deductions, credits, and other items from partnership business or rental activities without reference to limitations on losses or adjustments that may be required of you”.
A partner who sells or exchanges an interest has a notice duty and the Form 8308 report: “Generally, a partner who sells or exchanges a partnership interest in a section 751(a) exchange must notify the partnership, in writing, within 30 days of the exchange (or, if earlier, by January 15 of the calendar year following the calendar year in which the exchange occurred).” The Form 8308 mentioned in the code A text is the report of that kind of exchange.
Which revision applies
The edition read for this page is the 2025 Partner’s Instructions for Schedule K-1 (Form 1065) and the 2025 Schedule K-1 (Form 1065) itself, which are the revisions irs.gov served when they were read on 2026-10-16. Check the revision printed on the Schedule K-1 you received and the matching instructions, because a later edition can change the box layout, the code letters and the reporting lines.
Common mistakes
- Treating a distribution as income. The instructions say codes A, D and F decrease the adjusted basis (but not below zero), and only the excess over basis is treated as gain from the sale or exchange of the partnership interest.
- Skipping Form 7217 on a property distribution. The instructions require a separate Form 7217 for each date a partner actually received property subject to section 732, and exclude money-only distributions.
- Missing section 737 gain after a contribution. The instructions say a partner who contributed built-in gain property within the last 7 years may be required to recognize gain under section 737, in addition to any section 731 gain.
Related: Schedule K-1 (Form 1065) boxes explained, Form 8949 sales and dispositions, Schedule D (Form 1040), Form 4797 sales of business property, and 1099-B short-term or long-term gain.
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Answer againSources
- 2025 Partner’s Instructions for Schedule K-1 (Form 1065): https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf
- Schedule K-1 (Form 1065) (2025), Partner’s Share of Income, Deductions, Credits, etc.: https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf
Read from the IRS documents linked above on October 16, 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.