Updated October 16, 2026. Quick answer: Codes O and P in box 20 of Schedule K-1 (Form 1065) give a partner the information needed to figure interest owed on certain installment sales made by the partnership. Code O covers section 453(l)(3) interest on timeshares and residential lots, and an individual reports it on Schedule 2 (Form 1040), Part II, line 14. Code P covers section 453A(c) interest on certain installment sales, with a statement for each Form 6252 where the partner’s share of the selling price is greater than $150,000.
Related reading on this site: IRS Publication 537.
What codes O and P report
Both codes are about interest, not about the sale itself. “The partnership will report any information you need to figure the interest due under section 453(l)(3) with respect to the disposition of certain timeshares and residential lots on the installment method.” That is code O. For code P: “The partnership will report any information you need to figure the interest due under section 453A(c) with respect to certain installment sales.” This page covers the partner’s side of a K-1 that has been received. Every other box is set out on the Schedule K-1 (Form 1065) boxes overview.
Box 20 is a coded box. “In box 11, boxes 13 through 15, and boxes 17 through 20, the partnership will identify each item by entering a code in the column to the left of the dollar amount entry space.” When a code needs more than one number, the partnership attaches a statement: “The partnership will enter an asterisk (*) after the code, if any, in the column to the left of the dollar amount entry space for each item for which it has attached a statement providing additional information.” “For those informational items that can’t be reported as a single dollar amount, the partnership will enter an asterisk (*) in the left column and enter “STMT” in the dollar amount entry space to indicate the information is provided on an attached statement.”
Where each code goes
The two codes land in different places. The table sets out what the instructions print.
| Code | As printed in the instructions |
|---|---|
| Code O, section 453(l)(3) | “If you’re an individual, report the interest on Schedule 2 (Form 1040), Part II, line 14.” |
| Code P, section 453A(c) | “The section 453A interest charge is reported on the “Other taxes” line of your tax returns.” |
For code P the instructions name a reference: “See Pub. 537, Installment Sales, for more information on section 453A(c).” “See section 453A(c) for information on how to compute the interest charge on the deferred tax liability.” “See Interest on Deferred Tax in Pub. 537 for additional details on how to compute the section 453A(c) interest.”
The code P statement
Code P comes with a list of facts, one set for each sale. The instructions put a size test on it: “This information must include the following from each Form 6252 where the partner’s share of the selling price, including mortgages and other debts, is greater than $150,000.” The items on the list are below.
| Group | Items printed in the instructions |
|---|---|
| Property | “Description of property.” “Date acquired.” “Date property sold.” |
| Price and debts | “Selling price, including mortgages and other debts (not including interest, whether stated or unstated).” “Mortgages, debts, and other liabilities the buyer assumed or took the property subject to.” |
| Profit measures | “Gross profit.” “Contract price.” “Gross profit percentage.” |
| Payments | “Current-year payments and deemed payments received during the year, not including interest, whether stated or unstated.” “Origination-year payments and deemed payments received during the year, not including interest whether stated or unstated.” “Prior-year payments, not including interest whether stated or unstated.” |
| Income | “Installment sale income.” “Character of the income”, which the instructions identify as capital or ordinary. |
Form 6252, Form 4797 and Schedule D
The installment form is Form 6252. The instructions mention it in two ways. In the code P statement list it is the form each set of facts comes from. In the box 20 code L list, which covers property that carried a section 179 deduction, it is a request for information: “If the sale was an installment sale, any information you need to complete Form 6252, Installment Sale Income.” “The partnership will separately report your share of all payments received for the property in future tax years.”
Gain on business property is reported with Form 4797. For code L the instructions say: “you must report the gain or loss and any recapture of the section 179 expense deduction for the property on your income tax return (see the Instructions for Form 4797 for details).”
Capital gain from the partnership flows to Schedule D (Form 1040). “Report the net short-term capital gain (loss) on Schedule D (Form 1040), line 5.” “Report the net long-term capital gain (loss) on Schedule D (Form 1040), line 12.”
Limits and timing
The numbers in Part III come before the partner’s own limits. “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”. “If you have losses, deductions, or credits from a prior year that weren’t deductible or usable because of certain limitations, such as the basis limitations or the at-risk limitations, take them into account in determining your net income, loss, or credits for this year.”
Timing follows the partnership’s year. “If you file your tax return on a calendar-year basis, but your partnership files a return for a fiscal year, report the amounts on your tax return for the year in which the partnership’s fiscal year ends.”
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 column letters and the reporting lines.
Common mistakes
- Reporting a code O amount in the wrong place. For an individual, the instructions say to report the section 453(l)(3) interest on Schedule 2 (Form 1040), Part II, line 14.
- Looking for the section 453A interest on a named line. The instructions say the section 453A interest charge is reported on the “Other taxes” line of the tax return, and that the computation is described in Pub. 537.
- Ignoring a code P statement because the amount looks small. The instructions tie the information to each Form 6252 where the partner’s share of the selling price is greater than $150,000.
Related: Schedule D (Form 1040), Form 4797 sales of business property, Form 8949 sales and dispositions, Schedule K-1 (Form 1065) boxes explained, and depreciation recapture in year one.
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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.