U.S. · Tax forms
K-1 box 20 code AA.
The part of your allocated items that comes from section 704(c).
Box 20, code AA shows the portion of income or deduction items allocated to you under section 704(c). Those items are already included elsewhere in the income or deduction boxes of your K-1, so code AA is informational. It explains why some amounts differ from a simple share, and it ties to item N, which reports your net unrecognized section 704(c) gain or loss at the start and end of the year.
Look up a section 704(c) item
Result
Section 704(c) items on the K-1
| Item | Meaning | Where it goes (per the IRS instructions) |
|---|---|---|
| 20-AA | Box 20, code AA: Section 704(c) information | The portion of income or deduction items allocated to you under section 704(c). Already included elsewhere in the income or deduction items on the K-1 |
| ITEM-N | Item N: Net unrecognized section 704(c) gain or loss | Reported at the beginning and end of the year if you are allocated section 704(c) gain or loss; provided for your information |
| ITEM-M | Item M: contributed property with built-in gain or loss | Checked “Yes” if you contributed property with built-in gain or loss; a statement shows the property, date and amount |
When you get section 704(c) allocations
According to the item N instructions, you are allocated unrecognized section 704(c) gain or loss if you contributed property worth more than its adjusted tax basis (built-in gain property), contributed property worth less than its basis (built-in loss property), or the partnership revalued its property on its books to reflect changes in fair market value. The last case is sometimes called a reverse section 704(c) allocation.
What code AA tells you
The partnership reports item N balances for your information. When it sells the property or makes special allocations for depreciation, depletion or amortization, those amounts show up on other parts of the K-1, and code AA identifies how much of the income or deduction came from section 704(c). Because the amounts are already in other boxes, you do not add them again.
Worked example
Kim contributed equipment worth more than her tax basis. The partnership allocates her $1,100 of income under section 704(c) and shows it in code AA. That $1,100 is already part of her box 1 amount. Item N shows her net unrecognized built-in gain at the start and end of the year. Kim keeps the code AA figure for her records and does not enter it again on her return.
More K-1 (Form 1065) pages
Other pages in this set: K-1 (1065) Box 1, K-1 (1065) Box 17, K-1 (1065) Box 18, K-1 (1065) Box 20 Codes A and B, K-1 (1065) Box 20 Code N, K-1 (1065) Box 20 Code V, K-1 (1065) Box 20 Code W, K-1 (1065) Box 20 Code AH, K-1 (1065) Box 20 Code Y, K-1 (1065) Box 20 Code AB. The 1099-R box 7 lookup and W-2 box 12 lookup cover the same kind of question for those forms.
Sources
- Instructions for Schedule K-1 (Form 1065) (2025): Box 20, Other Information, code AA; Item M; Item N. Read November 2, 2026.
IRS page last reviewed April 30, 2026. Tax year 2025 edition. Line numbers are those printed in the 2025 instructions and can change. Names in worked examples are made up.
Frequently asked questions
What is box 20 code AA on a Schedule K-1 (Form 1065)?
The portion of income or deduction items allocated to you under section 704(c). It is already included in other income or deduction items on the K-1.
Do I report code AA separately?
No. The instructions say the items are included elsewhere on Schedule K-1, so code AA is informational.
What is item N on the K-1?
Your net unrecognized section 704(c) gain or loss at the beginning and end of the partnership’s tax year, if you are allocated section 704(c) gain or loss.
What is a reverse section 704(c) allocation?
What the instructions call a revaluation (book-up or book-down) of partnership property on its books to reflect changes in fair market value.
How is code AA different from code W?
Code W reports gain you recognize when property you contributed is distributed to another partner within 7 years. Code AA only identifies items allocated under section 704(c).
Not tax advice
This page summarizes IRS instructions, mostly written for the people who prepare the form, and is not tax, legal or financial advice. The payer, a CPA or an enrolled agent can confirm what a box or code means for your return. Everything runs in your browser; nothing you enter is sent anywhere.