What is Form 1065 used for?

Form 1065 is used as the U.S. Return of Partnership Income. This form is specifically designed for partnerships to report their income, deductions, gains, losses, and other tax-related information. Partnerships themselves do not pay income tax, but instead, they pass their income through to the partners who report it on their individual tax returns. Therefore, Form 1065 is essential for summarizing the financial activity of the partnership to the IRS, facilitating the proper allocation of income and deductions among partners.

This form includes detailed information about the partnership’s income and expenses, helps calculate the net income or loss, and provides a way for the partnership to report to the IRS while ensuring compliance with tax laws. Each partner receives a Schedule K-1, which outlines their share of the partnership's income, deductions, and credits, enabling them to accurately report their share on their personal income tax returns.

The other forms listed serve different purposes: Form 1040 is for individual income tax returns, Form 1120 is for corporate tax returns, and Form 706 is associated with estate and gift taxes. Thus, Form 1065 is singularly focused on partnerships, making option B the correct choice.