How to report income in 1040 from K1

Technical topics regarding tax preparation.
#1
Lalva  
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I know this is a very basic question, so forgive me.

I am preparing a tax return for a client that received a K1 (1065) with Ordinary income in line 1, Part III. Last year the K1 had a loss that wasn't reported in his 1040 because he didn't have enough outside basis.

I didn't include an statement or explanation with the 1040 last year. Now this year there is ordinary income, so I believe we can net last year loss carryover with the new income and include the difference in the 1040.

My question is: do I need to attach a statement, or a worksheet showing my calculations? I am reading the K1 instructions and I believe I have to, but I am not clear of what kind of attachment I need to include.

Can I use the Basis analysis in the 1065 software? I have the one ProSeries creates.
 

#2
dave829  
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See line 27 of Sch. E.
 

#3
Nilodop  
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Which sends us to the Instructions, which say:
If you have losses, deductions, or credits from a prior year that were not 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. However, except for passive activity losses and credits, do not combine the prior year amounts with any amounts shown on this Schedule K-1 to get a net figure to report on any supporting schedules, statements, or forms attached to your return. Instead, report the amounts on the attached schedule, statement, or form on a year-by-year basis.
. Which, to me, is vague,ambiguous, and unhelpful. But that's just me.
 

#4
Lalva  
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Which, to me, is vague,ambiguous, and unhelpful. But that's just me.


That's exactly why I am asking :?:
 

#5
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The correct way is to report current year on one line on E and the prior year PYA in the second line of the schedule E. This will net them in the end.
 

#6
Lalva  
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Are you saying not to apply the basis limitation? It will net at the end without using it but that's not what we are supposed to do.
 

#7
Nilodop  
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No, I think he is saying to put the K-1 income from the form on one line of schedule E, say, 50,000
And then, right after it, the loss that was suspended from the prior year(s) on the next line, as a negative amount, say -40,000
 

#8
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Here's what the instructions say: "...do not combine the prior year amounts with any amounts shown on this Schedule K-1 to get a net figure to report on any supporting schedules, statements, or forms attached to your return."

That's what you're supposed *not* to do. So don't do that. Piece of cake.
 

#9
Nilodop  
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And Schedule E is possibly not a supporting statement, schedule or form attached to the return.
 

#10
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Some "legal documents" seem to have adopted a convention that capitalizes [initial capital letters] any term that has been defined in the document.

Do you think the K-1 instructions are a "legal document" and do you think they have adopted this convention?

That "Schedule E" is not a "schedule" is among the things you're stating in your post, isn't it?

Aside: Did we all see the $5 million settlement in Maine for the missing Oxford comma in their overtime statute? Try here: https://www.nytimes.com/2018/02/09/us/oxford-comma-maine.html
 

#11
Nilodop  
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Even if Schedule E is a schedule, it is not attached to the return; it is part of the return (1040).

Aside: Did we all see the $5 million settlement in Maine for the missing Oxford comma in their overtime statute? Try here: https://www.nytimes.com/2018/02/09/us/o ... maine.html
. Can't answer for "all" but it's over there in NPZ.
 

#12
Lalva  
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OK, so what do I do? I am not clear.

For example, if the loss in 2016 was $1,600 and the gain this year is $2,000. Do I enter $400 in the SchE, and attach an explanation?
 

#13
Nilodop  
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I'd show gain 2000 on a line in schedule E
And loss 1600 on the next line with a proper description.
 

#14
DavidG  
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No. Follow Nilodop. I recommend you let your tax program do the work.

Lalva wrote:OK, so what do I do? I am not clear.

For example, if the loss in 2016 was $1,600 and the gain this year is $2,000. Do I enter $400 in the SchE, and attach an explanation?
 

#15
Lalva  
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Thank you all! What would I do without you! :D
 

#16
taxea  
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Lalva wrote:I know this is a very basic question, so forgive me.

I am preparing a tax return for a client that received a K1 (1065) with Ordinary income in line 1, Part III. Last year the K1 had a loss that wasn't reported in his 1040 because he didn't have enough outside basis.

I didn't include an statement or explanation with the 1040 last year. Now this year there is ordinary income, so I believe we can net last year loss carryover with the new income and include the difference in the 1040.

My question is: do I need to attach a statement, or a worksheet showing my calculations? I am reading the K1 instructions and I believe I have to, but I am not clear of what kind of attachment I need to include.

Can I use the Basis analysis in the 1065 software? I have the one ProSeries creates.


How do you have a loss carryover on the return if the K-1 was not included in the prior year return? You will have to include a statement of facts along with the prior year document.
 


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