990-PF and K1

I have experience working with small non-profits, but their investments generally revolve around securities or simple interest

I am doing work for a 990-PF that lost their exempt status for failure to file for three consecutive years. By the time i received even basic information from the former CPA and client, we were past the 15 month "simplified" retroactive reinstatement process per Rev. Proc. 2014-11. CYs 2014-2017 contain investments in partnerships that provide a routine (monthly or quarterly) stream of income from dividends. These business are NOT in any way associated with the PF's exempt purpose, and only serve to grow the funds on hand. Roughly 6% is distributed each year for the PF's original exempt purpose. They are owing taxes based on their minimum net investment income.

These K1s contain entries for Boxes 1, 5, 6a, 13, 16, 19, and 20. The investment in the partnership amounts to .068%. There are nonrecourse liabilities.

I am at a bit of a loss as to how to report this K1 activity. Like I said, they are from several different partnerships. I know dividends and interest are not deemed UBI, but it seems this may be deemed UBI since there is a small amount listed in Box 1 (I'm specifically referring to the single K1 from 2014). Line 20A matches the total of boxes 5 and 6a. 13K matches 20B. 20V? Missing statement and the client cannot seem to obtain it. I recognize a lot of this is redundant information on the K1 and will not necessarily flow through to return(s).

I have PPC's Desktop books for 990s and while they are helpful, they have only a brief excerpt on this topic under UBI and partnership K1s. The checklist they provide for determining if investment qualifies as UBI is helpful, and I am currently leaning towards this activity simply being part of net investment activity, not UBI necessitating 990-T.

If this were an ordinary tax return and I was handed these K1s, I would easily be able to get them entered in UltraTax. But, there obviosuly are not any such "K1" fields on 990s/990-PFs, and it seems the various activity needs to be entered on different screens. I read guidance for completing Form 1116, but it requires Form 990-T. Not attempting to avoid doing the proper work, just need to be certain my thoughts are correct, as the client does not understand any of this including why they owe tax on investment income.

Anyone encounter similar situations that provide some advice/guidance?39

The partnership will communicate to you any UBI via box 20V on the K-1. If there is no information, you are home free. You are correct, UT does not have a K-1 screen like other entities. So if there is interest income on a K-1 to report, you would enter it in the normal place (i.e. income and deduction screen, interest on savings field).

It is imperative that the client provide you with the complete K-1, especially if you suspect there is information for box 20V. They may need to contact the tax return preparer of the partnership for the K-1.

As suspected. The same partnership issued a K1 for 2017, but there is a gap for 2015-2016 even though the interest continued to be held. 2017 K1 box 20V shows "NONE" but it shows "SEE STMT" on the 2014 K1, and there is no corresponding statement in the documentation I have.

Forgive my ignorance on this particular matter--like I said, I am familiar with small non-profits and how to handle K1 activity for other for-profit entities and individuals, but none of the non-profits I have worked with have ever had partnership or S-Corp interests, and guidance is pretty limited. How does Box 1 income get reported on 990-PF? I'ts very insignificant for 2014 at only $37. Same with Allocated Deductions under 13K. I have lines 16B and 16I marked for entry on Form 1116 using lines 3E and 2, respectively. I would welcome any resources you might be able to recommend--this is certainly an elusive subject for reporting treatment.

Ultra Tax has an input field (income and deduction screen) to enter gross income from partnerships. That is where I would enter K-1 box 1 income, which carries to Form 990-PF, line 11.

DavidG,

I obtained new copies of the K1s, so I know what I have is complete as prepared by issuer. What still boggles my mind is that box 20V indicates "SEE STMT" but there is no statement pertaining to Box 20 items, and the only attached statement never references anything pertaining to Box 20 except the following:

"ADDITIONAL INFORMATION: If you are a tax-exempt entity, your share of Unrelated Business Taxable Income is reported in box 20V and is Ordinary Income."

The only reported amounts are $37 in ordinary income, $3949 in ordinary dividends, $24 in interest, and $767 in allocable deductible expenses, and $3041 in distributions. My suspicion is the "SEE STMT" for 20V is referring to the ADDITIONAL INFORMATION statement above, indicating that the UBI would be ordinary income...

Since no amount is recorded anywhere for 20V, it seems this is just net investment income, no 990-T, no UBI, and reported through various input screens as previously mentioned. I come to the same conclusion after utilizing Checklist C505 from the PPC 990 Deskbook. Does this make sense/seem logical to you? I have never seen a K1 that indicated "SEE STMT" for a box, and not have a associated statement or amount. It is the exact same documentation for the K1s issued for 2014-2017, just slightly different numbers.

Just trying to make sure my logic is sound. Other tax preparers I've spoken with do not have any experience in non-profits holding partnership interests, as most of the non-profits they work with are rather simple (just as most of mine are).

Anyone?

I agree. It is unlikely that investment income shown on this K-1 is UBTI.