estates and trusts

[tlfuchser]

I received a 1099-PATR for a distribution for me from my brother's estate.  Is this the same thing as a K-1?  I am using Turbo Tax Home and Business.  Because this was a distribution to me, I am pretty sure I have to pay the taxes on this distribution, but not sure how to handle it.

[MaryK4]

Form 1099-PATR, Taxable Distributions Received From Cooperatives shows the patronage dividends and other distributions. Yes, If your brother had a farm or business, the dividends should be reported as income on the farm or business return along with any related expenses.

However,, you do not report as income any patronage dividends received from expenditures that were not deductible, such as buying personal or family items, capital as-sets, or depreciable property. Reduce the cost or other basis of these items by the amount of such patronage dividends received. Personal items include fuel purchased for personal use, basic local telephone service, and personal long-distance calls.

If you are not sure of the details, you can add as other income but the entire amount will be taxed.

[tlfuchser]

Thanks for the feedback, just need a little clarification/guidance.

The 1099-PATR has several line items.

Box 1  Patronage Dividends   which I understand do not have to be reported as income

Box 3  Per-Unit retain allocations   which appears to be the primary income number

Box 5  Redeemed non-qualified notices   not sure what this is

Box 6  Section 199A(g) deduction - DPAD allocation   which I think also has to be declared as income

Box 7  Section 199A(b) (7) - Qualified payments   not sure what this is

Box 8  Section 199A(a) - Qualified Items   which seems to be a total of other items   not sure

Any clarification on how to report these various items would be appreciated.

Thanks,

Terry

[DianeW777]

A review of the boxes and what they represent are discussed below.

Box 3: A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. These allocations can be paid in money, other property, or qualified certificates. This would be income to you.

Box 5: When nonqualified notices are redeemed in cash or other property, the cooperative deducts the payments to patrons from its income, and a patron who receives a redemption includes the amount of the payment received in taxable income.

IRC Section 199A  is for the new qualified business income deduction (QBID) which is derived from business or farm income. The following boxes on your Form 1099-PATR pertain to that deduction.

Box 6 is a deduction, if allowed: The deduction allocated to each patron cannot exceed 9% of the qualified payments reported in box 7. Only eligible taxpayers, which does not include a C corporation that is not itself a specified agricultural or horticultural cooperative, may claim a section 199A(g) deduction that is passed through. Do not reduce the amounts reported in box 1 or box 3 by the amount reported in box 6.

• This is similar to the deduction under former section 199, which was known as the domestic production activities deduction. Section 199A(g) allows a deduction for income attributable to domestic production activities.

Box 7 is For specified agricultural and horticultural cooperatives only, enter the qualified payments paid to the patron. You are required to provide this information whether or not you pass any of the section 199A(g) deduction through to the patrons. This is the payment made to your from the profit. Information but not reported as income from this box.

Box 8 is for qualified items of income, gain, deduction, or loss from qualified trades or businesses that are not a specified service trade or business (SSTB) for purposes of section 199A. (Net profit from the business or farm activity - information and not income to you.)

• Where do I enter Form 1099-PATR? (Read carefully to decide if you should report on Schedule C or Schedule F)
  • The QBID will be automated by TurboTax once the income is entered and you must select that you materially participated for the deduction to populate in your return.