Form 1065: Where do I enter a section 1250 gain from a 1099=DIV when I also have a section 1231 loss from a K-1

[nitekman]

I am using form 1065 for a tax return for an investment partnership.

I have a section 1231 loss from a K-1, which TurboTax enters in form 4797.

I also have a section 1250 gain from a broker 1099-DIV statement, which I tried entering in schedule K, line 9c.

However, Turbotax returns the following error:

Form 1065 p4-5: Sch K, Line 9c: Unrecaptured 1250 gain should be blank because Form 4797 is already in use.

If an entry is required, please make it on Form 4797 or on the Asset Entry Worksheet, Form 6252, or Form 8824

I reached out to TurboTax support, and they advised that I should enter it on form 4797, part 3, line 26, and they emailed me the IRS instructions for form 4797.  However, this does not appear to be correct.

Can someone please advise as to where I should make this entry?

[PatriciaV]

Please clarify if the broker provided details of the Section 1250 gain or only a number.

[nitekman]

Hi Patricia,

The broker did provide details of about 20 individual transactions (description, pay date, unrecaptured 1250 gain amount), in addition to a total that is listed on form 1099-DIV.  Let me know if that helps.

Thanks,

Bob

[PatriciaV]

You will need to enter these transactions (or a summary) on Form 4797 p2. If you don't have page 2 in your return, click the Open Form icon in Forms mode, type in 4797 and click on page 2. You can name this copy whatever is meaningful to you.

1. On Line 19, enter a description and the two dates. You can group the transactions or simply enter a summary. For group or summary info, use the oldest and most recent dates that apply.
2. Complete the info on Lines 20, 21, and 22. The values on line 22 should total to the Sec 1250 gain reported on 1099-DIV.
3. Under Line 24 in the Property Type Smart Worksheet, check the box for Section 1250 property in the column(s) that correspond to the entries you just made.

Open Form 1065 p4-5 and confirm the number on Line 9c matches 1099-DIV.

This amount should be allocated to Schedule K-1 Line 9C according to the partner percentages.

[nitekman]

Hi Patricia,

Thanks, this was very helpful.

The broker statement only showed the total capital gain distributions (it didn't show gross sales and cost basis), so I fudged the gross sales price and cost basis (lines 20 and 21), so that the difference netted out to zero.  If it doesn't net out to zero, then it changes the Net section 1231 gain number on line 10 of schedule K.  Do you think that is acceptable?  

If I do that, I am seeing the correct number appearing on schedule K, line 9c, so I assume that is the important thing.

Thanks,

Bob

[PatriciaV]

If the amount reported on Line 9c is correct, then you have done the entries correctly. Good job!