How to indicate that I am real estate professional for K1 entries? Schedule E section under wages wants specific property income details, not seeming to apply to my K1's.

[skahn111]

The issue is that Form 1065 is not subtracting out my K1 income on Line 4b, even though I have indicated both that I am a General Partner and confirmed I am an active participant when asked. There don't seem to be any other relevant questions to trigger the material participation status and subsequent adjustment to NII on Form 8650 Line 4b.

[PatriciaV]

In order for Schedule K-1 income to be excluded from Net Investment Income reported on Form 8960, you must indicate that you are a Real Estate Professional at the beginning of the Rental Properties interview.

1. Log into TurboTax Online and open your return.
2. Go to Wages & Income >> Rental Properties & Royalties.
3. Edit your first Rental Property.
4. On the Property Info page, click the pencil icon (edit) to the right of Rental property info (under the house icon).
5. Under Owner Info, confirm there is Yes under Real Estate Professional, or click Edit to change your answer.
6. Continue back to the Rental Summary page.
7. Review all your rental properties to indicate that you materially participated and if the activity qualifies as a trade or business.
8. Also review your Schedule K-1 entries that may report rental income.

After you complete this process, you should see any qualifying income excluded from Form 8960 Line 4(b). The detail for this line is reported on the Form 8960 Worksheet, which is part of your complete return (not an IRS form).

[skahn111]

Hi PatriciaV - Thank you for the response.  For the benefit of others, I was able to get this to work by following the instructions - kind of.

I do not have any income to claim under "Wages & Income >> Rental Properties & Royalties" because all my rental income is derived through K1 partnerships. So I have K1's with rental income but nothing that would be entered under Wages & Income section.  Nonetheless, I created a dummy entry with $100 income and followed the instructions to edit and indicate  I was a real estate professional. This by itself did not fix my issue, because that designation did not carry over to the K1's. I deleted the dummy entry but then when I went back to edit the K1's, this time through the questionnaire it *did* ask if I was a real estate professional. So editing the Wages & Income entry must have retriggered the system to ask me everywhere....

Thanks!

[mwil1993]

OMG, Thank You!  I was pulling my hair out over this issue and your technique worked exactly as you described!