K1 Line 13 Code W

[Jason202104]

When I tried to enter K1 Line 13 code W, I had to select from a dropdown menu. The explanation there is  W-Soil and Water Conservation. It does not seem to be correct. Should it be PORTFOLIO DEDUCTIONS?

In addition, the value there is negative. Should I report it as an income? and where to report it? I do not think it is handled automatically by the software as I cannot find that value anywhere in the return, other than where I entered it.

Thanks a lot!

[JulieS]

Yes, if you are entering a Schedule K-1 (1065) for a partnership, box 13, code W is for "Soil and water conservation expenditures and endangered species recovery expenditures." 

If you think this is wrong, you should take a good look at the first page of your K-1 and make sure it is from a 1065. Form 1120-S and 1041 also issue Schedule K-1 forms. If it is a 1065  K-1, you may want to ask the partnership if this entry is right. 

As far as reporting this figure somewhere else, that's not a good idea. Please verify that you are entering your K-1 in the correct interview section and just enter it as it is on the form. 

Here's how to enter your Schedule K-1:

1. Sign in to your TurboTax account.
2. Select Income & Expenses.
3. Select Edit/ Add to the right of Schedule K-1.
4. Select Update to the right of the type of Schedule K-1 that you have.
5. Answer the remaining questions based on your form and your situation. 

[Mike9241]

the description for line 13w is correct. the IRS substantially modified the K-1 from 2022. whether  the preparer made a mistake and put the amount on the wrong line is unknown. the rules of IRC 175 apply

*************************¹.

• Limitation: The deduction is limited to 25% of the gross income derived from farming during the taxable year. If the expenditures exceed this limit, the excess can be carried over to succeeding taxable years¹.

For a more detailed explanation, you may refer to the U.S. Code or consult with a tax professional.

I.R.C. § 175(a) In General — 

A taxpayer engaged in the business of farming may treat expenditures which are paid or incurred by him during the taxable year for the purpose of soil or water conservation in respect of land used in farming, or for the prevention of erosion of land used in farming, or for endangered species recovery, as expenses which are not chargeable to capital account. The expenditures so treated shall be allowed as a deduction.

§ 1.175-3 Definition of “the business of farming.”

The method described in section 175 is available only to a taxpayer engaged in “the business of farming”. A taxpayer is engaged in the business of farming if he cultivates, operates, or manages a farm for gain or profit, either as owner or tenant. For the purpose of section 175, a taxpayer who receives a rental (either in cash or in kind) which is based upon farm production is engaged in the business of farming. However, a taxpayer who receives a fixed rental (without reference to production) is engaged in the business of farming only if he participates to a material extent in the operation or management of the farm. A taxpayer engaged in forestry or the growing of timber is not thereby engaged in the business of farming. A person cultivating or operating a farm for recreation or pleasure rather than a profit is not engaged in the business of farming. For the purpose of this section, the term farm is used in its ordinary, accepted sense and includes stock, dairy, poultry, fish, fruit, and truck farms, and also plantations, ranches, ranges, and orchards. A fish farm is an area where fish are grown or raised, as opposed to merely caught or harvested; that is, an area where they are artificially fed, protected, cared for, etc. A taxpayer is engaged in “the business of farming” if he is a member of a partnership engaged in the business of farming. See paragraphs (a)(8)(i) and (c)(1)(iv) of § 1.702–1.

you are correct Turbotaxx does not handle code W automatically, there should be another page that open that allows entry that will flow to a form. 

[Jason202104]

Yes, it is for Form 1065. and I did exactly what you mentioned in TurboTax, but that number was not used in my tax return. It is a little confusing as it seems to be a deduction, but the value is negative. If it is indeed a deduction, I can understand it might not be eligible for deduction. But since it is negative, I am not sure if I am supposed to report it as an income. I will check with the partnership to see if the code is correct.

Thanks a lot!

[Jason202104]

Thanks. I will check with the partnership to see if they made a mistake. What confused me is that it is supposed to be a deduction, but the number is negative, and it increased my balance. So I am not sure if I am supposed to reported it as an income.