What does "gross income sourced at beneficiary level" mean when TT is asking for details about foreign income reported in box 14 of a trust k-1?

[Jae56]

I received an amended K-1 for 2021 that sent me into this K-1 entry spiral.  It seems no combination of numbers will satisfy the error message in TurboTax. I have boxes 2a, 2b, 4a, 5 and 14 a,b,h & i values. My i statement information for line 14 B ($20 foreign tax) shows Gross income $572, Qualified Dividends $411 and taxes $20.  Other items in line 14 are A tax exempt interest of $170 and an H entry of -5,888 (an adjustment for section 1411 net investment income or deductions).  The original income of 5,888 appears on line 5 of the K-1.   Do you have suggestions on how I can enter this information so that it will be accepted without error and, more importantly, generate the correct tax?  Thank you.

[DrH21]

Hi Jae56,

I'm afraid I have never seen an H code. My mind isn't on taxes just yet, and hopefully you will solve the problem soon. But once I screw my tax brain in properly, I'll circle back to this and see if I can shed any useful light. Have you tried upgrading to one of the full service options with TT?

Sorry I couldn't be of more help at the moment.

[DaveF1006]

To clarify, are you reporting this 2021 amended K-1 in your 2022 return. It should be reported in your 2021 return and you should amend 2021. Is this correct? Is this K-1 a 2021 or 2022?

@DrH21 

[Jae56]

Correct.  I am attempting to amend my 2021 return.

[DaveF1006]

This sounds like this is for a trust account.  So when you prepare your K1 and after entering the information about the trust:

1. When it asks to check the boxes that have an amount, check Boxes 1-5 and Box 14>continue
2. In the first screen, record the amounts reported for box 2A & 2B>continue
3. now report the 4A & 5 amounts into the return from your k-1>continue
4. Now for Box 14, select the first drop-down arrow>select A and then record the amount given on the K-1 for 14A (170)
5. Now, one line below that, select the drop-down>select B and record the amount for 14B (20)
6. Now, select the third dropdown>select H and then record the amount (-5888)

I have have included this screenshot for the box 14 information to illustrate what i just outlined.

@Jae56 

[Jae56]

So you are suggesting that I don't enter the supplemental K-1 information on gross income and qualified dividends from the foreign source? (Note: it made the error message go away when I did not enter those amounts)

[AbrahamT]

Just to clarify, are you referring to the Gross income of $572 and Qualified Dividends of $411? $That's correct, you don't have to include those figures. That's the portion of the foreign income that you have your foreign taxes withheld from. When you enter the foreign tax paid 20.00 , the program should automaticaaly calculate the foreign income from where these taxes are being withheld from. The qualified dividends are already included in your Box 2B from your K-1 entered earlier.

[Jae56]

Thank you!

[jtax]

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@AbrahamT wrote:

Just to clarify, are you referring to the Gross income of $572 and Qualified Dividends of $411? $That's correct, you don't have to include those figures. That's the portion of the foreign income that you have your foreign taxes withheld from. When you enter the foreign tax paid 20.00 , the program should automaticaaly calculate the foreign income from where these taxes are being withheld from. The qualified dividends are already included in your Box 2B from your K-1 entered earlier.

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I may be missing something, but I don't think that a line 14 code B statement saying that there are $411 of foreign qualified dividends means that K-1 box 2B will be relevant. 2B will include both US qual divs and foreign qual divs. I don't see how TT can use 2B for the 1116 calc. It needs foreign QDI to be on the 1116 Comp Wks line g(1)(h) for use in calculating the (k) adjustment.

See the 1116 instructions, page 9: https://www.irs.gov/pub/irs-pdf/i1116.pdf

With the modest amounts  for foreign income and tax involved the FTC allowed might not change it is probably isn't worth spending much time on.

Also, I will note that one is never required to file an amended return. You may want to in order to get a refund or get ahead of potential interest/penalties, but you don't have to. See https://www.keimtaxlaw.com/do-you-have-a-legal-obligation-to-file-an-amended-income-tax-return

https://www.irs.gov/pub/irs-pdf/i1116.pdf

[melpaw57]

The K-1 Form that I received as a beneficiary of a trust does not show the gross foreign income anywhere. I got a copy of Form 1116 for the Trust from the Trustee, and that does show gross foreign income and gross income from all sources (higher than the gross income I actually received, due to deductions I guess). So can I use the ratio from Form 1116 (gross foreign income/gross total income) and apply that to the gross income reported to me on Form K-1 to determine the foreign income sourced at the bene level?

Thank you.

[RobertB4444]

That ratio should be fine.  As long as you aren't waiting on a K3 with more information then that is what I would do in order to get the numbers to file correctly.

@melpaw57 

[melpaw57]

Thank you Robert.  No additional forms are anticipated, so that's what I'll use.  And just as a further clarification, there are 2 or 3 additional screens in TT Desktop after this one, where I'm asked about Interest Expense (Total, US, and Foreign), Deductions (Total, US, and Foreign), Total Applicable Losses, Foreign Taxes Accrued, etc. 

Since I see no information relating to any of these in Box 14 of my Form K-1, I presume these can just be left blank?

[HopeS]

You should review the supporting Statements that come with your K-1 package to make sure Box 14  is correct. If there are statements for Box 14 showing codes,  you should report all codes for Box 14 on your return.

See link below

How to Fill Box 14 Schedule K-1

@melpaw57 

[pakman04]

Should "Gross Income Sourced at Beneficiary Level" include amounts from Box 4a (Net Long-Term Capital Gain) and/or Box 5 (Other portfolio and nonbusiness income) on the K-1?

In the past I've only included Box 2a (Ordinary dividends) as presumably foreign gross income implies some portion of total dividends that's applicable to calculating the foreign tax credit.

[RobertB4444]

Yes, gross income should include all income from all sources.

@pakman04