@Rick19744 @Anonymous_
Your K-1 instructions must be different than what I am seeing.
- https://www.irs.gov/instructions/i1065sk1
- Regardless, as stated previously, if you want to put them on box 11 as ordinary income, go ahead. The end result is the same. Understood
- Form 4797 is used to report the disposition of assets used in a trade or business. That's what you sold. Agreed. But I think that the 4797 is just for "normal" assets that you would capitalize as acquired. I could certainly add the items on the 4797. As pointed out the tax impact would be the same as putting them on the K1.
- As noted previously, I typically see the noncompete as a separate agreement between the buyer and the seller (not the business). The IRS specifically mentions Non-Compete in its description of income to go onto Line 11 of the K1 so I believe the sale of the leasing rights also belongs there.
- The instructions for form 4797 Part II state: If a transaction is not reportable in Part I or Part III and the property is not a capital asset reportable on Schedule D, report the transaction in Part II.
- As a result of bullet 5, I would put the items / assets on form 4797. If you can't figure out how to get them there, as stated previously, as long as the end result is correct, should you be audited, there will not be any implications. I looked at that and then switched over to the K1 Line 11 for the reasons stated.
I went back to the 1040 interview and after entering line 11 as Code "I" I got a screen asking me to select the type of income. I selected" Other Non-Passive income to be reported on Schedule E, Page 2" and entered the description and amount. (I had originally chosen "Other Income and I have a description", or something similarly worded, but TT did not know what to do with those amounts). I did this for each K1. The income fed into Sch E Part II Line 28. There are 2 additional line entries, 1 for each K1 in addition to the line entries for the "normal" business income. The description "Non-Compete..... " shows under column "Name" and the amount shows under column (k) "Income K-1".
I think this is the solution but I will thoroughly review.
