Thank you for the token. We have reviewed the entries and calculations relating to Schedule K-1 and Form 8960. It appears your entries are correct and that the program is handling this situation properly.
According to the IRS Instructions for Form 8960 Line 4b: "Enter the net positive or net negative amount for the following items included on line 4a that aren’t included in determining net investment income. [This includes] Net income or loss from a section 1411 trade or business that’s taken into account in determining self-employment income."
Because the net loss from Schedule K-1 is non-passive and thus excluded from Net Investment Income (NII), that amount must be eliminated from the calculation of NII. Only passive income is included in this calculation. The net amount on Form 8960 Line 4c represents the net income for your rental property from Schedule E (passive income).
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