for a 1065 k-1 it would go on line 11 other income. it needs to flow to part II line 10 of form 4797
for a 1120s k-1 line 10 same rule for following to 4797
You will have to have earned income in order to qualify for a retirement plan. However, your trading gains aren’t considered to be earned income and are exempt from Self Employment tax (Social Security + Medicare). The exception to this is futures traders who are full-fledged dealer/members of options or futures exchanges. Therefore, in order to qualify for a retirement plan and make contributions to the plan, traders will need to use entities like an S-Corp trading company and issue payroll for themselves. It's the payroll that's earned income.
A caveat with all retirement plans is, if you want to set up retirement plan for yourself, you will also have to cover all employees in your company and other affiliated service groups, such as a related entity you own. For traders who own most of the equity in another business that hires employees, they can’t set up a high deductible retirement plan for themselves in a trading entity without also offering a similar employee benefit to their employees in that other business, too. There are, potentially, ways to limit this requirement which your attorney or tax advisor can explain.
