As far as the IRS requiring three different K-1 forms as a viewpoint: No, this would be equally “absurd” (to borrow from your own wording).
Consider the outrageous waste of paper: Why use three or four times as many K1 sheets when you can combine all that information into one page?
Here is the gist of the matter: K1s go to informed people, such as partners, who ought to know what is going on in their businesses (thus the ability to split or break out expenses between earned income (Box 1, self-employed) vs passive income (Box 2, net rental real estate). These partners are alert enough to know how to separate earned income vs passive. The combining of these expense for reporting purposes saves paper. The separation of entry here at Intuit allows the taxpayer to properly associate expenses against both earned income vs passive income.
