My K-1 has both business income and a rental real estate loss. I tried to enter as two different K-1s but I get an error. Help?

[JamesG1]

The preparer of your K-1 may have reported more than one activity on one Schedule K-1.

At the screen Choose Type of Activity, click This K-1 reports in more than one of boxes 1,2, and 3.

Since your K-1 reports amounts in more than one of boxes 1, 2, or 3, the partnership/LLC is involved in more than one type of activity.  You should treat each activity separately in TurboTax.

So there will be one K-1 entry for box 1 income.  Only click on box 1 and the statement "This K-1...".

There will be a second K-1 entry for box 2 income.  Only click on box 2 and the statement "This K-1...".

The other boxes of the K-1 may refer to either box 1 income, box 2 income or a combination.  The preparer of the K-1 may have included attachments or detail which explain how those items break down.  

[Mike9241]

Entering each type on a separate k-1 should not produce an error because that's exactly what TurboTax requires. Lines 1 and 2 can not go on the same k-1.  Perhaps there is a box or something you failed to check or uncheck. This forum has no access to your return

[danwilcox77]

When I add another K1 to break out business income from rental income, how much of the partnership detail do I need to break out to create the 2nd K1?  Can I just add the business income and leave the rest of the capital account roll forward, etc blank?

[DaveF1006]

You can split them, and in most cases, it’s the right move. Just be thoughtful about which data you duplicate to keep your basis and capital accounts accurate.

How to Split the K-1 Effectively

When you create a second K-1 to report the rental loss, you don’t have to copy every line of the capital account. 

1. The "Main" K-1 (Business Income)

Keep this as your primary entry. It should include:

1. Box 1: Ordinary Business Income. 
2. Part II (Capital Account): Enter the full roll-forward (Beginning balance, contributions, distributions, and ending balance) here.
3. Basis Information: Keep all your debt basis (Recourse/Non-recourse) on this entry.

2. The "Secondary" K-1 (Rental Loss)

This is essentially a "shell" K-1 used just to trigger the correct forms (like Schedule E, Page 2).

1. Box 2: Net Rental Real Estate Loss. 
2. Part II (Capital Account): You can generally leave this blank or enter $0.
3. The "Link": Ensure the EIN (Employer Identification Number) is identical to the first K-1 so the IRS computer matches them to the same entity.

If you enter the full capital account details (like your beginning and ending balances) on both entries, the software might think you own twice as much of the company as you actually do. This will result in an artificially enhanced basis that will allow losses to occur that should be limited by your investment.

[danwilcox77]

Thanks!