Separating business and rental on 1065 K-1?

[avjunior]

I have a 1065 K-1 with amounts in box 1 and 2.  Turbotax requires me to separate which amounts on the K-1 are for business income and rental real estate and then create *two* K-1 entries in Turbotax from this one K-1.  I wish Turbotax would ask more questions about the entries and figure this out in the program rather than punting it down to me.  But anyway...

I have entries in boxes 1,2,5,13,17,18,19,20.  Codes are:

Box 13- A, K, W* (property taxes)

Box 17- A

Box 18- C

Box 19- A

Box 20- A, AB, AD, Z.

So what amounts go on the business K-1 and the rental K-1?

Thanks,

[Critter]

Here we go ... easiest way is to create 2 K-1 forms ... on the first enter EVERYTHING  EXCEPT box 2  and on the other enter ONLY box 2.  

[avjunior]

Thanks for the quick reply!  I have to ask however if it's as simple as this why doesn't Turbotax just do it in the program?

[Critter]

  Even the professional programs don't do it ... it is not a common situation. 

[RLK1]

Where in TT do I add a second K1?

[DaveF1006]

According to the following link, To enter a Schedule K-1:

1) Click on Federal Taxes (Personal using Home and Business)

2) Click on Wages and Income (Personal Income using Home and Business)

3) Click on I'll choose what I work on (if shown)

4) Scroll down to Business Items (Business Investment and Estate/Trust Income using Home and Business)

5) On Schedule K-1, click on the start or update button

Once your first K1 information is added, Turbo Tax will bring you to a K1 summary screen. There will be option on that screen to add an additional K1. 

[RLK1]

I'm using TurboTax Partnerships, Corporations, LLC's, Trusts & EstatesBusiness for tax year 2019.  Those instructions do not sync with my version.

[ThomasM125]

Line 2 is clearly rental income. Box 13 may include property tax for the rental. Everything else would "normally" be non-rental items. 

You would have to do some research to verify this, however, since most of the entries you are dealing with could pertain to the rental activities, but likely not. I suggest you read through the literature that may have been attached to the K-1 and see if you can discern what each item is for and that may help you determine if it is associated with the rental.

Otherwise, enter one schedule K-1 for the rental, box 2 and maybe 13, and everything else as normal business income. 

[avjunior]

I tried H&R also for my return and it doesn't require entering the same K-1 twice if you have both business and rental income.  However TT recognized more K-1 codes.

The other issue (which I posted on a different thread) is that sometimes you get a K-1 issued from a state (in my case because a partnership is based in a state that does this).  Neither TT or H&R are really clear what you do with these "state-specific" K-1's.  They should *at least* tell you not to try to enter a state K-1 on the federal return.  I know that may be obvious to pros but perhaps not people like me :-).

Then when you do a non-resident state return the guidance you get for a state-specific K-1 can vary. 

[rodderrs]

if have entries in box 1 and box 2, TT suggests creating two entries, where one version is just Box 2 and 13, and the other is Box 1 and all other boxes.  This leaves unexplained what to do with entries in box 20z where one of the items is often rental income.  (note that rental income goes in box 2 also).  So it seems illogical to have a separate version of the k1 in TT for Box 2 rental income and then have box 20 reported on the OTHER version of the k1 in TT.  Would seem more logical to instruct one version of k1 entries for Box 2 and Box 20.  THIS WHOLE COMPLICATION IS CREATED BECAUSE TT CANNOT HANDLE A k1 that has entries in box 1 and box 2.  Can't TT just fix that bug?

[Critter]

Ok ... it is just this simple ...

On the first K-1 entry screen ONLY enter box 2 .... and on the second screen enter everything EXCEPT box 2 ... the program will marry them together automatically.

[Critter]

And FYI ... this is the same for professional tax programs because the income is passive for the rental only.  

[jj_schoolshop]

Is this advice correct since the Box 2 income (Real Estate Income) is related to the 20Z Section 199A Income information?  If I have Box 1 and Box 2 income, shouldn't I put everything EXCEPT Box 1 the first K-1 to capture the Box 2 income and related Section 199A in 20Z, and then in the SECOND K-1 put in the amount in Box 1?  I'm not sure - could you clarify?

[jj_schoolshop]

I think it doesn't matter either way you do it.  The amount of the taxes/refund ended up being the same either way.  I would just suggest that in the two K-1's, make sure that the amount in the 199A (Box Z) related to either Box 1 or Box 2 is put in the same K-1 in TT and not duplicated.

[LeonardS]

Yes, to clarify you will report everything except Box 2 on the first K-1 and only report Box 2 on the second K-1