Surrender of modified endowment contract passed through on K-1

I own stock in a Sub S corp that cashed a life insurance policy that is subject to the 10% tax penalty. It was a modified endowment contract. I need to file form 5329 and report my part of the distribution on line 1. The electronic form in Turbo Tax does not have a line in the smart worksheet for line one for entering a MEC distribution. When I use the override to enter an amount in lines 1, 3 & 4 it creates an error in Turbo Tax saying I should not use the override; however, it does add the 10% penalty to my taxes due.

Is there another way to do this or am I on the right track?

947

Level 13

Aug 15, 2019 8:17:10 AM

Since you're using a desktop version of TurboTax you certainly can use "forms mode" to enter information. As I recall that can invalidate TurboTax's accuracy guarantee, but if you're sure you have things "right" that might not be a concern, really.

I assume the SubS Corp got a 1099-R? You might try the approach of simply entering the information through the 1099-R interview.

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Surrender of modified endowment contract passed through on K-1