Schedule K-1 and Section 1202 Small Business Stock Gains Exclusion

[qz78ws]

Is there a way for turbotax Deluxe to "inquire" about IRC section 1202 Small Business Stock Gains Exclusion based on Schedule K-1 entry?  There is no 1099-B in this case.

[MinhT1]

IRC Section 1202 only applies to stock of C-corps under certain conditions. It does not apply to small businesses organized as pass-through entities.

So this section would not apply to any gain reported on a Schedule K-1.

[qz78ws]

I should have mentioned, this is for a partnership that invested in a qualifying C-corp.  Unless I'm mistaken, partnership income, deductions, credits, etc. are to be reported on a Schedule K-1.  I suppose that's why I received a K-1 from the partnership CPA.

[qz78ws]

Directly from the IRS instructions for Schedule K-1...

• Gain from the sale or exchange of
qualified small business (QSB) stock (as
defined in the Instructions for Schedule D
(Form 1065)) that is eligible for a section
1202 exclusion. The partnership should also
give you (a) the name of the corporation that
issued the QSB stock, (b) your share of the
partnership's adjusted basis and sales price
of the QSB stock, and (c) the dates the QSB
stock was bought and sold. Corporate
partners are not eligible for the section 1202
exclusion. The following additional limitations
apply at the partner level.
1. You must have held an interest in the
partnership when the partnership acquired
the QSB stock and at all times thereafter until
the partnership disposed of the QSB stock.
2. Your share of the eligible section
1202 gain cannot exceed the amount that
would have been allocated to you based on
your interest in the partnership at the time the
QSB stock was acquired.
See the Instructions for Schedule D
(Form 1040) and the Instructions for Form
-10- Partner's Inst. for Sch. K-1 (Form 1065) (2021)
8949 for details on how to report the gain
and the amount of the allowable exclusion.
• Gain eligible for section 1045 rollover.

[rhibbs]

Partnerships that are investment vehicles that invest in C-Corps can generate Section 1202 cap gain exclusions. These partnerships can issue K1's.