Form 7217 regarding K1 with line 19C entry

[Philleann]

How do I add firm 7217 to my federal return for online submission

[Philleann]

Dear Patricia V:

Thanks for the answer.   Does this mean I can E-File the rest of my 2024 Federal return, and just mail

this form (7217) alone?
If that is correct, that would be a good outcome, as rest of my Federal form is rather large, plus

I can now E-File my State forms, if Federal E-File is allowed.

Best regards,

Philleann

[TomIL64]

PatriciaV,

Thank you for clarifying that Form 1040 can still be e-filed with TurboTax, and that Form 7217 can be filled out, printed and mailed through U.S. Postal mail. 

It appears TurboTax needs to include this instruction in the  software rather than instructing TurboTax users to opt to print and mail the 1040 tax return along with Form 7217 rather than e-filing.

Thanks,

Tom

[Philleann]

RE: Form 7217 by Mail:

I looked at IRS to see if there was a requirement for a cover letter for mailing form 7217, if rest of 2024 return is e-filed.

I found an IRS form 8453, which has a checklist of forms to be physically mailed, with this headline:

FILE THIS FORM ONLY IF YOU ARE ATTACHING ONE OR MORE OF THE FOLLOWING

FORMS OR SUPPORTING DOCUMENTS

This is followed by a list of forms, but Form 7217 is not listed?

Will the IRS accept form 7217 by mail, and should I make my own cover letter to provide essential data,

such as my name, address, and tax number, or will this not be accepted by the IRS, and I will have to proceed

to paper file the entire return?

Philleann

[topgun80]

@Philleann wondering if you were able to figure this out? Can I e-file my tax return and then separately mail form 7217 and if so what is the correct process for that?

Thanks

[Philleann]

Hello topgun80,

KEEP IN MIND THAT I AM AN AMATEUR, NOT A TAX SAVVY PROFESSIONAL.

SUGGEST DOING YOUR OWN 'DUE-DILIGANCE' BEFORE FILING.

The following is how I proceeded, for what it is worth:

I filed entire 2024 return, including partnership income, electronically.

I prepared a paper return containing:

*form 7217, Part 1, aggregated basis, and Part 2, allocation of basis

* Cover letter (my own document, not an IRS form) with the following:

       "US Individual Income Tax Transmittal for an IRS e-file Return, for Year 2024"

       names                                                     Social Security numbers

       (listed)                                                     (listed)

Address

(listed)

"Enclosed Form:

IRS form 7217, Partner's Report of Property Distributed by a partnership

The above mailed to:

INTERNAL REVENUE SERVICE

ATTN:   SHIPPING AND RECEIVING 0254

RECEIPT AND CONTROL BRANCH
AUSTIN, TX [removed]

(Note:  Not sure if this address is regional or national.   I happen to reside in the Carolinas.)

[boilermrkchck02]

No it does not!!!!

[DaveF1006]

To clarify, is there a question?

@boilermrkchck02 

[boilermrkchck02]

The TurboTax does not allow you to efile neither the FEDERAL nor the STATE if you need to complete 7217. Do not waste your time. 

[user17746542256]

@PatriciaV Can you provide some reference or backup for this statement?

The page to which you linked lists different addresses based on the form being filed, 1040, etc.   Form 7217 is not in the list, of course, only Form 4868, "U.S. Individual Income Tax Transmittal for an IRS e-file Return."

Form 4868 for 2025 does not list Form 7217 as one of the options that may be included, and the instructions are quite explicit that it is not the correct choice:

▲!CAUTION

 Don’t attach any form or document that isn’t shown on Form 8453 next to the checkboxes. If you are required to mail in any documentation not listed on Form 8453, you can’t file the tax return electronically.

Therefore I would ask, are you really saying that 7217 can be sent to the address lists for, e.g., 1040, on that page, without a 4868?  I strongly suspect that is not the case, and this statement made without justification greatly reduces my confidence in the label of "Tax Expert."

[IsabellaG]

For 2025 tax returns, you will need to attach Form 7217 to your tax return, and file by mail.  At this time, TurboTax does not support this form. Please read this IRS reference source for specific instructions on Form 7217. @user17746542256 

[Philleann]

Dear IsabellaG,

Your advice re:  IRS #7217 is the opposite of advice from TT Tax expert PatriciaV,

who stated that, after E-Filing the rest of my Federal return,  this form could be mailed to 

RECEIPT and CONTROL BRANCH for my region, which is the Carolinas, so

the branch office receiving it was in Austin TX.  I also followed this procedure for tax

year 2024, and have not received any communications from the IRS about this somehow

being irregular.

Outside of the TT Community, I have been reading that #7217 is not needed to prepare current

taxes, but is just to keep track of non-monetary returns, so when partnership is eventually

disposed of, the IRS will better be able to verify the true return over the lifetime of the partnership.

As two persons, both described as Turbo Tax experts, have given contradictory advice,

is there a way to get some higher expert to address this matter?

Best regards,

Philleann

[IsabellaG]

I understand that the advice you received last year contradicts what I am saying. You will note that Patricia's answer has been removed from this thread, so as not to create future confusion concerning Form 7217. 

The IRS instructions  state  who must file this form, and how to file it. "It is to be attached to your tax return for the year in which you received the distributed property subject to section 732." There is no IRS guidance stating that you can mail Form 7217 separately. 

Since TurboTax does not support this form, and there is no mechanism in TurboTax for you to attach this form, your only recourse is to paper file your return and attach the required form.

[rooksmith]

Look, I hate to say it but you are stuck between a rock and a hard place. You can just not report it and wait to see if the IRS notices it. Then they have to send you a letter explaining the error. What bugs me is that if they have the same K1 data somewhere, why cant they just figure it out. I have no idea what the boxes mean. Thats what TurboTax is supposed to do: Take the input data from your K1 and send it in. IF there is a huge discrepancy in the amount of taxes owed, then that is the IRS's problem to report it. If the Adjusted Basis and Fairmarket Value are the same. Why do we need this 7217 business. Printing out the entire tax return (in my case that would be like 3 New York City Phone Books) just to attach a form that doesnt even change the final taxable amount is nuts.  I'm not recommending this, but it make sense to intentionally make an honest mistake and miss the fact that K1 box 19 had a letter C in it at all.  

[rooksmith]

Fundrise eFund threw a curve ball to Turbo Tax, which prevents eFiling!

Gripe!

Fundrise is finally phasing out K1 and K3 statements, and is (behind the scenes) restructuring their eFund. According to the letter that comes with the K1 package in 2025:

2025 Final K-1 Tax Package IMPORTANT: The following information in this cover letter is for informational purposes only and is not individualized. It does not take into account certain information regarding your personal tax circumstances and should not be relied upon as tax advice. Enclosed in this package is your individual tax document pertaining to your investment in the Fundrise eFund. As an investor, you are required to report certain information about your investment as part of your 2025 taxes. Due to its merger with Fundrise Equity REIT, LLC on December 29, 2025, this is the final tax year and final K-1 for Fundrise eFund, LLC and you will not receive any future K-1s from this fund. Your 2025 Schedule K-1 reflects your share of income, gains, losses, and other tax items through the merger date. No future K-1s will be issued for Fundrise eFund, LLC. Form 7217 Notice: Your Schedule K-1 reports an amount in Box 19, Code C (see footnote statement for details). You may have an additional filing requirement (Form 7217) to report your receipt of Fundrise Equity REIT, LLC stock due to the merger transaction*. Please consult your tax advisor*

(God do I hate that legal boilerplate!) - But the key is that K1 Box 19 has a letter C which means you have to read the detailed statement to find the adjusted bases of some stock transfer. Even my tax advisor cant figure this out.

Bottom line here is this throws Turbo Tax into a sort of a WTF state. it has no Form 7217, so it just does the CYA of pointing to the IRS web site. Plus if you report it on the K1 input form in TurboTax, it wont allow you to EFile.

This is a big deal if you have a 1000 page long Federal Return. Also from what I can tell putting a positive number (say $8000) in the TT Input box 19 with C reported does not change the amount of taxes due (the little box on the top of the Turbo Tax screen). So you, the tax filer have a choice: follow TT's advice and *NOT* EFile (though you paid for it when you bought their product) or (heaven forbid), pretend that box 19C was blank or that you missed it somehow. The end result with the second option is that you didnt follow the instructions, even if it makes life easier for the IRS and you. The net amount of tax paid would be the same. It's just the IRS's new rule that a form 7217 must be filed if letter C appears in that box, and the fact that Turbo Tax does not support form 7217. Furthermore TurboTax fixed that problem by making it impossible to eFile if you have a number in there. Therefore the only logical thing to do is to not report that number, and let the IRS figure it out if they have to. You might end up getting a letter and a penalty, but printing out a 1000 page form and mailing it in might take them months to scan and analyze.

What would you do?

By the way, the blame should fall on TurboTax to fix this flaw in their code and add that form. And the IRS rule is the law.

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