Government obligation interest

[rbt1219]

My LLC owns a rental and invests proceeds in a money market government fund that distributes proceeds as dividends, 25% of which are from government obligations. Such income is exempt from my state's income tax. Where on form 1065/K1 do I indicate the amount of dividends that are state-tax exempt?

[AmyC]

Report tax-exempt interest income, including exempt-interest dividends received as a shareholder in a mutual fund or other RIC, on Schedule K, line 18a, and in box 18 of Schedule K-1 using code A.

Interest earned from federal obligations, such as U.S. Treasury securities, is generally exempt from state and local income taxes.