How to enter info from K-1, Form 1065 for exchange traded MLP,s reporting business and royalty income

[user17581262042]

I entered the data into the K-1 part of the program but it doesn't show in Schedule E.

Dave [removed]

[email address removed] or home phone, [phone number removed].

[Deepp]

TurboTax handles exchange-traded MLPs differently from standard partnerships due to their unique tax treatment.

Here are some of the key reasons why this happens:

1) Passive vs. Non-Passive Income.

• Ordinary Business Income (Box 1): Typically, income from an MLP is considered passive income for tax purposes. TurboTax will not directly populate this on Schedule E until a loss is utilized or the entire interest is sold. Instead, the program calculates and tracks the passive activity losses (PALs) on Form 8582, Passive Activity Loss Limitations. This form determines how much of your passive loss can be deducted against passive income in the current year.

• Royalties (Box 5): Royalty income is generally treated as passive and would also be subject to the passive activity rules, flowing through Form 8582.

2)

TurboTax uses the K-1 data you entered to complete Form 8582 in the background. If you have passive losses from the MLP, they are suspended and carried forward to future years. When you sell your entire interest in the MLP, any suspended passive losses from that investment become deductible and can then be used to offset other income on Schedule E.

3)

Not all data from a K-1 flows to Schedule E. Here's where other common items are typically reported:

• Interest Income (Box 4a): This is usually reported on Schedule B.

• Dividends (Box 4b and 4c): These are also reported on Schedule B and Schedule D, or the relevant lines on your Form 1040.

• Capital Gains/Losses (Boxes 8 & 9): These are reported on Schedule D and Form 8949.

• Section 179 Expense Deduction (Box 12): This deduction is typically reported on Form 4797.

Here is how you can double check on the entries and see if the information flowed through properly: 

1. In TurboTax, go to Tools > Print > Print Preview> Federal.

2. Then, find Form 8582 to see how your passive income and losses are being calculated and tracked.

3. You can also check Schedule D and Form 8949 for any capital gains or losses from the MLP.

By reviewing these forms, you can confirm that the data you entered is being correctly processed, even if it's not appearing directly on Schedule E as you might have expected.