Investment K-1: Entering QBI info for K-1 with multiple pass-through entities

[markmartian]

I now understand the correct way to enter the box 20 QBI info for a K-1 with multiple pass-through entities.  I should create a new K-1 entry for each pass-through EIN listed in the K-1 box 20, code Z section. 

I didn't know this (and didn't do it) for the past couple of years for my investment K-1s where there were 20-30 pass-through entities per K-1.  I essentially added up all the pass-through entity figures to reach a total for each category (rent, W-2 wages, 1231 gain, basis, etc) and used those figures in the main K-1.  (To clarify, I did create a separate K-1 entry for box 1 and box 2 figures, but not for each of the EINs of the pass-through entities.  So, I had a total of 2  K-1 Ttax entries per main K-1.)

Now I wonder if I should go back and amend those returns, or just start correctly entering it from here.  Can an expert tell me how adding up all the pass-through entity values and using that as my QBI entry effected the turbotax calculation of the section199A deduction?   What is the flow of the calculation, and how did my error effect it?  Did I gain or lose deductions by doing it that way?  And how significant might the difference be?  I don't understand the purpose of separating out each pass-through EIN.

I hate to think of entering 20-30 new K-1 entries for each investment K-1.  Help!  Thanks!

[tagteam]

@Mike9241 

[Mike9241]

probably wording similar to below was included with your k-1 

The passive activity loss limitations provide that individuals and some other types of investors that do not meet certain business participation
thresholds may only deduct losses from these activities to the extent of the taxpayer's income from such activities. One of the unique tax issues related to investments in PTPs provides that the passive activity loss limitations are generally applied separately with respect to each PTP that is owned by the taxpayer. However, the application of the passive loss limitations to tiered PTPs is not entirely clear, so you should consult your personal tax advisor as to whether you are subject to the passive loss limitations, and if so, how the information presented below should be reported on your federal and state income tax returns.

so you see no one knows the correct answer because the IRS hasn't addressed the issue.

so I'll give you two options but there is no support for either of these

1) ignore all the subentities  report everything based on the master k-1 

2) aggregate them depending on whether they reported income /loss on line 1, 2, or 3 . thus at most you would end up with 3 k-1's

in other words, if 10 entities reported on line 1, 15 on line 2, and 5 line 3

you would aggregate every line for each line for the 15 entities reporting on line 1 and report on the 1st k-1

you would aggregate every line for each line for the 20 entities reporting on line 2 and report on the 2nd k-1

the same for the other 5 on the 3rd. 

[markmartian]

@Mike9241, @tagteam 

Thanks for the response, but I don't think this is applies to my instance.  These weren't PTP (publicly traded partnerships).  They were commercial RE limited partnerships with 20+ pass-through EINs in each K-1.

1) I don't know if I should go back and amend those returns, or just start correctly entering it from here.

2) how did my error of adding up all the pass-through entity values (by category) and using that as my QBI entry affect the turbotax calculation of the section199A deduction?  What is the flow of the calculation, and how did my error effect it?

3) Did I gain or lose deductions by doing it that way?  How significant might the difference be?

4) I don't understand the purpose of separating out each pass-through EIN.  Why can't they be aggregated?  Is it related to the QBI deduction income threshold ($157500), and the more complex calculations if you exceed that income amount? 

I appreciate the help.  Thanks.

[Mike9241]

as i previously stated if you have 20 k-1s, no PTPs involved, some with losses and others with income on line 2, you can ignore the separate breakdown per k-1 for the tier entities. you would also enter the QBI items per k-1 as an aggregate. so at most you would have 20 k-1's to enter in TurboTax.  this is so unless the k-1 instructions indicate that separate reporting is required. (could be due to foreign investment) 

however, if the K-1 contains income or loss on more than one line of 1, 2, or 3 a separate k-1 is required for each. This is a Turbotax requirement. QBI items would then have to follow the k-1 reporting in Turbotax. But again amounts can be aggregated. this is what would happen if every k-1 was entered separtely. as a LP the income and losses would be passive so income line 1 of the k-1 would flow to form 8582 lines 2a for income and 2b for losses. line 2 of k-1 would flow to form 8582 lines 1a for income and 1b for losses.review form 8582 to see the computations

as an LP part II of the form would not apply 

i should have also pointed out, that aggregation MAY pose an issue if the LP disposes of one or more of its PTEs. then if it doesn't provide the info necessary to determine what you need to report due to the disposition. then you will need to look back on the prior k-1 for the PTE.  IRS rules now require the K-1 capital account to be on the tax basis. 

while PTPs may stand on their own, non-PTPs are aggregated (except as noted above)  to determine any allowable passive loss and any allowable QBI deduction. 

we can't see what was entered