K-1 Business Income, Dividends, and 179 Deduction

[laceysharpe]

I have a K-1 with Ordinary Business Income (line 1), Dividends (line 16 D), and Section 179 Deduction (line 11).  In the past the Ordinary Business Income was the same as the Dividends, so it looked like I was taxed on the Dividends.  This year the Ordinary Business Income is more than the Dividend distribution and I see I am being taxed on the Ordinary Business Income amount.  I did not receive this money, it is still invested.  Is it correct that I am not taxed on the Dividends but on  the Ordinary Business Income?  Next question, it appears TT is not allowing the Section 179 Deduction because I have no business income which is on the K-1 and I am being taxed on it.

I am literally searched everywhere for an explanation on this.  Hopefully someone on this forum can shed some light on this - taxes should not be this hard.

[PatriciaV]

You are correct. Dividends reported on Schedule K-1 (1120S) Line 16D affect your basis in the stock and are not taxable unless they exceed your basis (the excess is a capital gain). Ordinary Income (Box 1) from a K-1 is taxable, however.

The Section 179 Deduction from Line 11 may be subject to limitation and, if so, is being carried over to be used in a future year. Look at Schedule E (Form 1040) Line 28 Column (j) to confirm the deduction has been reported and how it's being used on your return.

For specific information on items reported on Schedule K-1, see IRS Shareholder's Instructions for Schedule K-1 (Form 1120-S).

[laceysharpe]

Thank you! I appreciate the information. I will check the Schedule E.