K-1 with Box 1, 2, 3 and 199a Z statement - more clarity needed

[RyanK]

All the dialogue I've seen on this subject is simply to too vague. I can't make heads or tales out of what TurboTax wants or how this section could be so significantly lacking in clear instructions. 

I am simply going to post images from my redacted K-1 and hopefully someone can tell me, in painstaking detail how to enter this information into Turbo Tax in a way that the IRS(!!!) wants to see it! 

I SUSPECT someone is going to tell me to enter 3 K-1's. One for each boxes 1, 2 & 3. But I simply don't see how that could be accurate. It seems then at no point will i be entering any detailed information about all these other businesses listed in the statement of my K-1. So when i  have to chose the check box of "Income from the partnership that generated the K-1" or "the income comes from another business" I'll have to lie here, which leads me to believe something isn't right. 

I can't tell if i am supposed to mention all the other business listed on the K-1 or not. Turbo Tax clearly has that section SO LONG AS there is ONLY 1 additional business listed. Why it can't handle more than one, i have no clue. I am dumbfounded that Turbo Tax doesn't have better clarity on this issue. 

[Mike9241]

Turbotax requires that lines 1, 2 and 3 be entered on separate k-1's, line 

did the partnership provide any instructions because there is an issue with line 2 in that multiple properties/partnerships are being reported. it is unclear if this is a tiered partnership and even if known the IRS has not specified how a tier partnership should be reported on the taxpayers return 

unless the instructions included with the k-1 say otherwise, what i suggest for this line is that you either 1) treat then all as one entity by making and aggregate election - check the box and provide the following  explanation on the QBI component worksheet. the following rental activities are being aggregated - then include the name of each sub partnership and its ein

2) don't aggregate  in which case you report each sub partnership on a separate k-1 

18

 Code B. Other tax-exempt income. Increase the adjusted basis of your interest in the partnership by the amount shown, but don't include it in income on your tax return.
The partnership will attach a statement for the amount included under code B that's exempt by reason of section 892 and describe the nature of the income.

18c is not used because it represents a non deductible expense.  this decreases your tax basis though

5 - enter on any 1 k-1

20a don't bother entering turbotax doesn't use it. it will use line 5

as for the other lines no details provided so follow the supplemental instructions 

[RyanK]

Thanks for the reply! The K-1 has no useful footnotes. This is all i got:
"THE SECTION 199A AMOUNTS TO BE USED IN THE CALCULATION OF QUALIFIED
BUSINESS INCOME DEDUCTION ON YOUR 1040/1041 RETURN ARE REPORTED ON LINE 20,
UNDER CODE Z. PLEASE CONSULT YOUR TAX ADVISOR REGARDING THE CALCULATION OF
THE QUALIFIED BUSINESS INCOME DEDUCTION, INCLUDING THE POSSIBLE
AGGREGATIONS AND LIMITATIONS THAT MAY APPLY AND THE FILING OF THE
1.199A-4(C)(2)(I) ANNUAL DISCLOSURE STATEMENT."

I was thinking it was clear I could not aggregate these businesses. Is that not accurate? The Partnership that invested in each of these deals and generated my K-1 owns a minority and passive interest in the various other businesses. 

I struggle with leaving stuff out, because it feels like that will bite me in a future year and I may not even know it! I guess it could also benefit me, but I'd prefer to simply input the K-1 correctly! Kills me that Turbo Tax can't just upload this and input the data where it should go on it's own! Where is AI when you need it???

[Mike9241]

is this a publicly traded partnership or master limited partnership box D on the k-1 would be checked. these are treated differently than other types of entities since even a passive investor qualifies for the QBI deduction based on the info in box 20.

if not, based on what you provided you don't qualify for the QBI deduction (not even line 1)  because you are a passive investor.

you should still separately report each sub partnership income/loss because sooner or later the property may be sold which would free up suspended passive losses or the partnership itself may terminate. Also, you might get notifications from the iRS as to failure to report these items 

real estate safe harbor for QBI

https://www.irs.gov/pub/irs-drop/rp-19-38.pdf 

[RyanK]

No not a PTP or MLP. 

Based on your response, as far as Turbo Tax goes, you think I should enter a "K-1" for (1) Each EIN listed within my K-1 and (2) An additional K-1 for any EIN that has more than 1 type of income listed?

[Mike9241]

yes for line 2 of the k-1 since you can't aggregate. if you don't enter them now, you will lose the benefit of any losses either when income is generated by it or when sold or if the partnership is terminated. also potential issues with the IRS.

say one has a 2024 loss but a profit in 2025 or a future year. you can't just reduce the income by the loss you never claimed. you would need to amend 2024 but if it's now 2028 it's now too late to amend 2024 so you can't claim the loss.

as for the portfolio income on line 5 i would enter for the primary k-1 along with line 1.  it's not passive so has no effect on any other lines

since no details were provided for the other lines, I   can't really say which k-1 is best. there should be a supplemental statement that might indicate which activity its associated with