K1 Hedge Fund investment

[antoniot1]

Hello,

I am really struggling to see how I should categorize my K1 income and deductions on my tax return for being an LP in an investment fund (I work for the GP that manages the LP).

I have three items on the K-1 I need help/clarifications:

(1) Income under line 11, code A, has four different items:

     a) IRC Sec 988 gain/loss

     b) Other income/loss

     c) Subpart F Income

     d) Swap income/loss

(2) Income under line 11, code I, has one item:

     a) Other income

(3) Deductions under line 13, code W

     a) Portfolio deductions

Some deductions under line 13, code W as "Other portfolio deductions"

Question 1: This is an investment (non trader) fund. I assume I should enter "No" for material participation. Is that correct?

Question 2: For 11 Code A, should I check the box that says "other portfolio income(loss) to be reported in schedule E, page 2"?

Question 3: For 11 Code I, should I check the box that says "other non-passive portfolio income(loss) to be reported in schedule E, page 2"? That seems wrong as it is passive. However, if I enter it in "another descriptive item", it doesn't seem to feed through to the 1040 and end up being an untaxed income

Question 4: For 13 Code W, if I put it under "I have another description item", this also does not feed through to the 1040 eventually, so end up with no deduction. However, that would contradict the earlier assumptions for Question 2&3 in which I enter these into Schedule E.

Any help would be much appreciated. Thank you!

[tagteam]

Reading through the thread below may help, at least somewhat.

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/re-if-all-your-shares...

Material participation would be a definite "No".

[Mike9241]

I have three items on the K-1 I need help/clarifications:

(1) Income under line 11, code A, has four different items:

     a) IRC Sec 988 gain/loss

     b) Other income/loss

     c) Subpart F Income

     d) Swap income/loss

these would probably need to be entered on the k-1 as other. Turbotax does not know where to carry these items in to the return, they properly belong on Schedule 1 line 8z 

(2) Income under line 11, code I, has one item:

     a) Other income

there are 6 categories for this in Turbotax. where it should be reported depends on what it is since it could be reported on schedule 1, form 4797, schedule D or other   forms

if really other then likely schedule 1 line 8z

(3) Deductions under line 13, code W

     a) Portfolio deductions

Some deductions under line 13, code W as "Other portfolio deductions"

unless you have a state income tax that allows these deductions don't bother entering them. these expenses are no longer deductible (through 2025) for individuals though they do reduce your tax basis

Question 1: This is an investment (non trader) fund. I assume I should enter "No" for material participation. Is that correct?

correct 

Question 2: For 11 Code A, should I check the box that says "other portfolio income(loss) to be reported in schedule E, page 2"?

see above but generally, this income is reported on schedule 1 line 8 

Question 3: For 11 Code I, should I check the box that says "other non-passive portfolio income(loss) to be reported in schedule E, page 2"?

see above 

That seems wrong as it is passive. However, if I enter it in "another descriptive item", it doesn't seem to feed through to the 1040 and end up being an untaxed income

you are correct Turbotax can't handle these lines and states (*) that these may need to be entered on other forms

having said all that in some cases it won't matter (your taxes will be exactly the same) if you enter those items so they flow to scheduke e page 2, but it seems the IRSs wants them on schedule 1.  

[antoniot1]

Thanks, this is very helpful. It would seem that most of these should be in Schedule 1 as "other income". However, would I have to manually override these as they seem to be flowing to the wrong place? (TT at best puts these in schedule E, and somehow would mark these as "active" participation even when I selected "no" for active participation; no idea why)