K1 passive income - number of forms

[gg381]

I received a K1 which has Box 1 - business income/loss and Box 2 - rental income populated with losses and there is some distribution as well. All the income is passive income category. From Turbotax, it seems I need to file 2 K1s, but in that case, I dont know how to divide the distribution amount as there is no split available / provided.

Is there a way to file 1 K1 only and hence not worry about figuring out the split ? 

[ThomasM125 · Accepted solution]

You will have to report the box 1 income and box 2 income on separate K-1 entries. You will have to allocate the numbers in the other boxes to one K-1 entry or the other, so that you don't double up on any of the numbers entered. That is the only way you can enter the K-1 in TurboTax.

The box one entry is ordinary income or loss, the box 2 is rental income or loss. That may help you determine which entries the other numbers belong with.

[Mike9241]

Turbotax does not use distributions for anything. so if you don't enter them there is no effect. It does not track tax basis.  That's your responsibility unless the partnership does it for you. so the issues you have that aren't handled automatically include: 

1) at risk. ignoring PAL loss limitations do you have enough basis to take the losses.

2) do the distributions reduce your tax basis in the partnership below $0 - then you have capital gain for the excess.

[LM232]

I have the same situation, with information in both blocks 1 and 2 on my K-1 and TurboTax says I have to split it into two K-1 Entries.  However, it says I should have received a form that would tell me how to split it, and I didn't.  Are there any blocks which I should not simply prorate based upon the amounts in blocks 1 and 2?  For IRS purposes will the two entries be put back together?  Does it really make any difference what I put on the two K-1s so long as the total is correct when they are recombined?

[DMarkM1]

You are correct so long as the totals in the boxes total correctly between the two it doesn't really matter.  My suggestion is to put box 1 on one K1 and box 2 and all the other boxes on the other K1.  You only need to duplicate the identification information for the partnership and partner.  

[nexchap]

@LM232 The reason the K-1s are split is that passive losses from rental activity can't be used to offset gains from "ordinary business" activity, and vice versa.  So you should attempt to break out all the line items on the K-1 between the two activities in as sensible a way as you can to try to comply with that restriction (pro forma is certainly one way to do it). 

[LM232]

Thanks.  I split all the numbered blocks, but also blocks J, K and L  showing share of profits, share of liabilities and Partner capital account analysis.

[WSO]

Given your answer, the question I still have is how to allocate the various values between the business loss in K-1 block 1 (10% of value in block 2) and rental real estate loss in block 2?

The K-1 blocks that have values annotated are 6, 9c, 10, 11 (code I), 13 with codes V and code W, 17 (code A & B), 18 (code B), 19 (code A), and 20 (codes A, B, N, V, Z).   The attached statements for all these blocks and codes don't explicitly delineate whether they apply to block 1 or 2.  

If the real estate is eventually sold in the future.  Does it matter if I just put all the values in one of the two K-1's I spilt this K-1 up under?

[WSO]

Your suggestion is so simple as I can't sort out where/how to allocate between the two K-1's I'll enter in TT for this one K-1.  If  the real estate gets sold in 4-5 years, will your suggestion work?

FYI the  business loss in my K-1 block 1 is 10% of value in block 2 (e.g. -$200) .  Rental real estate loss in block 2 is -$2000.

The K-1 blocks that have values annotated are 6, 9c, 10, 11 (code I), 13 with codes V and code W, 17 (code A & B), 18 (code B), 19 (code A), and 20 (codes A, B, N, V, Z).   The attached statements for all these blocks and codes don't explicitly delineate whether they apply to block 1 or 2.  The K-1 preparers simply told me I have everything needed to file and to consult my tax preparer if I have questions.