QBI vs. ordinary passive income in an MLP

[mlpinvestor]

I have a couple of questions about QBI in a master limited partnership.

One of my MLPs had positive ordinary business income last year, rather unusual for a midstream MLP.  This freed up some prior year accumulated passive losses.  What has me confused is the fact that, according to Turbotax Premier, the amounts freed up are different with respect to “regular tax” vs. 199A QBI carryovers.  I don’t understand why this should be.  Specifically, the suspended loss carryovers that Turbotax freed up for QBI purposes amounted to $740, which just so happens to be double the $370 of ordinary business income for 2023.  What’s going on here?  I must not understand how this calculation works.

For reference, below are the relevant portions of my 2023 K-1.

Secondly, notice that the QBI amount in Box 20Z does not equal the ordinary business income plus 1231 income.  I thought this was the literal definition of QBI, so I don't understand the discrepancy here, and hence what to even report as QBI in the Turbotax interview for this MLP this year.

(PII Removed)

[EleanoreS]

 I am providing information regarding the Qualified Business Income  (QBI) deduction in general as I am unable to see your actual Schedule K-1 and TurboTax input.

When looking at your individual situation, please keep in mind that the QBI deduction is calculated differently based on your taxable income. In addition, at higher income levels, the deduction may be reduced or eliminated.  

Here is a link to information and a video on how to input the information from your K-1s.  As you feel a number is being doubled, please double check your input to be sure the data was not entered twice.  

Thank  you for joining us at the Ask the Expert event today!

[FranklinF]

You may have a Negative QBI in the year you deduct them due to suspended losses,

QBI's from different sources interact with each other. Negative QBI from one source offsets positive QBI from other sources. An overall negative QBI for a given year would be carried forward to offset positive QBI in future years.

As for the amount that is being doubled, I will advise to review your previous entries for duplicate inputs.

In addition, section 1231 Gains or Losses are included in QBI's calculations only when they are not considered Capital Gains.

Lastly, for a response that more adequately address your particular circumstances, I will advise to sign for Turbo Tax Live Assistance, especially  if you are dealing with issues that may include navigational challenges.

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[mlpinvestor]

@FranklinF  @EleanoreS 

Thanks.  I’m strongly considering Live Assisted for next year.  I have to prepare multiple returns, including two trust returns.  I therefore use both Premier for individual returns and Business for the trusts.  Would a single Live Assisted subscription allow me to ask questions related to multiple returns across both these products?  Or is a separate subscription needed for each return and/or Turbotax edition?

I also have another, last-minute tax question, if I may:

What actually makes a dividend received from a non-US-based company "foreign income" for purposes of the Foreign Tax Credit, from the standpoint of a US taxpayer?  Is it simply the fact that it's non-US-based, or must there also be withholding tax levied on it?

Because of how the Form 1116 calculation works, the larger your total foreign income, the bigger the foreign tax credit you’d potentially be able to claim under the limitations.  But, not all “foreign” dividend income is taxed, so I’m unsure if it counts.  For instance, some jurisdictions (ex. UK, Bermuda) don't tax dividends paid to US investors at all.  So if a stock I hold is UK-domiciled, does that alone let me count its dividends as "foreign income" to be included in the numerator of the fraction described here: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-how-to-figure-the-credit

The formula is (Total foreign income / total taxable income) X US tax liability = Foreign Tax Credit eligibility.  So you can see where I'm going with this.

Doing so would effectively pad the amount of credit I’m eligible for with respect to taxes paid on all other foreign holdings for which there is withholding tax.  This seems fishy, since no foreign tax is involved for the UK-domiciled companies, but far be it from me to turn down a smaller tax bill if the IRS doesn't care.

[Mike9241]

can't answer all your questions because we can not see your k-1 or input. you may want to contact support. however. 1231 gains are capital gains and capital gains do not qualify for QBI. 

section 751 gain which is ordinary income on disposal of an MLP interest is depreciation recapture treated as ordinary income and qualifies for QBI,