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Level 2
posted Apr 5, 2022 2:33:06 PM

Schedule k-1 box 13 code W amount not being deducted from income

This is about Schedule K-1, Form 1065. This is a private investment fund and I am a Limited Partner. The amount from box 13, code W is not getting deducted from the income reported in box 11, Code C. I checked Schedule E and it has zeroes. I also checked 8582 to see if there are any passive loss limits, but don't see anything there either. Any idea why this might be happening? The entire amount reported in box 11, Code C is being reported as income, which is not the case (because the 13W amount is not deducted). Thank you for your help!!

0 4 10175
4 Replies
Level 15
Apr 5, 2022 5:12:54 PM

1065 line 13 code w requires two entries (maybe 3 - see item 😎 - supplemental detail for this line

  1. Other taxes – transfers to schedule A line 6
  2. Other itemized deductions (2%) – not deductible for federal. maybe for state
  3. Penalty on early withdrawal of savings – transfers to schedule 1 line 18
  4. Section 754 depreciation – reduces partnership income or increases loss as reported on schedule E page 2 assuming loss is allowed (may be subject to PAL limitation)
  5. State income taxes withheld – transfers to schedule A line 5a
  6. Other nonpassive deductions – flows to schedule E page 2
  7. Investment interest expense – flows to schedule E page 2 to the extent allowed
  8. Other. You need to reenter on another form or schedule depending on what it is

 

 

it is doubtful this would offset line 11c  that's income/loss form 1256 contracts. - that line flows to form 6781

so what is line 13 w for? 

 

 

Level 2
Apr 5, 2022 7:05:14 PM

Hi, thank you for your detailed reply!!

 

You are correct: line 11c income is from section 1256 contracts. The description for box 13W says "other deductions from pass through entities" and "other expenses". When I entered this amount as other itemized deductions or other, it didn't flow through at all. Schedule E page 2 had zeroes and the deduction didn't go anywhere. The entire income was being used to calculate taxes (which is not right). Then I used the "Other non passive deductions" and that flowed to schedule E page 2, which then offset the income on 1040.

 

After I did that, I found this at the bottom of my K-1: "LINE 13W REPRESENTS PROFESSIONAL FEES, MANAGEMENT FEES, AND OTHER DEDUCTIONS WHICH ARE RELATED TO THE PARTNERSHIP'S ACTIVITY AS A TRADER IN SECURITIES, THEY SHOULD BE ENTERED BY AN "INDIVIDUAL" TAXPAYER ON SCHEDULE E, PART II AS NONPASSIVE."

 

Based on that, I am thinking that my selection of "Non passive deductions to be reported on Schedule E, page 2" in Turbotax step-by-step is correct. Would you agree?

Employee Tax Expert
Apr 7, 2022 12:14:38 PM

Yes, you have selected the best option to report these deductions on Schedule E.

Level 2
Apr 7, 2022 1:36:06 PM

Thank you very much!!