Schedule K-1 (Form 1065) Box 20, Z STMT, Schedule 199A has multiple Rental Incomes

[momo_18]

Hello TT team,

For the subject details, I need your help to understand what calculation do I need to do to fill out Form 1065. 

I have two separate K-1 forms. The first is for business Income (box 1), and the second is for Rental Income (box 2).  Both incomes are negative numbers (loss). For both K-1 forms, Code Z STMT is entered in box 20. 

For the first K-1, Section 199A information includes only 3-entries, i.e. Ordinary Income (loss), W-2 Wages, and Unadjusted Basis of Assets. 

For the second K-1, Section 199A information includes rental income information for 5 different locations. Each dollar value is different, but for example, I am entering it in a random format below: 

Rent - Location A: Rental Income (Loss) $100, Unadjusted Basis of Assets $1000

Rent - Location B: Rental Income (Loss) $200, Unadjusted Basis of Assets $2000

Rent - Location C: Rental Income (Loss) $300, Unadjusted Basis of Assets $3000

Rent - Location D: Rental Income (Loss) $400, Unadjusted Basis of Assets $4000

Rent - Location E: Rental Income (Loss) $500, Unadjusted Basis of Assets $5000

Rent - Unallocated Expenses: Rental Income (loss) $-2500

This is my first time becoming a business (Limited, Domestic, Individual) partner or first-time K-1 filer.  Following are the questions:

1. For the second rental K-1 income, do I need to enter all five individual entries, or do I need to sum up all values for each option: Rental Income (loss) and UGA values? 

2. Where do I need to enter Unallocated Expenses Rental Income (loss)?

3. How do I calculate Qualitifed Bussiness Income (QBI) deduction, or is there an interview process that I will have to follow to calculate QBI?

4. There are two sections in K-1. A) IRC SEC. 163(J) Adjusted Taxable Income Calculation, and B) IRC SEC. 163(J) Business Interest Expense Limitation. Do I need to enter these entries anywhere?

I am using TT Delux Desktop version which has interview questions for Schedule K-1 (Form 1065). 

Let me know if you have any questions. I will greatly appreciate your response. 

@DavidS127 

@KathrynG3 

I will really appreciate it if you can answer anyone question or all questions. Thanks!

[AliciaP1 · Accepted solution]

I'll answer your questions as you have asked them:

1. You will add up the amounts for the different locations under each category and report the totals.
2. When you enter the K-1 for the rental activities, you will enter the Unallocated Expenses as "XXX has other deductions".
3. If you follow the step-by-step interview to enter your K-1, you will be prompted to enter your specific QBI information from your Statement A for each one.
4. Based on the information entries for the boxes on your K-1s, TurboTax will prompt you to answer more questions if needed for any additional information.

For more information on how to enter your K-1, please see Where do I enter a K-1 that I received?

[momo_18]

Hi AliciaP1,

Thank you for answering my questions in a sequential manner. 

I have only one follow-up question related to #2. When entering the Unallocated Expenses (-2500) as "XXX has other deductions", the software is asking me a question that this is an uncommon adjustment, so Value(s) on Statement A need to be changed, which now reads as  - Other deductions related to QBI = +2500.

a. Shall I choose this autocorrected option and move

on? 

b. Since all my losses are negative, including the unallocated expenses is negative, does this affect my return in any way? I was thinking there shouldn't be any effect as I am reporting only losses and no gains. 

Please answer at your earliest convenience. Thanks

[AliciaP1 · Accepted solution]

Yes to question a and for b, it may not affect your current year return, but it will affect your QBI Carryforward to be used in future years!

@momo_18