Schedule K-1

[JC049]

Smart Check questions my entry of "Z" (highlighted in pink) as shown in box 20 of partnership K-1 because I have not entered any Section 199A income on Statement A.  The Statement A I received shows no 199A income, only a section 1231 gain which was entered in box 10 of the K-1.  If I remove the entry of "Z" on the K-1 the problem goes away and there does not seem to be any effect either way on my tax due.

[AliciaP1]

You need to leave the code Z entry and continue through answering the step-by-step interview questions.  You will come to a screen asking about your Section 199A QBI Pass-through Entity.  It will have you enter the Section 1231 gain again as specifically QBI in order to determine your eligibility for the QBI Deduction.

[JC049]

AliciaP1, Thanks for the reply.  That's exactly what I did, re-entered the 1231 gain amount as that is the only number entered on the Statement A received from the accountant who prepared the partnership K-1's.  Turbo Tax still flags the Box 20 entry "Z" asking for the Section 199A income.  Note: I see nowhere on the Statement A where "Section 199A Income" is to be entered.

[AliciaP1]

Can you clarify if you have any amounts in box 1 or box 2?

[JC049]

Yes, a loss amount in box 2.  This was obviously from real estate rental activity.  No amount in box 1.

[AliciaP1]

Ok.  The amount in box 2 should have been listed on the Statement A even though it was a loss.  When you are reviewing the Statement A detail entries, you should mark the box that "XXX has business income(loss)" and enter the amount in box 2 as "Rental income(loss)".

@JC049

[JC049]

OK, I can understand that, but I still don't get why TT is asking me to resolve the entry in Box 20:

Code = Z

Description = Section 199A Information

How exactly do I get that error to clear? 

[JC049]

Alicia, Thanks again for answering my questions.  I read through some of the Form 1065 Instructions after downloading it from the IRS website.  I read that capital gains are not eligible for QBI deduction (flowchart on pg 49).  That is the only gain included on the Statement A.  It's on the Section 1231 gain (loss) line.   And our only other gain/loss was a rental income loss, so it seems to me that I have no QBI eligible deductions.  Am I right?  This is starting to feel like a TT glitch.  I just need to clear it so my return will be filed without issues.  Thanks,

Joe C.

[AliciaP1]

No, your rental loss qualifies for the QBI Carryover.  If your income was not eligible for QBI your K-1 box 20 would not have a code Z line. TurboTax asks you to resolve the code Z entry is because the entire entry is not complete.  If you enter the loss in the rental income and the 1231 gain on the screens after the entry for box 20, you should be able to proceed.  

@JC049