Schedule K-3 line 54 and multiple deductions

[R2001]

I have two separate schedules k-1 1065 / K-3.

One of them has values on k-3 line 54 (deductions) on columns c (passive) and d (general) even though it only reports income (line 24) on column d (general). When entering the data, TT asked to use two different forms given the deductions on two categories.

When reviewing the return, TT complains about the value of the passive income deduction, saying that "passive category (line M) is entered but no source of income for passive category has been entered (line M). Enter the income on line M or remove the deduction"

First, the message makes not much sense, maybe half of the "line M"s are supposed to be line G (aka income)?. That said, I see no way of making it happy... either with two separate schedules k1/k3 (so that the categories are in different forms) or having both deductions on a single k1/k3. By the way, the K-3 reports net  income loss for both categories on line 55 so clearly TT understands that deductions can be greater than income, as there is no complaint about it

As I said, I have a K1/k3 from a different company, which has passive income (and deductions), so even if this other company reports no foreign source income, the deduction would be useful after combining all forms (I think)

Do I really have to forget about the deduction and enter 0 even though the company is reporting it to me?

[Anonymous_]

@Mike9241 

[Mike9241 · Accepted solution]

line M in Turbotax's k-3 is the total from k-3 line 54 column C. it seems impossible to have passive expenses without passive income and that's what Turbotax is complaining about though it misstates the line for income it should be F not M, from the k-3 column C line 24 which you say is zero. so I would not enter it.

that leaves you with the general category income line 24 column d which gets entered on line G in turbotax

and the expenses for column d get enter on line  N

these deductions are only for purposes of computing foreign tax credits allowable on form 1116. they are not deduction for regular income tax purposes. 

i

[R2001]

Right... they are reporting "other deductions: portfolio deductions" (that doesn't sound impossible to me as that does not imply an income from those investments. In fact line 55 is negative for both categories: more deductions than income).

I was not expecting the deductions to count against regular income... but yes I was missing the point that all that section is only relevant for FTC limitations; that's easy to miss answering the questionnaire even though that's the title of the k-3 section.

It would still be useful to use that deduction on line 3 of form 1116... but zero it is then.

Thanks.