Trust (1041) K1 does not include 199A dividends (from REIT held by Trust)

[Pepeprwn]

My father's trust holds mutual funds that have REIT holdings.  On the trust's 1099-DIV there is ~$850 in box 5 (Section 199A dividends), which I presume is REIT dividends.  I have filled out TT business (including putting the ~850 in box 5 under the 1099-DIV section), but in the K1 worksheet (Amounts to Allocate to Schedule K-1 Worksheet) there is nothing listed in 14-I.  I would have expected some of the REIT dividends to flow there.  FYI, I do not expect the full amount to flow there as the trust did not distribute all accounting income (the trust paid taxes on a property, which reduced it's income, and it had capital loss carryover).  As a comparison the foreign tax paid on the K1 is about 92% o that listed on the trusts 1099-DIV box 7 (Foreign Tax Paid).

That leads into a second question.  I can use a 663(b) election to distribute the full accounting income, but by distributing slightly less the trust still owes no tax and the beneficiary has less dividend income to owe tax on.  Am I required to distribute the full accounting income?  In the trust documents the trustee is required to distribute the "net income" of the trust.

Thanks!

[Anonymous_]

If the trust requires the trustee to distribute net income, then the return should reflect that the distribution was made whether the distribution was actually made or not (i.e., whether the beneficiaries received the funds or not they are liable for any tax due).

[Pepeprwn]

Is distributing enough from the trust to get to a taxable income of $0 equal to "distributing all net income"?

[Anonymous_]

Yes, that would be all net income if the taxable income is zero.

[Pepeprwn]

Thank you for clarifying that!

Do you have any perspective on the first part of my question?  Why do the 199A dividends (REIT dividends) not flow through to the K1 to be distributed to the beneficiary?  I thought the beneficiary would be able to claim the 20% deduction on REIT dividends as QBI (not a lot, but every bit helps), but TT business does not make a 14-i entry on the K1.

[Anonymous_]

@Pepeprwn I am not certain why there is no entry on Line 14 on your K-1 because I have done several test returns and, after distributions, the 199A information appears on Statement A (and Line 14). 

You might want to check that your distributions are accurate and look at the forms in Forms Mode.

[Pepeprwn]

I think the distributions are accurate.  I have distributed enough in 2019 to have the trust have 1041 Line 23 be -$120.  The distribution is first tier (I did it by amount not percentage).  The distribution is less than the accounting income (1041 Schedule B Line 8).  What else should I be checking for?

I have tried distributing more from the trust, changing the 199A value, removing all trust deductions (e.g. the taxes it paid).  I cannot get the K-1 Line 14-i to appear with any portion of the 199A dividends I entered.

I can directly edit the K-1 form to produce a line 14-i distribution, but that doesn't seem like the right solution.

The 199A information is in the INT-DIV Wks in forms, but I cannot find the $ amount on any other form.

[Anonymous_]

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@Pepeprwn wrote:

What else should I be checking for?

I have tried distributing more from the trust, changing the 199A value, removing all trust deductions (e.g. the taxes it paid).  I cannot get the K-1 Line 14-i to appear with any portion of the 199A dividends I entered.

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I am not sure what else to suggest (other than contacting Support) because I cannot reproduce the issue.

Irrespective of the permutations, such as removing deductions, changing 199A values, altering distribution amounts and methods (percentages and actual figures), and even changing the trust type (from complex to simple) I still get Line 14 to populate with an "I" and "STMT" and then the amount appears on Schedule A beneath each K-1.

[RRArtie]

I have the same problem no 8995 form is generated which would be the source of data on 1041 line 20 and the K-1 Line 14. I have moused around in the form and it seems the 199A number gets no further than schedule D. There are no numbers carried forward to the QBI worksheets or 8995. TT is dropping the ball. I am considering forcing in overrides in the 8995. I will study how the data flows for the 199a data on the 1040 form. 

[rvhageman]

I have the same problem that REIT income from Schedule K-1(1041) does not flow properly onto the Form 8995.

[RRArtie]

I made a copy of my TT file reentered income and got to the review with no errors. Still no 199A on the K1 Line 14 item I. I then went to the QBI work sheet and put in the 199A number and no 199A on the K1. I am hesitant to force in a number on the K1 because I don't trust that I understand the instructions. Maybe zero is the right answer on the K-1 because of IRS rules that I don't understand. 

For the test case that worked and generated a Line 14 I STMT,  was there other QBI that might have justified doing the statement and forced TT down a path that we are missing?  Anyway, I won't file soon and hope for some kind of an update or closure. 

[Pepeprwn]

I tried a competitor's product.  It properly distributed some of the 199A income to the beneficiary's K-1 (line 14-i).  It also generated a form 8995.  As expected, it was not the full amount (as some of the trust's income stays with the trust to pay real estate taxes).  I will be returning TT Business.

I spent several hours on the phone with various TT support personnel.  All were polite and professional.  Some went further than others to try and solve my problem.  As I understand, TT no longer provides 'tax' support for their Business product, however they do provide software/technical support.  However, it was VERY difficult to consistently get a software support person on the phone, and often I was connected to a CPA or EA who couldn't help me with the Business product.  Most frustratingly this would be after 10-15 min hold time and going through a ground-hog-day like conversation.  There is only one support number, and it seems that the question leading customers to the "get the phone number" form, and the subsequent case number, will determine what kind of support person you will get.  Lastly, some support personnel referred me to the "business and Specialty Tax Line" which was a phone number to the IRS.  That was icing on the cake for me and drove me to a competitor's product.

[RRArtie]

Thank you for that update. I think I used that competitors product last year. I certainly will not use TT Business next year. Will shop for a replacement for TT Business for the 2019 tax filing. They charge a lot of money for a 1041, you would think they could get it right.

[DavidS127]

The issue with REIT 1099A dividends reported on a trust Form 1041 Schedule K-1 is being worked on.  I will update you when the issue has been resolved.

[kl51]

I think there may be 2 issues.  My issue is that the Section 199A dividends for the trust don't appear on the trust K1 under Box 14 code I.  In 2018 they showed up under Box 14 as "I* STMT" and 2 statement pages were included:  1) Schedule K-1 - 199A Supplement (Line 14) and 2) 199A Summary Worksheet.  I believe in 2019 the reporting should be the same.

Since I haven't yet produced the K1 properly, I haven't tried to enter the K! into my personal taxes.  If I am reading the comments properly, this is the 2nd issue with the K1 and the one that is being worked on by TT.