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Sch K-1 (Form 1065) Part II, I1 and I2, identify entity as IRA/Sep/Keogh. You do not question this and it does not appear on the TurboTax Worksheet. Is this important?

I hold this publicly traded partnership, PowerShares DB US Dollar Index Bearish Fund, in my rollover IRA account.  Yet I am being presently taxed on Other Income (Part III, 11C).  Perhaps this is required for K-1 items in an IRA.  TurboTax does not give me a question that allows me to show that my entity is an IRA.  And it does not appear in the type of entity block on the Turbo Tax worksheet.  This causes me to wonder, did Turbo Tax neglect to ask for information on the K-1 that it needs to know to correctly determine my tax consequences.
  • You don't report transactions within an IRA; The custodian reports net contributions and EOY values to IRS via form 5498, and you get an info copy.
If the amount in box 20 with code "V" is more than $1,000, then it must be reported - but not by you on your tax return, but by the IRA custodian on a 990-T form.  (Most IRA custodians send a letter to IRA owners that hold such an investment notifying them of this).

If you hold a Limited Partnership or LLC in your IRA then any Unrelated Business Income in excess of $1,000 is taxable (even though it is in an IRA). It is not reported on your tax return but on a 990-T form. (The custodian of your IRA is required to file the form for you but you must submit the K-1 form(s) to them - ask the custodian about this).


Unrelated Business Income is reported as code "V" in box 20 on the K-1 form.


Also see pub 598.


  • Both answers help.  Turbo Tax should ask the filer to enter the entity on Part II, I1 and I2, and then alert the filer to the responsibility for reporting.  I will contact the custodian as recommended and then amend my returns as appropriate.  Thank you.
  • The K-1 should have been addressed to your IRA and the custodian of the IRA.   I do not know of any way that TurboTax could know if the K-1 is for you or your IRA.  

    Any general warning on ALL K-1's would probably confuse most taxpayers that do not even have an IRA and only a very few taxpayers that do have an IRA will own a LCC within that IRA - this is very uncommon.  (I know about it because I do have such a holding and get a K-1 every year, but my broker always sends me a letter informing me that I will probably get one and what to do with it.)
  • Turbo Tax could ask the filer if Schedule K-1 (Form 1065), Part II, Questions I1 and I2, information showed IRA/SEP/KEOGH.  If filer answered "Yes" then Turbo Tax would tell filer that he or she does not report this information since Custodian reports it to IRS on Form 5498.  A follow up question would be whether an amount on line 11 or line 20 Part III was $1,000 or greater.  If "Yes" then it appears that a 990 return may be required (Does the taxpayer or custodian do this?).

    My confusion results from the K-1 that shows my name as partner in Part II, F, of the K-1, followed by the name of the IRA as custodian.  This is followed by my residence address.  Part II, Question E, shows the custodian's identifying number, not my SSN.  But, I was not alert enough to conclude from this that the K-1 form I received was an information copy and that I did not need to enter it.  I now need to amend 2009 through 2012 returns to back the incorrectly reported K-1 out.  Not much money involved, but a lot of paperwork that could have been avoided.

    The partnership could have told me this in a transmittal letter.  But they did not.
    Turbo Tax could ask questions on the K-1 entry that may help others avoid my same mistake.  I recommend that Turbo Tax consider helping others avoid my mistake.
  • You ID suggests that you are an attorney, so you would probably know this better than I.   I do not believe that TurboTax, as a IRS registered tax software provider, can legally ask about any tax information that is not required to be included on your Federal tax return (such as ANY information on a K-1 that is NOT required to be filed with your Federal tax return.)

    For example:  Many people have complained about the advertisement that suggests that your tax bill might be reduced by contribution to a Traditional IRA before the filing date, but their income it too high to allow that.  They ask, since TurboTax already KNOWS what their income is, what doesn't TurboTax simply not display the IRA ad.  The answer is: TurboTax is prohibited by law from using ANY information on a persons tax return for ANY other purpose than preparing the tax return.
  • Perhaps you are right.  TurboTax could have helped me merely by cautioning me that I should not enter a Schedule K-1 (Form 1065) with my name and address on it if it disclosed that the partnership entity was an IRA/SEP/KEOGH (Questions I1 and I2 of Part II).  I have been entering K-1 forms since I first used TurboTax.  It never occurred to me that this one was different and should not be entered until I asked the community.  I hope others will avoid making my mistake.  Apparently, what I have received for the past four years was an information copy to me.  The partnership did not tell me.
  • I will suggest that to TurboTax as an enhancement for next year.

    The custodian of my own IRA sends me a letter every year informing me that I hold such a LLC in my own IRA and encloses a self-addressed envelope for me to sent them the K-1 when it arrives.  I had assumed that most folks holding such an investment would be likewise forewarned by the custodian of their IRA.
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