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Screen K1-7 - Schedule K-1, 1065/1120S - QBID, Passive, Other, PTP (1040)

Qualified Business Income Deduction

Depending on the entity type, this field defaults as follows.
  • Partnerships
    : By default, self-employment health insurance (SEHI) is included as a deduction for qualified business income (QBI). If you don't want to include the SEHI as a deduction in the QBI calculation, enter a
    2
    .
  • S Corporations
    : By default, self-employment health insurance (SEHI) isn't included as a deduction for qualified business income (QBI). To include SEHI in the calculation of QBI, enter a
    2
    .
To include this trade or business in a grouping for the qualified business deduction under the rules of Regulation Section 199A-4, enter a group number. Use the same code for all the trade or businesses in the same group. UltraTax CS will combine all group members into one calculation. Form 8995-A, Qualified Business Income Deduction, Schedule B – Aggregation of Business Operations is produced only when Form 8995, Qualified Business Income Deduction Simplified Calculation is not used.

Passive Activity Info and Carryovers, Sec 179 Carryover

Enter the aggregation group number in this field to include this K1 activity in a grouping of passive activities. Units with the same aggregation number are reported as 1 item on the statement worksheets for Form 8582. All of the entities in an aggregation must have the same passive code.
Enter a unique group number to include this activity in a Regulation 1.469-4(d)(1) grouping of a rental activity within a trade or business activity. When grouping activities under Reg. 1.469-4(d)(1), don't use a number that has been used in the Aggregation group field.
The entire group is nonpassive for reporting purposes. Each member of the activity must use passive activity code 3, that is nonpassive. Since the group is nonpassive, the group income doesn't report on Form 8582 and isn't considered net investment income for Form 8960 purposes. The income or loss reports on the appropriate forms and schedules used regularly.
Enter the appropriate code applicable to this member of a passive activity aggregation group or Reg. 1.469-4(d)(1) group. The available codes are listed in the fieldview and the following table:
Code
Disclosure
1
New grouping
2
Addition to existing group
3
Regrouping
The code and the aggregation group are used to produce the statement required by Rev. Proc. 2010-13. Under Rev. Proc. 2010-13, you must file written disclosure statements with the tax return for the year in which 2 or more activities are grouped together for the 1st time (essentially serving as the election to group those activities), or for a year in which changes are made to existing groupings, including when a new activity is added to an existing group.
Select the appropriate recharacterization activity code.
Net income from these passive activities will be recharacterized as nonpassive and won't be included in the worksheets of Form 8582, Passive Activity Loss Limitations. Passive activities with net loss will continue to be included as passive and appear in the worksheets on Form 8582. For more information on the recharacterization of passive income, see IRS Publication 925, Passive Activity and At-Risk Rules.
Enter significant participation hours, if applicable, in this field.
  • If significant participation hours are less than 100 for an activity, the application considers the activity passive. It's not considered to be a significant participation activity.
  • If total significant participation activity hours on the return are greater than 100 but less than 500, the overall losses from the SPAs are treated as passive. Overall income from these activities is recharacterized as non-passive.
  • If total significant participation activity hours on the return are over 500, the
    Significant participation hours
     isn't calculated, and the passive or non-passive character of the entity or business isn't determined. You must code the activities' character.
Mark this field to include the income or loss from this activity in the Form 4562 section 179 business income. The calculation of business income for section 179 purposes doesn't include the income from passive activities. The passive activity code must be
2
 for rental real estate with active participation for this option.
Use the attached statement to record details about the elections taken for this Schedule K1 unit. The statement includes the following fields.
  • Description
    : Enter a brief description of the election taken.
  • Tax Year
    : Enter the tax year the election was taken.
  • Effective Period
    : Enter the election’s effective period. Some elections are perpetual, while others only cover the tax year taken.
  • Comments
    : Enter any additional information about the election. For example, enter information about an election that was revoked.
Enter last year's regular and AMT passive loss carryovers for this activity. This information is proforma'd from last year's data, if applicable. If the AMT fields are blank, it's assumed that there are no AMT carryovers. To enter state-related carryover amounts, use the St CO screen, or use the State allocation spreadsheet.
Enter last year's section 179 carryover for this activity. In future years, this information will proforma automatically. To enter state-related section 179 carryover amounts, use the K1-St screen, or select
Allocation
 in the K1-3 screen and use the State allocation spreadsheet.

Publicly Traded Partnership Information & Sales

A typical publicly traded partnership (PTP) usually provides a sales schedule with the information applicable to the sale of partnership units. The following table demonstrates the PTP sales schedule and the entry required.
Partnership K-1 Sales Schedule
Entry
Units Disposed
The K1-7 screen Sales information statement – Units Disposed column
Disposition Date
The K1-7 screen Sales information statement – Disposition Date column
Acquisition Date
The K1-7 screen Purchase history statement – Purchase Date column
Sales Proceeds (from broker statement)
The K1-7 screen Sales information statement – Sales Proceeds column
Original Purchase Amount
Entered previously or currently in the PBasis1 screen as Capital contribution and is contained in the basis calculation
Cumulative Adjustments to Tax Basis
The cumulative allocable share of income, losses, deductions and distribution have been incorporated into the basis calculation
Ordinary gain
The K1-7 screen Sales information statement – Ordinary Gain column
Capital gain or loss
The capital gain or loss is calculated and entered in Form 8949 – Sales and Other Disposition of Assets according to the holding period of the units.
Alternative Minimum Tax (AMT) Adjustment
The capital gain or loss is calculated according to the holding period of the units and entered in the AMT version of Form 8949 – Sales and Other Disposition of Assets, according to the holding period of the units. The difference between the regular tax and the AMT calculation is incorporated into the amounts that transfer to Form 6251, line 2k.

Publicly Traded Partnership Information & Sales

This section will only be available if the
Type of entity
 on screen K1 is 4 = Publicly traded partnership
Enter the date and units purchased for this publicly traded partnership. This information is usually provided in the Ownership Schedule in the Schedule K-1 package issued by the partnership.
This information is used to determine the short-term and long-term capital gains when sale information is entered in the
Sales Information
 field. The units’ purchase amounts have already been entered on the PBasis1 screen as contributions to the partnerships and have become part of the basis of the partnership on the Partner’s Basis Worksheet.
Enter the units disposed, date disposed, sales proceeds and any ordinary gain. This information is usually provided on the Sales Schedule in the Schedule K-1 package issued by the partnership. Don't enter sales information in the capital gain entry on the B&D screen, as this information will report the capital gain as follows.
Form 8949, Page 1, Part I Short-term,
Box B
Short-term capital gain on units held 1 year or less
Form 8949, Page 2, Part II Long-term,
Box E
Long-term capital gain on units held more than 1 year
AMT Form 8949, Page 1, Part I Short-term,
Box B
Short-term capital gain on units held 1 year or less
AMT Form 8949, Page 2, Part II Long-term,
Box E
Long-term capital gain on units held more than 1 year
Form 4797, Part II
Ordinary gains and losses
When there's a divided holding period in the partnership, the rules in IRS Regulation section 1.1223-3(c) (2)(i) – Sale or exchange of a portion of an interest in a partnership are followed. The oldest units are sold 1st to determine the holding period. The cost basis is divided by the total units sold then multiplied by the number of shares sold short-term and long-term for sales with 2 holding periods. A non-submittable statement prints detailing the calculation of the gain.
When the Sales information statement includes ordinary gain amounts, this field is marked automatically.
The taxpayer has reported ordinary income upon the disposition of units in “partnership name” as provided by the Tax Matters Partner. The amount was determined in accordance with Internal Revenue Code Section 751 and the detailed information is available in the offices of the Tax Matters Partner upon request.
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