Entering Partnership Expenses

[msindc1]

Folks:

For a real estate partnership return I have entered income and expenses in Screen 17 and depreciation from the depreciation button on that screen.  I have three problems/questions!

First, the 1065 reflects the gross income but does not include any deductions for expenses.

Second, all income and expense show up on Partner 1's K-1 and none on Partner 2's K-1.

Third, on Partner 1's K-1 the gross business income is reported as self-employment earnings even though it is passive.

Is this stuff correct?

Micah

[StknCPA · Accepted solution]

You probably have several keypunch errors.

None of the rental figures should show up on page 1 of Form 1065. Rental income and expense goes to the rental form (Form 8825), and the net rental passes to Schedule K. It does not appear on page 1 of the 1065.

If the gross income is on Form 1065, is there any chance you have the gross rental income entered on Form 10 instead of Form 17? It should only be on Form 17. (This may also be why gross is showing up as SE income.)

Then, check on Schedule K to see if the net rental income is showing up there.

As for allocating the income to the partners, have you completed Form 8?

On Form 17, there are checkboxes in the General Information section. One is that the property is not a passive activity, and another is include income/loss in self-employment income. These are not checked, are they?

I have to just guess since I cannot see your input, but hopefully these are good guesses.

[msindc1]

Thank you so much for your clear and detailed explanation.

If the gross income is on Form 1065, is there any chance you have the gross rental income entered on Form 10 instead of Form 17? It should only be on Form 17. (This may also be why gross is showing up as SE income.)

-->>> Yes, I had gross income on both Screen 10 and Screen 17.  Whoops.

Then, check on Schedule K to see if the net rental income is showing up there.

-->>> Yes, the net rental real estate income is on K-1 Box 2.

As for allocating the income to the partners, have you completed Screen 8?

-->>> Yes, sort of.  I did not fill in the ENDING numbers for some reason.  With both in there, it allocates among the partners.

On Form 17, there are checkboxes in the General Information section. One is that the property is not a passive activity, and another is include income/loss in self-employment income. These are not checked, are they?

-->>> No--but nor is it showing up as self-employment earnings anymore!

THANKS SO MUCH!

Micah