How do you enter Subpart F income from 1065-K-1 box 11 code h?

[Tolly]

I entered it in the appropriate spot on the K-1 input screen. It didn't go anywhere in the return. Then you get a diagnostic that tells you to read the partners instructions. All that does is tell the preparer of the K-1 to attach a schedule to the k-1. I suppose I could learn everything about Subpart F, then include it in the return and adjust the basis schedule if necessary. I was hoping someone already knows the answer!

[PhoebeRoberts · Accepted solution]

Yes, "I should figure out what kind of income this is, and the appropriate tax treatment and presentation, because my client is relying on me to competently prepare their return" is the right answer.

My file note says I treat Subpart F income as nonqualified dividends, which is the same tax treatment as any other ordinary portfolio (non-passive) income. I assume it's already been included in the foreign-source information. My note contains no statutory or other authority for either of those conclusions, meaning my answer is no more reliable than any other random person's uncited conclusion!

[abctax55]

"..meaning my answer is no more reliable than any other random person's uncited conclusion!.."

I would be inclined to argue that point  🤣

[PhoebeRoberts]

Auditor: What's this Subpart F income? Why did you call it a dividend?

Hapless preparer: Heck if I know. Some random person on the internet said that was where to put it!

[Tolly]

Thank you! I had already included it as nonqualified dividend income as an entry in the dividend screen. Then in the K-1 screen I increased the basis. I thought about including it as misc. income but then it would not have gone to the 8960. The only description on the K-1 is "Subpart F Income".

I'm not sure why Lacerte has a spot for it in the K-1 input when it doesn't go anywhere. They do give you a diagnostic but the only thing that does is let you know you have more work to do if you hadn't figured that out already.

Thanks again. Always nice to have a second opinion.

[PhoebeRoberts]

I include it with the entity's other dividend income in the K-1 input screen, which avoids the manual adjustment to basis. You lose the ability to specify that it's the Subpart F income, but the only return I have it on has 2 pages of statements listing the dividends already, so you kind of need a map for it regardless.

[Tolly]

I thought about that as well but I had PFIC income and made a QEC election so I had basis adjustments to that K-1 anyway. Most of my clients with PTP"s don't know there getting a K-1 until it comes. The numbers you end up floating through the return are awfully small on most of them even with a $ 25,000 investment. To do it right takes just as much time as if it were a million dollar investment. Very frustrating for me. This one has 19 entities listed on the Form 926 information sheet!

[PhoebeRoberts]

Agreed, worthless beasties.

I really hated PTPs until I had a client with those stupid hedge fund investment partnerships.

Form 926 has a pretty high threshold, says my memory. Even on a million dollar investment you have to be unlucky to have to file.