Pass Through Entity Tax - Partner Type Disregarded Entity

[Brian Hansen]

To populate Federal K-1 H2 with disregarded  entity name and TIN, "Disregarded Entity" has to be entered in Screen 7 as Type of Entity and then disregarded entity name and EIN entered in Screen 32.1. along with beneficial owner partner type.  However, if you do this, AZ pass through entity tax will not calculate for that partner even though the beneficial owner is an individual.  To get the AZ pass through entity tax to calculate, Screen 7 has to have "Individual" as the Type of Entity, but then the Fed K-1 will not report the DE information.  Any solution to this??  Seems the software logic needs to look maybe to screen 7 first, but it that is disregarded entity, then maybe the logic needs to go to 32.1 for final determination....

[PhoebeRoberts]

I can't recreate that with a dummy return. Are you on the most recent update?

[Brian Hansen]

Yes, on most recent and spent an hour on phone with Lacerte to no avail.  Reapplying updates to see if that works.

Does your AZ K-1 show "Individual" or "Disregarded Entity" as partner type?  Mine shows Disregarded Entity even though federal shows just as yours....

[Brian Hansen]

Reapplied today's updates, no improvement.  Can you send me screen shot of screen 7 and 32.1??  Trying to see if I've done somthing different somehow...

[PhoebeRoberts · Accepted solution]

AZ K-1 shows Disregarded Entity. I can't find a way to fix that presentation. My AZ 165 Sch D shows R for Resident, not O for Other Entity, at least!

Screen 7:

Screen 32.1 (the rest is empty):

My best guess is that there's some entry you have and I don't, which entry is required to make the return work, that is the problem. That is super hard to troubleshoot, and to fix in a satisfying way.

[Brian Hansen]

Interesting.  I found the fix.  In 32.1, the entry in "Partner type for disregarded entity" I had "Fiduciary" as the DE is an irrev trust that is grantor trust for tax purposes.  Then I had "Individual" in "Beneficial owner partner type"  This populated the Fed K-1 appropriately, but did not allow the AZ PET calculation.  Changed to "Individual" in both and now both K-1s and returns look right and the PET is calculated correctly.  Thank you for your help.  

As a note, it seems to me that the first box should be a note of the type of entity that the DE is and the second the type of entity of the reporting taxpayer (the "Beneficial Owner").  This appears to not be the case, but it seems odd that they would have the same answer twice...  Thoughts???

[PhoebeRoberts]

Woohoo! Glad it worked!

I always figured the existence of two boxes was a vestige of prior-year presentation. There's just layers on top of layers, and you leave them alone unless they break something, because taking them out might break something.