anyone completed K-3 input for 1120-S?

[riggscpa]

I have K-3 for 1120-S but do not see any input areas in 1040 module to enter this information. Has anyone dealt with this?

Ron

[itonewbie]

You may refer to this article for detailed instructions:

https://proconnect.intuit.com/support/en-us/help-article/partnership/generate-k-2-k-3-proconnect/L10...

[riggscpa]

I mis-stated my question. I'm trying to determine if an individual owner of a US S corp which owns a UK disregarded entity must file form 8858. The S corp prepared a form 8858 and submitted this form along with K3 to individual (<1% owner) owner of S corp.

[itonewbie]

The S corp would be the tax owner but not its individual shareholder.

[riggscpa]

I agree with that but the S corp has completed and attached to K-1 form 8858 as if the shareholder has to file as well. When you look at 8858 instructions item 2 under "Who must file" confusingly states "A U.S. person that directly (or indirectly through a tier of FDEs or partnerships) is a tax owner of an FDE or operates an FB." Why did S corp provide 8858?  Is filing a form 8858 a better answer given the severe penalties for not filing? Any downside to filing?

[itonewbie · Accepted solution]

It's not clear why the S Corp would attach F.8858 to the K-1.  In general, there is no requirement to attach F.8858 to K-1, K-2, or K-3 to be provided to shareholders.

Direct and indirect ownership for purposes of F.8858 reporting is determined based on attribution rules from §958(a).  Indirect ownership attribution, however, generally stops with the first US person in the ownership chain, S Corp in this case, pursuant to §1.958-1(b).

If you refer to item 6 under "Who must file", you will see that the following [emphasis added]:

A U.S. corporation (other than a RIC, a REIT, or an S corporation) that is a partner in a U.S. partnership, which is required to file a Form 8858 because the U.S. partnership is the tax owner of an FDE or an FB. Even though the U.S. corporation is not the tax owner of the FDE and/or the FB, the U.S. corporation must complete the entire Form 8858, including lines 1 and 2 of the identifying information section and report its distributive share of the items on lines 10 through 13 of Schedule G for each FDE and FB of the U.S. partnership. The U.S. partnership must furnish all information necessary to the U.S. corporate partner for the partner to complete the entire Form 8858.

If the intention is to treat USC as an indirect tax owner, there would have been no need to explicitly impose a filing requirement on USC and highlight that USC would be required to file even though it is not a tax owner of the FDE/FB.

IMHO, filing the F.8858 with all its full glory with a 1040 will just create unnecessary confusion.  This being an engagement you are personally responsible for, you would be right to raise questions and do more research before deciding how you may like to proceed.

[riggscpa]

I very much appreciate your thoughtful reply.  Seems to me the key is the attribution rules you mentioned under 958(a) and I will give more consideration to whether to file 8858 for my individual client since he should not be required to file given that the S corp has already filed. Again, thanks for your help.