Form 1041, owning a Partnership Interest

[sharonbret]

My Trust client owns a partnership interest that made a large cash distribution.  Is there a place to show that on the partnership's Sch K-1, that would be Proseries input form K-1, that there was a cash distribution?  I find no input line or input box 

[TaxGuyBill]

The distributions of the Partnership should be in Box 19 of the 1065 K-1.  Is it there?  If not, you may need to contact the person that prepared the Partnership return to clarify why nothing is there.

[sharonbret]

Thank you.  Yes, my issue is not with the Form 1065, Sch K-1, it is with entering the information into the ProSeries partnership input schedule.  For trust accounting income, the income is not the K-1 net income shown on the Partnership K-1 but is instead the distribution under the Uniform Principal and Income Act.  I was hoping to see if Proseries would use the cash distribution as income for TAI and then use net income on the Partnership K-1 for tax income purposes.  I suspect it is a little too complicated for Pro Series.  Just thought I would give it a try.

[TaxGuyBill]

I know that with other things (such as Basis limitations) if Box 1 is not what should be taxed, you need to manually enter Box 1 with the amount of what should be taxed, and manually carry over any excess amounts.

I would GUESS it is the same thing for your situation.  Maybe somebody who is experienced with this situation may come by and offer a better suggestion.

[hedgeslaw · Accepted solution]

In ProSeries desktop, enter the information from the 1065(K-1) you received on the Form 1041's "K-1 Entry Wks-Partnership" form, entering the various income, credit etc, items ... and entering the distributions on line 19, Code A of that worksheet. Now go to page 1 of the 1041 and on line 8, write in "Pass Thru Distribution Income" and the enter that Line 19 distribution amount. That fixes your DNI.

Now go to page 2 for the 1041, and in Sch B, find the smart worksheet after Line 7 entitled "Trust Accounting Income Smart Worksheet and ...". Drop down to the 1st write-in line and enter "Pass Thru Income Adjmt" and enter a negative amount matching the income item(s) reported to you on the 1065(K-1) you received so that the result on Sch B, Line 9 equals the page 8 write-in amount. That fixes your Trust Acctng Income and your required distribution calculation.

If this answers your question, please mark it SOLVED so other can easily find the answer. Thanks