Reporting Section 1202 Gain from Schedule K-1 Line 10H on 1040 Tax Return

[Tax Explorer]

Hi all,

I received a K-1 with Section 1202 gain, which is reported on Line 10H of the K-1. When I input the Line 10H amount on the K-1 Worksheet though, it does not seem like the Section 1202 gain is being taxed on the individual return. I would expect the Section 1202 gain to be subject to 28% tax and 3.8% Net Investment Income Tax (NIIT). How can I get the software to recognize and tax the Line 10H Section 1202 gain reported on the return?

[Terry53029 · Accepted solution]

I believe you have an 1120S K1. You will have to manually enter the amount on schedule B worksheet, and when in the schedule B worksheet double click in any box to get the "capital gain/loss adjustment worksheet the scroll down to find 1202 exclusion amount 

[Tax Explorer]

Thanks for the prompt response! I'll check it out when I get a chance.

[Tax Explorer]

Hi Terry,

Apologies for the late reply. I was able to follow what you did to get the Section 1202 gain on Schedule B. However, ProSeries seems to be calculating the Section 1202 gain by the long-term capital gains tax rate rather than the 28% tax rate. Do you know how to get the Section 1202 gain to be multiplied by the 28% tax rate?

[Tax Explorer]

Figured it out. Please disregard.