Taxes

[Rhoder19]

In 1040 program, how do i enter section 1202 gain reported on K-1 from a partnership?

[PATAX]

I think that would be on the K-1 worksheet , maybe on the other income line, not sure as I am not in my office now, just off the top of my head.. Just my opinion

[Rhoder19]

Gain should be 100% excludable.  Definitely don't want to show it as other income.

[PATAX]

You are right... I think that is just the line that it goes on but the code that is used will exclude it from income...

[Rhoder19]

I don't see a code on line 11 of the Sch K-1 Wks that corresponds to 1202 gain, plus there needs to be more information because there are different exclusion percentages based on the acquisition date of the stock that was sold.

[Terry53029]

It will be reported on line 11 code I (other income/loss). here are the irs instructions, and link:

https://www.irs.gov/instructions/i1065sk1

"

• Gain from the sale or exchange of qualified small business (QSB) stock (as defined in the Instructions for Schedule D (Form 1065)) that is eligible for a section 1202 exclusion. The partnership should also give you (a) the name of the corporation that issued the QSB stock, (b) your share of the partnership's adjusted basis and sales price of the QSB stock, and (c) the dates the QSB stock was bought and sold. Corporate partners are not eligible for the section 1202 exclusion. The following additional limitations apply at the partner level.

  1. You must have held an interest in the partnership when the partnership acquired the QSB stock and at all times thereafter until the partnership disposed of the QSB stock.

  2. Your share of the eligible section 1202 gain cannot exceed the amount that would have been allocated to you based on your interest in the partnership at the time the QSB stock was acquired.

  See the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949 for details on how to report the gain and the amount of the allowable exclusion.

[Rhoder19]

Maybe I need to clarify my situation.  The total capital gain has been reported in box 9a, which is the first problem, because if I just enter this in the software it will all get reported and taxed as long term capital gain.  The information pertaining to the section 1202 gain (which is included in the amount in box 9a) is reported on the K-1 as a footnote on an additional page, not on any particular box on the front page of the K-1.  Nothing is being reported on the K-1 in box 11.  I know where everything is supposed to be reported, but where in ProSeries do I enter things to get them to flow to the right place?

[Terry53029]

Sounds like the partnership did not do the K1 per IRS instructions. ProSeries does not flow every line of the K1 to the 1040 form it belongs, but there will be an "*" letting you know which ones you have to do manually. If the 1202 gain was included in 9a (incorrectly) then you have to put only LT capital gain in box 9a, and I would fill out the supporting statement showing the 1202 taken out. Then you need to fill  out schedule D, and 8949 for the 1202.

[SP5]

The problem seems to be that, in ProSeries, one cannot set up a Sch D entry that has a negative number in column (h) (or zero as the "proceeds/sale price"). E.g., I have a K-1 that shows 100 of long-term capital gains on line 9a, and the supplemental info says 15 of those 100 are eligible for Sec 1202 exclusion. I believe the correct presentation is that line 12 of Schedule D shows 100 (the full amount of capital gains reported on line 9a of the K-1), and there is an entry on Form 8949/line 10 of Schedule D that shows zeroes in columns (d) and (e), "Q" in column (f), and -15 in columns (g) and (h).  I cannot find a way to accomplish that result.  The best I can do is back out the 15 and report only the net 85 in the K-1 screen (so that it populates 85 in line 12 of Schedule D), and then create an entry under "Dispositions" that shows proceeds of 15 in column (d), "Q" in column (f), -15 in column (g), and zero in column (h).  It is a "nothing" entry in that it nets to zero, but perhaps it gives a clue to the IRS as to why line 12 shows a net 85, rather than the 100 that appeared in the K-1.  Has anyone found a better way to address this issue within the constraints of the program?

[Terry53029]

You enter the 1202 exclusion on the 1099B worksheet. Go to any box on the quick entry table and double click. You then scroll down to part III Specific adjustments, and fill out the QSB info.

[SP5]

How do you get the -15 into columns (g) and (h) using that worksheet? I have not been able to do it.

[Terry53029]

@SP5 You should ask a new question not in the middle of a discussion on a particular subject, so some one will know what you are having an issue with. and better help you

[SP5]

Thanks. Since I was having the same issue as the original poster, I intended just to add an example to further clarify/respond to the original question.  That said, I did subsequently create my own question.  Please see: Re: How to Back out Section 1202 gain that is included in line 9a of Partnership K-1

If you have any better workaround than the one stated in the link above, I would appreciate any insight you might have! Thanks again.

[Terry53029]

@SP5 I see you use ProConnect. I use ProSeries, and not familiar with ProConnect, sorry.