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qbi for real estate partnership

Level 1

1065 instructions provide codes for partnerships.  For LTD engaged in real estate rental do I input code Z plus AA plus AB.   I know that the regulations allow for trade or business treatment for direct investment (assuming certain tests are met.   But at the partnership level, I do not think that code Z applies.  Rather, I think that the preparer need only input the AA and AB information

  • Box 20, new codes have been added for the qualified business income deduction: code Z, section 199A income; code AA,

section 199A W-2 wages; code AB, section 199A unadjusted basis; code AC, section 199A qualified REIT dividends; code AD, section 199A qualified PTP income


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2 Comments 2
Level 8

Code Z applies, Box 1 or 2 income may not by QBI.  QBI income should be reported.

Level 2

The reporting of QBI, W-2 wages and UBIA for each trade or business by an RPE (relevant passthrough entity) is required by Reg 1.199A-6. Also that regulation says if an item is not reported on the K-1 by the partnership (i.e. Code Z, AA, etc) then the owner's share of each unreported amount is presumed to be zero.

So it seems as if the IRS intends to disallow deductions for QBI on pass-through entity income if the entity doesn't explicitly identify on the K-1 that it there is QBI. A partner won't be allowed to assume income is QBI.