It doesn't?

There is no reason to put a personal residence into a corporation.  And if it was done, it is not a business and I don't see why those should be passed on the to taxpayer.

But *IF* they are allowed, they would be passed through via the K-1.  The corporation DID file a tax return, right?  If not, there are high penalties for late filing.

I think the taxpayer needs to bring this mess to the crazy lawyer that talked him into this.