Issues with 1041 information trans. to K-1s for beneficiaries

[Maegan_35]

A trust has oil & gas working interest that is shown on Schedule C, land rent that is shown on Schedule E and royalties that are shown on Schedule E. However, the beneficiaries' K-1s show the net amount for Schedule C (oil & gas working interest), Schedule E (land rent), and Schedule E (royalties) on line 5 (other portfolio and nonbusiness income). I want only the net amount for Schedule E (royalties) to show on line 5 of the K-1s. I want the net amount for Schedule C (oil & gas working interest) to show up on line 6 (ordinary business income) of the K-1s. So far the only way that I have been able to accomplish this is to indicate that the taxpayer "did not materially participate" in the oil & gas working interest on Schedule C, which is incorrect. I want the net amount for Schedule E (land rent) to show on line 7 (net rental real estate income). So far the only way I have been able to accomplish this is to indicate that it is a "non-passive" activity, which again, is incorrect. Am I missing something? Is there a way to get my desired result (i.e. Schedule C working interest to show up on line 6 (ordinary business income) of the beneficiaries' K-1s and Schedule E (land rent) to show up on line 7 (net rental real estate income) of the beneficiaries' K-1s) without making a a ton of overrides in screen 43? 

[PhoebeRoberts]

Asking a second time isn't likely to get you better answers!

I don't have any clients with 1041s, the types of income you describe, and distributions that carry out DNI. That's a pretty specific fact pattern, and none of the regular question-answerers here are likely to have clients with it, either. We are all a bunch of volunteers, and it would take a chunk of time to do up a dummy return, see if I could replicate your situation, and then try to trouble-shoot it. The first week in April doesn't have a lot of chunks of time.

I suggest you either email the file to support and ask them, or override judiciously, or extend the return and see if anyone wants to volunteer in May.

Note that rents of bare land generally do not throw off passive income. See https://www.cohencpa.com/insights/articles/the-tricky-business-of-classifying-income

Note also that material participation isn't relevant for working interests. See https://www.law.cornell.edu/uscode/text/26/469 (specifically 469(c)(4))

[Maegan_35]

I apologize. The first one was my first post and after I made it I realized I should have made the subject line more pointed so that readers would have a better idea of what my question was simply by scrolling through the feed and without having to click on my post directly. I thought re-posting with a more pointed subject line may help me get some feedback. I did not mean to be pushy and meant no harm in it. Good luck with your final few weeks of tax season!  

[PhoebeRoberts]

Not a problem! I hope you can get the 1041 figured out! 🙂