K-1 from a Cooperative

[Rosario - CSLP]

Hi ProSeries family,

Does anyone have an insight about this find of return?  A have a client who is a member of a cooperative and she got a K-1 (form 1065).  She is a limited partner and her Part III Partner's share is the following:

Box 1. Ordinary Business Income $3,002

Box 4a. Guaranteed Pymts $22,166. (this is also the Total Guaranteed - Box 4c)

Box 14. Self Employment Earnings    A.$25,168.   B.$22,160

Since she is not self-employed but a member of a cooperative, is she able to make deductions?  Since she has self-employment earning, can she fill out a Schedule C? If not, and if she can enter deductions,  where would she?

I appreciate any help on this.

Rosario

[IRonMaN]

Take the numbers provided and enter them on the K-1 worksheet in the client's 1040.

[jeffmcpa2010 · Accepted solution]

If she has expenses she paid personally on behalf of the partnership (cooperative- whatever it is called) that will not be reimbursed, on the Schedule K-1, under line 20Z there is a quickzooom to enter unreimbursed partnership expenses (UPE) where they can be entered and deducted.

[Rosario - CSLP]

Thank you, JeffmCPA2010.  I do see the 20Z worksheet and, of course, it does not look at all like an Sch. C.  Can the client deduct home office, internet, and mileage, etc. similarly to a Sch C?

Thanks so much for your time.

[BobKamman]

Cooperatives can be an apartment building in New York City or a collection of silos in Iowa.  Tell us what is really going on here.  And don't assume the K-1 is correct.  Paying Social Security tax when not eligible for benefits based on real work, is just as illegal as tax evasion. 

[Rosario - CSLP]

Hi BobKamman,

It is a cooperative of people that offer similar services.  This one is more admin; I have seen other for interpreters. The cooperative gets contracted by other organizations.  That is why this k-1 shows self-employment income.

Thanks for your help.

[BobKamman]

If she is offering services, it sounds like self employment and it should find its way to Line 2 of Schedule SE.

[Rosario - CSLP]

Hey Bob,

Thanks for the info.  I believe I cannot mix k-1 income (even when self-employment is involved) with Sch C. How then do I deduct home office for this individual?

Thanks!

Rosario