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Passive & Non-Passive activities on same K-1

Calneva
Level 3

Is there a preferred way to enter passive & non-passive activities appearing on a single K-1 ?  For example Line 1 Ordinary business income(loss) is non-passive and Line 2 Net Rental Real Estate income(loss) is passive.  If box is checked as Not a Passive Activity line flows through as non-passive but line 2 also comes through the same way.  If the box is not checked Line 1 and Line 2 are netted together and treated as passive.  Do we need to use the "Separately Stated Income & Deductions" input line ?

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Jack4
Employee
Employee

Hello, Calneva. If you have a K-1 with both passive and non-passive items (box 1 and box 2), we recommend creating two separate activities. One for passive items and the other for non-passive for the same K-1. This will keep the K-1 separate for the different categories of income.

 

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PATAX
Level 11

Maybe try splitting it up on two separate K1 worksheets and see if that works...

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Calneva
Level 3

Yes have done that in the past but with need to track basis you can't really input the same basis on two separate K-1 inputs or at least there's no way to parse out the basis shown on the single K-1 between two K-1 inputs.  Don't really think that works.

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Jack4
Employee
Employee

Hi, Calneva. You are correct about the basis. We recommend making basis entries on one of the K-1 activities to match the other. In other words, use Other increases/decreases on the K-1 screen so that the basis properly reflects the increases/decreases. Then the other K-1 will show blank.

 

 

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Jack4
Employee
Employee

Hello, Calneva. If you have a K-1 with both passive and non-passive items (box 1 and box 2), we recommend creating two separate activities. One for passive items and the other for non-passive for the same K-1. This will keep the K-1 separate for the different categories of income.

 

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Calneva
Level 3

Yes but how do you properly show the basis provided on the single K-1 when inputting to two separate K-1  inputs in Lacerte ?

 

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Jack4
Employee
Employee

On the K-1 screen under the Basis Limitation section, use the other increases/decreases fields to properly reflect the other activity information. Only do this on one K-1 activity, so that you don't have two different basis schedules for one K-1.

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Calneva
Level 3

OK would I use the check box to indicate the K-1 as non-passive also ?

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Calneva
Level 3

Seems would have to leave it unmarked (leave as passive) and then use the separately stated income input for the non-passive line 1.

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Jack4
Employee
Employee

Hi, Calneva. Yes, you can leave it unmarked and enter the non-passive item in separately stated items. Just be aware this will report the non-passive item as a separate item, and not ordinary income.

Hope that helps!

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Calneva
Level 3

Yes, I know and don't like the presentation on the K-1 worksheet but seems like the only way to go and is the best compromise.

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Birmingham
Level 2

What about using the separately stated income and deduction lines. Using separate K-1s can cause basis headaches, true?

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Calneva
Level 3

Don't like the presentation on the K-1 Reconciliation worksheet but it's less bad because you at least have the single basis on single input.

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