K-1 Issued by 1065 Partnership

[Bonnie]

I have a taxpayer with a K-1 that was issued by a 1065. This is my first time dealing with this and I want to make sure I do it correctly so asking for help.

Entries on lines:

1 9,965
2 -7,741
14A 9965
14C 23,829
18C 161
19A 7,225

Taxpayer also has mileage for this business. They are investing in Real Estate, rental properties and buying and selling some houses. I have been told several different ways to handle his personal expense of the mileage so would like your opinions. From what I have read, the 7225 for distributions does not seem to be taxable. And my program does not carry the 23,829 anywhere that I can tell. I think the 161 on line 18c is for meals. Can he use that as a personal expense along with the mileage?
Can anyone help me understand where all this ends up on the Sch E or 1040.

[Burke]

Your software should have the K-1 input in it for Form 1065 so the tax return can process it. It should also have the "codes sheet" which details where all this goes. If not, go onto Google and input "K-1 Form" and print out the page 2 codes sheet.

[Gretel]

If you can take business expenses paid for with personal funds depends on the Partnership Agreement.

[Bonnie]

If you can take business expenses paid for with personal funds depends on the Partnership Agreement.

Yes, I do understand this but am trying to figure out where this goes on the tax return. One person told me to do a 2106. I have also found information that this goes on Sch E part II (h), trying to determine if I in fact do need the 2106 to support what is on the Sch E. I can't seem to figure out how this flows. Putting it on a 2106 sends it to the Sch A which does not seem right so I'm thinking this was bad information but it came from the CPA who prepared the K-1s.

Thanks for any help

[Burke]

I have a taxpayer with a K-1 that was issued by a 1065. This is my first time dealing with this and I want to make sure I do it correctly so asking for help.
I think the 161 on line 18c is for meals. Can he use that as a personal expense along with the mileage?.

To answer your question about the meals on 18c, no. That is the one-half of the meals non-deductible by the partnership. So he cannot take it elsewhere if that is actually what it is. And no, the $7,225 distribution is not taxable, just used to calculate basis. He has $9,965 of ord income subj to SE tax and a $7,741 rental loss that he may or may not be able to take depending on other factors. See 8582.

[Lion]

Upe

If the partnership agreement states your client is expected to use his own transportation and will not be reimbursed, he has unreimbursed partnership expenses. They go on Schedule E page 2 just like the items off the K-1. How to feed it there is software specific. You might create a second K-1 input with the same EIN but labeled X Partnership UPE and use that to input mileage. He is not an employee so does not report on 2106 (that could be an employee/shareholder in an S-corp). Definitely have the codes, usually page 2 of the K-1, in front of you. Your software should handle most of the heavy lifting, so read your software manual or help screens for Partnership K-1 input.

[taxxcpa]

Upe

Drake has a place just below line 20 of the K-1 input for Unreimbursed Partnership Expense which flows to schedule E, page 2. The instructions for Schedule E also explain that you should enter it as UPE to be deducted from taxable partnership income. It also reduces self-employment tax if it is for a general partner.