Have a customer who would qualify for EIC except for income on a K-1. Box 1 of the K-1 shows (3132), box 2 shows 2761 and then there is interest income of 602 in box 5. When this all transfers to the 1040, It actually shows a loss on line 17 but the taxpayer is disqualified for EIC because the 2761 in box 2 combined with the 602 in box 5 is more than 3100. Just running this by the message board to make sure this is correct. I know this is an odd scenerio as not many who qualify for EIC would have this type of income. Taxpayer is a builder whose business has not done well lately because of economy so his income is very low. The K-1 is an outside business partnership that has nothing to do with his personal business on Sch C. I haven't dealt a lot with K-1s so just want to make sure this is being handled correctly.
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Ah yep. that's about the size of it.
I remember first time I came across it 15 years ago maybe. The couple had low income but rental income from properties inherited from mother. Needless to say, they were miffed when for the first time they didn't get the EIc.
Perhaps he didn't believe me, for they didn't return the next year.ChEAr$,
Harlan Lunsford, EA n LA
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