I am a Pennsylvania tax preparer and have a 1099-R with a distribution code of U. According to the PA Department of Revenue, the manner in which it is reported depends on whether or not the stock in the ESOP has been allocated to the recipient. If it is non-allocated it is reported only on Schedule W-2S; if it is allocated it is also reported on line 1 of Schedule B. In this case the stock has been allocated to the recipient, but Drake software prevents it from being e-filed to PA unless it is reported as being non-allocated and reported only on W-2S. After some back & forth with Drake, they have said that I will need to paper file the return if I wish to report it as dividend income on Schedule B. Though they have yet to provide a detailed explanation, one of their support staff has stated that they do not agree with my interpretation. I am only quoting the Department of Revenue; am I missing something here, or is Drake. Thanks for any help.