Schedule K-1 question - partners identifying number is the investment company

[triciatax]

Hi, my client received a schedule K-1 form 1065. The partner's identifying number is the investment company and not my client's social security number. However, my clients name is listed under the partnership name as the FBO. So it is the investment company's name and then says FBO client.
Does this need to be included on my clients tax return?
Thank you.

[Koss]

Who is the partner?

You might be dealing with a K-1 that contains an error. But that's pretty unlikely.

You'll need to ask your client a couple of questions about the "investment company."

My guess is that what you are referring to as the "investment company" is a company that is serving as a trustee, or custodian, for your client's IRA, or some other type of retirement plan, such as a SEP, or a 401(k), or a Defined Benefit Plan.

If that is the case, then the answer to your question is no. The retirement plan itself is required to file its own tax return, and that return is filed by the custodian--not by the taxpayer.

Earnings, profits or other income that is generated by an investment that is inside a tax-deferred retirement plan is not reported on Form 1040. You are probably dealing with something that is similar to dividends, or interest, or even capital gain from the sale of stock, within an IRA account. It has no impact on the individual tax return.

Like I said, you should ask your client for little more information, as in, What is this thing? Is this partnership an investment inside your retirement account?

I am making an educated guess based on the abbreviation FBO, which means for the benefit of. That suggests that the "investment company" is managing the taxpayer's retirement account.

But it could be something else, such as a revocable living trust. You gotta get a little more info.

BMK

[Burke]

Hi, my client received a schedule K-1 form 1065. The partner's identifying number is the investment company and not my client's social security number. However, my clients name is listed under the partnership name as the FBO. So it is the investment company's name and then says FBO client.
Does this need to be included on my clients tax return?
Thank you.

It's probably in the guy's IRA. Check into that. It does not go on the TP return. If UBTI from all IRA K-1's is in excess of $1K, the custodian for the IRA needs it to pay any tax.

[triciatax]

Thanks for your help

hi, thanks for replying to my message. I was thinking this was not taxable to my client. It is part of their investments, so I though the investment company would be responsible, but I wanted to make sure that this was the correct way to handle it.
Thank you.