K-1 and EIC

[Bonnie]

Does income on a K-1 not disqualify the EIC. I was thinking it would be investment income but my program still allows the EIC.

[David1980]

It'll depend on whether the income is passive. See worksheet 1 from publication 596 on page 6. http://www.irs.gov/pub/irs-pdf/p596.pdf

[AccTaxMan]

I agree with David. A determination must be made.

And since it is related to EITC, I would document how the determination is made carefully and in details.

[Bonnie]

Not passive. Have 2 K-1's and both are active participation. One is residential real estate rental property and the other is an Auto Mechanic Shop. Partner is actively involved in both businesses.

[David1980]

Not passive. Have 2 K-1's and both are active participation. One is residential real estate rental property and the other is an Auto Mechanic Shop. Partner is actively involved in both businesses.

How is residential real estate rental not passive? Is the taxpayer a real estate professional that materially participates?

[Bonnie]

The lady who prepares the 1065 and K-1s has always told me it's non-passive income. It is a partnership of 3 individuals and they own about 20 properties and all 3 actively participate in the business in different capacities.