Can a beneficiary of an estate take a QBI deduction on rental income?

[jmcdtax]

Can a beneficiary of an estate take a QBI deduction on rental income? The beneficiary receives 1041 K-1 showing $32,000 line 7 net rental real estate income. This is for a multifamily residential property. She has no active participation. Someone obviously has been hired to manage and maintain the property, which would be more than 250 hours. They were probably hired by fiduciary or the decedent before death. The 1041 K-1 includes no information on line 14 code I: Section 199A information.

[New York Enrolled Agent]

The determination of whether an activity qualifies for QBI is made at the entity level. Reg. 1.199A-6 clearly states if the K-1 does not contain the 199A information it is deemed to be zero.

[Rapid Robert]

Someone obviously has been hired to manage and maintain the property, which would be more than 250 hours. They were probably hired by fiduciary or the decedent before death. .

Is that conclusion a result of your due diligence? If audited, would you simply insist it is "obvious" and provide no other evidence?

[jmcdtax]

I quote: "Reg. 1.199A-6 (iii) Failure to report information. If an RPE fails to separately identify or report on the Schedule K-1 (or any attachments thereto) issued to an owner an item described in paragraph (b)(3)(i) of this section, the owner's share (and the share of any upper-tier indirect owner) of each unreported item of positive QBI, W-2 wages, or UBIA of qualified property attributable to trades or businesses engaged in by that RPE will be presumed to be zero."

Could we presume the firm preparing the 1041 and resulting K-1 forgot, or disregarded 199A QBI, or for goodness sake made a mistake? I have found in the past not all K-1s are equal and not all are written in stone. As Robert points out due diligence would require further investigation. However, many firms are reluctant to discuss their potential errors and sometimes they even get nasty. Nonetheless further inquiry would be best. Thank you both for your responses.

[TaxGuyBill]

#1) Find out the facts to determine if it rises to a §162 business. If not, go to #2.
#2) Find out if the Safe Harbor is met. In addition to the hours, there are requirements for recordkeeping.
#3) Have the taxpayer ask the preparer of 1041 about QBI. It doesn't matter if the firm is reluctant or gets nasty. It is the firms responsibility to do a correct tax return, and it is the clients job to ask the firm questions if something does not seem right.
#4) If the firm refuses to amend the 1041 and you/your client feel that QBI should be applied, you may be able to file Form 8082 (?) with the return to point out the errors in the K-1. You may be required to provide details and documentation for why you feel the K-1 is wrong.