1040 – how are these reported ?

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  • August 18, 2015 at 7:20 am #196200
    Ninja20
    Member

    Hi all,

    Can you please tell me how these are reported in 1040 – Description of the lines will be helpful ( eg wages )

    1. S Corp – share of income ? ( part of Self employment income ?- I don’t think so as not subject to SE tax )

    2. Share of Partnership income – general Partner

    3. Share of Partnership income – Limited Partner ( PAL will apply in this case I guess )

    Thanks

Viewing 5 replies - 1 through 5 (of 5 total)
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  • August 18, 2015 at 10:22 am #687513
    spatel15
    Participant

    Pretty sure that's all detailed in individual Schedule K-1's, and summarized in a Schedule E, which flows to calculations of Gross Income, specfically on line17 of the Form-1040.

    K1's are given to each partners/owners I believe from the entities themselves which disaggregate from respective Schedule K's of each entity.

    I think PALs arise from all three actually, even other areas too; but deductions to offset nonpassive income only arise from real estate PALs, in which an individual “actively” or “materially” participates in the activity. Real estate professionals are limited to that deduction as well, unless they “materially” participate in which case it's sorta like their business and you can reduce income by total loss.

    And I believe, losses first offset all passive income, before considering deductibility. So you can't have a real estate passive loss of 25K and deduct that on Form 1040 if you have passive income from some other source.

    August 18, 2015 at 10:27 am #687514
    spatel15
    Participant

    Then add like 1,000 more sub-details to my general response and you've got that topic covered =)

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    Edit:Self Employment is Schedule C btw which sums to the gross income part of 1040. Schedule SE is to determine the tax part of it which sums to the “other tax” portion of the 1040. And inbetween ya got that weird 50% adjustment. This'll probably hurt you more but I think of C as in company(sole) and E for estate(as in real estate…and all other topics that blend with it; plus the E reminds me that only real Estate PALs if any are deductible)

    August 18, 2015 at 10:54 am #687515
    Ninja20
    Member

    Thanks Spatel.. Gives me some clarity

    Yes PAL would apply for case 1 and 2 but I don't think it would when the TP IS A GENERAL PARTNER.

    ( he is actively participating right ? )

    As regards SE, I think guaranteed payments will be subject to SE and part of wages line item and share of income for a general partner is also subject to SE taxes.

    August 18, 2015 at 1:45 pm #687516
    spatel15
    Participant

    General partners, doesn't necessarily imply active participation I don't believe. And I'm sure it doesn't imply material participation which is what you test for when determining passive vs active activities. General vs Limited partner role is more about who's taking more liability. More often than not, since the Gen.Partner is more liable he would want to be more hands-on, but he still has to pass the “material participation test.”

    Each activity of the business is determined to be nonpassive or passive and defined in the General Partner's K-1, whereas for limited partners it's just summed up into one line for passive activities. Investment activities and deductions are individually listed as separate lines for both partners though. Activities are a key item to this whole idea: for our purposes it's just a set of similar(but distinguishable compared to other activities) operations. If half your business is renting and half is like sales, you can't group those together. Same goes for personal property rental and real estate rental. Each of those activities will be determined by the general partner to be active or passive. And in the case of non-real-estate pros, that real estate rental activities will always be passive for the partner, general or not.

    WOWWWW! Major News: FICA and SE Taxes are NOT Income Taxes….sometimes stuff like this totally passes me by.

    So…now to the point that made me spend hours only to come to that conclusion:

    You're totally right about the guaranteed payments though. And more importantly the SE tax on the General Partner's share. They are considered payments for services rendered, i.e. employment, and that's what SE and FICA are taxing: Employment. Just spent so much time confused on that lol. I was like…where do partner's get taxed lol? Kinda like going through all this, it's helping me get the nitty gritty points such as that one lol.

    Also because I'm on R3 and I don't want to move forward with reading =P. Learning through discovery is much better lool. Really need to push on though….9 days till test day…

    August 18, 2015 at 11:17 pm #687517
    Ninja20
    Member

    Thanks Spatel.. you are awesome ! 7 days for me. Goodluck

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