Discussion:K-1 from Hedge fund
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| I was reading these posts to confirm how I have been entering these hedge fund K-1s. On the ones I'm getting, it appears you have to enter the amounts on lines 1-10 AND ALSO the items broken out in box 11. It's not either/or, I don't believe. If you add all the regular items shown to the amounts broken out in Box 11 you can reconcile to the partnership's reconciliation of book/versus tax income. At least on the ones I'm getting. So I've been entering BOTH sections as income. One on a passive K-1 and one on a non-passive K-1. I think that's what they are trying to get at in breaking out some items separately. Do you disagree?}} | I was reading these posts to confirm how I have been entering these hedge fund K-1s. On the ones I'm getting, it appears you have to enter the amounts on lines 1-10 AND ALSO the items broken out in box 11. It's not either/or, I don't believe. If you add all the regular items shown to the amounts broken out in Box 11 you can reconcile to the partnership's reconciliation of book/versus tax income. At least on the ones I'm getting. So I've been entering BOTH sections as income. One on a passive K-1 and one on a non-passive K-1. I think that's what they are trying to get at in breaking out some items separately. Do you disagree?}} | ||
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| + | {{ForumReplyPost|UserID=JAD|Date=12 October 2009|Text="One on a passive K-1 and one on a non-passive K-1." | ||
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| + | Careful. I'd bet that's not correct. If the entity is only trading, not investing in trades/businesses, then all of the allocations are non-passive. If you are unsure, contact the firm that prepared the partnership return. The entities that I see that have both specify in supplemental schedules the portion that is non-passive. }} | ||
Revision as of 19:02, 12 October 2009
Discussion Forum Index --> Advanced Tax Questions --> K-1 from Hedge fund
Discussion Forum Index --> Tax Questions --> K-1 from Hedge fund
| 28 July 2009 | |
| I'm looking at a partnership K-1 from a Hedge Fund & am confused (more than usual).
Line 1, Ordinary Business Income shows $40,000. The attachment to the K-1 states that line 1 consists of $60,000 of qualified dividends and $20,000 of non-passive business loss. So, do you all think that I can split out the $60K & get the benefit of the lower tax rate on qualified dividends? Thanks. | |
| 28 July 2009 | |
| Kevinh5 - I think what they're getting at is the Section 469 passive activity issues. As I understand it, an exception to the passive activity loss rules has been carved out for traders.
I checked the client's IRS Wage & Income Transcript & it shows the $40,000 of income from the partnership, so I'll somehow have to make sure I don't trigger a matching problem. | |
| 28 July 2009 | |
| Agree that the trade or business of trading personal property is not a passive activity. | |
RoyDaleOne (talk|edits) said: | 30 July 2009 |
| If reporting deviates from the K-1 reporting what must we do?
And not for nothing qualified dividends, possible could be correctly reported on Line 1. | |
| 22 September 2009 | |
| I am wondering if anybody has experienced the matching discrepency notice CP2501 regarding amounts reported on the face of a hedge fund schedule K-1, which the IRS picks, and the detail amounts reported on the attachments to the schedule K-1 which often the preparers report. For example line 11 of schedule K-1 might report Other Income of $20,000 while the attachment referenced to line 11 might break it down as long-term capital gains $15,000 and short-term capital gains of $5,000. The IRS will be looking for $20,000 of Other Income, while the preparer has reported it as $15,000 of long-term capital gains and $5,000 of short-term capital gains.
I am interested in hearing about your experiences with the IRS trying to resolve such descrepencies. | |
Death&Taxes (talk|edits) said: | 22 September 2009 |
| I've never had a discrepancy notice regarding Line 11. The K-1 instructions even note the number of potential forms that could be involved including 6781 for Code C, 4797 in regard to several items under Code F, Line 21. The sheer complexity at this point probably defeats efforts to reconcile same via a CP2501.
I am completing a client now who owns 31 partnerships offered through his investment banking firm and most contain at least threeo items on Line 11 [Section 987 & 988 gains or losses, various gains that may or may not be from portfolio income, straddles etc.] I use a spreadsheet to list these by partnership, though I hope to efile the return and keep the spreadsheet only for future reference or IRS questioning. If I don't efile this return, his state (PA) requires a copy of each K-1, and each other state that might be involved through these K-1s. | |
| 22 September 2009 | |
| D&T, I used the line 11 Other Income as a simplified example to get my point across. I use spreadsheets in reporting Hedge funds schedule K-1 as well (but do not send it to the IRS) given the volume of information on such K-1s. I have not received CP2501 relating to Hedge fund reporting until now. Therefore, I am trying to see how best I can respond to the CP2501 given the complexity of the reporting of hedge fund schedule K-1.
What would be the agrument(s) against a possible assertion that the taxpayer should report the amounts on the face of the Schedule K-1(i.e. lines 1 thru 20) and not on the attached supporting statements for the hedge funds? | |
| 22 September 2009 | |
| You are not required to use the face amounts on the K-1 if the attachments break it down. Just be sure your computer doesn't do something tricky with the corrected input. The Wage & Income Transcripts I've seen reference lines 1 -11 and 20A, so an increase in lines 1 and 11 is not going to affect it. | |
Death&Taxes (talk|edits) said: | 22 September 2009 |
| There is no way to fireproof the return, but if a CP2501 is sent, you should be able to reconcile the items to the return, showing IRS where the 'bodies are buried,' so to speak. Page Two of the K-1, and the K-1 instructions are the basis for where items are reported. | |
| 11 October 2009 | |
| Hi everyone -
I was reading these posts to confirm how I have been entering these hedge fund K-1s. On the ones I'm getting, it appears you have to enter the amounts on lines 1-10 AND ALSO the items broken out in box 11. It's not either/or, I don't believe. If you add all the regular items shown to the amounts broken out in Box 11 you can reconcile to the partnership's reconciliation of book/versus tax income. At least on the ones I'm getting. So I've been entering BOTH sections as income. One on a passive K-1 and one on a non-passive K-1. I think that's what they are trying to get at in breaking out some items separately. Do you disagree? | |
| 12 October 2009 | |
| "One on a passive K-1 and one on a non-passive K-1."
Careful. I'd bet that's not correct. If the entity is only trading, not investing in trades/businesses, then all of the allocations are non-passive. If you are unsure, contact the firm that prepared the partnership return. The entities that I see that have both specify in supplemental schedules the portion that is non-passive. | |
