Drake Tax – 1120: K1P Screen Lines 2 and 3 Missing

Because Drake Tax cannot automatically determine how to handle rental real estate income for a corporation from a partnership's Schedule K-1 (K1P screen), lines 2 and 3 are not included on screen K1P. There are many questions the preparer should ask before making a decision as to how the income or loss is reported. Additionally, since Form 8810 is not supported in Drake Tax, there is no place the income to flow if it is determined to be passive.

IRS Instructions for Form 1120 state:

"Enter the gross amount received for the rental of property. Deduct expenses such as repairs, interest, taxes, and depreciation on the proper lines for deductions. A rental activity held by a closely held corporation or a personal service corporation may be subject to the passive activity loss rules."

Use screen INC, line 6 to enter gross rents. Double-click on the entry field to create an OVERFLOW worksheet of income and expenses. The total will carry to line 6; however, the worksheet is not e-filed with the return.

For more information about regulations relating to limitations on passive activity losses and credits for personal service corporations and closely held corporations, see IRC Section 469 and IRS Publication 925.