Schedule K-1: Section 1411 adjustment amount shown as negative number

Forum|Forum|6 years ago
June 7, 2019
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Hello! My husband settled out his father's estate in 2016 & he's received a Schedule K-1 (form 1041). On line 14, under "other information", the trust officer has Code H, Section 1411 Adjustment and then a negative number ($-2,814). On line 5 of the K-1 is the amount $2,814. (there was no carryover from last yr). When I plug all this information into our return it shows the $2,814 as taxable income. The Trust Officer says he can't advise us on our tax return. Can someone please explain these figures to me?

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Best answer by Anonymous_

" When I plug all this information into our return it shows the $2,814 as taxable income."

That would be the result of the Line 5 income on the K-1 being transferred to Line 17 of your individual income tax return and the fact that the negative number (on Line 14, Code H) is merely an adjustment on Form 8960, Net Investment Income Tax. If you are not subject to the Net Investment Income Tax (NIIT), because your income level is beneath the threshold, you will not even see the NIIT calculation on your income tax return.

The bottom line here is that the $2,814 is taxable income to you while the negative number is not an offset but (potentially) enters into another tax calculation.

Anonymous_Answer

Employee

" When I plug all this information into our return it shows the $2,814 as taxable income."

The bottom line here is that the $2,814 is taxable income to you while the negative number is not an offset but (potentially) enters into another tax calculation.

celticgirl2022Author

Thank you, this helps. We are way below the modified adjusted gross income of 250K, so we wouldn't be subject to the NIIT. If the negative number is not an offset but (potentially) enters into another tax calculation---what tax calculation might you be referring to?