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William Ellis, CPA
William Ellis, CPA, CPA
Category: Tax
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Experience:  Over 15 years of experience in public accounting
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Where to report ordinary and net swap income on tax return?

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My partnership K-1 reports box 11 items, Code F such as other ordinary income, net IRC Sect 475 market-to-market income, net IRC section 988 currency loss, and net swap income. Where do I report these on my tax return?

That information is supposed to be included in the boxes above, as well. You should enter the information in the appropriate boxes as they relate to the K-1 because this is what the IRS will be looking for.

Don't worry about the miscellaneous information.

JACUSTOMER-35tr5vdt- :

Enter in the "appropriate boxes" is already in the instructions, so this isn't the information I'm looking for. The items are entered in box 11, code F as on the K-1, but where else do I enter them on my tax return. For example, Box 5 "Interest Income" is "appropriately" entered on Sch B, line 8a; Box 9a "Net long term capital gains" are "appropriately" entered on Sch D; etc. So where are box 11 "ordinary income, net IRC Sect 475 mark to market income, net IRC sect. 988 currency losses, and net swap income appropriately entered--Sch E? 1040 line 21?; form 4797?, somewhere else?

Code F refers to specific capital transactions. If you are using tax software that allows you to enter the code letter for Box 11, the amounts should properly flow to your Sch D. Otherwise, look at the notes on the following pages to see whether the items are considered long-term or short-term. Net short-term items will be entered on Line 5, and net long-term items will be entered on Line 12 of your Sch D. I apologize for my incomplete answer earlier. At times, I forget that people aren't using software with the same sophistication that I'm accustomed to using.

Customer: replied 7 years ago.

I know where capital gains are entered (with or without software). I'm concerned about ordinary income, net IRC Sect 475 mark to market income, net IRC sect. 988 currency losses, and net swap income from line 11 Code F.

According to the instructions for Form 1065, Sch K-1, pp. 7-8, referring to Line 11, Code F, these specific items are not mentioned. Nearly everything that is mentioned is treated as a capital transaction and handled on Lines 5 and 12 of your Sch D. Read it for your self at If the notes included with your K=1 do not identify which of these should be treated as capital transactions, you should enter the net of these hedging activities on Line 21 of your 1040, subject to SE tax.

Customer: replied 7 years ago.

You are suggesting that I use line 21 of 1040, but I don't understand why it's subject to self employment tax. Wouldn't self employment earnings have been shown in box 14 of the K-1?

Hedging securities under those codes are treated as inventory items. This means that their sale falls within the ordinary activities of the Partnership which makes the income subject to self-employment tax.

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