Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Rental and Schedules K-1

Summary and Exercises

Summary

For those with Advanced certification, the training covered taxpayers who receive Schedule K-1 (Form 1065, Form 1041, or Form 1120S) and report their share of income from interest, dividends (ordinary and qualified), capital gains (net short-term and net long-term), and royalties from partnerships and corporations. Schedule K-1, page 2, lists the appropriate forms and schedules where the taxpayers’ income from these sources should be reported. Only royalties on Schedule K-1 from Form 1065 and Form 1120S are within scope. Volunteers must certify to the Advanced level or above to prepare a Schedule E with entries from Schedule K-1.

For those with Military certification, the training covered rental income and deductible rental expenses are reported on Part I of Schedule E, Supplemental Income and Loss. Volunteers must certify at the Military level to prepare a Schedule E for rental income.

When renting out part of the property, certain expenses must be divided between rental use and personal use; some are reported on Schedule A and some on Schedule E.