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

Income — Rental and Schedules K-1

Out of Scope

Out of Scope Situations for VITA/TCE

Income reported on Schedule K-1 that is within scope includes:

  • Interest income (Schedule B)
  • Dividend income (Schedule B)
  • Net short-term capital gains and losses (Schedule D)
  • Net long-term capital gains and losses (Schedule D)
  • Tax-exempt interest income (Form 1040, line 8b)
  • Royalty income (Schedule E)

The following are out of scope for this lesson. While this list may not be all inclusive, it is provided for your awareness only.

  • Income (not listed above), deductions, credits, and other items reported on Schedules K-1
  • Royalty income reported on Form 1099-MISC
  • Taxpayers who rent their property at less than fair rental value
  • Rental-related interest expenses other than mortgage interest
  • The actual expense method (auto and travel expense deductions)
  • Casualty loss
  • Completing Form 8582
  • If the answer to question A on Schedule E is yes, indicating the taxpayer has a Form 1099 filing requirement, preparation of the Form 1040 and any related Forms 1099 are out of scope for the VITA/TCE program.