1041-US: Screen K1 income data is not part of accounting income (FAQ)

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Question

Why is the income entered on Screen K1 not part of accounting income?

Answer

Per the 1997 revision of the Uniform Principal and Income Act (Section 4001), receipt of a Schedule K-1 from a partnership or S Corporation does not create fiduciary accounting income. Distributions are not recorded on the fiduciary's books until the actual distribution is received. Therefore, the amounts you enter on Screen K1-3 in the K1 1065 & 1120S folder in the Cash and marketable securities distributions and the Property distributions fields are included as part of accounting income instead of any income reported on Schedule K-1.

To use amounts entered on Screen K1 in accounting income instead of distributions received, enter X in the Include income reported instead of distributions in accounting income checkbox on Screen Dist in the Allocation folder.

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