What this line means
The combined total of all passive and nonpassive income and loss from every partnership and S corporation listed on line 28. This is the bottom line of Part II — the net result of all your passthrough entity investments after applying basis, at-risk, and passive activity limitations. This amount combines with the totals from Parts I, III, IV, and V on line 40.
Does this apply to you?
- You completed Part II of Schedule E with one or more partnership or S corporation entries
- You need to carry the combined passthrough entity result to the Part V summary
- You have multiple K-1s and need to confirm the total matches all entries
Easy to overlook
K-1 income items beyond Box 1 affect this total Schedule K-1 reports more than ordinary business income in Box 1. Rental income (Box 2), interest income (Box 5), dividend income (Box 6a/6b), royalties (Box 7), net short-term capital gain (Box 8), and net long-term capital gain (Box 9a) are all passed through separately. Some items go on other forms — capital gains go to Schedule D, interest goes to Schedule B. Only the ordinary business income/loss from Box 1 and rental income/loss from Box 2 typically appear on Schedule E. Verify you are not putting all K-1 items on line 32. 1 IRS Schedule E instructions — Line 32
Multiple Schedule E pages must be consolidated If you have more than four partnerships or S corporations, you file additional Schedule E Part II pages. The totals from all pages must be combined on the primary Schedule E. Only the primary page carries line 32 forward to line 40. 2 General filing pattern — K-1 amounts not reconciled to Schedule E
Watch out for this
Including income or loss amounts that were limited by basis or at-risk rules in the total. Only the deductible portions — after applying all limitation rules — go into line 32. If a K-1 shows a $25,000 loss but your basis only supports $10,000, only $10,000 enters the loss column. Using the K-1 face amount without checking limitations overstates the deduction.
Footnotes
-
IRS Schedule E (Form 1040) Instructions, Line 32. https://www.irs.gov/instructions/i1040se ↩
-
IRS Schedule E (Form 1040) Instructions, Additional Pages. https://www.irs.gov/instructions/i1040se ↩