When entering the entity type for a partner in the 1065 partner worksheet, I put one in as "S Corporation". However, it is entered on the K-1 as "Corporation". Since this is a cash basis partnership, which normally can not be cash basis with a Corporation as a partner, ProSeries flags this in the diagnostic. Why can't ProSeries show this as an S Corporation on the K-1 like my other CPA buddies software does?
Per the IRS instructions for Form 1065 (page 22), there is no mention of ?S-Corporation? as an entity type for partners. The instructions simply state to choose ?whether the partner is an individual, a corporation, an estate, a trust, a partnership, a disregarded entity, an exempt organization, or a nominee (custodian).? And based on my understanding, an S-Corporation is just a corporation electing the ?S? status.
I am not sure about the error you are receiving. I have my partnership setup with Cash basis and do not get any errors or diagnostics.
IRS 2007 Form 1065 Instructions: http://www.irs.gov/pub/irs-pdf...
Thanks for the response. The program (on second page of diagnostic) will warn you about a cash basis partnership with a Corporation partner. Seems like there should be no warning when picking an S Corp as entity type. I also think that, in spite of the instructions, if the program printed "S Corporation" as the entity type it would "head off the IRS at the pass" from thinking the Pshp is using a cash basis with a C Corporation partner when in certain cases they should not be doing that.
Minor point maybe, but some of the other programs print S Corporation on the K-1.
