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Lacerte > 04Tax > Partnership > IL > Form IL-1065

Problem

In the 2004 version of Form IL-1065, the state of Illinois removed the line for Section 1231 gains and losses from the computation of unmodified Illinois base income (Part IA of the form). The state has now issued guidance that Section 1231 gains and losses are to be included in Part IA, line 2e, "...other items of income or loss.."

Solution

The following steps should be taken to include Section 1231 gains and losses on Part IA, line 2e:

1. Enter a description and an amount for Section 1231 gains and losses in Screen 22, Other Schedule K items, codes 16 and 116, "Other income: description and amount," with a K-1 code of "F" for "other income (loss)."

2. Process the return, and print Form IL-1065 from the Illinois state return.

3. Remove the entries made in step #1 for Section 1231 gains and losses from Screen 22 so that they do not incorrectly impact the federal return or other state returns.

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