When doing the annualized method - is there a requirement for which quarter(s) the income from pass-thru entities is to be picked-up?
It first blush I'd figure a smooth recognition of the K-1, by using hindsight once the K-1 was in hand. But then, that's not really a fair way to do it. Especially. if say the K-1 is for a year-ended January 31st. For a January 31st year-end pass-thru entity, I think that perhaps the fair thing to do would be to pick up the whole K-1 in the 1st quarter.
Using that same logic of fairness, I'd think that a K-1 with a year- end of December 31st should all be picked up in the 4th quarter. But then, perhaps that isn't fair either, since it is possible that the pass-thru entity earned the income prior to the 4th quarter. But then again, even if the pass-thru income was earned early in the year, the individual taxpayer would not necessarily be privy to that information, so he couldn't make the determination at the time, even if using hindsight after the K-1 was issued.
All I've found so far is IRS Publication 505 that says: "Enter your AGI for the period. This is your gross income, including your share of partnership of S corporation income or loss, for the period..." It doesn't say "your theoretical ratable share of each quarters' earnings as earned during each quarter by the entity." nor does it say "your actual pass-thru share as of the year-end date of the K-1."
Any thoughts ...or any rulings on this issue?