(Tables below are in fixed-pitch font, which works fine in Free Agent. If this is a problem for other viewers, I can try posting from a browser.)
The scenario is a publicly-traded partnership (PTP), with carried prior-year loss, and with K1 income in boxes (1 & 10, in this case) which are reportable on different forms/schedules.
In the example in the K1 instructions [1], all the gain goes to Sch E: Sch E 4797 (net)
-------------------- 0 4500 4500 prior-year (carried) loss
8000 0 8000 current-year gain 3500 overall gain (same as above) 0 4500 4500 reported passive loss
4500 0 4500 reported passive income
3500 0 3500 reported non-passive income
Which is straightforward enough.
But, what if that same gain is split between the two forms ...
Sch E 4797 (net)
--------------------- 0 4500 4500 prior-year (carried) loss
7000 1000 8000 current-year gain 3500 overall gain 0 4500 4500 reported passive loss ? ? 4500 reported passive income ? ? 3500 reported non-passive income
This seems like a plausible case, but I don't see anything in the instructions covering it.
My guess, by analogy with (AIUI) how carried losses are allocated [2], is that the overall gain would be allocated between the forms in proportion to their contributions to the current-year gain:
formX NPI = * ---------------- So, ...
Sch E 4797 (net)
--------------------- 0 4500 4500 prior-year (carried) loss
7000 1000 8000 current-year gain 3500 overall gain 0 4500 4500 reported passive loss
3938 562 4500 reported passive income
3063 437 3500 reported non-passive income
But, that's pure speculation. Any thoughts would be appreciated.
[1] "Publicly traded partnerships", K1 Partner's Instructions, p4:
925, p7: