In the context of a partnership’s Schedule K-1, separately stated items are those that must be reported individually because they can have different tax implications for the partners. Let’s look at the options:
- Option 1: $5,000 long term capital loss – This is a separately stated item because capital losses can offset capital gains for partners and vary in their tax treatment.
- Option 2: $20,000 of section 1245 recapture – This is also separately stated. Section 1245 recapture pertains to depreciation recapture on certain properties and affects how much tax the partner owes on their share of income.
- Option 3: $3,000 charitable contribution – Charitable contributions are typically separately stated too, as they can provide a deduction for the partners depending on their individual tax situations.
- Option 4: $5,000 bond interest – This is generally not a separately stated item. Interest income on bonds is considered ordinary income and gets grouped with other income items on the Schedule K-1.
- Option 5: All are separately stated – This option is not correct since the bond interest is not treated as a separately stated item.
Considering these points, the correct answer is 4) $5,000 bond interest. This item is reported with other income rather than separately.