# Question about Schedule K-1



## Carmonli (Jul 1, 2014)

My husband (a non-US person) is considering investing in a real estate development project in the US. The accountant for the project told him that they fill out a K-1 form for each of the investors.

My question is this: currently, I (the US citizen) file my 1040 as married, filing separately. My husband doesn't file anything. As I understand it, this Schedule K-1 is filed by the developer each year until the property is sold. At that point, he is told he will need to fill out a 1040 (or should it be 1040-NR?) and pay taxes on the gain.

At the point where he would need to file - is this a one-time deal? Or would he be opening himself up to the whole can of worms? Would he have to include Form 8938 and fill out an FBAR as well?

This is a whole new area for me - any advice is greatly appreciated!


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## Bevdeforges (Nov 16, 2007)

As long as your husband isn't personally subject to US taxation, and you continue to file as married, filing separately, his only US tax filing obligation would be for a 1040NR when he realizes income from the US - and then, only on his US source income. 

I don't know how they do capital gains, but some "financial companies" simply withhold the relevant taxes for all amount remitted to foreigners, and if they've done that, he may not even need to file a 1040NR.


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## Carmonli (Jul 1, 2014)

Thanks for your quick reply. It really puts my mind at ease.


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## SoCal85 (Jan 14, 2019)

I agree with above, file as married filing separate for yourself and as nonresident for your husband (1040NR). A nonresident only has a filing requirement if he earns US effectively connected income (ECI). A real estate project based in the US will generally give rise to this type of income. Along with the K-1 the partnership should also be providing a Form 8805 if there is net ECI subject to withholding tax. 

Also depending on the state where the project is, he may also have a state filing requirement and state taxes due.

Typically real estate development projects run at losses for multiple years until exit when the underlying property is sold. Depending on the amount of the loss, he may want to file tax returns each year so he can claim the losses in the future.

Only US persons are required to file FBAR, 8938 etc. so no need to worry about that.


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