Schedule E - Part 2
What does it mean
The Schedule E - Part 2 is the area of the personal tax return where income from various businesses they own is accumulated. This would include income from some types of LLCs, S-Corps & other entity types. The dollars that show up in this schedule are derived directly from the Schedule K-1 the owner received from each of the entities they have ownership in. The Schedule K-1 show’s this owner’s share of the income (and ultimately their corresponding tax liability).
Why does it matter
Community Banks will routinely lend money to the entities contained within a person’s Schedule E - Part 2. One thing to note is that the income shown in this area DOES NOT mean the owner received this money (in the case of income) nor does it mean they paid in this money (in the case of losses). The money on these schedules only shows their share, not what they actually received. If you would like to see what money they actually received (or contributed), take a look at the Schedule K-1 for that particular company.
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