K-1 line 12S question

[Kea]

Client got a K-1 from First Bancorp of Oklahoma. There is an entry of $266 on line 12S. This does not carry anywhere from the worksheet. The note on the K-1 says that it is "Section 754 Basis Adjustment from Passthrough Entities" & to see Form 1040 instructions for how to handle (gee, that was helpful). Per Tax Almanac you are to report it on Sch E based on how the partnership would handle this. How do I feed this to Schedule E? Do I just reduce the amount on Sch E by the amount in 12S with an overwrite? Or is there a better way to handle this.

The K-1 notes do not indicate if the source is from real estate or business income. (FWIW -- box 1 is $30K and box 2 is $-152)

Thanks

EDIT: OK, I lied. Even though the worksheet says it doesn't carry it to Sch E, it did anyway. Cool!

[michaelmars]

A BASIS adjustment is most likely real estate -its a step up of the basis due to sale or death etc from book value to fmv so additional depr is allowed for that one partner.