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Level 2

Question

Reporting loss on form 1065

Forum|Forum|1 month ago
June 21, 2026
19 replies
182 views

I invested in a note for property. It was foreclosed on then sold for a total loss. the K-1 I received has beginning capital account $475,160. Other increase -$501,246. Ending capital account -$26,086.

How do I report this loss on my business turbotax 1065 forms?

TurboTax Home & Biz Windows

M-MTax

Level 15

I’ll page a member of this community that is an expert in partnership taxation, @Rick19744

To be clear, however, you are using TurboTax Business to prepare a 1065 and related K-1(s), correct?

Rick19744

Level 13

Just as an FYI, I get the notification, but when clicking on it within TT I get an error. And of course there is no “lounge” equivalent at the moment to ask the moderators or let them know about the issue. New platform glitches.

However, if I click on the “view reply” button it does link to the question. Interesting.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

M-MTax

Level 15

I read the following in a post by rjs re the Lounge:

“From the Community home page or the Discussions page click Groups > The Lounge. (Of course, only Champions will have that option.)”

I don’t have access to it, which is fine by me, but it doesn’t appear as if a moderator has posted to it at this point anyway.

Rick19744

Level 13

Several questions:

My take on the question is you received a completed K-1 and are not preparing the K-1? Correct?
How long have you had this investment? Asking as the presentation of Schedule K-1 Line L changed a few years ago.
Have you maintained your own tax basis in this investment?
Did you receive any cash distributions in the final year? I’m assuming no since you only mentioned the “other increase / decrease line” in Line L.
What was your original capital contribution? Just trying to make sense of the beginning capital account amount.
I’ll address the overall question once the above are addressed.
Is the K-1 marked “final”

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

pvdstuffAuthor

Level 2

My take on the question is you received a completed K-1 and are not preparing the K-1? Correct? That is correct. I received the K-1 for the investment. I am doing the business 1065 to get a K-1 from the business for my personal tax return.
How long have you had this investment? Asking as the presentation of Schedule K-1 Line L changed a few years ago. My initial investment was 12/03/2018 ($250,000). I added to the investment ($50,000) on 06/08/2019. I paid a tax payment ($1,246.64) on 12/03/2020.
Have you maintained your own tax basis in this investment? Yes
Did you receive any cash distributions in the final year? No. I haven’t received any return of principal.
What was your original capital contribution? Just trying to make sense of the beginning capital account amount. See answer to question 2
Is the K-1 marked “final” No. Investor hold small amount to pay final expenses. Expect 2020 to be final K-1.

Thanks, for your held. I appreciate all the help I can get.

Rick19744

Level 13

Comments:

Since I don’t know which lines have what on your Schedule K-1 Part III, it makes it difficult.
Having said that, based on the facts, it appears that you only have $475,160 of at-risk basis.
So that means, you need to limit the loss being reported on the 1065 to that amount. The remaining will be carried over.
You noted that you have maintained your “tax basis” in this investment. What is that amount? It should agree to what is reflected on the K-1; or very close.
From the limited facts in this string, after taking the loss noted above, your tax basis should be zero; as it cannot go below zero. You can have a negative capital account, but not a negative tax basis.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

pvdstuffAuthor

Level 2

Maybe you can help me with both Tax Basis and how to report the loss. Here are all the prior year results from the K-1s:

2022 Line L Beginning $501,246, Ending 501,246

2023 Line L Beginning 501,246, Current Yr Net -17,214, Ending 484,032 Line 1 -20, Line 2 -17,194, Line 20 income 2,996, Expense 20,190

2024 Line L Beginning 481,032, Current Yr -8,872, Ending 475,Income 11,021, Expense 160, Line 1 -23, Line 2 -8,849, Line 20 Income 11,021, Expense 19870

Questions: 1. What is my loss?, How do I report it?, What do I carry over? and how? What is my Tax Basis? and why is it important?

Thanks, I appreciate your help.

Rick19744

Level 13

Responses:

Your 2024 beginning capital account figure of 481,032 doesn’t agree to your ending capital account figure of 484,032. Most likely a typo?
Assuming your 2024 amount is a typo, your ending capital account figure should be 475,160. This ending amount agrees to your original facts amount (reflecting a beginning capital for 2025).
As stated previously, you can only deduct losses to the extent that you have at-risk. Based on the facts provided, your at-risk is 475,160. However, see question 5.
Are you preparing a late 2024 form 1065?
What is reflected on your K-1 Part II line K1 end of the year?
1. Nonrecourse
2. Qualified non recourse financing
3. Recourse

Your tax basis is important as it is the tracking mechanism that determines allowable losses, impact of distributions, etc. The tax basis is your economic investment in the business. As stated previously, your tax basis cannot go below zero since a taxpayer cannot deduct more in losses than what has been contributed. However in the partnership arena it gets complicated when a partner’s share of liabilities is involved. That’s why I asked question 5 above.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

pvdstuffAuthor

Level 2

Yes, I did not proof read my typing very well. 2024 K-1 should read:

2024 Line L Beginning 481,032, Current Yr -8,872, Ending 475,160, Line 1 -23, Line 2 -8,849, Line 20 Code AJ Income 11,021, Expense 19870

2025 Line L Beginning 475,160, Other decrease -501,246 (Adjustment to Capital), Ending Capital -26,086. There are no entries for lines 1-20

I filed my 2024 1065. I am now trying to file my 2025 1065 with the loss. Do I need to Amend my 2024 filing? If so with what changes?

There are no entries in either 2024 or 2025 K-1 for Nonrecourse, Qualified non recourse financing, and Recourse.

With this information, How do I report my loss and how much is it?, Do I have a carry over? If so, how do I report it?

Rick19744

Level 13

Well…………….

Based on the limited facts and your commentary for 2025, it appears that you have no tax implications. This is based on the parens comment (adjustment to capital) and nothing on lines 1-20.

I’m not overly comfortable with the K-1 presentation, but I don’t have any understanding of the current year reduction to capital; was there a valuation adjustment, did the partnership have a book down, etc.

I would recommend you call the partnership, unless there are some notes that came with the K-1 explaining the capital adjustment. Keep in mind, that if nothing is reported on lines 1-20, while the K-1 shows a capital adjustment, this does not impact your outside tax basis based on what I see; albeit limited.

Based on the above reply, 2024 appears to be fine; no amendment necessary.

I wouldn’t recommend filing your 2025 partnership return until you understand the capital adjustment.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.