Final K-1 loss

[gnorby]

I have been invested passively in an LLC since 2017.  My initial investment was $50K.  I have accumulated an $83K income loss on my K-1 that has been carried forward through 2024.  The business is being liquidated in 2025 with a negative equity on the balance sheet.  Assuming no additional income gain or loss on my final K-1, Turbo tax is showing that I will realize an $83K (income carryover) loss AND a $50K capital loss since I have not been repaid any of my investment and the business effectively has no value (basis is $50K and $0 sales price or value).   Is this correct?  If not, please explain what losses I can claim.  

[RobertB4444]

You have two types of losses here - passive loss and an active investment loss.  The passive loss has carried forward and accumulated for the life of the investment but can never exceed what you actually have invested in the LLC.  In other words, you can't lose what you have not invested.  

Your basis in the investment should be $50,000 unless there was some other contribution into the business made on your behalf.  The maximum loss that you can deduct is the amount that you have invested in the company.  That's the actual amount that you lost.  If there were other contributions made on your behalf into the company then those would increase your basis or investment in the company and increase the amount that you lost.  Otherwise, your maximum loss deduction for the year is your initial investment or $50,000.

@gnorby 

[Mike9241]

Not sure what you mean by income loss. You either have net income or a net loss. The K-1 should be checked final

For capital loss purposes, your basis was the original $50k (I assume no distributions) reduced by the net losses each year. (Your K-1 schedule L, if completed, should show a negative $33K). Your cumulative losses exceed what you invested, and that indicates you were not at-risk for the excess so that portion is not deductible. For your 2025 return, you should get an ordinary loss deduction of $50K (the suspended losses reduce by the amount not at-risk). You must go through the disposal section and indicate sold for $0 with a basis of $0.  There is no way you get a $133K loss when you only put in $50K. 

https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf  - make sure to read the at-risk section

you can use the worksheet in the 1065 instructions to figure your basis. However, be warned that the 1st line is your basis on 12/31/2024, with a warning that it says- Not less than zero. Normally if schedule L is completed, it would be what's showing at the beginning of the year + your share of liabilities. With termination, your share of liabilities at the end of the year should be zero.