K1 does not make a difference

Forum|Forum|6 years ago
March 18, 2020
1 reply
3 views

Hi,

I have a k-1 from a real statel company of which I own a 30%.

The company main activity is real state rental

The company had losses this year and I received a k1

All my investment is "at risk" and is much greater than the losses

When I enter the K1 information in Turbotax, the summary of my income shows this line (schedule K-1) as "0" and it does not make a difference on my taxes. Since this is a pass through entity should't I see a "loss" equal to the amount in the K1 form?

Thanks

Best answer by DawnC

Not necessarily. Box 2 on Schedule K-1 reports rental income (loss) which is generally considered to be a passive activity. Losses from passive activities can only be used to reduce other passive income (most commonly income reported on Schedule K-1 for partnership and S-Corporation investments). However, there is an exception for rental losses that allow a loss for active participants up to $25,000. This is eliminated if your modified adjusted gross income exceeds $100,000 (or $75,000 if married filing separately), however.

Any unused passive losses carry over to future years to offset future passive income. When your interest in the partnership is sold or disposed of, you can take all losses carried forward in the year of disposition.

Please refer to the link below for more information regarding passive loss limitations specific to rentals.

Passive Activity Limits

DawnCAnswer

Level 15

Not necessarily. Box 2 on Schedule K-1 reports rental income (loss) which is generally considered to be a passive activity. Losses from passive activities can only be used to reduce other passive income (most commonly income reported on Schedule K-1 for partnership and S-Corporation investments). However, there is an exception for rental losses that allow a loss for active participants up to $25,000. This is eliminated if your modified adjusted gross income exceeds $100,000 (or $75,000 if married filing separately), however.

Any unused passive losses carry over to future years to offset future passive income. When your interest in the partnership is sold or disposed of, you can take all losses carried forward in the year of disposition.

Please refer to the link below for more information regarding passive loss limitations specific to rentals.

Passive Activity Limits

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C

convertibledreaming

Level 2

@DawnC ,

I have a -$125,000 loss from a LLC K1, but $72,000 cash income from freelance/property management work I've done. No matter HOW I enter in the cash bank deposits, I'm still getting taxed the full amount. How do I get my K1 to pass through and offset the gains I had in cash? I want to be honest, but it kicks in a $10,200 tax bill if I report the deposits. Why doesn't the extreme loss of my 3 member LLC still show a loss for my TOTAL taxable income?

BTW- The loss in from box 1 on the K1. It's not in relation to rental properties. It's my husband and I doing a VERY SMALL car repair/dealership. The cash that I'd like to report is from our number one customer who ended up having us repair his 3 properties and all vehicles.

I've tried to use "bank statement" to add the amount and choose "freelance" work, but the K1 loss doens't counter balance that. I removed that entry and tried to enter in a "business" in our own name/address in order to create a schedule C, but that didn't offset the K1 loss either.

DawnC

Level 15

K-1 losses have layers of limitations. The basis limitation is a limitation on the amount of losses and deductions that a partner of a partnership can deduct. The basis limits are the first of three limitations that are applied to Schedule K-1 losses and deductions. After the basis limits are applied, the At-risk limits (Form 6198) are applied. If losses are allowed by the basis and at-risk limits, the passive limits (Form 8582) are applied, if applicable. All of these questions can be answered during the K-1 entry process.

You must have a basis in the partnership; you must be at-risk in the business, and you must be an active participant in the business to have your K-1 losses offset other income on your tax return.

@convertibledreaming

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