K1 Form 1065 Box 20 with ZZ problem

nowhere in Turbotax. It does not use this info for anything.   there are two basic computations that need be made to determine if losses are allowed and/or whether or not distributions are taxable. (Once these are done then there can be another computation which Turbotax does do if the loss is passive to determine how much can actually be deducted on your 1040). It does not calculate if distributions are taxable. 

 

the two basic computations are tax basis and at-risk (IRC 465). Turbotax does neither (but there is form 6198 for at-risk). These are DIY projects. Some partnerships provide the partner with these calculations.

 

an example you make a capital contribution of $50 to a partnership. before anything else you have $50 of tax basis and $50 is at-risk. But now say your brother, also a partner, guarantees you that he'll reimburse you if you lose more than $20.  Under the tax laws your basis is still $50 but your at-risk is now only $20 so the maximum that would be allowed as a potential deduction is $20.

 

The code and regulations for determining tax basis and at-risk can be complex. 

even schedule L on your K-1 might not reflect your true tax basis.    for example, not reflected in schedule L is qualified nonrecourse financing. this adds to both tax basis and at-risk in a partnership.

technically you're not at-risk for (QNF) but the tax laws say you can count it.

 

here's a thread that goes into more detail of calculating tax basis and at-risk and how they can differ in their tax effect of losses and distributions.

 https://www.dbbllc.com/newsletters/focus-our-tax-e-newsletter/partnership-tax-rules-basis-partnership-liabilities#:~:text=Qualified%20nonrecourse%20financing%20generally%20includes%20financing%20for%20which,or%20that%20is%20borrowed%20from%20a%20%E2%80%9Cqualified%E2%80%9D%20person. 

Thanks so much for your reply.  Seems like I will need an accountant as the link is helpful to pointing out how complex this is.

Thanks again

Henry