My Schedule E Part V line 41 shows a loss of $9,859. But Form 4797 Part I line 2(g) shows a gain of $9,859 instead (Description: "From K-1"). Why?

[lrambabu1]

This amount is a net of gains/losses from Schedule Part 1 and Part II. Why is this net loss shown as a net gain instead in Form 4797?

[Mike9241]

what does 2a of form 4797 say? on what line on schedule E does the loss originate?

you could be subject to Passive loss limitation. see form 8582. it's possible that due to PAL the loss allowed on schedule E. is limited to the gain on the 4797.  the 4797 gain should flow to schedule D line 11

[lrambabu1]

> what does 2a of form 4797 say?

It says "From K-1".

> on what line on schedule E does the loss originate?

Lines 21 and 32.

> you could be subject to Passive loss limitation. see form 8582.

Yes on p1 of 8582 I have a PAL of $69,958 (Part I line 3).  Allowed losses (Part III line 11) are $10,380.

> the 4797 gain should flow to schedule D line 11

Yes it did, and to Form 1040 line 7

[Mike9241]

we can't see your return or k-1.  you most likely were subject to Passive Activity loss limitation.    if you are a passive partner or shareholder the ordinary passive loss (lines 1,2 or 3) shown on the k-1 including any carryover can't exceed current year passive income. 

the other possibility is that the K-1 is from a publicly traded partnership (BOX D is checked on the k-1). in this case regardless of your adjusted gross income the passive activity rules apply. deductible passive losses can't exceed passive income items. There will be no 8582 because each PTP stands on its own regarding this rule.

when passive loss limitation rules apply in full at best you end up with a net of zero. thus, like in your case, the ordinary loss on schedule E which flows to schedule 1 line 5 is offset by an equal amount of capital gain form 1040 line 7. 

[lrambabu1]

> we can't see your return or k-1

I would be glad to share those with you.

> the ordinary loss on schedule E which flows to schedule 1 line 5 is offset by an equal amount of capital gain form 1040 line 7. 

So this gain that is shown on Form 4797 2(g) is just a made up number, to offset my allowed net loss number on Schedule E, $9,859, because I have too much PAL?

[Mike9241]

the gain reduced by any prior suspended losses of the same nature determines the allowable loss assuming you have no other passive activities. 

this is a public forum so any info you forward should omit names and tax ID numbers

as starters

a picture of the following

k-1 and if any supporting schedules 

form 4797

form 8582 and worksheets if present.

the amount of any carryforward losses from 2022 and their nature for the partnership/s-corp.

because PAL can get complicated additional info may be required  

[lrambabu1]

Attaching the forms that you asked for:

I am truly appreciating your help.

[Mike9241]

maybe i misunderstood but i thought you only had 1 k-1.  evidently you have multiple k-1s. all are passive and apparently none with active participation. in this case from passive losses are only allowed to the extent of the total of all items of passive income from the k-1s.  is it possible the 1231 gains are coming from any of the other ones?  If not, I have no idea where the 4797 amount comes from. also the 8582 does not make sense. the k-1 you presented shows a loss of 812 on line 1 but i don't see this number in the current year loss column for any of the items in part V (including the supplemental detail for that $50K+ loss) and I can't say why. I can't if it's Turbotax  doing something wrong or NOT or you entered something incorrectly or NOT.  I haven't seen OPs posting about Turbptax errors in reporting passive items.   also from the 8582 some losses allowed are reported on schedule E page 1 (the allowed portion of rental losses) while the allowed portion of business losses are appearing on schedule E page 2

If you are concerned that Turbotax is doing something incorrectly, with multiple k-1s you need to consult a pro that can look at everything including your 2022 return.