Thomas,
Thank you for your timely reply. As I stated in the background to my question, the passive activity loss was generated from investments in public traded master limited partnerships. The investments are on the books of the S corporation that I own. The K-1 received from the master limited partnerships reflected the loss in box 1 as ordinary business loss.
The S corporation generates income from its primary business and such income was reported in box 1 of the S corporation K-1.
The K-1 from the S corporation reported the passive activity loss in box 10 H (other income /loss) (and definitely not included in boxes 1 through 3) which I inputted as the response to the turbo tax question for box 10. However, such amount did not get reported in Form 8582 as the program needs additional information to recognize that the amounts need to reported on Form 8582.
When you state that I could enter the loss in box 1 on an additional K-1 entry, are you suggesting to create another K-1 for the S corp that I own and reflect the passive activity loss in box 1 as business income (loss), then proceed with the questions until it asks if I materially participated, answer "No", and therefor it will classify such amount as a passive loss? This method seems like it could raise a question from the IRS as there was only one K-1 filed with the IRS for the S corporation and it reported the passive activity loss in Box 10 as noted above. In response to the question regarding materially participating in the S corporation for the original K-1, I answered "Yes" as I do materially participate.
If I could override the Form 8582 in turbo tax, I would input the information directly on the form. However, turbo tax specifically states that the override function is turned off on form 8582 and the associated worksheets.
I apologize for my lengthy response but I believe it is necessary in order to understand the situation and my problem. Thank you in advance for any further assistance you can provide.
