Recording passive activity loss on personal return...
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Recording passive activity loss on personal return from investment by a Sub S corp

I own a S corporation that had ordinary business income as well as investments in publicly traded master limited partnerships that generated passive losses.  The passive loss was reported on the S corp K-1 in box 10 H (other income loss).  How do I record the unallowed loss on turbo tax so that the passive activity loss will be reported in form 8582?

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Recording passive activity loss on personal return from investment by a Sub S corp

You would have to determine what business activity generated the loss. If the loss was from rentals for instance, you could make an additional K-1 entry and enter the loss in box 2 or 3.

 

It the loss was from ordinary business activities, you could enter it in box 1 on an additional K-1 entry.

 

Of course, you need to make sure the loss isn't already included in box 1 to 3 on your schedule K-1.

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Recording passive activity loss on personal return from investment by a Sub S corp

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.

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