Sale of entire partnership interest

[JaxSwiss]

I was a member in an LLC (business is rental real estate) and sold my entire interest to an unrelated party at a loss. I am currently not able to use recent operating losses due to passive activity limitation. I understand that upon disposition of a partnership interest to an unrelated party I can recognize both those passive activity losses in addition to the capital loss incurred upon the sale. My problem is I can't figure out how to enter this in TT. When I enter the basis in TT it reduces the basis amount on Form 8949 and Schedule D to reflect no gain on the sale. In addition I can't see where it's reclassified the passive nature of the operating losses to permit me to capture these losses. Any help would be very much appreciated!

[Critter]

Contact TurboTax support and speak directly with a TurboTax support agent concerning this situation.

See this TurboTax support FAQ for a contact link and hours of operation -https://ttlc.intuit.com/questions/1899263-what-is-the-turbotax-phone-number

Although the expert help may be what you really need ...

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[smarttees]

Make sure you check the box that you sold your interest when you enter your k1. Make sure you enter a negative when you enter operating losses. Enter the sale of your interest the same as you would the same of a stock in the investments section.

[JaxSwiss]

Thanks. I've done that and have found that the only way to get the amounts in schedule D correct is to override the value - but then can't file electronically!

[Rick19744 · Accepted solution]

This is a complicated area.  As a member in an LLC taxed as a partnership, you have 3 loss limitations that determine the allowable annual loss; basis, at-risk, and passive activity (in that order).

Based on your limited facts, you appear to know your basis in the LLC investment.  Additionally, you indicate that losses have been suspended as a result of the passive activity loss rules.

If you go through the detailed input questions and indicate that you have a full disposition of the interest, TT should handle this correctly.  This happens all the time.

You have to keep in mind that there is a circular process between the loss you may be looking for and the reporting of any suspended losses which would be taken as an ordinary loss at this juncture.

Also keep in mind, that even though losses are suspended due to the passive activity rules, these losses still reduce your basis immediately.  

Depending on the $$ involved, you may want to consider getting some professional help in understanding what the end result should be.

[JaxSwiss]

Thank you!