Thank you Alicia. Your answer is helpful and is getting me closer to understanding my real issue.
Assume the following scenario:
I invest $5000 in 2020 in an LLC as a passive member with my entire investment at risk. Assume my share of LLC ordinary losses is $4000 for years 2020-2022 and the LLC is terminated in 2022.
Year Year-end adjusted basis K-1 Box 1 Box-1 in TurboTax Allowed loss Disallowed loss (carry forward)
------ --------------------------------- ------------- ------------------------- ------------------ --------------------------------------------
2020 1000 -4000 -1000 1000 3000
2021 0 -4000 0 0 4000
2022 0 -4000 0 0 4000
Since the LLC terminated in 2022, I can now realize all passive losses. When I add up all the allowed and disallowed passive losses, the total is $12000. I believe this number will show up in Schedule 1, line 5 (via schedule E).
My real question is this: Is it possible for my LLC total loss (sum of all passive losses = $12000) to be greater than my total investment in this LLC ($5000)? Is there some other loss limitation that I'm (and TurboTax) is missing?
