Well, this is certainly a learning moment in the tax world.
- I agree that you need to remove any unused losses from the prior LLC that issued a final K-1 in 2018. Those cannot be used against any other passive income past the 2018 tax filing.
- As a member of an LLC you should have been maintaining a tax basis schedule of the investment in the LLC. This should have been updated each year you received a K-1.
- Your tax basis schedule should have been utilized when preparing your 2018 tax return in determining any gain or loss on the LLC investment.
- TT has many questions related to each K-1 received and one of those questions has to do with a complete disposition of the activity (example receiving a final K-1). If you are preparing your own tax return, then you need to take some responsibility in reading each and every question and make sure you understand the question and your response. Had you indicated that there was a complete disposition of the LLC K-1, then TT would have generated other questions. Whether those questions were answered correctly or not, TT would have "released" the suspended losses in 2018. This doesn't guarantee that your overall gain or loss was correct, as that will only occur if you input the correct responses to the numerous questions; ie; knowing your tax basis.
- This was an unfortunate lesson, but a reminder, that while TT is a good tax preparation software, it does not replace sitting down with a tax professional and having a one on one when you have an unfamiliar tax situation. TT can only prepare an accurate return if provided accurate information and the appropriate questions answered correctly.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
