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Partners' Liabilities are allocated on Form 1065, page 5, below Schedule L "Partners' Liabilities Smart Worksheet" (see screenshot below - click to enlarge).
TurboTax allocates
liabilities to all partners based on their year-end profit ratio. The program
allocates all other liabilities ONLY to the general partners based on their
year-end loss ratio. If you want to allocate the liabilities in a different
manner, use the special allocation boxes.
NOTE: Loans from
partners on line 19a, column d are treated as recourse debt on line D of the
Partner's Liabilities Smart Worksheet.
CAUTION - Limited
Liability Companies: Recourse liabilities, entered or calculated to the
Partner's Liabilities Smart Worksheet, page 5, line D will NOT be allocated to
members unless a special allocation code is entered.
Enter a special allocation
code ("P" for Profit percentage, "L" for Loss percentage,
"O" for Ownership percentage, or any other ) in the column to the
left of the amount.
To check the allocation calculations, see the Schedule K Reconciliation worksheet, Lines K-1 K(2) and K(3).
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