PatriciaV
Expert Alumni

Business & farm

Recourse Liabilities are entered under the Balance Sheet topic of Federal Taxes. You may need to overstate your ending assets in order to access this topic from the step-by-step interview. Follow the prompts until you come to the page "Any Other Liabilities?" The choices on this page allow you to enter your liabilities.

 

An easier way to enter these liabilities would be using Forms Mode

  1. Click the Forms icon in the header, then locate "Form 1065 p4-5" in the left column. 
  2. Click the form name to open it in the large window.
  3. Scroll down to Schedule L (Balance Sheet per Books). 
  4. Now scroll down to the Partners' Liabilities Smart Worksheet just below the Balance Sheet.
  5. The amount you entered for the loan should appear as Recourse debt.
  6. You may choose to allocate this debt by entering a code in the small box in front of the number ("P" for Profit percentage, "L" for Loss percentage, "O" for Ownership percentage). The loan will be allocated to the individual partners' capital accounts (and Schedule K-1) based on this percentage.

Note that you should edit only numbers that appear in blue. Overriding calculated numbers invalidates the return for e-filing (you will need to mail the return). This is an IRS constraint. 

 

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