You are correct that at least one point is to determine whether regular business LOSS as reported on K-1 line 1 has basis to allow deductibility.
The IRS constructed the form such that Part III ONLY PERTAINS TO LOSSES, NOT ANY GAIN, and therefore the "logic" used to flow results from Part III presumes the information is entered as a positive number (which will then be SUBTRACTED from basis)...as suggested by others, "try it, you'll like it"...
