There's a question in the interview that reads "All of my investment in this activity is at risk". When you first buy the PTP, your investment is the purchase price and its all at risk -- if the PTP disappeared, you'd lose all that money -- so that box is checked. But as the year's go by, and the PTP pays distributions and hands out tax losses, your 'basis' steadily reduces until one day it hits 0 and you no longer have anything at risk: you've had your entire investment returned to you. At that point, you uncheck the box and:
- the losses that are reported on the K-1 don't automatically go to sched E or get carried over
- any distributions have to be reported as capital gains (and you pay tax)
- the sales schedule that shows you with a negative basis is wrong -- you're basis will never go below 0.
To fix, you'll need to start with the return where basis first dropped below 0, uncheck the "at risk" box, and TT will bring form 6198 into your return. If that was in a prior year, you'll need to amend your return to handle the reporting of distributions. You'll also see the carry-over losses being adjusted, since those are limited.
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**Note also, I'm not a Tax Preparer/CPA. Just a volunteer, seasoned, TurboTax user.
Use any advice accordingly!
