Should a passive loss reported on a K-1 offset 1099-Misc income?

I have a sizeable passive loss reported in Line 1 of a prior year K-1 (Form 1065) tied to a PE holding. Before I even enter this year's (which I don't even have yet) K-1, TurboTax seems to automatically offsetting this year's 1099-Misc income. In other words, the K-1 entry (which is empty) shows a negative number that exactly offsets my 1099-misc total. My 1099-misc income is tied to structured investments that generate options premium (complex straddles) in my standard investment account, which I believe would be consider active income. Am I understanding the tax treatment incorrectly, or do I need to mark something differently in either the K-1 or 1099-misc interview?