Losses from K-1 (ordinary business losses) don't seem to reduce taxes due to offset capital gains on stock sales (passive income)?

Forum|Forum|6 years ago
March 24, 2020
1 reply
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I have about $2k of passive losses from a K-1 LLC (Form 1065). I also have about $3k of capital gains from the sale of a stock I had held in 2019. I had entered the 2019 Cap Gains from the stock sale in TurboTax first and saw my tax return results (owe Federal but State refund, net result is I owe about $1,300). I would have thought that once I entered my K-1 losses (all of which are at risk) from the private investment that I would be able to use those passive losses to offset the capital gains tax but my return results didn't change at all. Would appreciate some guidance on how to utilize those K-1 losses against the passive income from the cap gains.

Thanks!

TurboTax Premier Online

Best answer by DavidD66

You can't use your passive losses reported on a K-1 to offset capital gains from investments. You can only use your passive losses to offset passive gains (stock investments are not passive). You can carry over the unused passive loss. When you dispose of the investment in the LLC you can take the passive losses to offset any gain on disposal or to offset ordinary income.

DavidD66Answer

Level 15

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gregk71

Level 2

So if you have ordinary income from a W-2(dayjob) and you have passive losses from a K-1(ordinary business loss from an investment asset); does the passive loss reduce your income on your 1040? When i entered my information into TT; nothing changed? It seems to want to carry the loss fwd to next year???? Please advise? Thanks.

Greg

sinan-tarlanAuthor

Level 2

Mine was the same. The k-1 passive loss didn’t reduce my taxable income or my capital gains on stocks. As the poster above said it only offsets other passive losses but you can carry it forward.