Skip to main content
Level 4
October 16, 2023
Question

Weird K-1 error in QBI passive loss column for an MLP

  • October 16, 2023
  • 5 replies
  • 43 views

Hi all,

 

Just putting the finishing touches on my taxes, and I'm getting this strange error.  The error check told me that an entry was needed for the QBI passive loss column.  For some reason, it wasn't filling it in with the values I had entered.  The left column (Regular Tax) was filled in with an operating loss of -1,577 for 2020.  (Most midstream MLPs have operating losses most years due to depreciation, despite positive cash flow.)  But the right column (QBI) was left blank, and this threw an error.  This wasn't a problem in last year's taxes, or 2020's taxes.  But it suddenly shows up now.

 

Yet when I fill in -1,577 manually, which is the correct value, it does the following.  1,577 suddenly appears on the line for 2018.  This is obviously wrong, since I didn't even own this before 2019.

Apparently, the only value it will accept is zero.  But that's wrong.  It should be -1,577, which is the operating loss for 2020, just as -939 was the operating loss for 2021.  What's causing this?

    5 replies

    Mike9241
    Level 15
    Level 15
    October 16, 2023

    above that there and just below where the current WBI info is entered is a section that says "Qualified Business Income Carryforward"

    then there's a line that says B QBI suspended losses - passive. the total of all QBI carryforwad must be entered in the  2022 column to match the year by year detail. 

     
     

     

    Mike9241
    Level 4
    September 17, 2024

    @Mike9241 thanks for your help with all my mlp questions in the past, including the one above.  I'm still a little unclear on one point.  Your method for entering PTP sales in Turbotax is:

     

    1) Use interview for ordinary gain only

    2) Adjusted 1099-B Basis = purchase price - basis adjustment + ordinary gain

     

    Straightforward enough.  What about passive activity loss carryforwards, though?  Turbotax imports these along with last year's return.  However, if the cumulative adjustment to basis shown on the sales schedule includes passive activity losses carried over from prior years, shouldn't I delete them from Turbotax so as to not double count them?  Or, alternatively, subtract them from the adjusted basis I sub into the 1099-B?

     

    Thanks again.

    Mike9241
    Level 15
    Level 15
    September 18, 2024

    when you indicate final k-1, total disposition and enter the ordinary income recapture, if any, in the K-1 sales section, Turbotax shouldd allow as a deduction all its passive loss carryovers (each PTP stands on its own so only that PTP's suspended losses will be allowed. in addition, there are probably QBI loss carryforwards that will now flow to the QBI deduction form. 

     

    However, if the cumulative adjustment to basis shown on the sales schedule includes passive activity losses carried over from prior years, shouldn't I delete them from Turbotax so as to not double count them?  Or, alternatively, subtract them from the adjusted basis I sub into the 1099-B?

     

    no. 

    consider these examples

    example 1

    bought for $5000

    suspended losses not deducted $3000 (cumulative adjustment to basis)

    tax basis now $2000

    you sell for $2000

    thus no capital gain or loss

    wouldn't you now want that $3000 deduction to reflect that you actually paid $5000 and now only have $2000

    example 2

    bought for $10000

    received $2000 in distributions

    suspended losses not deducted $7000

    cumulative adjustments to basis $9000 (the $2K + the $7k)

    tax basis now $1000

    sell for $1000

    wouldn't you now want that $7000 deduction to reflect you paid $10000 but received only $3000 (sales proceeds and distributions) 

    example 3

    bought for $15000

    received $3000 in distributions

    suspended losses not deducted $7000

    cumulative adjustments to basis $10000 (the $3K + the $7k)

    tax basis before ordinary income recapture $5000

    ordinary income recapture $1000

    tax basis now $6000

    sell for $6000

    wouldn't you now want that $7000 deduction to reflect you paid $15000 received $9000 (sales proceeds and distributions) and have to report $1000 as ordinary income making the net for the year a $6000 loss 

     

    I should add that in the final example that ordinary income recapture is QBI income - report on the qbi line for other income/(loss) its not included in 20Z on the actual k-1

     

    Mike9241