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mfam
New Member

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

 
11 Replies
Rick19744
Level 12

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

Not understanding your comment "cost basis = 0".
Are you saying you have no tax basis in this entity?
Are you active or passive in the activity?
*A reminder that posts in a forum such as this do not constitute tax advice.*
mfam
New Member

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

Yes, no basis and active.  If I follow TurboTax instructions and put accumulated carry forward losses in the box shown in the image, my tax liability for 2017 decreases.  Doesn't seem correct.  Is it simply a matter of TurboTax not putting a proper qualifying statement on the Easy Step process (or whatever it is called)?
Rick19744
Level 12

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

The problem is that you have checked the box that you are at-risk.
This means that you have tax basis and your losses are allowed.
As such, that is why when you include the loss it will decrease your tax liability.
You need to uncheck the "at-risk" question box.
*A reminder that posts in a forum such as this do not constitute tax advice.*
mfam
New Member

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

Rick,
The software does work as you suggest, but shouldn't there be a question to ask how much of my carry-forward losses are at-risk?  Why would it assume that my cost-basis equals or exceeds the carry-forward?
I'm not comfortable yet.
Thank you,
Dave
Rick19744
Level 12

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

These more complicated issues are difficult to address without being face to face and looking at what you are seeing.
Based on your facts and comments, carryover losses and tax basis go hand in hand.
Having said that, you have indicated that you have no tax basis.  If that is the case, your carryover losses are not deductible.  So if they are not deductible, then you need to "uncheck" the at-risk box as noted earlier and you will not get any tax benefit.  This is the correct handling based on the at-risk rules (no skin in the game then no deduction on the tax return).
Based on what you are presenting in your facts and responses, I believe the software is handling the situation correctly.
*A reminder that posts in a forum such as this do not constitute tax advice.*
mfam
New Member

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

Say my carry forward losses were $100K.  If during 2017 I added $1 of investment in the company, my cost basis is $1 and I have at-risk 'skin in the game', right?  This form then removes all of my tax 2017 liability due to that $1.  Doesn't seem right.
mfam
New Member

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

Maybe my mis-understanding is that the entry on the form for the carry over loss is entitled "Carryover Prior Year Loss", but what is meant is "At-Risk Carryover Prior Year Loss".   Form doesn't want to know what I am carrying over as a loss, it wants that portion that is covered by my current cost-basis.
Rick19744
Level 12

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

If your carryover losses are $100k and you add $1, then you are at-risk for this $1 and only the $1.
When you check the box that you are at-risk, then you are telling TT that you have sufficient at-risk (basis) to absorb all $100k; the language says "all of my investment is at-risk".
You being active, cannot have "at-risk carryover loss" as for you they are mutually exclusive.  You would have carryover loss due to at-risk limitations (no at-risk).
TT is asking you exactly what needs to be asked "what portion of the carryover loss is covered by basis / at-risk".  That is all you are entitled to deduct.
By way of example: Suppose you have $100k carryover loss due to no basis / at-risk.  Your K-1 reflects $50,000 of current year income.  You are entitled to use $50,000 of the carryover since you are now at-risk for that $50,000.  This will net to zero taxable income and you will also now have zero basis with $50k carryover loss.
*A reminder that posts in a forum such as this do not constitute tax advice.*
TaxGuyBill
Level 9

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

@mfam   The official response from Product Quality is that "we don't support a loss greater than the basis" and "it is something we don't support".  In other words, they say you can't use TurboTax in your situation.

@Rick19744   See our prior discussion on this.  You advocated the "At Risk" was an acceptable way to go (at least for an S-corporation), but I disagreed:
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/discussions/lounge/4128104-k-1-problem">https://ttlc.intuit.com/discussions/...>
Rick19744
Level 12

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

Not sure the relevancy here.  The OP is indicating that they have no basis.
What were you disagreeing with in the previous post?
In most of these contexts basis and at-risk will be used interchangeably.  Especially in an S corp context.
Where this becomes more "technical" is in the partnership arena, but most will correlate at-risk and basis as one and the same.  If you are at-risk you have basis to take losses.
*A reminder that posts in a forum such as this do not constitute tax advice.*
jeastman
New Member

K-1 shows loss. Cost basis=0,so can't deduct, but no indication of that in TurboTax "Schedule K1 At Risk Allocation Worksheet". Can I put carry-over loss here to benefit?

I have used TurboTax for 14 years but it can't handle K-1 forms (which I just received). I did not check that I was at risk and yet the software insists on giving me a huge deduction, which should be ZERO. There is no way to over ride TurboTax's error. I am defeated.

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