Partnership Form 1065 With Losses

[TedDaly]

I received a K-1 from the LLP I am a partner of.  The K-1 reports a net income loss.  Once I enter the K-1 into Turbotax,  the loss does not get reported on a Schedule E or my 1040.  I'm looking for advice on getting the losses reported on my return.

[Mike9241]

as a limited partner, the loss is passive, which means you get no current deduction.    look at form 8582.

[TedDaly]

Thanks for the reply. Not sure if it makes any difference but I’m a general partner and not a limited partner. If you have any insight on that difference it would be greatly appreciated 

[Rick19744]

A couple of comments:

• I can't speak for all states, but in most states, an LLP is a type of general partnership.
• I would assume that on your K-1 box G is checked as general partner or LLC member-manager
• I believe when you went through the question and answer for inputting your K-1 information you indicated this was a limited partnership and you were a limited partner.  You should change that response to general partnership and general partner.
• There is also most likely a question asking if you are "at-risk" for the loss.  I am assuming you are and you should respond "yes" to that question.
• I also assume that you are maintaining a tax basis schedule of your investment in the LLP.  This is key in determining if losses are allowable, impact of distributions and the overall gain or loss upon disposition.

[TedDaly]

Thanks for your reply Mark.  

• I live in Minnesota and it is a general partnership
• The K-1 is marked as a general partnership
• In Turbotax, I have marked that I am a general partner and it is a general partnership
• I marked "yes" that I am at risk for the loss. 
• I will double-check to make sure that I have a tax basis schedule properly filled out.  

Follow-up question, Are there other limitations (like income level) that may be affecting whether the losses are allowable?

[Rick19744]

Follow up response:

• The only other item that may be limiting the loss is if you have indicated that you are not a material participant
• If you are a general partner, are at-risk, and are a material participant, then TT should not be limiting any loss and income level would not impact the loss limitation based on your facts.
• Just check the wording on the "at-risk" question to make sure it is answered correctly.
• You don't indicate what method of TT you are using.  If downloading the software, just make sure you have the latest version.

[TedDaly]

Once again, thank you for the information.  I think you have it narrowed down for my situation.  I am not a material participant.  The LLP I am a partner of owns farmland and rents it out to a separate business that I am not involved in.  So the income comes from rent.  This past year the loss came from depreciation of improvements in the land (drainage tile).

I'm assuming for my case that I can't use the losses this years return, but will be able to use them to offset any income in future years.  Are my assumptions correct?

[TedDaly]

I also forgot to mention that I'm using a desktop version of TT deluxe, and I check for updates to the software every time I launch the software.  

[AliciaP1]

Yes, your assumption is now correct.  You are reporting Passive Activity Losses and they can only be used to offset Passive Activity Income.  You will have a PAL carryforward this year that will offset future income when your K-1 reports net income rather than loss.

@TedDaly