Sale of Partnership Interest with Nondeductible Losses

[MI-PP-ENV]

Hello,

I am filing using Home & Business 2025 on Windows 11 and attempting to report the sale of my partnership interest at the end of 2025. This sale was at a loss but since it was to a family member, the loss is non-deductible as per Schedule D instructions:

Certain Nondeductible Losses
You can’t deduct a loss from a sale or exchange between certain related parties. This includes a direct or indirect sale or exchange of property between any of the following.
• Members of a family.

As per the instructions for Form 8949, I need to report this nondeductible loss by inputting adjustment code L to (f) and input the loss amount of (h) to (g) as a positive number to result in a loss of 0:

You have a nondeductible loss other than a loss indicated by code W

enter this code column (f):  L

AND: Report the sale or exchange on Form 8949 and enter the amount of the nondeductible loss as a positive number in column (g).

I see no way to get this to populate in the step-by-step instructions Under "Personal Income", Schedule K-1, after checking "Disposed a portion of my interest in partnership during 2025" there is nothing prompting for other situations or nondeductible losses.

If I attempt to Override these fields, I get an error message saying e-file cannot be completed and I must reverse the Override.  The data sources listed for these fields are worksheets that do not exist (e.g. Capital Asset Sales Worksheet) as the entry comes from checking the box above regarding K-1. How do I correctly report the Nondeductible Loss on this form without overriding?

Thank you in advance.

[JamesG1 · Accepted solution]

A manual entry may be able to report a long-term disallowed loss with code L in column f on IRS form 8949.  Enter a manual IRS form 1099-B and select Personal items under What type of investment did you sell?  I am able to report a loss and long-term sale information. 

In TurboTax H & B, follow these steps: 

• Across the top of the screen, click Personal.
• Across the top of the screen, click Personal Income.
• Under Investment Income, click to the right of Stocks, Cryptocurrency, Mutual Funds, Bonds, Other.
• Click Add investments.
• At the screen Let Us Enter Your Bank and Brokerage Tax Documents, click Skip Import.
• At the screen OK, let’s start with one investment type, select Other.  Continue.
• At the screen Tell us more about this sale, enter the information. Click Continue.
• At the screen Now enter one sale for XXX, select Personal items under What type of investment did you sell? 
• Enter transaction information. Click Continue.
• Repeat as necessary by clicking Add another sale.  Click Continue.

Within the K-1 entry screens, you may need to report: 

• at the screen Describe the Partnership, select This partnership ended in 2025, and 
• at the screen Describe Partnership Disposal, select No entry.

In this case, TurboTax does not report the sale.