topic USL ETF Schedule K-1 interview "at risk" question in Business & farm

USL ETF Schedule K-1 interview "at risk" question

subusinha — Sun, 25 Apr 2021 16:51:54 GMT

I bought some USL ETF last year but haven't sold any yet. I have received a Schedule K-1 for it which shows an income in the Part III.

How do I answer the "at risk" question in the Schedule K-1 interview in turbotax online? Is it irrelevant since the schedule doesn't show any loss?

Schedule K-1 for reference below (with redacted personal information).

Re: USL ETF Schedule K-1 interview "at risk" question

KathrynG3 — Sun, 25 Apr 2021 17:29:13 GMT

Yes, it is true any 2019 unallowed at-risk loss would have been entered on the appropriate line of the related Schedule K-1 At-Risk Limitation Allocation Worksheet.

However, this is still an important question for this investment. See the TurboTax definition for At-Risk Rules below:

At-Risk Rules

The at-risk rules prevent you from claiming losses that exceed your actual investment in a business. Your loss is considered the lesser of the following:

- The amount of the loss
- The amount you have at risk in the activity

You are at risk up to the amount of cash and the adjusted basis of other property you contribute to the activity. Funds borrowed for use in your business and for which you are personally responsible can be added to the at-risk amount..

You are not considered to be at risk if you:

- Do not have to repay borrowed amounts because you have an arrangement that protects you from loss.
- Borrowed money from a lender who has an interest in the business other than as a creditor.

You can carry disallowed losses forward to a year when you have amounts at risk. Be sure to keep records of these disallowed losses so you can claim them in later years.

Re: USL ETF Schedule K-1 interview "at risk" question

M-MTax — Sun, 25 Apr 2021 17:30:51 GMT

As long as you didn't invest with non recourse financing...which would be rare as anything......and have basis in the investment you're at risk. It'd be kind of strange if you didn't have basis having bought it last year so all of your investment is at risk.

Re: USL ETF Schedule K-1 interview "at risk" question

subusinha — Sun, 25 Apr 2021 22:11:11 GMT

Thanks! Out of curiosity at what point do I cease to have basis in the investment other than just completely selling it off? When the loss reported on the K-1 has exceeded the initial basis?

Re: USL ETF Schedule K-1 interview "at risk" question

M-MTax — Sun, 25 Apr 2021 22:18:26 GMT

Yes when losses exceed your cost basis.