topic 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? in Investors & landlords

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 — Thu, 06 Jun 2019 14:43:33 GMT

Not understanding your comment "cost basis = 0". Are you...

Rick19744 — Thu, 06 Jun 2019 14:43:35 GMT

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?

Yes, no basis and active. If I follow TurboTax instructi...

mfam — Thu, 06 Jun 2019 14:43:36 GMT

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)?

The problem is that you have checked the box that you are...

Rick19744 — Thu, 06 Jun 2019 14:43:38 GMT

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.

Rick, The software does work as you suggest, but shouldn'...

mfam — Thu, 06 Jun 2019 14:43:39 GMT

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

These more complicated issues are difficult to address wi...

Rick19744 — Thu, 06 Jun 2019 14:43:41 GMT

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.

Say my carry forward losses were $100K. If during 2017 I...

mfam — Thu, 06 Jun 2019 14:43:43 GMT

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.

Maybe my mis-understanding is that the entry on the form...

mfam — Thu, 06 Jun 2019 14:43:44 GMT

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.

If your carryover losses are $100k and you add $1, then y...

Rick19744 — Thu, 06 Jun 2019 14:43:45 GMT

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.

@mfam The official response from Product Quality is tha...

TaxGuyBill — Thu, 06 Jun 2019 14:43:46 GMT

@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/lounge/4128104-k-1-problem</a>

Not sure the relevancy here. The OP is indicating that t...

Rick19744 — Thu, 06 Jun 2019 14:43:48 GMT

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.

Re: These more complicated issues are difficult to address wi...

jeastman — Wed, 08 Apr 2020 04:10:33 GMT

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.

Re: @mfam The official response from Product Quality is tha...

comboardq — Fri, 07 Oct 2022 02:48:52 GMT

@TaxGuyBill I noticed your comment pertaining to my issues here https://ttlc.intuit.com/community/taxes/discussion/re-s-corp-dissallowed-loss-carryforw[product key removed]ation/01/2778763 , perhaps you have some insights or comments? Would you say it is simple unfeasible to use TT in my situation (Similar to OP). Thanks.