Claiming partnership expenses without a K1

[medgold]

Hello,

I was involved in an LLC partnership that was shut down in 2024. My ex-partners - and in particular the partner that did the LLC's taxes - did not send me a K1. I don't know whether a 1065 was filed for the business for 2024; the breakup was acrimonious.  Is there some way that I can file a "substitute K1" on my own behalf, so that I am in compliance with IRS rules, as well as so that I can claim my own losses from this partnership?

Thanks

MG

[PatriciaV]

You have two options: 1) File an extension with the expectation of obtaining the information or 2) file now without entering any income/loss for the year and report the disposition of your LLC investment.

In either case, you may wish to consult an attorney on your legal rights to obtain a copy of any filed return. If you're successful, you can either file before the extension deadline or amend a previously filed return.

[medgold]

Hello,

When you say there is an option to "file now without entering any income/loss for the year and report the disposition of your LLC investment.", please provide more detail on how I can report the "disposition of my investment". E.g. the entity is no longer operating. I do know that my former partner notified the Secretary of State that the entity was closed, but I am unsure of whether they did so with the IRS - via a 1065. 

(1) Are you saying that I should inform the IRS of the business closure? Or that I no longer have any interest in the entity? In either or both cases, how would you suggest I do that?

(2) I have incurred a net loss. Are you saying that I am able to report that loss elsewhere on my return - perhaps as an investment loss? Or are you saying there is absolutely no way for me to claim the loss on may taxes without a K1?

Thanks again. 

[PatriciaV]

If you have previously reported this LLC on your TurboTax return, you can edit the existing investment and report a final "K-1" and that it was "disposed of" in a complete disposition. This allows you to claim no sales proceeds and write off your remaining investment (or report the overall loss). You don't need to enter any income or expenses from a K-1 in order to report the dissolution of the partnership.

It's not necessary for the LLC to have filed a final return with the IRS. You simply report that you no longer own an interest in the partnership.

You would only need to file an amended return if the LLC did send you a final K-1 at some point and there was activity that changed the loss you claim for the investment.

[medgold]

Hello again. Thank you for the feedback. So just to be clear, YES I am using Turbotax Home and Business for my personal return.

Questions:

(1) There is a K1 form entered in 2023 was for the entity that closed as of 12/31/2024. So when I fill out my 2024 taxes, I'm assuming Turbo Tax will ask me questions about that entity. Is that correct? Or do I have to enter my changes directly on the K1 form?

(2) If I have to edit the K1 form directly, please confirm how I should modify the form from 2023? Do I check the box "Final K1"?

(3) How do I declare my losses (in 2024)? For example, let's say the business was started with $90,000 ($30,000 per each of 3 partners). In 2023, the business lost $30,000 ($10,000 per partner) which were reported on K1 forms to each partner. In 2024, the partnership returned $10,000 to each of 3 partners, and shut down with no liquid or sellable assets. So each partner lost a total of $20,000 ($30,000 invested - $10,000 returned in 2024) of which $10,000 was reported in 2023. Does that mean I can report loss of $10,000 in 2024? Where exactly do I enter that on 2024 K1 and on 1040?

Thanks!       

[RobertB4444]

As far as the K1 goes you will just mark it as final and enter it as it is there.

In order to take your loss you will mark this as a sale of an investment.  Enter it in the investment income section of wages and income on your federal return.  Click start next to "Stocks, Bonds, Cryptocurrency, Other"  (you're the other).  

Enter the purchase date of the day that you originally invested in the partnership.  For the purchase price you will enter the remaining basis that hasn't been returned to you (you said 10K so that would be what you enter).  For sale date enter the final date the partnership was active and for sale price enter zero.  That will allow you to take the capital loss for the partnership.

@medgold 

[Tuite]

See the IRS instructions for form 1065 K-1 which explains what you must do if no form K-1 is received by a taxpayer.  Per the instructions, you must file form 8082 to report an inconsistent treatment on your return and the K-1, which was possibly not filed.  Per the IRS instructions you must file this form to avoid a penalty.