How do I know if my ordinary loss is more than my basis?

[hhenley1207]

My schedule K-1 indicates an ordinary income loss, but I am not sure how to determine if this is more than my basis. I am obviously not extremely active in the work this business does.

[RichardK · Accepted solution]

For a partnership your (outside) basis is a dynamic calculation, which starts with your initial investment and is adjusted every year for income, expenses, distributions, contributions to a partnership, and partnership liabilities (if you are liable on the obligation). You should calculate your basis year-to-year, starting with the prior year basis and adjusting for changes (previously mentioned) to your basis, click here for more information.

In some instances you may be able to use your inside basis to determine if losses exceed your basis. This calculation is generally, the from the K-1 and is your capital account (box L), plus your share of the liabilities (box K).