K-1 with Multiple Activities - How to treat the ending/dormancy of one activity?

[adville]

I receive a K-1 that historically had multiple activities:

• Box 1, 5, 9a - small amounts for ordinary business loss, interest income, long-term capital gain from investments
• Box 2 - net rental real estate income (loss) 

As TurboTax instructs, I have been entering these as two K-1s.

Related questions:

1. How do I treat this when one activity (box 1 etc)  doesn't have any activity in the year? (Still holds investments, but they don't generate any items that flow down to the K-1, and may not for several years, until remaining investments are disposed of.) Should I still enter a second K-1 with zeroes, or should I delete it? If relevant, in the Passive Activity Adjustment to Income or Loss worksheets, column (d) Loss Suspended for Current Year, there is a small total loss. I suspect deleting this K-1 would lose the tracking of this suspended loss.
2. When this activity (box 1 etc) finally ends (last investments are disposed of), how do I treat that? The K-1 would not have the "Final K-1" box checked, because the Box 2 rental activity continues. Should I nonetheless check the "This partnership ended in 2024" box in TurboTax in the last year of that activity? (Would that resolve the suspended passive activity loss, or move it somewhere else, since the partnership's other activities continue?) 

Thanks!

[PatriciaV · Accepted solution]

There is no problem leaving one K-1 blank for the years without activity. Answer "no" if TurboTax asks if you want to remove that K-1 so your suspended losses remain associated with that activity.

Because both activities relate to the same investment, you should leave both Schedule K-1s in your return until you receive a final K-1. Then report both K-1s as final so all passive losses are released. Make a note to be sure to allocate any sales proceeds between the two activities.

[adville]

Thanks, @PatriciaV !

To confirm, when one activity winds up (say, all the remaining investments are disposed of here) that activity nonetheless stays active indefinitely until the other activity (here, the rental real estate) winds up and a final K-1 for the partnership/entity is issued, even if that could be years or decades down the road?

[PatriciaV]

Yes, because both activities relate to the same partnership, you will retain both K-1s in your TurboTax return until the partnership ends (or is sold). This is necessary to preserve any carryovers from the dormant activity.