K1 losses on Form 4797 and Schedule E

[saunderstomr]

I invested in a start up that went bust in 2024.  The final K1 has the Account Analysis illustrating a decrease of $15,000 in the Capital Account (Ordinary Business loss and Net section 1231 loss).  Part III include values for Ordinary Business Loss, Net Section 1231 loss, Net Long Term Capital Gain, etc.

I considered this a Complete Dissolution and Abandoned Partnership Interest.

The confusing thing is the decrease in the Capital Account plus the Net Section 1231 appears on Form 4797 (sale of business property) while the Ordinary Business Income appears on Schedule E (all losses).

Seems like double dipping; that the deduction should be the loss in Capital only (not Income or 1231 losses also).

The illustration is simplified here.

Any comments/suggestions

[Mike9241 · Accepted solution]

no illustration which would help. is part II section L completed. 

your actual net is

ordinary loss

+ 1231 loss

= total losses

reduced by long-term capital gain

= net gain or loss

this should match section L current year net income (loss) unless you omitted something

ordinary loss flows to schedule 1 line 5; 1231 loss which flows to form 4797 then flows to schedule 1 line 4

while the capital gain flow to schedule D line 12

[saunderstomr]

Thank you very much, it seems to have worked...

After I entered:

K1 not in Retirement Plan

Limited Partner of LLC

Domestic Partner

Partnership ended in 2024

Complete Disposion (if chose any other does not seem to account for losses)

Abandoned Partnership Interest

Purchased 2/28/2022 Sold 12/31/2024 (estimate)

TT asked for "Sale information" and I put my beginning capital balance as the basis.  This seems to have cause the double dipping.

Now I need to Amend 2023  return and so far I have not been able to get TT to recognize the losses (no passive losses allowed on schedule E) without defining it as Ended and Complete Dissolution.  

Any suggestions? Should I Amend in online or desktop version (able to go to Forms mode)?