Unallowed passive loss carryover associated with Final K-1 (Form 8582)

[taheri1]

For the 2017 tax year, I had received a K-1 that was marked "final". In TT, I processed it by saying that the disposition was NOT via a sale.  (By way of background, I didn't sell my ownership. The K-1 issuer closed one LLC and opened a new LLC and transferred all assets over and started issuing me a K-1 from the new LLC in 2018.) TT produced a 2017 return which showed unallowed passive losses on Form 8582, Worksheet 3 for the old LLC.

Now, when doing my 2018 taxes, I haven't received a K-1 from the old LLC anymore (but I have received one from the new LLC). How do I inform TT that I have unallowed passive losses (from the old LLC) that need to be carried over from 2017 into 2018?

More generally, when an issuer issues a final K-1 and my disposition isn't via a sale -- but it's because the issuer has wound down the business -- and I have unallowed passive losses to be carried forward, does the tax law allow me to actually carry forward these losses and use them to offset future (passive?) income from other sources? If so, how would I recategorize these passive losses? It doesn't seem as though Form 8582 would be the place to manage this, unless I continued to create a fictitious K-1 that was totally blank except for the unallowed passive loss carryover. Otherwise, perhaps the place to handle it would be on Schedule D as a capital loss carryover ...

[Anonymous_]

You can carry the losses forward, but in order for suspended losses to be released you have to dispose of your entire interest in the passive activity to an unrelated person in a fully taxable transaction during the tax year.

In that instance, the losses allocable to the activity for the year are not limited by the PAL rules.

[taheri1]

Is it OK to process in TT as though I had received a blank K-1 in 2018 -- one year AFTER having received the Final K-1 -- so that I could carry forward disallowed passive losses from 2017 that are associated with that same entity?

This pertains to Worksheet 3, Form 8582. The only way to convey that I have passive loss carryover into 2018 would be through a distinct line item here.

[Anonymous_]

I really do not believe it matters exactly how it gets there as long as it gets there. The K-1 that would be generated would be for your records only, anyway; it does not get transmitted to the IRS.