Recourse Debt Error on Negative Retained Earnings

[theshowco]

Hi everyone --

I had -65K in retained earnings for 2021.  My balance sheet is in balance according to TT, which is great news.  However, I keep getting this error about not allowing recoursed debt to partners without an allocation code or reclassifying it as nonrecourse debt.

I found a great article about reclassifying, but it doesn't work for me.  I went to the Partners Worksheet in the 1065, where I was instructed to move the items from Row D (recourse debt) to Row C (nonrecourse debt).

Unfortunately for me -- TurboTax will allow me to add a number in nonrecourse debt, but will not allow me to modify the number in Row D (recourse debt).

How to proceed with this?  Is this the right time to use an allocation code?  I was advised earlier to reclassify and not use one of those code (P,L,O).

I seem to be at an impasse over this issue.  In reality, the company took a loss.  Why this should be looked at as debt at all, I am unsure.  But TT has placed it firmly there.  Very firmly.

Thanks for your time.

[AliciaP1]

Negative Retained Earnings does not constitute Recourse Debt.  You need to check your Partner Capital reconciliation to ensure you have balanced the net loss for the year with the ending Capital account balance of $-65k per your example.  Also, look at your balance sheet line item balances for Liabilities & Capital on the balance sheet to see what the opposite entry is to offset the negative retained earnings to get the balance sheet in balance. 

If the partners have loaned the partnership monies to support the business, those loans are non-recourse debt to the partnership.  If the partnership has obtained a loan from a financial institution to support the business, the loan is non-recourse unless one or all of the partners had to make a personal guarantee.  If a personal guarantee was made, the business has recourse debt that needs to be allocated to the partners either by the Profit share percentage, Loss share percentage, or Ownership percentage, or a Special Allocation.