I have some investments which are structured as partnership. I don't participate in business after investing in it. If the deal succeeds, I get some distribution. So for 2022, I have one deal succeeded and one deal failed. When a deal failed, investor got nothing back, lost all the investment capital.
I received two schedule k-1 for these two completed deals. I followed TT instructions to input K-1 numbers, however, in schedule E part II "Income or loss from partnerships and S corporations", line 28, 0 is shown in column (h) for the succeeded deal under passive income and loss; and 0 is shown in column (k) for the failed deal under nonpassive income and loss. I would expect net gain to show up in column(h) and loss in column (g) in passive income and loss section. What could go wrong here?
Though I didn't see income number in column (h) in schedule E, in Form 8582, Part I "All other passive activities", I did see net income in line 2a. Seems TT knows I had passive net income from the succeeded deal. However, the passive loss didn't show up in 2b, where I would expect it to show. Seems the passive loss didn't flow through from schedule K-1. Any idea why loss number didn't show up?
passive income and losses always flow first to form 8582 to figure out what's allowable and from there to schedule E. have you checked all sections of the 8582? if so go back to the entries you made for the loss k-1. perhaps there is something answered incorrectly like the at-risk limit question.
Thanks for the info. I revisited my K-1, it only has 9a net long term capital gain and loss, and 19 Distributions.
I see in IRS K-1 instructions that 9a should got to schedule D line 12. I am a bit confused. Would this income and loss be considered as capital gains which get reported in schedule D or considered as passive income which is reported in schedule E? Reporting in both schedule E and D seems wrong.
@Mike9241 Just want to confirm, if K-1 only has 9a long term capital gains, does it go to schedule D instead of Form 8582 and schedule E? I guess long term capital gains are not treated as passive income, correct?
You are correct.
9a long term capital gains will be reported on Schedule D line 12. The income does not flow through Schedule E Supplemental Income and Loss and is not passive income.
In addition, box 19 Distributions may generate a taxable event and may also be reported on Schedule D Capital Gains and Losses.