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@RichGee wrote:

Only able to have basis due to PPP loan forgiveness in 2021.

2020 loss was carried over to 2021 and was shown as non-passive loss on 2020 return..

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Are you using ProSeries?

ProSeries has not been capable of automatically limiting a loss due to Basis, so you may have entered something wrong on the 2020 return.  You should have ONLY enter the amounts allowable on the K-1 worksheet, and the 2020 program would not show anything about a carryover.  Then you would have needed to manually kept notes for carrying it over to 2021.

So you first may want to look at if 2020 needs to be changed or not.

As for 2021, add a second K-1 for the corporation, but rather than using the corporation name, call it "PYA".  On that "PYA" K-1, enter the amounts that are now allowed due to restored Basis.  And be sure to check "yes" for Box 27 of Schedule E.