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Final K-1 / Basis Limitation Not Being Applied

Level 1

Individual owns an interest in a partnership with large passive loss carryover (about $5 million).  In 2019, partnership K-1 is final.  Partner does not have enough basis to use all of the "freed up" passive loss carryover.  Partner has about $1 million in basis.  Lacerte is allowing the ENTIRE passive loss carryover of $5 million and is flowing this to Schedule E, Page 2.  That can't be right.  What are we doing incorrectly?  Or how to we get Lacerte to apply basis limit first?

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1 Comment 1
Level 11
Level 11

The basis limitation should have applied in the year the loss originated. The order is basis, at-risk, passive, and you have to have had basis to have a passive loss carryforward.