Schedule E Part II Column F

[EmsBTW2016]

Partner in K1 (1065) has no amounts at risk. Passive loss not allowed due to no amount at risk (also no income in prior years). Should the box be checked in column F for “check if any amount is NOT at risk”. I would think yes, but maybe is it not getting checked since no losses are allowed so it’s just disregarding that box?

[itonewbie]

Why do you believe there's no amount at risk?

[EmsBTW2016]

The clients parents made them a partner in the K1 so they did not personally invest anything into it, in prior years this box is checked. It looks like this client is being transferred ownership % each year per the K1 worksheets. I suppose I should investigate further to confirm.

This K1 is meant to be a tax shelter for them and create losses in the early years that will (or should - according to clients dad) more than offset income in future years.

[itonewbie]

This does not sound right.  It is a case of gifted partnership interest.  Provided it is a gift of present interest, the children should have established a basis and the amount at risk.  Agree you will need to obtain more information about the structure and the history of the transfer of such interests.

[EmsBTW2016]

Oh man. Well I have just requested more information. I do not know why last year it was assumed that no amount was at risk. I requested to be put in touch with the accountant who prepares the K1 and hopefully they can give me the information I need.

Looking at the Changes in Ownership worksheet, it shows their ownership percentage increasing each year. I asked how she is getting her ownership.

[EmsBTW2016]

You were right. 

Client is gifted non voting shares each year. She is getting me in touch with accountant who prepares the K1.

in short - this means she DOES have amounts at risk (her non voting shares) correct?

So the box in column F will not be checked. However we need to track her amounts at risk and her basis (which the accountant should have).

Am I missing anything? Thank you so much for your responses! This forum is so helpful. 

[itonewbie · Accepted solution]

Wait to receive the details from the accountant who structured all that and then verify whether you agree with his/her opinion.  That would be my starting point.