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1040-X K-1 losses suspended

Nat Hussey
Level 3

I'm entering a late K-1 and Box 1 losses are being suspended while box 5, 6a, 8 and 9a figures for interest, dividends and s/l capital gains are resulting in increased income. This seems off. Thank you!

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13 Comments 13
Jim-from-Ohio
Level 11

Interest income, dividend income, and capital gains are not impacted by a suspensed loss from Box 1.  sounds like the program is handling it correctly. 

 

dkh
Level 15

If applicable - Have you checked the Materially participated in business activities box for Line 1  ?    

Also guessing you have Basis Statement that would allow the loss to be deducted.....

Nat Hussey
Level 3

Client has a substantial positive capital account balance per K-1.

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Nat Hussey
Level 3

Thank you Jim from Ohio. My expectation was that since the client has a substantial positive capital account, the loss would offset income items. (?)

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Jim-from-Ohio
Level 11

why do you think the loss from Box 1 is suspended?

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Nat Hussey
Level 3

I must be comparing apples to oranges - my assumption was passive losses and income on the same K-1 would offset, but the box 1 loss is showing as suspended due to 6198 which I don't understand because all investment is at risk. 

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Jim-from-Ohio
Level 11

I think there are two issues. 1. Interest, dividend, and capital gain income are still taxable even if there are suspended losses. 2. As far as why the loss is suspended, that one I am not sure why if he has basis.. is the materially involved box on the K-1 input checked?

sjrcpa
Level 15

If Line 1 is passive it won't be allowed unless there is other passive income on the return.


Ex-AllStar
Nat Hussey
Level 3

He has substantial basis in the partnership - many times the loss amount- but it's an investment, so he does not materially participate in the enterprise. Thank you for staying with me on this. 

Nat Hussey
Level 3

That was my belief as well. The client has substantial net positive passive income. 

PATAX
Level 15

@sjrcpa is exactly correct. I just had this with the client and an out-of-state K1. There was a loss but it was not deductible.

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Nat Hussey
Level 3

Was that the case even though the client had other passive income? My client has plenty of other passive income and I had expected passive offsets passive. Thank you!

PATAX
Level 15

@Nat Hussey my client had no other passive income.

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