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Calculating the basis limitation for an individual return in Lacerte

by Intuit• Updated 2 months ago

A passive Schedule K-1's losses and deductions are subjected to three limitations: (1) Basis; (2) At-Risk; and (3) Passive, and must be applied in that order. Once a loss has been allowed by a limitation, that limitation never gets reapplied.

For example, if a loss is allowed by the basis limits, but disallowed by the at-risk limits, the resulting at-risk carryover can be allowed the following year if the amount at-risk increases, even if the basis in the partnership is reduced to zero.
A non-passive activity is only subject to the Basis and At-Risk limitations. A passive PTP (publicly traded partnership) has additional limitations that may affect the loss limitations.

To calculate the basis

For Lacerte to calculate the basis, the beginning basis must be entered in the basis limitation section of the applicable activity. To enter this information:

Go to Screen 20.1, Partnership Information.
Scroll to the Amount at Risk (6168) subsection.
Enter the amounts in the field Adjusted basis at beginning of year - Simplified computation (6198 Part II) (-1=none) [Override].
- The ending basis will proforma from the previous year, to the new tax year as the beginning basis.

To generate the basis worksheet

Lacerte produces a basis worksheet to show the basis calculation. The worksheet displays each passthrough K-1 activity separately (the worksheet isn't included with the e-filed return).

To generate the basis worksheet for all clients:

Go to the Settings dropdown menu.
Select Options.
Select the Tax Return tab.
Scroll to the Federal Tax Options section.
Locate the Basis Schedule dropdown.
Select Always with Worksheets.

To generate the basis worksheet for a specific client:

Go to Screen 3, Miscellaneous Info./Direct Deposit.
In the lower part of the Miscellaneous section locate the Basis schedule [O] (Ctrl+T) dropdown.
Select With Worksheets.

To view the basis worksheet:

Go to the Forms tab.
Scroll through the Form panel in the left menu and select Basis Limitation.
The form will display as Federal Basis Limitation Worksheets.

To generate the Schedule of Loss Limitations worksheet

Lacerte also produces a Schedule of Loss Limitations worksheet to help identify where losses are being suspended. The schedule will provide a detailed view of loss by activity and will show how losses are being used or suspended based on the order rules (this worksheet isn't included with the e-file return).

To generate this worksheet for all clients:

Go to the Settings dropdown menu.
Select Options.
Select the Tax Return tab.
Scroll to the Federal Tax Options section.
Locate the Schedule of Loss Limitations dropdown.
Select Always with Worksheets.

To generate this worksheet for a specific client:

Go to Screen 3, Miscellaneous Info./Direct Deposit.
In the lower part of the Miscellaneous section locate, Schedule of Loss Limitations [O] (Ctrl+T).

To view the worksheet:

Go to the Forms tab.
Scroll through the Form panel in the left menu and select Basis Limitation. This worksheet will be listed under Basis Limitation in the forms view, as an additional worksheet.
Select Schedule of Loss Limitations in the Description panel.

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