Using the Schedule K-1 Worksheets in a individual return in ProSeries

1. In Part I of the worksheet, enter the pertinent information such as the name of the entity, EIN, and type of partner/shareholder.
2. In Part II, be sure to identify whether this is a Taxpayer, Spouse, or Joint worksheet.
3. In Part II, check the box that determines whether there is an at-risk limitation.
4. In Part III, enter the amounts from the taxpayer's Schedule K-1 in the corresponding fields.
5. If this is the first time you are creating a worksheet and there are carry over amounts, enter the amounts on the appropriate line in the "Suspended Loss Carryover From Prior Year" column.
6. If there are both rental and ordinary income, two worksheets will be needed for that Schedule K-1. There is no limit to how many Schedule K-1 Worksheets can be created. These worksheets are input sheets and will not be filed with the tax return.

1. In Part II of the Schedule K-1 Worksheet, click the QuickZoom button to go to Form 6198, At-Risk Limitations.
2. Enter the amounts needed to determine the at-risk limitations. Refer to Tax Help for more information.
3. If needed, in Part II of the Schedule K-1 Worksheet, click the QuickZoom button to go to the At-Risk Limitations Allocation Worksheet.
4. Allocate the appropriate amounts on the appropriate lines. Refer to Tax Help for more information.

ProSeries tax software does not calculate basis limitation.

1. If needed, in Part II or Part III of the Schedule K-1 Worksheet, click the QuickZoom button to go to the appropriate additional information worksheet.
2. Enter the appropriate amounts on the appropriate lines.

Losses reported on Schedule E, Page 2, line 28 from Partnerships and S Corporations and Line 33 from Estates and Trust may not be the same amount as reported on the Schedule K-1 for several reasons:

• Is all of the Amount At-Risk? Generally, at-risk rules limit the losses in a business activity to the amount of the loss or the amount at risk, whichever is less. See Form 6198, Part IV, line 20, 21 and the Disallowed Losses Smart Worksheet. Refer to IRS Pub. 925 for more information.
• What is the Passive Status of the activity? The program will indicate one of six statuses:
  • Disposition - The property is being treated as a nonpassive activity because it is a complete disposition of a passive activity with an overall loss.
  • Former - The property is being treated as a former passive activity.
  • RE Pro - The property is being treated as a nonpassive activity because it qualifies as a rental real estate activity with material participation owned by a real estate professional.
  • Active RE - The property is being treated as a passive activity that qualifies for the special allowance for rental real estate with active participation.
  • Passive - The property is being treated as a passive activity subject to the passive activity rules.
  • Nonpassive - The property is being treated as an activity not subject to the passive activity rules.
  • To verify the Passive Status in the program, look at the Passive Status field on the Schedule K-1 from a Partnership or S Corporation Page 3, Section A of the K-1 Worksheet.  For a Schedule K-1 from an Estate or Trust, it's located in in Part III.
• Is the K-1 from a PTP? The passive activity limitations are applied separately for items (other than the low-income housing credit and the rehabilitation credit) from each publicly traded partnership (PTP).  Therefore, a net passive loss from a PTP may not be deducted from other passive income.  Instead, a passive loss from a PTP is suspended and carried forward to be applied against passive income from the same PTP in later years. If the partner's entire interest in the PTP is completely disposed of, any unused losses are allowed in full in the year of disposition.
• Is the loss limited by Active Participation Rules? Generally, a Passive Activity with Active Participation allows those in a real estate activity to offset up to $25,000 of rental losses each year against non-passive sources.
  • If married filing separately and lived together no loss is allowed.
  • If married filing separately and lived apart the offset is $12,500
  • The loss is limited by modified adjusted gross income based on the formula (modified AGI - 100,000) x 50% or (modified AGI - $50,000) X 50% if Married Filing Separately and living apart.
  • See Form 8582, Part II for Modified AGI phase-out calculations.