K-1 Unallowed Losses


C

ct kid

My wife has a LLC (with other family members) where we have
an outside accountant prepare the K-1 form. I use Turbo Tax
(TT) to prepare our return and have encountered an issue I
do not understand.

The K-1 show a net rental loss of <2,700> which I entered
in TT. I noticed that form 8852 shows the same amount as a
disallowed loss. I assume that means are taxes are not
benefiting from that loss.

Can someone tell me what leads to that being a disallowed
loss. The TT help files provide no meaningful guidance.

Thanks for your consideration.
 
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D

David Woods, EA, ChFC, CLU

ct kid said:
My wife has a LLC (with other family members) where we have
an outside accountant prepare the K-1 form. I use Turbo Tax
(TT) to prepare our return and have encountered an issue I
do not understand.

The K-1 show a net rental loss of <2,700> which I entered
in TT. I noticed that form 8852 shows the same amount as a
disallowed loss. I assume that means are taxes are not
benefiting from that loss.

Can someone tell me what leads to that being a disallowed
loss. The TT help files provide no meaningful guidance.
Without seeing the K-1, it is impossible to definitively
answer. You should direct your questions to the accountant
who prepared the K-1.
 
T

Thomas Healy

ct kid said:
My wife has a LLC (with other family members) where we have
an outside accountant prepare the K-1 form. I use Turbo Tax
(TT) to prepare our return and have encountered an issue I
do not understand.

The K-1 show a net rental loss of <2,700> which I entered
in TT. I noticed that form 8852 shows the same amount as a
disallowed loss. I assume that means are taxes are not
benefiting from that loss.

Can someone tell me what leads to that being a disallowed
loss. The TT help files provide no meaningful guidance.
Welcome to the world of passive activities. There are a
couple of reasons the 8582 (not 8852) would disallow the
losses:

1. Your income is over $150,000, not counting the loss.
2. Your wife's ownership of the LLC is under 10%, so
she can't use the special $25,000 rental real estate
exception.
3. Your wife's basis in the LLC is zero (oh, in that case
you would need to fill out form 6198 before completing
the 8582).

If none of these applies, you haven't marked something
correctly in the K-1 input, or it's time to get your own tax
accountant.
 
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J

John Beurket

ct said:
My wife has a LLC (with other family members) where we have
an outside accountant prepare the K-1 form. I use Turbo Tax
(TT) to prepare our return and have encountered an issue I
do not understand.

The K-1 show a net rental loss of <2,700> which I entered
in TT. I noticed that form 8852 shows the same amount as a
disallowed loss. I assume that means are taxes are not
benefiting from that loss.

Can someone tell me what leads to that being a disallowed
loss. The TT help files provide no meaningful guidance.

Thanks for your consideration.
The loss will be allowed if she claims that she actively
participated in the rental real estate activity (line 2 of
the K-1.)

John B.
 

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