I have a 1065 PTP K-1 flowing into a 1040. Box 20AD shows a QBI PTP loss. Per 1.199A-3(c)(3)(ii), shouldn't the QBI loss be suspended until the ord inc is released?

[PhoebeRoberts · Accepted solution]

Yes. But the QBI loss, like the PTP loss, is suspended at the 1040 level, not the 1065 level.

[arin]

Agreed, but Lacerte isn't suspending it.  I called and they told me Lacerte is correct, which seems at odds with the Regs.  Do I just need to track this seperately and override the Lacerte input?

[sjrcpa]

Yes keep track separately and override Lacerte.

[PhoebeRoberts]

Enter the PTP as a separate K-1.

[arin]

How would entering it seperately work?  I see how that works for ordinary suspended losses, but my PTP loss gets entered in line 20AD and isn't getting suspended like the ordinary income is.  In fact, when I enter a seperate PTP K-1, Lacerte isn't netting out the income due to suspension like it does with non-PTP losses.

[PhoebeRoberts]

20AD is the PTP *QBI* loss. The PTP loss that goes into the income calculation is entirely separate. Your K-1 should disclose the PTP portion of the K-1 income and deduction items separately. So if Box 1 is $500, made up of a $50 PTP loss and $550 of non-PTP income, you enter them as if they were two different K-1s.

You may need to request additional information from the K-1 issuer, if they don't have the PTP separately stated.

[arin]

Yes, that makes sense for the income.  My question is about suspending QBI PTP loss.  My understanding of the regs is that you won't recognize the QBI PTP loss until the associated ordinary loss is also recognized.  I'm trying to figure out if Lacerte will suspend/track that or if I have to do that manually off-line and then only enter into 20AD the portion that should be recognized for QBI purposes.

[PhoebeRoberts]

Ah, I see what you're saying - even entering it separately, Lacerte is allowing the PTP QBI loss and suspending the PTP ordinary loss. (And if you have an overall loss, there's not even a worksheet, worthless Lacerte.)

Yeah, Lacerte is doing it wrong. You have to override. Sorry!

[arin]

Thank you for looking at this.  It's very helpful to have confirmation that I'm interpreting the K-1  and QBI rules correctly.  Good luck with the rest of tax season!