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Basis Limitation on a Personal Return for a Business Activity (Partnership)

prkwork
Level 3

I have a married couple with an LLC based in a non-community property state. Thus, the LLC files as a partnership. The partnership is profitable and passes a K-1 to each partner. As the couple live in a community property state and is filing jointly, I combine them. The opening adjusted basis plus additional investments during the year plus the LLC's pass-through income less distributions to the partners is positive. However, ProConnect calculates a basis limitation, resulting in carryover. This does not seem right. The Federal Basis Limitation Worksheet Page 1 cites a negative Adjusted Basis at End of Year. How can this be?

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prkwork
Level 3

I have entered the correct distributions amount from the K-1s as Line 19A  (two detail lines within this entry, showing by partner name) on the Partnership K-1 entry screen. I see this on the worksheet by partner name, but the worksheet also has the distribution labelled "Current year distributions of money". I don't see where this could come from. 

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7 Replies 7
sjrcpa
Level 15

Have you checked the basis computation worksheet for errors (yours or the software's)?


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prkwork
Level 3

1. If you mean the At-Risk Limitation Worksheet, that looks fine.

2. The "Basis Limitation (Federal Basis Limitation Worksheets)" is where the problem lies. It causes some tax basis carryover. "Basis Limitation (Schedule of Loss Limitations)" shows certain expenses "Disallowed due to Basis Limitation".

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prkwork
Level 3

As far as data problems. all the entry is fine. It's that the worksheet shows a zero ending Adjusted Basis (wrong) and a negative "Adjusted basis used for this calculation". How can any of this be, when the K-1s all show income? Here is one oddity that may give you direction to the solution: The Federal Basis Limitation Worksheet has doubled up the distributions to the owners. "Current distributions of money" shows the correct distribution amount as does "Cash Distribution". Taken together, distributions are double-counted, resulting in a drop of calculated basis to zero.

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sjrcpa
Level 15

" distributions are double-counted, resulting in a drop of calculated basis to zero.

That's the problem. You may have inadvertently entered it twice?


ex-AllStar
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prkwork
Level 3

Yes, there was a double-count in entries. ProConnect Online has you enter the distributions as Line 19A from the K-1s, but there is also a place in the Basis input to enter distributions as well. To roll forward the basis properly, it would seem that it would be needed here. However, entering to both places results in the double-count. There is no note in the software that the Basis input would default from the 19A input, no note that you should not enter distributions to the Basis input if you entered them to 19A. I should recommend to ProConnect to better label this area.

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sjrcpa
Level 15

Problem solved now?


ex-AllStar
prkwork
Level 3

I have entered the correct distributions amount from the K-1s as Line 19A  (two detail lines within this entry, showing by partner name) on the Partnership K-1 entry screen. I see this on the worksheet by partner name, but the worksheet also has the distribution labelled "Current year distributions of money". I don't see where this could come from. 

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