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1040 - entering k-1 from 1065, how to release losses from rental property inside 1065

ekhosme
Level 1

My client has a partnership with 3 rental properties.  Two of the rental properties have been sold, one remains.  K-1 losses have been suspended and carried forward each year, and now need to be released only for the 2 properties that were sold.  How can I do this in ProSeries?  

My thoughts on this are to use separate K-1s for data entry purposes to report each property on it's own and mark final so losses are released.  Similar to when you have ordinary income in box 1 of a K-1 and rental income in box 2 of a K-1, they have to be reported on separate K-1 input sheets.  Not sure if this is the correct way to release the losses?

 

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hedgeslaw
Level 3

Regardless, whether or not the suspended losses were reported on line 10 of the K-1 1065 you can enter the release of suspended losses on the taxpayer's 1040 by going to SCH K-1 PARTNERSHIP-ATTDL INFORMATION 1 ... then go to the Box 10 area ... then on Line 4 (portfolio income or loss) enter RELEASE OF SUSPENDED LOSS and enter the suspended losses as a negative amount.

Verify the negative amount flows to page 2, Sch E, as an Ordinary Loss.

You might want to check to see if the properties were "grouped" by the partnership. Sometimes losses get trapped until all the grouped items are sold.

Also, you may need to attach as a PDF your Basis Computation for that partnership if you took a draw or had loan transactions with it. If so, check that box on page 2, Sch E, Col (e) and attach the PDF.