A passive Schedule K-1's losses and deductions are subjected to three limitations: (1) Basis; (2) At-Risk; and (3) Passive, and must be applied in that order. Once a loss has been allowed by a limitation, that limitation never gets reapplied.
- For example, if a loss is allowed by the basis limits, but disallowed by the at-risk limits, the resulting at-risk carryover can be allowed the following year if the amount at-risk increases, even if the basis in the partnership is reduced to zero.
- A non-passive activity is only subject to the Basis and At-Risk limitations. A passive PTP (publicly traded partnership) has additional limitations that may affect the loss limitations.
To calculate the basis
For Lacerte to calculate the basis, the beginning basis must be entered in the basis limitation section of the applicable activity. To enter this information:
- Go to Screen 20.1, Partnership Information.
- Scroll to the Amount at Risk (6168) subsection.
- Enter the amounts in the field Adjusted basis at beginning of year - Simplified computation (6198 Part II) (-1=none) [Override].
- The ending basis will proforma from the previous year, to the new tax year as the beginning basis.
Generating Form 8582 Passive Activity Loss Limitations for an Individual Return
Passive Losses from Publicly Traded Partnership (PTP) are Disallowed.
Partner's Instructions for Schedule K-1 (Form 1065) (2011)
Shareholder's Instructions for Schedule K-1 (Form 1120S) (2011)