allocation of recourse debt

Forum|Forum|3 years ago
April 10, 2023
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One partner in the partnership is at risk for loans made to the LLC and the other does not. The Turbotax software refuses to not allocate this debt that is not recourse to the other partner and wants to allocate based on % profit or loss but that does not apply to the allocation as the allocation is 100% to one partner and not the other that is passive and is not liable for any of the liabilities. How do I fix or deal with this in order to allocate 100% to one partner of the recourse liabilities of the LLC and not to the other???

TurboTax Business Windows

PatriciaV

Employee

Yes, you can set up Special Allocations for Partners' Liabilities following these steps:

First, confirm that "Makes Special Allocations" is listed as Yes under Business Info >> About Your Business.
Go to Partner/Member Information and click Done at the bottom of the Member Summary page.
Continue to the page "How to Enter Special Allocations" and click "See Demo" at the bottom.
Follow the first example for Special Allocation by Amount to enter the specific liability amounts on the Schedule K-1 worksheet for each partner under Special Allocations By Amount Line A. (Skip the entry for Schedule K.)
Go to the Partners' Liabilities Smart Worksheet under Schedule L of Form 1065 p4-5.
Enter the SA code and the total Liabilities on Line D Recourse (beginning and ending columns).
If your beginning and ending liability amounts are different, set up two SA codes in step 4, the first for beginning and the second for ending amounts. Then enter the correct SA codes on the Smart Worksheet in Step 6.
To confirm the allocations, review Section K on each Schedule K-1.