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How can a huge loss in box 2 of my K1 not generate a large reduction in my tax liability on Turbo Tax?

Forum|Forum|6 years ago
June 7, 2019
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I entered a large negative number into Box 2 of Turbo Tax for my K1 from an Oil and Gas Partnership. I was expecting my total tax liability to reduce by a large amount from this entry, it did not move at all. What am I doing wrong? Can Turbo Tax handle Oil and Gas Partnership K1?

TurboTax Self Employed Online

Best answer by AnnaB

Box 2 on Schedule K-1 reports rental income (loss) which is generally considered to be a passive activity. Losses from passive activities can only be used to reduce other passive income (most commonly income reported on Schedule K-1 for partnership and S-Corporation investments). However, there is an exception for rental losses that allow a loss for active participants up to $25,000. This is eliminated if your modified adjusted gross income exceeds $100,000 (or $75,000 if married filing separately).

Any unused passive losses carryover to future years to offset future passive income. When your interest in the partnership is sold or disposed of, you can take all losses carried forward in the year of disposition.

Please refer to the link below for more information regarding passive loss limitations specific to rentals.

https://www.irs.gov/publications/p527/ch03.html#en_US_2015_publink1000219118

Yes, TurboTax can handle Schedule K-1 for a partnership and based on the fact it is a rental loss, you may not be doing anything wrong.

A

AnnaBAnswer

Employee

Box 2 on Schedule K-1 reports rental income (loss) which is generally considered to be a passive activity. Losses from passive activities can only be used to reduce other passive income (most commonly income reported on Schedule K-1 for partnership and S-Corporation investments). However, there is an exception for rental losses that allow a loss for active participants up to $25,000. This is eliminated if your modified adjusted gross income exceeds $100,000 (or $75,000 if married filing separately).

Any unused passive losses carryover to future years to offset future passive income. When your interest in the partnership is sold or disposed of, you can take all losses carried forward in the year of disposition.

Please refer to the link below for more information regarding passive loss limitations specific to rentals.

https://www.irs.gov/publications/p527/ch03.html#en_US_2015_publink1000219118

Yes, TurboTax can handle Schedule K-1 for a partnership and based on the fact it is a rental loss, you may not be doing anything wrong.

C

ckl9988

Question about box 2 losses - if AGI is over 150K can we deduct in entirety especially if one is an active participant (real estate professional)?

T

ThomasM125

If you are a real estate professional, you can deduct the full loss, but you also may need to pay self-employment tax on future income.

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J

jingchangjian

In my final K-1, when both box 1 and 2 have a negative number, can I just file one k-1 instead of two? Greatly appreciate your time and expertise!

Critter-3

@jingchangjian

NO ... you must divide it into 2 K-1 entries ... the easiest way is to enter everything EXCEPT box 2 on the first entry and ONLY box 2 on the second entry and the program will marry them back together automatically.