K-1 incorrect loss on Schedule E

Forum|Forum|3 years ago
March 19, 2023
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I'm confused about why my K-1 S Corp losses are being brought forward to Schedule E. My stock basis is 0 and there is no debit basis. I have a loss from the current year and a carryover lass from prior year. Both are being brought forward to Schedule E line 28 column (i) as separate items.

Form 6198 has the sum of both losses on line 5. Part II has 0 on line 10b

The At Risk Wks S has the current years loss and the carryover loss on A line 1.1. The sum of the losses are in the Allowed column and carries through to A line 8.

Form 7203 is correct and shows the sum of the current year and prior year as carryover losses.

I tried overriding the allowed column on the At Risk Wks S A line 1.1 and forced it to 0. This changed Schedule E line 28. The entry for the carryover loss is still present in 28(i). The entry for the current year now has a value equal to the carryover loss from the prior year in 28(k) income column. The net effect is that a 0 loss is on Schedule E.

This raises a couple of questions.

After overriding the allowed losses on the At Risk WKS A, why does Schedule E handle the prior years losses in th way it did?

Why isn't TurboTax disallowing the loss in the first place?

Rick19744

Employee

This is an area that TT needs taxpayer input as TT does not maintain your basis schedule.

I would not override the loss. Too many issues with doing so.

What you need to do is find out where form 6198 Part II line 6 is driven from. Once you do, you need to input zero on this line. Appears that since line 10b is correct, this should have resolved the issue.

The next item I would look for is to make sure the form 6198 is linked to that specific K-1. Can't tell you how to accomplish that, but it does need to be linked for the software to properly handle the at-risk limitation.

If the above doesn't resolve the issue, reply and I will use a "phone a friend" helpline.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

Doc99Author

Thank you for your suggestions. I'll dig into it again this weekend.

Doc99Author

Still not clear

Form 6198: Part II line 6 is 0. Part IV lines 20 & 21, Amount at risk and Deductible loss are 0.

Maybe I'm supposed to override the loss on line 1 of Section A, Passive Activity Adjustment to Income or Loss, of the K-1 S form. Doing that does zero out the loss on Schedule E, Part II line 32. It still does it in an odd way on Schedule E, Part II line 28.

What I call an odd way on Sch E, Part II line 28 is this:

The S Corp name is listed on one row with the carryover loss from last year in the income column k.

PYA is listed on the next row with the carryover loss from last year in the loss column i.

The net effect is to not allow a loss for the tax year. It just looks strange.