Solved

I am a minority partner in a LLC that has experienced losses over the past few years. Is there a limit to the amount of losses I can claim?

Forum|Forum|7 years ago
June 6, 2019
1 reply
0 views

The firm is a manufacturing company that had profits earlier in its existence and paid taxes on profits and the capital account increased. The last three years it has lost money. I claimed the losses on my '14 and '15 returns but wonder if there is a limit to what can be claimed. My capital account is still positive but less than my initial investment.

Best answer by Rick19744

You need to be maintaining a basis schedule. This basis schedule is updated annually for the applicable lines on the Schedule K-1. This schedule will provide the details as to whether you are at-risk to take losses and will also be necessary to determine your overall gain or loss upon disposition.

I have attached a link to a worksheet that will provide some guidance:

http://www.thetaxbook.com/updates/TheTaxBook/Client%20Tax%20Tools/Partners_Adjusted_Basis_Worksheet....

As long as your basis is positive, you are able to take losses. Once your basis reaches zero, any additional losses will be suspended and utilized in future years when the LLC generates income.

Your capital account and tax basis are not the same.

Rick19744Answer

Employee

You need to be maintaining a basis schedule. This basis schedule is updated annually for the applicable lines on the Schedule K-1. This schedule will provide the details as to whether you are at-risk to take losses and will also be necessary to determine your overall gain or loss upon disposition.

I have attached a link to a worksheet that will provide some guidance:

http://www.thetaxbook.com/updates/TheTaxBook/Client%20Tax%20Tools/Partners_Adjusted_Basis_Worksheet....

As long as your basis is positive, you are able to take losses. Once your basis reaches zero, any additional losses will be suspended and utilized in future years when the LLC generates income.

Your capital account and tax basis are not the same.

*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.