Why is a loss not flowing to the second page of Schedule E for a K1P or K1S?
Following are items you can check in a return if the Schedule E, page 2 is not reflecting the expected losses:
- Check the basis worksheet (Wks K1P Adj Basis or Wks K1S Adj Basis) in view mode. For example, if the taxpayer has a loss of $25,000 and no (0) partner basis or shareholder basis, the loss may not be allowed.
- Check the Basis Worksheet screen(s) in data entry. Is a basis worksheet being considered even though there are no entries? Look at the bottom left of the Basis Worksheet screen(s). If it says Record 1 of 1 the software thinks there is a worksheet in play. Delete the worksheet if necessary.
- Check the at-risk worksheet (Wks K1P At-Risk or Wks K1S At-Risk) and/or Form 6198 in view mode. For example, if the taxpayer has $10,000 in partner basis, but has no (0) at-risk basis, the loss may not be allowed on the Schedule E, page 2. (Note: The partner or shareholder’s basis will be affected.)
- Check the 6198 At Risk screen(s) in the K1P or K1S data entry. Is an at-risk worksheet being considered even though there are no entries? Look at the bottom left: if it says Record 1 of 1 the software thinks there is an at-risk worksheet in play. Delete the worksheet if necessary.
- Check Form 8582, Part II in view mode. The loss may be limited because of the MAGI (see the Wks MAGI in view mode). If the MAGI is between $100,000 and $150,000 the loss may be limited. If it is $150,000 or more the loss may not be allowed. (Note: You can force the 8582 to print from the PRNT screen, under Items to Print.)
- Are there prior-year (PY) passive losses involved? PY passive losses may change the amount of losses allowed on the Schedule E, page 2. Check the data entry screen for prior year unallowed losses. Also look at the WKs PAL in view mode.
- Check data entry on the K1P or K1S screen. Is The activity was disposed of during taxable year selected? If not, you may need to make that selection to see the loss flow to the Schedule E, page 2.
- Check the Treat this ENTIRE activity as section on the K1P or K1S screen. Is the wrong activity type selected?
- the Filing Status on screen 1 (Name and Address). If the filing status is MFS (#3), the loss may not be allowed. You also may need to select Taxpayer did not live with the spouse even 1 day during the year from the Taxpayer did not live with spouse drop list on screen 1.
- Form 8582, Part II. If line 6 is zero, check your filing status. If lines 6 and 7 have amounts but line 8 is 0, the MAGI may be too high to receive the special allowance. Check the WKs MAGI in view mode. See Publication 925 under "Special $25,000 allowance".
- This last item applies only to a K1P:
Check the data entry on the K1P screen. Is This is a publicly traded partnership selected? If so, losses for each PTP may only be taken against that same PTP’s gains. Check for an 8582_PTP in view mode.