Suspended loss

[DTS]

If a partner who is receiving guaranteed payments has a suspended loss from K-1, box 1 and the box 14 shows the decrease for SE earnings, is the loss suspended for lowering the SE earnings in box 14, as well? My program is showing the SE earnings lowered by the suspended loss and flowing to Sch SE.

Seems odd the loss would be suspended one place, but allowed on another. Thoughts?

Thank you.

[S T]

No Answers

I don't have an answer, but more questions, so trying to give you a "bump"

Is this a partnership or LLC filing as partnership?
Is partner LLC Member limited partner?
What is partner's basis - At Risk?

You state "suspended loss" for box 1 on K-1, meaning Partner has no basis or at Risk Basis for loss stated on K-1?

Sandy

[Snaggletooth]

Don't think so

Dennis, I don't think so. I believe either you are populating your software incorrectly, or else the software is simply treating this wrong.

If there were no K-1 involved, i.e. a proprietorship, the SE would not allow reduction for a NOL. If there is a suspended loss, it doesn't make sense SE would reach out into a suspended loss to reduce the SE tax. In fact, even when the loss is re-engaged I'm wondering if the loss would reduce the SE in a subsequent year.

The one element you introduce which I'm not familiar is a guaranteed payment with a suspended loss, because it is possible there might not even be a loss if there were no guaranteed payments. If the suspended loss does not exceed the guaranteed payments, then the reduction in SE tax may be handled correctly by your software.

I'm like Sandy -- don't know for sure.

[DTS]

Sandy and Snag

Thank you both. I'll give you a little more information and a fellow board member emailed me a few links from another forum and one link in particular seems to address the question, but not sure how reliable that other link is.

It is an LLC, partner (not limited) has no basis, negative capital acct., ordinary loss is ($19K), g/p is $42K, SE earnings stated at $23K, which is shown on Sch SE utilizing the loss of ($19K) and all UPE are suspended, as well.

The link that was sent to me from another forum states the loss is suspended for SE purposes and that the full amount of $42K is SE earnings. I don't know if this correct or not.

My program is showing the reduced amount from box 14. I believe I have filled out the at-risk properly, the basis worksheets look correct to me, but maybe they're not. If there is something I'm missing here I don't know what it is, but if either of you could point me in the right direction I'll try to discover what that missing element is.

Thanks again.

[veritas]

If you look at the instructions

for Form 1065 there is a worksheet to compute SE Earnings. The computation does not exclude the loss for that purpose.

I believe it makes more sense to allow the loss in the current year for SE purposes.

[S T]

Question

Another bump, as I don't have the answer and would really like to know for future reference

LLC - general partner (not limited)

Does a loss on line 1 of the form 1065 K-1 of ($19K) reduce the guarantee payment of $42K for SE tax (Box 14) to $ 23K

In particular because this LLC member has -0- basis or -0- at risk??

Isn't it true that basis and capital accounts can be very different and that basis can never go below -0-?

Maybe that is the issue in the software - that you have to show basis at -0- (not negative basis)

Hoping someone more proficient at the basis issues and at risk issues will post

Sandy

[DTS]

Zero basis

Yes, I am showing zero basis. I am going through the instructions for 6198 to make sure I'm filling the form correctly.

[Davc]

for Form 1065 there is a worksheet to compute SE Earnings. The computation does not exclude the loss for that purpose.

I believe it makes more sense to allow the loss in the current year for SE purposes.

See page 10 of the Partner's instructions to Schedule K-1 (Form 1065) where it states that if the amount in box 14 is a loss carry only the deductible amount to Schedule SE. The above referenced worksheet is for the partnership's reporting, it does not determine treatment at the partner level.

[veritas]

Your right

See page 10 of the Partner's instructions to Schedule K-1 (Form 1065) where it states that if the amount in box 14 is a loss carry only the deductible amount to Schedule SE. The above referenced worksheet is for the partnership's reporting, it does not determine treatment at the partner level.

I looked at those first and did not read it correctly. And of course at the partnership level there is no way to determine the proper computation.

Thanks for the post.