Last minute question (partnership loss)

[ILLMAS]

I am helping a fellow tax preparer with an issue she is encountering, her client closed the partnership (final return) and had a loss of $20K, the TP personal income was over $200K, I know the loss is limited to zero if the loss was from passive activity, but in this case it wasn't, the business is a consulting firm.  Sorry for the last minute question, I am trying to think would cause for the loss to be limited to $3K only, anyone?  Is it because it's a final K-1?

Thanks

[jklcpa]

You didn't say if the TP had other cap gain or loss activity, but if the $20K loss is in excess of her basis, with no other gains on Sch D to offset and if the Sch D total losses are more than $3K, then it sounds like the cap loss limitation might be your reason.

[ILLMAS]

Thanks, they are going to fax over the k-1, will respond as soon as I get it.

MAS

[ILLMAS]

Here is the partners capital account info:

Beginning capital                       $-40,000

Capital Contributed during year $100,000

Current year decrease              $-20,000

Withdrawal & Distributions        $  -5,000

Ending capital                           $ 35,000

I know if the capital account end in negative it actually positive if I am not mistaking, in this case it's negative.