1065 K1 Help

[ETax847]

Client has a loss of $89k in box 1 for Ordinary Business Loss and Guaranteed Payments of $125k in Box 4 of his 1065 K-1.  His ending capital account on Line L shows a negative amount.  Is the tax payer able to take the loss having a negative capital account or does that change things?

[ETax847]

Client's CEO emailed client saying "With regards to effects on your personal return, profits interests won’t have a tax basis or at-risk basis to take any losses.Tax advisers should know that any disallowed losses are carried forward and will be allowed at any time you dispose of your interest" 

My question is why is the Ordinary Business Loss carried forward?

[Abby Normal]

30 minutes ago, ETax847 said:

Client has a loss of $89k in box 1 for Ordinary Business Loss and Guaranteed Payments of $125k in Box 4 of his 1065 K-1.  His ending capital account on Line L shows a negative amount.  Is the tax payer able to take the loss having a negative capital account or does that change things?

You need to know the partner's capital BASIS and debt basis. The capital may not equal the partner's outside basis. Did the K1 come with basis worksheets? If not, then ask for them, or reconstruct basis with your client.

[ETax847]

Thanks Abby! Much appreciated.