NJ: NET LOSS FROM ALL 1065 K1

[KATHERINE]

Hi dear friends here,  

Found something strange, the client has multiple K1s from VA, which ends a net of  negative.   Seems NJ does not allow me to reduce her income from this net loss of K1.  Is that correct?

 

I checked with instruction, it said box 4 of NJ Bus-1 goes to box 21, but only positive number goes.  Where shall I post the loss from K1 to reduce my NJ income?

 

Thank you all.

 

Kate

 

 

 

[GLGACCT]

Have you looked at NJ - Bus 2? 

[KATHERINE]

Hi GlGA,

Thank you for your response.  The 1040 doesnot take negative number from BUS1, and Bus 2's negative also not allow shown as negative in NJ1040.  so, if a NJ resident have negative K1 from other states, cannot reduce income, I am not sure?

[Lion EA]

CT gives credit for taxes paid to another state on the same income that CT's taxing. If the other state has NO income, did NOT tax any income due to a loss, then there is NO credit on the CT return. CT, the home state, is NOT taxing that loss. Maybe NJ is similar. Start by reading the NJ instructions.

[KATHERINE]

6 minutes ago, Lion EA said:

CT gives credit for taxes paid to another state on the same income that CT's taxing. If the other state has NO income, did NOT tax any income due to a loss, then there is NO credit on the CT return. CT, the home state, is NOT taxing that loss. Maybe NJ is similar. Start by reading the NJ instructions.

Hi dear Lion,

That is the thing.  I am in NY, we are doing like this:  if paid tax to the K1 source state, we will give credit; if source state K1 is negative, we WILL allow a loss because NY tax worldwide income too, if a loss, they will allow to take the loss subject some restriction.   NY return starts from FED AGI with some adj , but the loss from other state is not an add back item.   now, I feel NJ will tax on positive K1 from other states, but not allow negative K1 to reduce income.   so, CT is the same, if CT resident only has one K1 which is a NY K1 with a loss, that NY K1   cannot reduce his CT gross income?  is that true?  

Thank you so much!

 

Kate

[Lion EA]

In CT, it already reduced his worldwide income, because CT starts with the Federal AGI that includes any losses. Like the old Ragu commercials: it's in there.

[GLGACCT]

It is my understanding, that NJ does not allow you to take the loss, but rather carry it over to future years to offset the income.  If you had income, column A would be filled in on NJ-BUS 2 and appear on line 21 of the NJ-1040. Then lines 7-11 on NJ-Bus 2 would also be filled in offsetting the carry over loss but be reduced by the adjustment percentage on line 10 and appear on line 35 of the NJ-1040 as a reduction.

Also, in NJ if you are paying taxes to other states, you do get a credit as well see NJ Sch NJ-COJ/NJ-DOP.

[KATHERINE]

3 hours ago, GLGACCT said:

It is my understanding, that NJ does not allow you to take the loss, but rather carry it over to future years to offset the income.  If you had income, column A would be filled in on NJ-BUS 2 and appear on line 21 of the NJ-1040. Then lines 7-11 on NJ-Bus 2 would also be filled in offsetting the carry over loss but be reduced by the adjustment percentage on line 10 and appear on line 35 of the NJ-1040 as a reduction.

Also, in NJ if you are paying taxes to other states, you do get a credit as well see NJ Sch NJ-COJ/NJ-DOP.

I tried to fill out Bus-2 manfully, it did not create a negative number to NJ1040.   seems, NJ resident have net loss from outside NJ K1, NJ doesnot allow use that loss to offset NJ income to reach the NJ taxable income.  Thank you!

[GLGACCT]

You are correct, in NJ you can not offset a k-1 loss against other income, hence the carryover to be used against future k-1 income.  If you have income next year, the full net profit from next year's  k-1 will flow to line 21 of next year's  NJ 1040, and then a portion of the loss will appear on line 35 of next year's NJ 1040.  Lines 30 - 35 are reductions and will reduce NJ taxable income.  Unfortunately, you will not be able to reduce taxable income in NJ this year.

 

 

 

[Lion EA]

The NJ credit is not about the VA loss offsetting the NJ gain. (If it's like CT, and it looks like that from the pages you posted above.) It's a credit to NJ tax to offset the VA tax he paid on the same income. But, he had a VA loss, he had NO VA income, so he did NOT pay VA tax on any income. Therefore, he has NO VA tax to offset his NJ tax. He's NOT paying tax on the same income twice. GLGACCT gave you a great explanation.