- quote -

Sorry.. This is an LLC (1065 filer).

- quote -

Thanks for the input.

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"JMc" <jmmc76[at]NOSPAM.gamebox.net> wrote:

- quote -

Please tell us if you are a partnership (1065) or an S-corp.
Based on your first question, I'm supposing you are an S
corp. But if thats true, I'm not quite sure about your
"guaranteed payment" question in the 2nd question.

If you are an S corp, I record the entire loss on one line
of Sch E just as shown on the K-1. Then after doing my side
calculation of basis and determining how much of such loss
must be "suspended", I enter as a second line an offsetting
amount reducing the loss and call it XYZ Corp-Suspended
Losses. This method has the benefit of showing the entire
amounts from the K-1 which IRS has they can compare to. Keep
a running account of the suspended losses because you would
be asked to show how you determined the basis if audited.

Mike Lewis, CPA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Group,

I have two separate yet somewhat related questions.

1) A taxpayer receives a K-1 with an ordinary loss of, let's
say, $100,000. However, taxpayer's basis in the entity is
only $50,000 (including debt basis). So, taxpayer can only
report $50,000 of loss on return, and the remaining $50,000
is suspended (i.e. the taxpayer ran into and tripped over
the basis hurdle before he could even get to the at-risk
hurdle). Is there some sort of disclosure the taxpayer
needs to make on their 1040 when limiting their loss due to
lack of basis since there will be a discrepancy between the
K-1 and what is reported on schedule E?

2) When calculating your loss from activity for the at risk
calculation, are guaranteed payments factored in? I have a
colleague that thinks they shouldn't be factored in.
However, IRC section 465(d) says that the loss is the excess
of the deductions over the income from the activity.
Wouldn't "income from the activity" include guaranteed
payments?

Thanks again!

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >