The following video provides a walk-through for applying the basis limitation to a K-1 pass-through entity and shows you how to see the calculations in a 1040 return.



To enter Partnership basis limitation:

1. Select the Income/Deductions category.
2. Select the Partnership Passthrough worksheets.
3. Select Section 6 - Basis Limitation Information.
   • In line 1 - Subject this entity to the basis limitation calculation, select the check box to activate the basis limitation.
   • In line 5 - Adjusted basis at beginning of year,  input the amounts for each column, as needed.
   • In lines 6-9 - Increases to Basis information, complete each line as needed.
   • In line 10-12 - Decreases to Basis information, complete each line as needed.
   • In line 13-18 - Debt basis information, complete each line as needed.
   • line 19 - Other Increases/Decreases grid, input other increases or decreases, as needed.
4. Calculate the return.

To enter basis carryovers:

1. Select Section 16 - Basis Carryovers.
   • In lines 1-35 - Basis Carryovers information, input each line as needed.
2. Calculate the return.

To enter S Corporation basis limitation:

1. Select the Income/Deductions category.
2. Select the S Corporation Passthrough worksheets.
3. Select Section 6 - Basis Limitation Information.
   • In line 1 - Subject this entity to the basis limitation calculation, select the check box to activate the basis limitation.
   • In line 5 - Adjusted basis at beginning of year,  input the amounts for each column, as needed.
   • In lines 6-9 - Increases to Basis information, complete each line as needed.
   • In line 10-12 - Decreases to Basis information, complete each line as needed.
   • In lines 13-18 - Debt basis information, complete each line as needed.
   • In line 19 - Other Increases/Decreases grid, input other increases or decreases, as needed.
4. Calculate the return.

To enter basis carryovers:

1. Select Section 16 - Basis Carryovers.
   • In lines 1-35  Basis Carryovers information, input each line as needed.
2. Calculate the return.

Note: Current year income, gains, losses and deductions from the passthroughs are carried to the basis limitation worksheet automatically.
Note: If capital gains/ losses are listed in Income and Deductions> Gains and Losses> Section 2 - Other Capital Transactions and/or Section 4 - Business Property, Casualties, and Thefts, these will carry to the basis limitation worksheet, if they are attached to the specific passthrough activity.

 

To prevent capital gains/losses flowing from the above sections to the basis limitation worksheet:

1. Select the Income/Deductions category.
2. Select the Gains and Losses worksheets.
3. Select Section 2 - Other Capital Transactions.
   • Select Detail (located at the top left of the grid).
   • In line 16 - Basis Code, input a code '2' for the gain or loss to not be included in the basis calculation. Or,
4. Select Section 4 - Business Property, Casualties and Thefts.
   • Select Detail (located at the top left of the grid).
   • In line 14 - Basis Code, input a code '2' for the gain or loss to not be included in the basis calculation.
5. Calculate the return.

To view the basis limitation worksheet:

1. Select the Federal Government tab.
2. Select K-1 Basis Limitation.
3. Select Partnership Basis Worksheet. (If applicable.), or
4. Select S Corporation Basis Worksheet. (If applicable.)

Note: Since the basis is calculated at the entity level, but the at-risk and passive limitations are calculated at the activity levels, K-1's entered with multiple activities are totaled together for the basis limitation and then separated back out for the purpose of the at-risk and passive activity calculations.

Note: If losses exceed basis, carryovers are calculated and proformaed to the next year's tax return. The carryover report can be found by doing the following:

1. Select Federal Government tab.
2. Select Misc - Miscellaneous
3. Select C/O to 20XX - Tax Return Carryovers to 20XX.