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New client with Partnership Return - prior year return reported activity as passive losses

  • 1.  New client with Partnership Return - prior year return reported activity as passive losses

    Posted 04-04-2023 04:49 PM

    Hello everyone,

     

    I recently got a new client which includes the Partnership Tax Return as well as the Personal Tax Returns for each Partner.  Each Partner owns 50%.   The Partnership had a loss in 2021 as well as guaranteed payments.  The guaranteed payments were picked up on Schedule E but no self-employment taxes were calculated which does not seem correct.  Furthermore, the ordinary losses were reported as passive losses on Form 8582 and were deemed "not allowed".  At first I thought they were not allowed due to a basis limitation.  However, in looking at each Partners K-1 (there was no basis schedule included in the package), the ending capital balances were negative but each Partner had $75,000 of Qualified Nonrecourse Financing from SBA loans.  My understanding is that these loans would give each Partner basis and if so, then the ordinary losses would have been allowed.

     

    There are a lot of moving parts with the prior year return.   This year the Partnership is showing ordinary  income.    Do I net against the "passive loss" that was claimed last year.   There are also a good about of Partner Distributions but a portion could be classified as guaranteed income.  Any input for last year and this year would be greatly appreciated.

     

    Thank you,

     

    Peter B. Scala, CPA, Founder

    Peter B. Scala, CPA, LLC

    775 Park Avenue, Suite 255

    Huntington, New York 11743

    Phone Number:  (631) 923-0200

    Mobile Number: (516) 318-3615

    Email: pbscala@pbscalacpa.com

    Website: www.pbscalacpa.com

     

     

     

     

     

    Sent from Mail for Windows

     



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