Bart Posted February 23, 2012 Report Share Posted February 23, 2012 Client is a general partner in a partnership. Client has no basis or at-risk basis in the partnership. K-1 shows ordinary loss on line 1 of (40,000) and guaranteed payments of 14,000 on line 4. Form 6198 is not allowing any of the 40,000 loss to flow thru but all of the 14,000 is being taxed. Is this correct or should some of the 40,000 ofset the 14,000 for income tax purposes? Quote Link to comment Share on other sites More sharing options...
mcb39 Posted February 23, 2012 Report Share Posted February 23, 2012 If he is a general partner, how does he have no basis? Obviously if he has Guaranteed Payments, the partnership already deducted those as an expense; so no double-dipping allowed. He is liable for tax and SE tax on the Guaranteed payments. How can the loss be recognized if he has no basis? Seems odd to me. Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 23, 2012 Report Share Posted February 23, 2012 As a general partner he is liable for all partnership debts which normally puts him at risk and should give him some basis for deduction. You need to rethink this situation and look closer at form 6198 calculation. Quote Link to comment Share on other sites More sharing options...
Bart Posted February 23, 2012 Author Report Share Posted February 23, 2012 Thank you Marilyn and OldJack. The client's K-1 does not show any partner's share of liabilities and I do not know if the partnership has any liabilities. I will ask. Thanks again. Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 23, 2012 Report Share Posted February 23, 2012 Look at it this way... where did the money come from that created the 40k loss. It had to be from a partner capital account or a debt. Quote Link to comment Share on other sites More sharing options...
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