S Corp Basis Limitation

[David]

Client has been carrying forward losses that were limited in past years because of basis. He is allowed to take some previously suspended losses. However, the loss is showing up on Sch E pg 2 in the passive category.

I can't figure out how to get it in the nonpassive section. Also Form 6251 shows the difference between regular tax and AMT on line 19 Passive acitivities.

I don't think this should be classified as a passive activity. Or is it considered a passive loss since it is a basis limitation loss carryforward?

If it should be classified as nonpassive, can anyone who is using ProSeries tell me where to go to classify it to nonpassive?

Thanks.

[Ringers]

When you input the K-1 from the 1120-S into the individual's 1040, you can check the box underneath line 1 on the K-1 input form which says "check if materially participated in business activities."  With this box checked it will show the loss as non-passive.  BUT This would imply that the loss did not exceed the T/P basis.  What I have done with clients in the same situation as your client is show the accumulated loss which has been suspended in a supporting statement for line 1 of the Schedule K-1 and show the amount of loss on line 1 as "0."  Then, in years with a profit, show in a similar supporting statement for line 1 on Sch K-1 the calculation as to how much of the profit is offset by suspended losses from prior years and report that amount on the schedule K-1 on the 1040.  

I have been reporting the profits/suspended losses on one client's return for 11 years without any problem from IRS.

 

But then again, in the words of Intuit, "It doesn't take a genius..."  LOL

[Randall]

ATX also has basis worksheets.  I assume ProSeries would have something like this.  It's added to the return as a separate form in ATX.

[David]

Thanks for your help with this.

I used ATX in 2013 and am preparing a 2014 amended return in ProSeries. Both ATX and ProSeries (PS) have basis worksheets. 

I did have the materially participated box checked under line 1 of the K-1 input form. I still don't understand why it is reporting the suspended loss allowed in the passive category on Sch E pg 2. Any other ideas?

I am looking at this because the client received a letter from the IRS stating that it appeared the client was subject to the AMT and to submit Form 6251. The original 2014 individual tax return did not include the 6251. PS didn't include the 6251 in the return since the PS calculations determined the client wasn't subject to the AMT.

The 6251 still doesn't appear in the client's tax return even though I can "add" the form and view it. PS still doesn't include it in the return - it goes away after I close the return. Any ideas on having the 6251 included as part of the return? In print options I selected "if any data". "Always" doesn't appear in the drop down selections. PS still doesn't include it in the return.

PS carried forward the 2013 loss carryover from ATX - $162K regular tax and $213K AMT. All the suspended losses (basis limitation) were allowed in 2014 since the S Corp had a profit of $305K. This resulted in a $51K negative amount being shown on line 19 Passive activities of Form 6251. With this entry, there is no AMT. Without it, there would be AMT. I guess the IRS isn't aware of the difference between the regular loss carryover vs. the AMT carryover.

If I am going to submit Form 6251 shouldn't it show the $51K negative amount on line 20 Loss limitations instead of the passive activities line? Or does PS know something I don't know?

Thanks.