K-1 (1065) Dom. Prod. Act. Ded. Negative

[BulldogTom]

TP has K-1 from patnership, an activity that builds and sells houses. As you can imagine, there have been nothing but losses for the last couple of years. This year, the K-1 has a negative amount for DPAD. That seems very strange to me. I know enough about this to know that it is limited by income. You cannot take a deduction if you don't have income to offset. So why would they put a negative amount on the K-1. You cannot have a negative DPAD.

Or am I missing something?

I do the calculation every year for the company that I work for in my day job. One of our divisions qualifies as an activity for the deduction, but that division does not always have income. And when I break that division out and apply the overhead, I know if it is not a profit there is no deduction. That is pretty much the extent to which I work with this form. Never for any of my clients.

Any thoughts appreciated.

Tom

Lodi, CA

[jainen]

>>You cannot have a negative DPAD<<

A partnership is a passthrough entity. Some can calculate Qualified Production Activities Income on the entity level, others will simply report all the necessary information on income and losses. In either case, the actual DPAD deduction is determined on Form 8903 of each partner's separate return.

[BulldogTom]

OK, I get that. But I think you have to segregate the activities. I don't think you can combine 2 unrelated business activities for the deduction. Or can you?

[jainen]

>>I think you have to segregate the activities>>

Who says? Every entry on Form 8903 goes in the column titled "All activities." Line 7 in particular specifies plural pass-throughs. Check it out. Form 8903. Since the instructions are a pdf file, I even did a search for "what Bulldog Tom thinks," and it wasn't in there any where.