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Old 03-09-2013, 05:39 PM
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How to account for investment loss from K1

I'm hoping someone can help with this. A few years back I invested money into a private fund that purchased a property. They would issue K1's to all the investors as part of the LLC. It would basically be 0 income, 0 loss. So no big deal.

Recently, the LLC basically had the property foreclosed and the recent K1 issued showed a -$10K loss in box 1, Ordinary Business Income (Loss).

My confusion is, is this something I can claim as an active loss? I wouldn't say I actively participated in anything other than handing over money. However, the money is now all gone. It is liquidated and so is the asset (property). So unlike a rental, I could never sell it and then claim the loss at a time of sale.

If I have to claim this as passive, when would it actually help offset income?

TIA!!



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Old 03-10-2013, 05:28 AM
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“My confusion is, is this something I can claim as an active loss? I wouldn't say I actively participated in anything other than handing over money. However, the money is now all gone. It is liquidated and so is the asset (property). So unlike a rental, I could never sell it and then claim the loss at a time of sale.”=======An interest in a partnership is considered a capital asset. Loss upon sale of a partnership interest is therefore generally treated as a capital loss.But the sale of a partnership interest can be restructured to permit ordinary losses. With inventive planning, it can – particularly for real estate and other “asset-rich” partnerships.
The amount reported in box 1 is your share of the ordinary loss from trade or business activities of theLLC. Generally, where you report this amount on Form 1040 depends on whether the amount is from an activity that is a passive activity to you. You need to report box 1 loss from partnership trade or business activities in which you did not materially participate; If loss is reported in box 1, you need to report the loss on Sch E of Form 1040, line 28, column (f).Since a loss is reported in box 1, follow the Instructions for Form 8582 to figure how much of the loss can be reported on Sch E (Form 1040), line 28, column (f) and 1040 line 17.


“If I have to claim this as passive, when would it actually help offset income?”===As said above, you can report the loss of $10K and on Form 1040, line 17 and it reduces your AGI/TI and tax liability on yur return


Last edited by Wnhough : 03-10-2013 at 05:44 AM.


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