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Stephen G.
Stephen G., Financial Advisor
Category: Capital Gains and Losses
Satisfied Customers: 7119
Experience:  Senior Tax Expert; CPA/PFS(retired)Personal Financial Planner; Small Business & Professional Mergers & Acquisitions
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I just received a K-1 from an LLC after I filed. It states

Customer Question

I just received a K-1 from an LLC after I filed. It states that as a result of my termination from the company I "on the Partners current year increase(decrease) Worksheet, Schedule M-2 subtraction, other decreases: Equity Termination Adjustment. That
adjustment was for -$19,635. I have been trying to find anywhere if I can deduct this loss on my revised return. I can't find anything. I think it may be a capital gain loss, but I need a definite answer.
Submitted: 1 year ago.
Category: Capital Gains and Losses
Expert:  Stephen G. replied 1 year ago.

The first question is what type of K-1 did you receive?

Is it a Form 1065 - Schedule K-1 or a Form 1120S -Schedule K-1?

If you have a deductible Capital Loss it won't actually come from your K-1.

As you may know, you are required to keep track of your tax basis in the Partnership or S-Corp starting with you original investment in the Company.

Your record-keeping apart from the entity's books & records would look something like this.

Example:

Beginning Investment $ 25,000.

Ordinary Income on K-1 10,000. (You included this income in your tax returns)

Less Cash Distributions - 7,500.

---------

Adjusted Tax Basis $27,500.

======

So, if that was your ending investment balance & you didn't receive any payments for you interest upon withdrawal from the partnership, you would have a long-term capital loss on your tax return.

If, for example, given the example of $27,500. above & upon termination you received a cash distribution of $20,000., you would have a long-term capital loss of $7,500.

If, for example, given the example of $27,500. above & upon termination you received a cash distribution of

$30,000., you would have a long-term capital gain of $2,500.

Customer: replied 1 year ago.
It was a form 1065 K1. Where would the loss go on my tax return?
Expert:  Stephen G. replied 1 year ago.

It would go on Form 8949, the new Schedule D sub-schedule. You would treat it just like any other sale of stock.

If you need further assistance, let me know. I should be online most of the rest of the day. If you respond here, I'll get an email notifying me of it.

Thanks, ***** *****

Expert:  Stephen G. replied 1 year ago.

Do you have any questions or comments or may I clarify anything for you?

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