1040-US: Partner's Basis Worksheet - calculation of basis limitation

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Question

How does the Partner's Basis Worksheet calculate the basis limitation on the deductibility of a partner's share of partnership losses?

Answer

A partner's distributive share of partnership loss will be allowed only to the extent of the adjusted basis, before reduction by current year's losses, of such partner's interest in the partnership at the end of the partnership taxable year in which such loss occurred. UltraTax CS calculates this adjusted basis all the way through to expenditures of the partnership not deductible in calculating its taxable income and not properly chargeable to capital account. Partnership losses and deductions are allowed in full when the total is less than the adjusted basis. When the total of loss and deductions exceeds the outside basis as adjusted above, a portion of each loss item is allowed, based on the proportion that each bears to the total of all loss items. Losses and deductions not allowed this year because of the basis limit are carried forward indefinitely and deducted in a later year subject to the basis limit for that year.

UltraTax CS combines all K1 units from the same partnership to provide a single, aggregated adjusted basis for all interest in the partnership per IRS Revenue Ruling 84-53.

Related topic: Partner’s and Shareholder’s Basis Worksheets FAQs (1040)

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