Entering tax basis for LLC

Swagner97
Swagner97 Member Posts: 2 Newcomer
in Income

I have a high tax basis based on non-recourse liabilities on my K1 but my distribution is showing as a gain due to negative basis. Where do I enter information about my tax basis?

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Answers

  • MatthewD
    MatthewD FreeTaxUSA Admin, FreeTaxUSA Agent Posts: 1,052 image
    Hello Swagner97,

    The software does not support entering any basis information about partnerships. We only support S-Corporation basis with the Form 7203 if you have a distribution or loss flowing through the S-Corp to the individual owners.

    The software will always warn the customer about their basis when taking a distribution and you'll need to ignore the Yellow warning and move on if you have a high outside basis.
  • Swagner97
    Swagner97 Member Posts: 2 Newcomer
    https://community.freetaxusa.com/discussion/comment/8548#Comment_8548

    My problem is it is reporting a capital gain on Schedule D that I can't remove. Do I need to use a different software to handle my taxes because of this?

  • CoryF
    CoryF FreeTaxUSA Agent Posts: 236 image
    Hello again,

    You don't need to use different software. You can enter the Capital gain as an entry in our software. Please follow this main path:

    Income > Common Income (grouping) > Investments and Savings.

    In case you don't understand what is happening, the amount of the distribution beyond $0 of your basis is the capital gain part. You will list that amount as sales proceeds and enter a $0 cost basis. This will create a Capital Gain and taxes will be assessed. Be sure to enter the buy date as the date you started business and the sale date as the distribution date to apply Short Term or Long Term applicable tax rates.

    There is no possible Negative Basis for a Partnership. Meaning, your basis will remain at $0 until you have an increase of the basis by contribution or income.

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