K-1 Question

[snbauser]

For a very short time in 2012 I was a 50/50 partner in a center. We filed our taxes last year. We need to file again this year because we had a small amount of income that carried into 2013 (from state paid kids) but we also had a ton of expenses we were (and still are) paying off. So when I go to enter the K1 on my taxes it asks if "the partnership is currently a non-passive activity, but you have carryforward losses from when it was a passive activity". I'm confused as to whether this is a yes because the business is no longer active or a no because I was an active partner in the business? Thanks.

[TomCopeland]

Passive activity

For a very short time in 2012 I was a 50/50 partner in a center. We filed our taxes last year. We need to file again this year because we had a small amount of income that carried into 2013 (from state paid kids) but we also had a ton of expenses we were (and still are) paying off. So when I go to enter the K1 on my taxes it asks if "the partnership is currently a non-passive activity, but you have carryforward losses from when it was a passive activity". I'm confused as to whether this is a yes because the business is no longer active or a no because I was an active partner in the business? Thanks.

Since you had income in 2013 this is not a passive activity. The answer to the question posed by the K1 is no, because in 2012 your business was not a passive activity. In other words, you have no carry forward losses from a passive activity, since you never had passive activity.

[snbauser]

Thanks Tom!. A follow up question - since we are still paying off debt this year, we will need to file one more time next year. So am I understanding that because there will be no income this year, then next year I would select yes?

[TomCopeland]

Passive activity

Thanks Tom!. A follow up question - since we are still paying off debt this year, we will need to file one more time next year. So am I understanding that because there will be no income this year, then next year I would select yes?

Next year the answer will still be no because your partnership will not be a non passive activity. (double negative means you would only answer yes if your partnership became active in 2014)

[snbauser]

ahhh..got it. Thanks so much Tom!