DATA-ENTRY EXAMPLES FOR PARTNER S AND SHAREHOLDER S BASIS WORKSHEETS UltraTax/1040

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1 DATA-ENTRY EXAMPLES FOR PARTNER S AND SHAREHOLDER S BASIS WORKSHEETS UltraTax/1040 Introduction... 2 Forms and schedules... 2 Partner s and Shareholder s Basis Worksheets... 2 Example 1 Current-year loss limited... 2 Results... 3 Example 2 Prior-year basis carryovers... 3 Results... 3 Example 3 S Corporation loan basis restored... 4 Results... 4 Example 4 Loss limited by basis, at-risk amount, and passive activity rules... 4 Results... 5 Figure 1: Example 1 Screen K Figure 2: Example 1 Screen K Figure 3: Example 1 Schedule E Page Figure 4: Example 1 Partner s Basis Worksheet Page Figure 5: Example 1 Partner s Basis Worksheet Page Figure 6: Example 1 K-1 Reconciliation Worksheet Figure 7: Example 1 Federal Statements Figure 8: Example 2 Screen K Figure 9: Example 2 Screen K Figure 10: Example 2 Screen K Figure 11: Example 2 Schedule E Page Figure 12: Example 2 Shareholder s Basis Worksheet Page Figure 13: Example 2 Shareholder s Basis Worksheet Page Figure 14: Example 2 K-1 Reconciliation Worksheet Figure 15: Example 3 Screen K Figure 16: Example 3 Screen K Figure 17: Example 3 Screen K Figure 18: Example 3 Schedule E Page Figure 19: Example 3 K-1 Reconciliation Worksheet Figure 20: Example 3 Shareholder s Basis Worksheet Page Figure 21: Example 3 Federal Statements Figure 22: Example 4 Screen K Figure 23: Example 4 Screen K Figure 24: Example 4 Screen Figure 25: Example 4 Schedule E Page Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 TL Copyright by Thomson Reuters. All rights reserved. Page 1

2 Figure 26: Example 4 K-1 Reconciliation Worksheet Figure 27: Example 4 Partner s Basis Worksheet Page Figure 28: Example 4 Partner s Basis Worksheet Page Figure 29: Example 4 Form Figure 30: Example 4 At-Risk Allocation Worksheet Figure 31: Example 4 Form Introduction Use the topical information and procedural examples in this document to process partnership and S Corporation basis and losses limited by such basis. This document addresses the forms, schedules, and worksheets used to report partnership and S Corporation activities in UltraTax CS. It is designed to help you review where to use basis amounts in UltraTax CS, learn how to enter carryovers, and learn about UltraTax CS behavior under various tax scenarios. The following examples illustrate some basic basis data entry and list the corresponding output produced by UltraTax CS. Forms and schedules UltraTax CS automatically combines information you enter throughout the return and determines the allowed losses for an activity. UltraTax CS reports partner and shareholder activity amounts on Schedules A, E, and SE, and Forms 1040, 4684, 6781, and 4952, or as adjustment amounts that transfer to Form 4797 or Form UltraTax CS reports basis limitation amounts throughout the personal return and reports alternative minimum tax loss limitation adjustments on Form Partner s and Shareholder s Basis Worksheets UltraTax CS produces submittable worksheets to support the basis of partnership and S Corporation activities. If the losses from the activity are limited by basis rules, the Partner s and Shareholder s Basis Worksheets provide a detailed audit trail showing the loss allowed and disallowed by each income and deduction type. Example 1 Current-year loss limited This example illustrates data entry for a taxpayer with a partnership activity with a current loss which will be limited due to the partner s basis in the partnership. The taxpayer has a beginning basis in the partnership, a change in liabilities during the year, and has current loss for the year. 1. Click the K1 1065, 1120S folder. 2. Enter general information and business income for the partnership activity in Screen K1 (Figure 1). 3. Click the K1-5 tab. 4. Enter the basis information in Screen K1-5 (Figure 2). The partner basis worksheet will not calculate unless the Calculate Partner Basis Worksheet field is marked, which UltraTax CS automatically marks when data is entered in Screen K1-5. TL Page 2 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 Copyright by Thomson Reuters. All rights reserved.

3 Results UltraTax CS generates Schedule E, Page 2 (Figure 3); Partner s Basis Worksheet Page 1 (Figure 4) and Page 2 (Figure 5); and the K-1 Reconciliation Worksheet (Figure 6) for this activity. Partner s Basis Worksheet (Figure 4) shows the beginning basis as well as the current-year increases and decreases in the basis of the activity to determine the available basis for deductible losses and deductions. When losses and deductions exceed the available basis, UltraTax CS allocates the available basis to the various losses and deductions. When there is a change in liabilities, a statement is produced to support the amount (Figure 7). After UltraTax CS determines the deductible loss amount, the amount is reported on Schedule E, line 28 (Figure 3). Because the current-year loss has been limited to the amount of basis, the Partner s Basis Worksheet Page 2 (Figure 5) shows the suspended basis loss that will be carried over to next year. UltraTax CS will proforma these amounts to next year s return. The K-1 Reconciliation Worksheet (Figure 6) is produced to reconcile the K-1 amount entered to the amounts reported on the return. Example 2 Prior-year basis carryovers This example illustrates the required data entry and results for a client who has prior-year basis loss carryovers of $8,765. UltraTax CS performs the basis carryover calculation and reports the carryover on Schedule E, Page Click the K1 1065, 1120S folder. 2. Enter general information as well as current income for the S Corporation activity in Screen K1 (Figure 8). 3. Click the K1-7 tab. 4. Enter the beginning basis information (Figure 9). Entering amounts in the Beginning basis field or any other field will automatically mark the Calculate Shareholder Basis Worksheet field. The Calculate Shareholder Basis Worksheet field must be marked to produce the Shareholder s Basis Worksheet. 5. Click the K1-8 tab. 6. Enter the prior-year suspended losses from the S Corporation activity (Figure 10). Results UltraTax CS generates Schedule E, Page 2 (Figure 11); Shareholder s Basis Worksheet Page 1 (Figure 12) and Page 2 (Figure 13); and the K-1 Reconciliation Worksheet (Figure 14) for this activity. Shareholder s Basis Worksheet Page 1 (Figure 12) shows the beginning basis of zero (due to the entire basis being decreased in prior years by distributions, losses, and/or deductions) and the current increases and decreases in basis. Prior-year suspended losses are available to take this year because there was current income (a basis increase). UltraTax CS reports the basis carryover from the prior year on a separate line indicated with the text PYA Basis Limitation on Schedule E, Page 2, line 28 (Figure 11). Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 TL Copyright by Thomson Reuters. All rights reserved. Page 3

4 The K-1 Reconciliation Worksheet (Figure 14) is produced to reconcile the K-1 amount entered to the amounts reported on the return. The Shareholder s Basis Worksheet Page 2 (Figure 13) shows the prior-year suspended amount of operating loss and the current-year amount allowed. UltraTax CS automatically proformas any amount disallowed in the current year to the next year. Example 3 S Corporation loan basis restored This example illustrates the data entry and results for a client with an S Corporation activity with a loan basis that was reduced in the past to be restored in the current year by current income or increases. UltraTax CS automatically calculates the amount of loan basis to be recaptured in the current year. 1. Click the K1 1065, 1120S folder. 2. Enter general information, pass-through income or loss, and expenses for the S Corporation activity in Screen K1 (Figure 15). 3. Click the K1-4 tab. 4. Enter the distributions and loan repayments in Screen K1-4 (Figure 16). 5. Click the K1-7 tab. 6. Enter the beginning stock and loan basis information. The beginning loan amount must be present for UltraTax CS to calculate the loan basis restored (Figure 17). Note: The shareholder basis worksheet will not calculate unless the Calculate Shareholder Basis Worksheet field is marked. UltraTax CS automatically marks this field when data is entered in Screen K1-6 or is shared from UltraTax/1120. Results UltraTax CS generates Schedule E, Page 2 (Figure 18); the K-1 Reconciliation Worksheet (Figure 19); the Shareholder s Basis Worksheet (Figure 20); and the Amount Used to Restore Loan statement (Figure 21). Schedule E, Page 2 (Figure 18) and K-1 Reconciliation Worksheet (Figure 19) show the current gain from the S Corporation activity. The Shareholder s Basis Worksheet (Figure 20) shows the calculation of current basis and the restoration of the loan basis. A statement (Figure 21) shows the calculation of the restored loan basis. Example 4 Loss limited by basis, at-risk amount, and passive activity rules This example illustrates the data entry and results for a client with a partnership rental real estate loss limited by basis, the at-risk amount, and passive activity rules, respectively. TL Page 4 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 Copyright by Thomson Reuters. All rights reserved.

5 1. Click the K1 1065, 1120S folder. 2. Enter general information, pass-through rental real estate loss, and a passive activity code of the partnership activity in Screen K1 (Figure 22). 3. Click the K1-5 tab. 4. Enter the beginning basis and loan information in Screen K1-5 (Figure 23). 5. Click the 6198 tab. 6. Enter the beginning at-risk amount (Figure 24). Results UltraTax CS generates Schedule E, Page 2 (Figure 25); the K-1 Reconciliation Worksheet (Figure 26); the Partner s Basis Worksheet (Figures 27 and 28); Form 6198 At-Risk Limitations (Figure 29); the At- Risk Allocation Worksheet (Figure 30); and Form 8582 Passive Activity Loss Limitations (Figure 31). The Partner s Basis Worksheet (Figures 27 and 28) shows that the rental real estate loss from the partnership is limited to the amount of basis the taxpayer has in the partnership. Form 6198 At-Risk Limitations (Figure 29) and the At-Risk Allocation Worksheet (Figure 30) show that the loss limited by the basis limitation is further limited to the at-risk amount in the partnership. Form 8582 Passive Activity Loss Limitations (Figure 31) shows that the rental real estate loss from the partnership is subject to the overall passive activity limitations. Schedule E, Page 2 (Figure 25) shows the overall limited passive activity loss from the partnership. The K-1 Reconciliation Worksheet (Figure 26) recaps the current amount of the rental real estate loss and how it was applied to the tax return. Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 TL Copyright by Thomson Reuters. All rights reserved. Page 5

10 Figure 5: Example 1 Partner s Basis Worksheet Page 2 TL Page 10 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 Copyright by Thomson Reuters. All rights reserved.

Figure 11: Example 2 Schedule E Page 2 TL 25613 Page 16 Data-Entry Examples for Partner s and

17 Figure 12: Example 2 Shareholder s Basis Worksheet Page 1 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 TL Copyright by Thomson Reuters. All rights reserved. Page 17

18 Figure 13: Example 2 Shareholder s Basis Worksheet Page 2 TL Page 18 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 Copyright by Thomson Reuters. All rights reserved.

25 Figure 20: Example 3 Shareholder s Basis Worksheet Page 1 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 TL Copyright by Thomson Reuters. All rights reserved. Page 25

32 Figure 27: Example 4 Partner s Basis Worksheet Page 1 TL Page 32 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 Copyright by Thomson Reuters. All rights reserved.

33 Figure 28: Example 4 Partner s Basis Worksheet Page 2 Data-Entry Examples for Partner s and Shareholder s Basis Worksheets: UltraTax/1040 TL Copyright by Thomson Reuters. All rights reserved. Page 33

DATA-ENTRY EXAMPLES FOR ROTH IRAs Ultra/Tax 1040

DATA-ENTRY EXAMPLES FOR ROTH IRAs Ultra/Tax 1040 Introduction... 2 Special notes on clients with IRAs... 2 Example 1 Traditional IRA converted to a Roth IRA... 2 Results... 3 Example 2 Traditional IRA