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S-Corporation received a K-1 with passive loss
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HN
Level 2
09-08-2025
10:46 AM
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My client (S-Corporation) received a K-1 (1065) with a small passive loss. There is no limited partner check box anywhere on the 1120-S. The loss is reported under "Other loss" (line 5 with partnership info) and reduces my overall business income. Is there any correct solution? Example: business income is $50,000. Passive loss is $2,000. The K-1 automatically reports $48,000 ordinary business income (line 1) where it should only be $50,000.
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Terry53029
Level 15
09-08-2025
11:04 AM
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If the K1 is incorrect then you need to contact the partnership to get a corrected K1
TaxGuyBill
Level 15
09-08-2025
03:09 PM
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@HN wrote:
Example: business income is $50,000. Passive loss is $2,000. The K-1 automatically reports $48,000 ordinary business income (line 1) where it should only be $50,000.
Why do you think it should show $50,000?
If that $48,000 consists of $2,000 of passive loss and $50,000 of potentially non-passive income, that would be included as a note with the K-1.
With that being said, I'm not entirely sure if the passiveness automatically passes through like that.
