I know this is a very basic question, so forgive me.
I am preparing a tax return for a client that received a K1 (1065) with Ordinary income in line 1, Part III. Last year the K1 had a loss that wasn't reported in his 1040 because he didn't have enough outside basis.
I didn't include an statement or explanation with the 1040 last year. Now this year there is ordinary income, so I believe we can net last year loss carryover with the new income and include the difference in the 1040.
My question is: do I need to attach a statement, or a worksheet showing my calculations? I am reading the K1 instructions and I believe I have to, but I am not clear of what kind of attachment I need to include.
Can I use the Basis analysis in the 1065 software? I have the one ProSeries creates.