Partnership loss beyond basis

Hi all,

It's a final year of the partnership. Capital account of the limited partner is zero.

A note to the K-1 says:
"Partner's allocable share of partnership loss was disallowed in excess of the partnership's LP's adjusted tax basis in the partnership interest in the lower-tier partnership at the end of tax year in which the loss occurred".

I saw when partnership dissolved and there was some basis left, it was claimed as long-term capital loss on schedule D.

Is that the case here too?

Many thanks

As long as it's truly the final year and everything has been distributed then I would claim the remaining basis as a capital loss. If there was a negative basis they would have to restore it so I don't see why it couldn't go the other way...

Yes, it is the final year and the K-1 is marked "Final".
The basis at year-end is zero, after factoring some ordinary loss and distributions. No negative basis.
Thanks for the info!

We haven't been told whether there was any distribution in liquidation, including whether there were partnership liabilities. Nor whether partner abandoned all hope of ever getting anything and therefore abandoned the partnership interest. Possible, not likely. https://casetext.com/case/swartz-v-united-states-7

Wait, now I see a post that says there were distributions. In what year(s)?

And the title of this thread is confusing. It's about a partner's possible loss, and it's not "beyond" basis.

From the K-1:

Beginning Capital account 3,667
Current year (decrease) -904
Diatributions - 2,763
Ending Capital account 0

The K-1 is marked "final". There will be nothing to recover later. If they will, it'll be cap gain.
The note says that there was more loss that is "in excess of the partnership LP's tax basis" (quote from the k-1), therefore I thought it can be claimed as L/T capital loss.
Thanks

I'm just looking at two things:
Whether there is any basis left at the end of he year (outside basis)?
If so, whether there is any way to get an ordinary loss, not a capital loss?
With your last post, I'm thinking the answers are both "no".
What am I missing? Have you tracked outside basis?

The partnership from which you have a K-1 owned a LP. The K-1 info is telling you that there was a loss from the owned LP that could not be used because your top tier partnership didn't have basis to claim the loss.
Correct?

If so, I don't see any loss - capital or otherwise for your client.

Nilodop - no outside basis. At best, it can be claimed as L/T cap loss.
sjrcpa - sorry, it's misleading. LP here = Limited Partners, not an owned Limited Partnership.

merlin, with no outside basis, how can it be claimed as anything? Again, what am I missing?

Nilodop - you are correct. I think that I was too eager to claim a loss, since it was the final year of the partnership. This said loss is beyond the partner's basis and therefore cannot be claimed.