K-1 section 1231 gain increasing 1040 refund - turbotax bug?

[ulises78]

Hello,

I have invested in a couple apartment syndication deals starting 2020 as a Limited Partner. 

So I have accumulated some passive "losses" over the past 2 years.  

In 2022 the first deal I participated in was sold.  So I have a Net section 1231 gain for 2022.

Accounting for the previous "losses" my total gain would be near zero.   

However when I added the info from the final K1 form, my federal tax return jumped quite a bit, from around 3k, to around 10k.

How can this be?

I called twice to get phone support but they see nothing wrong with the forms.  The difference seems to be coming from schedule D, where somehow my tax basis was reduced from approx 25k to approx 17k.

[Mike9241]

what you say is possible. those suspended losses 9or at least those allocated to this venture) are allowed which reduce your ordinary income taxed at your highest bracket while 1231 gain (no 1250 portion?) is taxed as capital gain max rate 20% or your tax bracket whichever is lower while any 1250 portion gets taxed at the lower of 25% or your tax bracket.

so if you are in a higher tax bracket those ordinary losses reduce your taxes more than the gain increases them. 

there would be worksheets where you can see your tax computation - capital gain and qualified dividend.  depending on the version you are using you may have to pay first to view the forms. 

a lot depends on whether you have any other capital gains or losses. 

[ulises78]

Thanks @Mike9241 

I do see the schedule D info and schedule D tax worksheet.  I get it that the capital gains are taxed at a lower rate, I do have other small capital gains from a stock brokerage account.

I also have carryover passive losses to cover the gains from this sale from this same's deal past years (about 80%) and then the remaining 20% would be covered by other passive losses.  Which is why I was expecting my return to be pretty much the same as it was before I input the info from the sale.  

My concern is that the program is doing something wrong and then IRS will come from the refund I'm getting this year. 

Does anyone know if there is a way to send the info, I think it's called a diagnostic file, to someone in turbotax just to check if the numbers make sense?

Or is it allowed to post the worksheets that turbotax generates in these forums?

[Mike9241]

contact support but you may need to upgrade to live for which there would be a fee. if there is in fact a Turbotax error you pay the taxes and file a claim under its accuracy guarantee to get reimbursed for penalties and interest. 

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[ulises78]

OK thanks.  I am using the CD premiere version. 

Do you know if the "accuracy guarantee" applies only to Live version and higher, or would it be available for the CD version I bought?

I mean, assume I file my taxes as they currently are with the big return, and then IRS rejects it or worse audits me and determines I owe taxes and penalties.  

I usually pay the audit protection, not sure if that would make a difference. 

[t_taxslave1]

I have the same problem: A 1231 GAIN (positive) triggered a DECREASE in my taxable income. The IRS computer does not agree, and I had to pay additional taxes plus interest for 2022. It seems the problem originates in the K-1 worksheet, where a Section 1231 GAIN is made into a NEGATIVE number. While forms 8582, 4797, and Sch.D are correct, Schedule E is not. As a result, the taxable income is REDUCED by 2X the Section 1231 gain. I would assume the gain should only offset the ordinary income from the same partnership, which it does (regardless of whether the sign on Sch.K-1 column (c) is positive or negative), offset the LT cap loss on Sch.D, but otherwise not impact the taxable income.

Can anybody confirm this is a TTax bug?