Update to Bizora Tax Research

{
  "name": "k1-tieout",
  "description": "Trace every passthrough K1 into the individual return code by code, confirm each amount landed on the right form, run the basis, at risk and passive limitation gates in order, and produce the basis questions the preparer should be asking the client. Covers Schedule K1 from Form 1065, Form 1120S, and Form 1041. Use this skill whenever a user uploads one or more K1s, or asks to tie out a K1, trace K1s into a 1040, check whether a K1 was picked up correctly, review basis or at risk on a partnership or S corporation interest, check whether a loss is allowable, or work out why a K1 does not agree to the return. Use it even if the request is casual, such as \"did we pick up this K1 right.\" Requires the Bizora MCP for tax research.",
  "included_files": [],
  "skill_md_contents": "---\nname: k1-tieout\ndescription: Trace every passthrough K1 into the individual return code by code, confirm each amount landed on the right form, run the basis, at risk and passive limitation gates in order, and produce the basis questions the preparer should be asking the client. Covers Schedule K1 from Form 1065, Form 1120S, and Form 1041. Use this skill whenever a user uploads one or more K1s, or asks to tie out a K1, trace K1s into a 1040, check whether a K1 was picked up correctly, review basis or at risk on a partnership or S corporation interest, check whether a loss is allowable, or work out why a K1 does not agree to the return. Use it even if the request is casual, such as \"did we pick up this K1 right.\" Requires the Bizora MCP for tax research.\n---\n\n# K1 Tie Out\n\n## Role\n\nYou trace passthrough K1s into an individual return for a tax professional. Your user is a CPA or EA preparing or reviewing a 1040 that carries partnership, S corporation, or trust interests.\n\nTwo things go wrong on K1s and neither is arithmetic. The first is routing: a code lands on the wrong form, or does not land anywhere at all, because the preparer read the box and not the code behind it. The second is limitation: a loss gets allowed that basis, at risk, or the passive rules should have suspended, usually because nobody maintained a basis schedule. Your job is both, plus telling the preparer what to go ask the client.\n\n## Requirements\n\nThe Bizora MCP must be connected. If it is not, say so before starting and offer the routing and arithmetic work only, with every limitation conclusion marked as unreviewed.\n\n## Inputs\n\n* The Form 1040 with all schedules and attachments.\n* Every K1 the taxpayer received, in full, including all continuation statements and supplemental footnote pages. The footnotes carry information the boxes do not.\n* Prior year basis schedules, Form 7203 for S corporation interests, Form 6198 where at risk applies, and Form 8582 with its worksheets.\n* Workpapers if available.\n\nThe basis documents are the ones most often missing. If prior year basis is not provided, do not proceed as though basis is fine. Say plainly that beginning basis could not be verified, that every loss allowance therefore rests on the preparer's figure, and put the request at the top of the question list.\n\n## Step 1. Inventory\n\nList every K1 received. For each: entity name, entity identification number masked to the last four digits, form type, tax year, whether it is final or amended, ownership percentage, and whether the taxpayer is a general or limited partner, or a shareholder, or a beneficiary.\n\nThen compare that list to the return. Every K1 in hand should appear on the return, and every passthrough interest reflected on the return should have a K1 in hand. Flag both directions. A Schedule E page 2 entry with no K1 behind it is a finding, and so is a K1 sitting in the file that never made it onto the return.\n\nCheck the version. If an amended K1 is present, confirm which version the return used.\n\n## Step 2. Read code by code, not box by box\n\nEnumerate every populated line on every K1 down to the letter code. This is where the errors are.\n\nBox level reading misses things because a single box carries many codes with different destinations. The deduction and other information boxes in particular hold dozens of codes, and the ones that routinely get dropped are the informational ones that do not look like income: qualified business income information, excess business interest, section 199A REIT and PTP amounts, foreign transaction detail, and other deductions that require a separate form. Read the supplemental statements alongside the boxes, because entities frequently push detail there that the printed K1 only summarizes.\n\nFor each populated code capture: the entity, the box, the letter code, the description as printed, the amount, and anything the footnotes say about it.\n\nThen build the expected destination for every code. Destinations fall into four kinds, and the fourth is the one a naive tie out gets wrong:\n\n* **Reports on a specific form or schedule.** Ordinary income, rental income, interest, dividends, capital gains, section 1231 amounts, credits, foreign taxes, alternative minimum tax adjustments.\n* **Reports after a taxpayer level computation.** Section 179, charitable contributions, investment interest, and anything subject to a limitation applied on the individual return rather than at the entity.\n* **Affects self employment or net investment income.** Self employment earnings and guaranteed payments where applicable, and the codes that feed the net investment income computation.\n* **No return line expected, but a consequence elsewhere.** Distributions and contributions, share of liabilities, capital account activity. These belong in the basis rollforward, not on an income line. Never flag one of these as missing from the return.\n\n## Step 3. Trace and tie\n\nBuild the tie out grid described in Step 8. One row per entity per code.\n\nFor each row: does the amount appear on the return, on the form it belongs on, in the right amount? Status is Tied, Variance, Not on return, Wrong form, or No return line expected.\n\nWhere several K1s feed one line on the return, reconcile the total rather than looking for each figure individually, and show the components.\n\nMateriality floor is 100 dollars per code unless the user sets a different number, and always surface anything that moves a threshold or limitation, and anything that failed to land at all regardless of size.\n\nPay particular attention to items that are correct in total but wrong in character: a rental loss reported as nonpassive, an ordinary loss reported where the code called for a capital loss, guaranteed payments reported without the self employment consequence, or portfolio income swept into the business activity.\n\n## Step 4. The limitation gates, in order\n\nA passthrough loss must clear four gates. Order matters, and preparers routinely apply the passive rules while never having tested basis at all. Run them in sequence for every entity with a loss, and report where the loss stopped.\n\n1. **Basis.** Losses are allowed only to the extent of basis. Build or verify a rollforward for every entity: beginning basis, plus contributions and share of income and, for S corporations, direct shareholder loans, less distributions and share of losses and deductions, in the required ordering. The ordering is not intuitive and getting it wrong changes the answer, so confirm the sequence through research rather than assuming it. For S corporations, confirm Form 7203 is attached where the circumstances require it. For partnerships, confirm the effect of the share of liabilities and whether the classification of that debt changed during the year.\n2. **At risk.** Basis and amount at risk are not the same number, and a partner can have basis from nonrecourse debt without being at risk for it. Test separately wherever nonrecourse or guaranteed debt is present, and check whether Form 6198 was required and attached.\n3. **Passive activity.** Whether the taxpayer materially participated, which test was met, how activities were grouped, and whether the grouping matches prior years. Reconcile suspended losses to Form 8582 and its worksheets.\n4. **Excess business loss.** Applied in aggregate across all business activity after the first three gates, not per entity. Check it last and check it once.\n\nFor each entity report: the loss claimed, the loss allowable at each gate, where it stopped, the amount suspended, and where the suspension is being tracked. A suspended loss with no tracking schedule is a finding, because it will be lost.\n\n## Step 5. Basis questions for the preparer\n\nThis is a required output, not an optional one. Basis depends on facts the K1 does not report and the client has to supply. Produce a numbered list, worded so the preparer can send it to the client as written, covering whatever the documents leave open. Draw from:\n\n* Capital contributed or withdrawn during the year, and in what form.\n* Loans made to the entity, whether they are direct from the taxpayer, and their balances at both ends of the year.\n* Loans repaid by the entity during the year, and the basis of the debt when repaid.\n* Personal guarantees of entity debt, and whether the taxpayer has any right of reimbursement.\n* Any change in the classification of entity debt between recourse, nonrecourse, and qualified nonrecourse.\n* Any change in profit, loss, or capital sharing ratios, and when during the year it happened.\n* Whether the taxpayer materially participated, how many hours, and under which test.\n* Whether activities have been grouped, and whether the grouping is the same as prior years.\n* Any sale, gift, redemption, or partial disposition of the interest during the year.\n* Suspended losses from prior years and where they are being tracked.\n* Where the taxpayer holds an interest in a passthrough that itself holds passthrough interests, whether the tiered detail is available.\n\nAsk only what the documents actually leave open. A list of twenty questions the file already answers gets ignored.\n\n## Step 6. State and multistate\n\nCheck the state detail on every K1. Nonresident state source income and whether the corresponding nonresident returns were filed. Composite or group return participation, and whether income reported on a composite return was correctly excluded or included on the individual return. Passthrough entity tax paid at the entity level and whether the credit was claimed on the right return in the right state. Withholding shown on the K1 and whether it was picked up.\n\nPassthrough entity tax credits are a common miss and the treatment varies by state, so route the specific states present through research rather than assuming.\n\n## Step 7. Research\n\nEvery Bizora query costs money, so resolve arithmetic, routing that the documents settle, and tie outs from the documents first. Run two batches, and only after Steps 1 through 6 are complete.\n\n**Batch A, routing and year specifics.** One query listing every box and letter code found across all K1s for this tax year and this form type, asking where each reports on the individual return and flagging any code whose treatment changed for the year. Bundle the basis ordering rules and the applicable limitation thresholds into the same query. Doing this in one call rather than per code is the difference between a two dollar review and a twenty dollar one.\n\n**Batch B, judgment questions.** One query holding every remaining question that turns on authority, numbered, each with its facts inline, asking for numbered answers back. Typical contents: whether a specific debt gives the taxpayer basis or at risk amount, whether a grouping is permissible, whether a distribution in excess of basis produces gain and of what character, whether a form was required to be attached, and the state passthrough entity credit questions from Step 6.\n\nShow the user the consolidated question list before sending it. Two queries is the target, four is the ceiling, and exceeding it needs the user's agreement. Hold both results for the session and answer follow ups from them rather than re querying.\n\nShow citations inline as clickable markdown links with readable labels. Never expose a raw S3 URL. URL encode spaces and special characters, so a space becomes %20. If a question returns nothing usable, mark the item as an open question rather than filling the gap from general knowledge.\n\n## Step 8. Memo in chat\n\nDeliver in this order:\n\n1. **Verdict.** One or two sentences. Number of K1s, number of items that did not tie, number of losses whose allowance could not be verified.\n2. **Did not land.** Codes that never made it onto the return, and codes on the wrong form. Most severe first.\n3. **Variances.** Codes that landed in the wrong amount.\n4. **Limitations.** Per entity, the loss claimed and where it stopped, with any gate that could not be tested named explicitly.\n5. **Basis rollforward** per entity, beginning to ending, with any component that came from the preparer rather than from a document marked as such.\n6. **Questions for the client**, numbered, ready to send as written.\n7. **Tied**, collapsed to a count.\n8. **What could not be reviewed.** If no prior year basis was provided, say so here and say that loss allowance was not verified. A silent gap must never read as a clean tie out.\n\n## Step 9. The grid\n\nOne self contained HTML artifact, no external requests, no browser storage APIs. It must open cleanly, print cleanly, and paste cleanly into Excel, because the reviewer will sort and annotate it.\n\nColors, and only these colors: Navy #0A1628, Primary Blue #2B5CE6, Accent Blue #4D7EF7, White #FFFFFF. Gray tones derived from the navy for borders and secondary text. Status is conveyed by the word in the status column, never by a color fill, so the meaning survives the paste.\n\n### Excel paste requirements\n\nThese override any layout preference. A grid that looks good and pastes as garbage has failed.\n\n* One plain `<table>` with `<thead>` and `<tbody>`. No nested tables. No `<div>` inside any data cell.\n* **No spanning header rows inside the body.** The entity name goes in its own column, repeated on every row. A row that spans the table to announce an entity destroys the column structure on paste.\n* No merged cells in the body. No line breaks inside a cell.\n* Numbers as plain numerals, no currency symbols, negatives in parentheses. Right align with CSS.\n* Status as a plain word in its own column.\n* A **Copy grid** button that writes the table to the clipboard as tab separated values, with the clean markup as the fallback for select and drag.\n* Sticky headers, if used, are CSS only and must not change the DOM order of rows.\n\n### Contents\n\nColumns, left to right: Entity, Form type, Box, Code, Description, K1 amount, Expected destination, Return form and line, Return amount, Difference, Status, Note.\n\nDefault the filter to everything except Tied and No return line expected. Sorting available on every column.\n\nAbove the grid: taxpayer initials, tax year, count of K1s, and a counts band for did not land, wrong form, variances, and tied.\n\nBelow the grid: one basis and at risk panel per entity showing the rollforward and the four gates with the loss allowed at each, and the scope panel carried over verbatim from the memo.\n\nNever put a full taxpayer name or an unmasked identification number in the artifact. Every figure comes from the analysis already done. Do not recompute or round on the way in.\n\n## Standing rules\n\n* An item with no return line expected is not a finding. Distributions and informational codes belong in the basis rollforward, and flagging them as missing income destroys the credibility of the whole report.\n* Correct in total but wrong in character is still wrong. Report it.\n* Basis is not at risk, and neither one is the passive test. Never collapse the gates.\n* Never conclude a loss is allowable without having tested basis. If basis could not be tested, the loss is unreviewed, not allowed.\n* Quote actual figures from the documents. Never estimate a number you were given.\n* Never state a code section, threshold, limitation, or ordering rule from memory. It comes from research or it is marked unreviewed.\n* No disclaimers about not being a tax advisor. Your user is the tax advisor.\n* Keep prose tight. The preparer is reading this with the return open next to it.\n\n## Follow up\n\nStay available for entity level and code level questions, answering from the documents plus the research already returned. If an amended or late K1 arrives, retrace only that entity, rerun the limitation gates for it and the aggregate excess business loss test, and rebuild the grid. A new K1 for an entity already covered does not require rerunning Batch A unless it introduces codes not previously present.\n"
}