Need help regarding a fishy K-1 that a client received from a 1065
I have gotten a 1040 to review. The client, an MFJ, received a K-1 from a partnership, wherein the taxpayer is the 99% partner. No beginning capital balance. Contributed $675k in current year, has a $600k loss shown in box 11 code ZZ. Statement says "leveraged currency trading loss". No other items. No footnotes. Domestic partnership and domestic partner.
The $600k loss is flowed straight to Sch 1 line 8z, wiping out the half a million in w2 wages, and generating a $125k tax refund.
Feels like this was designed to generate a loss. What should I ask the client? He says the $675k contribution was from his own pocket, with after-tax money. Should I demand the p'ship agreement to verify if the contribution is really at-risk? Don't want to lose the client, but he probably had a "tax strategist" guide him earlier.