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Yes, you can deduct your cryptocurrency losses from your K1 profit, but there are some rules to keep in mind.

Firstly, your crypto losses are treated as capital losses, which means they can be used to offset capital gains (like profits from selling stocks or other cryptocurrencies). If your capital losses exceed your capital gains, you can use the loss to offset up to $3,000 of other income, like your K1 profit.

Secondly, you need to make sure you properly report your crypto transactions. This includes keeping track of the cost basis (what you paid for the crypto), the selling price, and the dates of each transaction.

Remember, the IRS treats cryptocurrency as property, not currency, so the rules for property transactions apply.