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One of my clients has a rental loss of the year, and proseries is not calculating it automatically like usual.
On schedule E Worksheet, I usually enter the property's info and click the boxes for "active participation" and "Material Participation", then i proceed to enter expenses.
Line 21 on Schedule E is resulting in a loss. However, line 22 "Deductible rental loss" is 0. If i scroll down it says "Passive dissalowed loss" all the way to the bottom. Nowhere in the return am i stating that this is a passive activity as the owner actively participates in the rental business.
The only way i got proseries to calculate this loss is by checking box "G" for "Other passive exceptions", I dont even know what that means.
Has anyone encountered the same issue?
Thank you
Best Answer Click here
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Real Estate Rentals are automatically passive unless there is a special provision to treat them as non-passive (such as self-rentals, rental of land, and Real Estate Professionals). Active and/or Material Participation do not change that.
So by default, the passive losses are not allowed and are carried forward on Form 8582.
If the taxpayer "actively" participates there is a special provision to deduct up to $25,000 of passive losses *IF* the taxpayer's income is under $150,000. Because your taxpayer's income is over $150,000, your taxpayer does not qualify for that provision.