LLC taxed as partnership, has house rented short term. Also has personal use. Entering fair rental days and personal use days does not change the loss on form 8825 or K1s

[LSTAX]

This is a vacation rental that is mostly rented short term through an out of state property management company. Entering the days rented and personal days does not change the K1 losses allocated to the two partners, $21,000 each . Once imported into the partner 1040, the K1 shows the loss on line 2 and the entire loss is disallowed.  Form 8582 is populated.  Is this correct?

[sjrcpa · Accepted solution]

On the 1065 you need to apply the vacation home limitation manually. Lacerte does not do it.

[LSTAX]

Thank you for replying.  Is it possible to make lacerte do the right things with the check boxes on the K1 in the 1040 module?  I'm not sure if all of the loss should be disallowed and if it should show on form 8582

[TaxMonkey]

Just saying, if that was possibly she would not have said "you need to apply the vacation home limitation manually"  That is a direct answer to your question.

[LSTAX]

sjrcpa, how do you manually apply the vacation home limitation?  

[sjrcpa]

Calculate what the net income/loss should be for the 1065. On the 8825, enter a line in other deductions called excess vacatioin home deductions and put in the number needed to get to the correct net income/loss.

[JimS_1]

Hi sjrcpa - Thank you for posting this answer on the excess vacation rental deduction.  Too bad Lacerte doesn't do it automatically, so I appreciate you posting this. 

I did have a question:  Is the other side of the entry a "distribution"?  I have to print a balance sheet, and when I put this negative deduction in, it creates an imbalance.  If I put in a "distribution" of cash and marketable securities on screen 22.1, this creates a distribution for each partner on the K-1.  

Logically, I understand that the cash paid for the expenses has a component that is being paid for the business and a portion being paid for the personal use (i.e. the partnership paid it to the partner so he/she could pay their personal portion of the cleaning, mgt fee, condo fee, etc....).  This seems logical, but I wanted to confirm that partners should expect this "distribution" to appear on their K-1, even though they did not receive actual cash payments.

Thank you for your help.

[JimS_1]

@sjrcpa  Sorry - I meant Screen 28 for the distribution of "Cash and marketable securities"

[sjrcpa]

No it is not a distribution. It is an M-1 - deductions on books not on return,

[JimS_1]

@sjrcpa  Thank you!  Huge help!

[Accountant-Man]

Since the property is owned by the LLC partnership, not the partners, the calculation won't be done automatically since the LLC is not a person.

[sjrcpa]

You're welcome.