Schedule E land rent

Forum|Forum|5 years ago
March 24, 2021
11 replies
52 views

I'm working on a return with Schedule E land rent - taxpayer does not actively or materially participate. There is rent income, real estate taxes and some insurance. That's it. It results in income (not a loss). Proseries is defaulting to "nonpassive" for this income which will then not offset a passive loss from a K-1 on Sch E p. 2. Last year, exact same situation and it was passive. When I scroll all the way to the bottom of the Schedule E worksheet it clearly shows that it has nonpassive status and overriding that to "passive" does not change anything. Any idea why it is doing this and how to fix it?

ProSeries Professional

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Best answer by TaxGuyBill

It is not a glitch, it is the law.

For land (and self-rentals), losses are passive and profits are nonpassive.

dkh

Level 15

The taxpayer doesn't actively participate? ..... he doesn't collect rent, pay the property tax bill, pay the insurance, make the rental agreement?

S

sstreitAuthor

Level 3

Rental activities are considered passive by definition unless you are a real estate professional, which my client is not. If I select code 5 at the top of the worksheet for land and have a loss, Proseries calculates that as a passive loss but if there is profit, it changes to nonpassive. Doesn't make any sense at all. If I change the code to 4 which is commercial property, it stays passive with a profit or a loss. So, I changed the code to 4. Must be some sort of glitch with code 5. Can't think of any other explanation.

T

TaxGuyBillAnswer

It is not a glitch, it is the law.

For land (and self-rentals), losses are passive and profits are nonpassive.

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