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I have a new client whose previous accountant (a prestigious top 100 firm) wrote off $70K in rental real estate losses flowing through from a partnership return. Taxpayers are not real estate professionals by trade; decided to invest in real estate via an LLC (1065). My understanding is rental real estate is always considered passive unless you are a real estate professional. Are there any other scenarios where this massive write off of rental real estate loss makes sense? Am I missing something? thanks in advance.
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Partnership return was final?
Another $70K of passive income from something else?
The more I know the more I don’t know.
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hi...no, not a final return in 2019. I am preparing the 2020 1065 this year. No other nonpassive losses either. Thanks for brainstorming with me! 🙂
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This is not my usual wheelhouse . . . was the Partnership reporting separate activities (on the 1065 K-1s as supplemental information)? If we're just brainstorming, maybe one partnerships owns 4 properties and reports them all as separate activities to the partners. Last year, if one of the activities was disposed of in a fully taxable transaction, wouldn't that release the suspended passive losses related to that one activity?
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Hi...thanks for your thoughts. There are two properties each reported separately on form 8825. But neither one was sold, so suspended losses should not have been released. I am glad I am not the only one stumped by this! lol