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?
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! 🙂
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?
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
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