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R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 3374
Experience:  Over 20 Years experience
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Have a client who has a year 1 partnership for rental property.

Customer Question

Have a client who has a year 1 partnership for rental property. When I put their K-1 info in to 1040 the loss is not carrying through to line 17. The loss is on line 2 of the 1065 k-1, bet rental real estate loss Why would that be? I have them as actively and materially participating on their k-1.
Submitted: 4 years ago.
Category: Tax
Expert:  R. Klein, EA replied 4 years ago.

Randalltax :

Whether someone is actively and materially participating, real estate, by definition, is a passive activity. If this client has an income over $125K and the client is NOT a real estate professional, then the loss is not allowed in the current period due to Passive Activity limitation.

JACUSTOMER-pkple5yg- :

What if they are a real estate professional and their income is over $125K?

Randalltax :

You have to find someplace in your program to indicate this situation applies.

Randalltax :

Under this scenario, the loss should be allowed.