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The self rental income is not passive and so passive losses are not netted with the passive rental income.
"LAW: Under Reg. § 1.469-2(f)(6), if a taxpayer rents property to a business in which he materially participates, net rental income is non-passive. Stated differently, rental income from self-rented property cannot be used to trigger allowance of passive losses on Form 8582. This rule does not apply if there is a written binding contract entered into before 2/19/1988."
IRC section 469 provides all the passive loss rules.
These rules do apply to C corporations as well as other entities. See, for example, the article at http://www.journalofaccountancy.com/Issues/2001/May/SelfRentAndPassiveLosses.htm
"Regulations section 1.469-2 (f)(6) reclassifies as ordinary any net rental income from a lease of property to an activity in which the taxpayer materially participates. Regulations section 1.469-4(a) defines taxpayer activities as including those conducted by C corporations as well as pass-through entities. Both regulations were issued under IRC section 469(l), which authorizes the Treasury to issue regulations to carry out the passive loss rules."
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