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?
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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.