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Self Rental Exception to passive treatment
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bstarr001
Level 1
04-09-2023
05:49 PM
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I have a self-rental situation where a partnership owns and rents all the fixed assets of an operating business to its related mirror owned operating business which is also a partnership. The rental activity ends up on Form 8825 and the software automatically treats as a passive activity limiting the loss. All the partners spend 500 or more hours running the business so since they materially participate the losses should not be limited. Reg. Sec. 1.469-1T(e)(3). To have the loss not be treated as passive the only way I can get it to work is report the loss on line 1 of the K-1, but the software put the self-rental loss on line 2, thus invoking the passive loss rule. I guess I can override the software but I'm hesitant. Has anyone else had this issue?
Thanks,
Golf Hack, CPA
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dkh
Level 15
04-09-2023
06:10 PM
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Are they renting buildings or equipment ? or both ?
Buildings on 8825. Equipment on page 1 F1065
