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Rental real estate loss as nonpassive?

annmariep
Level 1

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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4 Replies 4
sjrcpa
Level 15

Partnership return was final?

Another $70K of passive income from something else?


ex-AllStar
annmariep
Level 1

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!  🙂

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rbynaker
Level 11

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?

 

annmariep
Level 1

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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