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.
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?