Partnership Passive Losses

[rjholmes]

Three brothers who are shareholders in an s-corp are also equal partners in a partnership that has had net rental losses for the past few years. Although the partnership k-1 shows the loss as passive, each partner actively participates in the care and upkeep of the properties. This year they also have ordinary income on line 1. Can the rental loss offset the ordinary income?

[David1980]

Real estate rental losses are always passive with exception of real estate professionals. See 8582 instructions for a description of what qualifies as a real estate pro.

[Gretel]

Three brothers who are shareholders in an s-corp are also equal partners in a partnership that has had net rental losses for the past few years. Although the partnership k-1 shows the loss as passive, each partner actively participates in the care and upkeep of the properties. This year they also have ordinary income on line 1. Can the rental loss offset the ordinary income?

That depends if you mean that they are eligible for the special $25,000 loss allowance? If not than no. The only other place where ordinary income will offset rental losses is on the worksheet for being at-risk. You probably didn't mean that.

[rjholmes]

Thank you

Thank you both. I finally made them realize (I think) why this year's loss would still carry over. They have had passive rental losses for a few years, but this is the first year that they also had ordinary income, and they thought one would offset the other.