Is husband/wife LLC invested in hotel passive?

[mhcpa1964]

Hi all,

Husband and wife formed LLC that purchased an interest in a hotel partnership. Is the K1 income passive or non-passive?


The K1 from the hotel lists the LLC as limited partners in the hotel, but that's because the K1 is issued to the LLC. On the LLC's partnership return, I've marked the individual members (husband and wife 50/50) as general partners.

I've been going round and round with my thoughts, but I believe it's non-passive income and both members are subject to SE tax.

Do any of you have some other insight to share with me? I'd appreciate your thoughts and time.

[terryats]

Your clients do not actively participate in the hotel therefore the income is passive

[FEDUKE404]

Hi all,

Husband and wife formed LLC that purchased an interest in a hotel partnership. Is the K1 income passive or non-passive?


The K1 from the hotel lists the LLC as limited partners in the hotel, but that's because the K1 is issued to the LLC. On the LLC's partnership return, I've marked the individual members (husband and wife 50/50) as general partners.

I've been going round and round with my thoughts, but I believe it's non-passive income and both members are subject to SE tax.

Do any of you have some other insight to share with me? I'd appreciate your thoughts and time.

There is likely a pretty good reason why the PTS K-1 shows "limited partner" in Part II line G ? ?
terryats is correct -- passive activity

[mhcpa1964]

Thanks. I couldn't get it through my head that they are non-passive with respect to their LLC and passive with respect to its hotel revenue.