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K-1 loss not recording in TurboTax

Forum|Forum|3 years ago
March 14, 2023
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I am a general partner of an LLC and actively manage one property in another state. When I input the loss listed on my K-1 into TT, it shows up as passive income and is not included as an non-passive loss in Schedule E. I have confirmed with my LLC accountant that the loss is deductible, however TT is not coding it as such. Even when I note that I am actively managing and it is at risk, TT is still categorizing it as passive income, which it is not. How do I fix this?

I also noticed that my last year's return were also incorrectly categorizing losses as passive and now have to amend that return. How do I fix this in last year's return?

Best answer by MinhT1

Real estate rental activity is considered passive even if you materially participate. It is only non-passive if you qualify as a real estate professional.

Spending more than 750 hours in real estate alone is not sufficient to qualify as a real estate professional. You need to pass all the following four tests.

For TurboTax to consider your actively as non-passive, you need to check both boxes saying that you spend more than 750 hours a year actively involved in real estate and that you spent more than 50% of your work-related time involved in real estate,

You are a real estate professional if all of the following are true:

- You materially participated in a real property trade or business.

- More than half of your time is involved in real estate activities during the year.

- You materially participated for more than 750 hours in this business.

- You materially participated in each rental real estate activity.

A real property trade or business is any business that involves property:

- Development

- Construction

- Redevelopment

- Reconstruction

- Acquisition

- Conversion

- Rental operation

- Management

- Leasing

- Brokerage

Please read this IRS document for more information.

M

MinhT1Answer