Question

Can the passive loss from K1 offset gain from selling a Schedule E rental property?

Forum|Forum|3 years ago
June 29, 2022
2 replies
0 views

Let's say I sold a $100K rental property from Schedule E for $180K ($80K gain). During the same year, I invested $100K in a partnership that sent me later a K-1 form showing that accelerated depreciation of the investment resulted in an $80K passive loss for this year. Will TurboTax be able to offset my $80K gain from Schedule E property using the $80K passive loss from the K-1 investment?

Not A Product Question

A

Anonymous_

Employee

@natalan wrote:

Will TurboTax be able to offset my $80K gain from Schedule E property using the $80K passive loss from the K-1 investment?

No, and that would be the proper treatment.

The loss from your K-1 is a passive loss while the gain from selling your rental property is both Section 1231 and (unrecaptured) Section 1250 gain (i.e., capital gain and depreciation recapture); the former would not offset the latter.

M

Mike9241

however. if the rental property you sold has a net schedule E profit that could offset some or all of the passive loss from the partnership. this will not happen if the partnership is a master limited partnership/publicly traded partnership