Changed rental property from sole proprietorship to husband-wife partnership on Jan 1, 2022. Manually filled out 1065 and K-1's. Where do I enter the K-1 lossses?

[Anonymous_]

---

@korz wrote:

I don't think that we can be a QJV... 

---

Yes, most likely not unless you or your spouse materially participates.

You are then most likely better off simply owning the property jointly and reporting it in that manner. 

[korz]

Trouble!  I clicked on the dot that says we converted from a Rental to Personal use, as I was directed.  Then there were two screens about passive losses carried over from 2021.  Then there's a screen that asks whether this property was rented all of 2022.  I'm not sure whether I should answer Yes to No.  I think it's still asking about the property *before* "we converted to personal use" (but we didn't actually... we "converted it" on the morning of Jan 1, 2022 and then we converted back to a rental as a partnership on the morning of Jan 1, 2022 (i.e. we instantly converted it from passive self-employment income to passive partnership income).  I'm just trying to get TT to set up the Schedule E properly so that I can add the information from the two K-1's into it.  The K-1's already account for depreciation and days use as a rental and everything else.  I will have to print this out and send it via paper, so that I can attach the 1065, 8825, 4562, and two K-1's to my 1040 and Schedule E (and a Schedule C from another business, which really *is* a sole proprietorship).

So what answer do I give?

I'm afraid that I'm going to have another question on the very next page...  ugh!  I wish I'd never created the partnership!

Thanks for your help.

[Carl · Accepted solution]

I assume you're referring to the 1065 partnership return where you're having the issue. I don't know enough about 1065's to help here. But I do know that with a partnership, you don't convert to personal use "per-se". The assets have to be removed from the partnership, and you do that by something like a distribution to the partners, or a "return of capital contribution" to the contributing partnerr. The latter makes it a non-taxable event, which is what this is of course.

Hopefully, someone else can jump in to help at this point.

@Anonymous_ are you privy to the inner workings of the 1065 stuff?

[Anonymous_ · Accepted solution]

That is correct; the property is distributed to the partners and, since the partnership is being dissolved, the 1065 is marked as the final return for the partnership.