@killerf1 wrote:
Make sure you’ve marked the rental income as distributable to the beneficiary and check that passive losses are set to flow through.
Yeah, it doesn't work that way and you have to be careful with suspended passive losses in an estate or trust.
This is similar to situations that occur when decedents have suspended passive losses on the date of death. Those passive losses are absorbed in connection with the stepped up basis and can be utilized only to the extent the PALs exceed the stepped up basis. If they do not, they are simply lost.
Otherwise, if an estate or trust actually distributes the passive activity, any suspended losses serve to increase the basis of the property so distributed.
