You are correct, they both flow to page two of schedule E. Normally, rental income is reported on page one of schedule E, but I see there is an exception to that in the case of rental income reported on a k-1 schedule.
Since you have a business loss, it may be deducted from rental income, so they may both appear on schedule E in the same column, in which case they would end up be netted against each other. It may be different if you had a rental loss, which has restrictions due to it being considered a passive loss by default. Even though rental losses are passive, you are allowed to deduct them against ordinary income, depending on the adjusted gross income and filing status on the tax return.
Also, business income reported on a K-1 can be either passive or non-passive, whereas a rental loss is by definition passive.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
