Answer 1: Thanks!
Answer 2: Followup question: But we didn't change it to personal use... we simply went from renting it as a sole proprietorship to a partnership. Also, we did not formally transfer ownership of the property from our names to the LLC. I found out that this was next to impossible and we'd have to refinance the property. Even if we assumed that we could transfer ownership (why would a bank want to write a loan for a property that lost money in years 1 and 2?), we'd lose our sweet 3.5% mortgage and would have to get a new 7% mortgage. No... I'm afraid we're still going to always own this property personally, even if the income comes in as partnership income in 2022. Does that change your answer?
Also, I've had it with all the additional partnership paperwork hassles. I've decided to change it back to a sole-proprietorship in 2023. If we say that this started Jan 1, 2023, does that change your answer?
Answer 3: I've read the passive income rules several times and this is not passive income. We do everything except billing the tenants, managing the listings (Airbnb, VRBO, etc.), and paying the maids. We visit the condo several times per year and we upgraded furniture in 2022, We personally repainted the whole condo in 2022. We hired a company to clean and waterproof the sleeper sofa. We pay all the bills monthly (mortgage, electricity, HOA fees, insurance, etc.). We hired contractors to fix the broken shower valve. We bought a new dishwasher and hired a contractor to install it in 2021 - and again bought another new dishwasher in 2023 and paid a contractor to install it (sheesh!). That's not passive, is it?
However, when I opened the "Do any of these situations apply to this property?" TT had "Do I have passive activity real estate losses carried over from a prior year" was checked and when I click Continue, it shows how I have -3,103 Sch E Regular Tax Carryovers and -3,103 Sch E AMT Carryovers and -3,103 Sch E QBI Carryovers. When I unchecked that and checked the "I have at-risk losses carried over from 2021." the next page shows empty boxes for At-Risk Losses From Prior Years.
It seems that TT decided that this was a passive income and there's nothing I can do about that short of filing an amended return.
Am I right?
Thanks again.
