here's what i did as a test using desktop deluxe for 2023
1) entered two rental properties both showing rental losses
2) neither active not material participation was checked for either property
3) property 1 showed a rental loss of $35K
4) property 2 showed a rental loss of $33K and a loss on disposal of its assets of $82K - complete disposition
5) for qbi purposes both were indicated as one enterprise using rev proc 2019-38 safe harbor - this rev proc only applies to QBI not PAL (PAL and QBI are two different tax items)
results property 1 treated as passive so none of its loss was allowed. for either PAL or QBI despite the single enterprise election
property 2 treated as nonpassive the $33K rental loss was allowed as well as the 4797 loss of $82K
I can see the logic that the loss of property 1 is not included in QBI since for PAL purposes no loss was allowed for regular income tax purposes [IRC 199A(c)(1)?]. Changing to active participation for property 1 does nothing for either PAL or QBI because my test AGI was over $150K. Lowering AGI to $100K resulted in $25K of property 1 loss allowed and for both income tax and QBI purposes.
