I was a partner in a partnership that owned real estate and leased a substantial portion of the real estate to a business that I was a shareholder of. I changed jobs in 2020 and sold my partnership interest in the real estate partnership back to the partnership at cost. I held the interest for more than a year.
Notwithstanding the sale of my partnership interest at cost, I believe the basis of my partnership interests at the time of disposition will be substantially higher than the sale price (haven't got the K-1 yet). Upon information and belief, this is due to significant principal payments on debt, which resulted in a lot of phantom income, which substantially exceeded cash distributions and depreciation (when I bought into the partnership, the property had been depreciating the same asset since the 90s, so there wasn't much depreciation to go around). Given the above, I believe I there will be a significant capital loss from a tax perspective.
I'm having a hard time understanding how I can utilize the capital loss from this passive real estate activity (I was on the committee that managed the real estate but I don't think that's sufficient to establish "material participation").
If it is a capital loss, can it be used to offset ordinary income? If not, can it be used to offset capital gains from a non-passive activity (like selling stocks)? Is there a limitation on how much I can use in a given year?
Any guidance would be appreciated, I'm having trouble finding answers. And apologies if any of my assumptions above are incorrect - partnership tax can be a real mystery.
