Capital loss (1231) not offsetting gain from sale of house

[qofmiwok]

I have a large K1 capital loss from the sale of a commercial building (which is being called a 1231 loss.)  I also have a large capital gain from sale of my residence.  Shouldn't they be offsetting?  It is still showing the 1231 loss as an unallowable passive loss for this year and not offsetting the capital gain from the sale of my house.

Thanks

[tagteam]

Section 1231 gains and losses are netted but, regardless, your loss is going to be suspended until you dispose of your interest.

[qofmiwok]

Not sure what you mean.  The property was sold, which generated the capital loss.  

[tagteam]

Yes, except you do not own the property; the entity (you stated you received a K-1) owns the property.

[qofmiwok]

It's a passthrough entity (partnership) and the entity has sold the property.  Are you saying the losses must be carried until the entity is dissolved or has a capital gain?  That doesn't make sense because then it's not a passthrough entity.  And TT is applying some of the losses to my ordinary income.  I just don't have much to apply it to other than the gain from the sale of my home.

[Mike9241]

It's a passthrough entity (partnership) and the entity has sold the property.  Are you saying the losses must be carried until the entity is dissolved or has a capital gain?  Yes. that is the law. until your interest in that partnership is terminated (either by selling your interest or the partnership terminated)  or there is a passive capital gain (1231 gain) or even ordinary passive income the 1231 loss remains suspended. if you actively participate, a lower standard than material participation, then up to $25,000 of losses would be allowed if your modified adjusted gross income is less than $150,000. see form 8582.

sure it's a passthrough entity. it's the one that sold the property and conducted other activity that it is passing through to you via the amounts on the k-1.  you didn't sell the property the partnership did. 

[qofmiwok]

Thanks, that's interesting.  Well, at least offsetting ordinary passive income is worth more than offsetting non-passive capital gains.  

[Mike9241]

I should have added that passive income doesn't have to come from this entity. you can have passive income from other entities (except MLP's or PTP's) and they are netted to determine any allowable deduction.