I have passive activity loss from an investment club (stocks) . How can I offset it against the capital gains I have on my K-1? or against my other capital gains?

[jaureguizar]

All the passive activity loss questions seem to deal with real estate.  My passive activity losses stem from investing in the stock market (individual stocks, not mutual funds) and keep growing each year by a little bit.  I don't understand why the losses aren't used in the software to offset capital gains from the same investing activity on my K-1 or even offset other capital gains I have on stock sales.

[MiriamF · Accepted solution]

A capital loss cannot be used to offset income from other passive activities.

The income from a partnership is "pass-through" income, reported on your tax return exactly as it would be if you had earned it on your own. Capital gains can't be used to offset rental losses, and rental income can't be used to offset capital losses.

When you sell the partnership, you will be able to recoup any remaining losses. Until then, you're stuck. Unless, of course, you invest on your own and have a gain. Then you can deduct your capital losses from your gains, and deduct another $3,000 in losses in addition.

[jaureguizar]

The "passive activity" is an investment club where I am the treasurer and general partner, so my activities are NOT actually passive.  No real estate or rentals involved.  Only the buying and selling of individual stocks.  I don't understand why my "passive activity losses" are not offset against the very same "passive activity gains".  My PAL is about $3,700 and my capital gain is about $5,700.  The loss grows every year do to expenses not included in the club K-1.  The partnership can never be sold, only dissolved whenever there is no further interest in investing.  Do I have to withdraw some of my money or all of my money to finally take the loss?

[MiriamF]

It sounds like you need to take some of your gains to offset the expenses of the club. As a partnership, you can agree to do that - use your income to pay the bills. It's just not something you can do at tax time on a tax return. Even though you are an active partner, these still count as passive losses. See. <a rel="nofollow" target="_blank" href="https://taxmap.ntis.gov/taxmap/pubs/p550-011.htm">https://taxmap.ntis.gov/taxmap/pubs/p550-011.htm</...>