K1 with passive real estate losses

[j_pgoode]

Hi,

I have a K1 for a real estate partnership and Turbotax doesn't appear to be able to handle it correctly from what I can tell.  Here's my scenario:

1) Box 2 shows a loss (call it -15,000)

2) Box 5 shows a small gain on interest (call it 2,000)

3) Statement A shows 4 pass-thru entities which comprise the losses, along with some values for UBIA of qualified property, W-2 wages, and other deductions

So my three questions are:

1) no-matter what I enter, it doesn't seem that the loss on box 2 goes anywhere.  It's my understanding its supposed to go the Schedule E.  Is there a bug or am I doing something wrong?

2) for the statement A items (pass-thru entities), it's my understanding I need to create multiple K1s in turbotax to handle this from other postings.  But, I don't see how I can easily do this as I would have to have values for all the K1 form items per entity, which I don't have.  Is there any reason I can't just sum all the items for the pass thru entities and report as one thing?  I would assume that would have the same net effect.

3) Even if I do input the Statement A items (like with my first question), it doesn't seem that the data results in any effect on my taxes.

Thank you in advance for any help you can provide.

[Mike9241]

real estate losses are subject to the passive activity rules. generally, PAL losses are only deductible against PAL income.  Two exceptions a real estate professional is not subject to these PAL rules second if not a REP, then if you actively participate your loss would be deductible but only if your modified adjusted gross income is unner $150.,00 (1/2 this if MFS) see form 8582

[j_pgoode]

thank you.  I'll have to go look at form 8582 to see what is being done.  Thank!

[j_pgoode]

ok, I re-read the response provided to my question.  So since I'm not actively involved in the LP, the passive losses should offset my passive gains I would think (in this case, interest income on the K1).  Turbotax is only including the interest income on my overall taxable income and doing nothing with the loss from what I can tell.

Any ideas?

[PatriciaV · Accepted solution]

The passive loss from Schedule K-1 Box 2 should appear on Schedule E page 2 Line 28 column (g), which flows to Schedule 1 (Form 1040) Line 5. The interest income from Box 5 should appear on Schedule B Part I Line 1, which flows to Form 1040 Line 2(b).

How the passive loss is handled depends on other passive income/losses (including carryovers) that are also reported on your return. Schedule E page 1 should allow you to trace the flow of passive income from various sources to Form 1040.

You may combine Statement A for pass-through entities owned by the Schedule K-1 investment. Note that the QBI income from these sources may or may not be used on your return. Review Form 8995 for the calculation of Qualified Business Income (if any) included on your return.

[j_pgoode]

OMG thank you so much for the detailed answer!  This was exactly what I was looking for 🙂