Self rental

[rschaddock78]

Does anyone know what turbotax product would support a self rental?  I have a residential rental that has a loss and now have commercial self rental that has a gain.  I need to keep the residential losses from being able to offset the commercial self rental gain.  Other products I have seen won't do this so I would have to manually change worksheets.  I also have schedule c income and k-1 partnership income but most every product that would support self rental will support those incomes.

[VictorW9]

For you to be able to separate residential rental from your commercial you may have to create an LLC for your commercial rentals. You will report your residential rental in Schedule E using Turbo Premier and create an LLC for your commercial rentals. You will also need to elect S corporation status and report the business on a K-1 that will be transferred to your Turbo Tax Premier for filling your individual 1040. 

I make the assumption you don't have any partners in your commercial rental, in that case your option will be to elect S corporation status. If you do have a partner then you will prepare a 1065 Partnership return.

[AmeliesUncle]

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@rschaddock78 wrote:

Does anyone know what turbotax product would support a self rental?  I have a residential rental that has a loss and now have commercial self rental that has a gain.  I need to keep the residential losses from being able to offset the commercial self rental gain.  Other products I have seen won't do this so I would have to manually change worksheets.  I also have schedule c income and k-1 partnership income but most every product that would support self rental will support those incomes.

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As far as I know, this program should be able to do this correctly.  As I think you are indicating, the profit of the self-rental is non-passive, so the passive loss from the residential would not automatically be applied against the non-passive gain of the self rental.  I am quite surprised that other software does not do this.  Perhaps you entered it incorrectly?

However, be aware that if your income qualifies, you would deduct up to $25,000 of losses from the residential rental, which would offset any non-passive income.  If your income qualifies to do that, there is no way around that, and you must use that loss.

There is NO need to set up an LLC or a S-corporation.  Please do NOT do that without sitting down with a tax professional and/or business attorney.

[rschaddock78]

Thanks for the responses.

So which product would you recommend?  Turbo tax premier?

Let me provide a little more detailed information.

The residential rental operates at a loss and flows through the Scdedule E pt 1.  The self rental is part of a 2 member partnership LLC that files a 1065 (done by a separate accountant so I don't need software to support it) and provides me a K-1 from that partnership.  I also have a loan associated with acquiring ownership in partnership that I create a K-1 for the interest deductions.  The self rental seems to flow though schedule E part 2 and I don't see an option to elect a property type there (7-self rental).  Now that the self rental has a profit the loss from the residential rental calculated on form 8582 and it's worksheets gets deducted at the end of schedule E pt 2.  I was going to get around this by modifying worksheets, making notes to IRS, and keeping track of carryover/suspended losses on my residential rental myself.

My self proprietorship is changing to s-corp (same accountant will prepare s-corp taxes so I don't need software for this either)  and will be renting from the commercial building starting 2020 and I plan to have this self rental in place for many years.  I would like to find a software program that can support this with out me having to manually override worksheets.

Just want to know if this will work with a software program before I pay for it.

Thanks,

-Robert

[AmeliesUncle]

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@rschaddock78 wrote:

The self rental is part of a 2 member partnership LLC that files a 1065 (done by a separate accountant so I don't need software to support it) and provides me a K-1 from that partnership.  ...  The self rental seems to flow though schedule E part 2 and I don't see an option to elect a property type there (7-self rental). 

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Ah, you didn't mention that the Self-Rental is through a Partnership.  That is where the software is going to have a program.  Offhand, I don't know if you can make the software do that without overriding (if you didn't have another rental it could be done, but the work-around would mess up your other rental).

Do you have any other ren

[Carl]

I have a residential rental that has a loss and now have commercial self rental that has a gain. I need to keep the residential losses from being able to offset the commercial self rental gain.

Not possible and not legal on a personal 1040 tax return. Period. So the bottom line is, your losses on one will offset the gains on the other.

Won't work if you put the commercial property in an S-Corp either. For the commercial property you would have to create an LLC and file 2553 to have that LLC "treated like an S-Corp" for tax purposes. Or just skip all that crap and create an S-Corp. Then if your mortgage holder on the property will allow it (I seriously doubt they will) you transfer property ownership to the S-Corp. Then the S-Corp will file it's own physically separate 1120-S Corporate return reporting all rental income/expenses on SCH E as a physical part of the 1120-S Corporate return.

The only problem with that, is that since the S-Corp will issue you a K-1 showing passive gains, and those gains will be included on page 2 of your 1040 SCH E. Those passive losses will "still" offset the gains since it's all passive, no matter what.

So you're spinning your wheels here.

[AmeliesUncle]

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@Carl wrote:

I have a residential rental that has a loss and now have commercial self rental that has a gain. I need to keep the residential losses from being able to offset the commercial self rental gain.

Not possible and not legal on a personal 1040 tax return. Period. So the bottom line is, your losses on one will offset the gains on the other.

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@Carl  A "gain" for a Self-Rental is NON-Passive.  So that Nonpassive gain should NOT offset the Passive Loss from the other rental.

[rschaddock78]

That is my issue.  I have used a software program and it doesn't have an option I can find to make the gain non-passive but still not subject other taxes of non-passive/active income.  I was under the impression the self rental gains would not be subject to se tax or niit tax etc.  Which I don't want to pay if I am not supposed to.  The 1065 will show the property type as 7 self rental on the 8825 which was also on my K-1.

[AmeliesUncle]

After thinking about it, could you just add that amount to Box 1?  That should treat it as non-passive income, and should still show up in the proper spot on Schedule E.

[rschaddock78]

I am going to play with the software and try that but I think my problem is the interest associated with the loan to acquire the self rental (I had to make my own K-1 and use the partnerships TIN) and the actual suspended losses (from 2018) for the self rental haven't wanted to follow the self-rental.  I want to use those losses.  I'm just hoping to find a software program that can do this so going forward I won't have to re-invent the wheel every year to get my proper losses.