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Vacation rental property reported on Form 1065 as a multi-member LLC

We have a rental property used last year 20 personal days and rented 165 days. Therefore, the property is a short term vacation property. The property is owned by an LLC and we file a partnership F1065. Form 8825 is NOT limiting the loss - instead it is allowing a net loss allocable to each partner, although the K-1 does show Property type as ‘3 Vacation / S-Term’. 

However - on TurboTax 1040 program there is no where to show that this loss should be limited to zero and carried over?

 

so my question is - shouldn’t the loss be limited to zero either at the partnership OR 1040 level - if do - How do I accomplish this 

 

thanks in advance 

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5 Replies

Vacation rental property reported on Form 1065 as a multi-member LLC

The answer here depends upon the nature of the deductions that you reported.

 

Note that your personal use days, being more than the greater of 14 days or 10% of the days rented at fair value, take the rental out of being subject to Section 469 (PAL rules).

 

See https://www.irs.gov/publications/p527#en_US_2023_publink1000219123

Vacation rental property reported on Form 1065 as a multi-member LLC

Thanks for your reply! 

We are reporting the usual expense for a residence. Property taxes, insurance, legal, etc. We upgraded our interior and have more depreciable assets in 2023 - which TurboTax showed as qualifying for the 80% bonus - which even after I’ve elected OUT of this expense - TurboTax is not limiting the overall loss to zero. Maybe we are allowed a net loss somehow - but I thought if a property qualifies as a vacation ST rental - any losses are not allowed and must be carried over. 

am I missing the law - it is there a button in TurboTax I am not seeing? Thx 

Vacation rental property reported on Form 1065 as a multi-member LLC

Due to the personal use number of days versus fair rental days, deductions would be limited by Section 280A, not Section 469.

 

As a result, there could be deductions that are strictly rental use related that would create a loss and, if so, the loss would be nonpassive. 

Vacation rental property reported on Form 1065 as a multi-member LLC

Wow - ok great THANKS I was not fully understanding the rules. You’ve been very helpful - I will proceed! 

have a great day 

 

Vacation rental property reported on Form 1065 as a multi-member LLC

The following is an (admittedly crude) example of what I am referring to.

 

Rental income = $10,000

Commissions = $4,000

Mgmt fees = $4,000

Advertising = $4,000

 

The foregoing would result in a $2,000 loss and that loss would be nonpassive as all of the expenses creating the loss are related to rental use.

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