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

[elainebblanks]

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 

[tagteam]

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

[elainebblanks]

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 

[tagteam]

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. 

[elainebblanks]

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

have a great day 

[tagteam]

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.