K-1 Guarantee Payments

3 replies
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My partnership K-1 shows a roughly $10,000 LOSS in box 2 and an almost identical guaranteed payment for capital in box 4b. I thought the two would offset when it came to my tax obligation, but TT added about $3,000 to my taxes due when I entered the K-1 data. What's up? (Yes, I have other businesses that showed operating losses, including other real estate I manage myself -- is that the issue?)

Anonymous_Answer

Level 15

The amount in Box 2 is considered a passive activity loss while the amount in Box 4b is considered nonpassive income.

Passive losses, with certain exceptions, are generally only offset by passive income with excess losses being suspended.

Anonymous_Answer

Level 15

The amount in Box 2 is considered a passive activity loss while the amount in Box 4b is considered nonpassive income.

Passive losses, with certain exceptions, are generally only offset by passive income with excess losses being suspended.

pbmeye02Author

Level 2

many thanks for a quick response ... but we actively manage the K-1. I am a managing partner, though I am not a real estate professional. Does my non-professional status cause the loss to be passive?

Anonymous_

Level 15

@pbmeye02 wrote:

.......we actively manage the K-1. I am a managing partner, though I am not a real estate professional. Does my non-professional status cause the loss to be passive?

You need to materially participate in the rental activity as a real estate professional in order to avoid losses from the activity to be considered passive.