topic Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why? in Get your taxes done using TurboTax

Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why?

Just_In_Thyme — Tue, 24 Feb 2026 07:24:14 GMT

I have passive loss carryover from the past 3 consecutive years (19,20,21) from SAME entity K-1 reported on Box 2 Only. I've noticed that Turbo tax has split this amount between Box 1 and Box 2a each year (seemingly arbitrarily) and again in 2022 return when partnership was dissolved with GAIN large enough to offset all accumulated losses. Without EVER having any Box 1 income reported from this partnership, why does turbo tax split the amounts btwn box 1 and 2?

I have several other non-PTP real estate rental K-1's with losses and it also splints passive loss carryovers in the same manner....as they roll from year to year.

Re: Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why?

Anonymous_ — Thu, 14 Sep 2023 16:35:24 GMT

I'll page @Mike9241 but those losses are treated differently (passive losses and passive losses from PTPs).

Re: Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why?

Mike9241 — Thu, 14 Sep 2023 16:35:29 GMT

PTP's don't get reported on the 8582

real estate with active participation gets reported on line 1

real estate with no active participation gets reported on line 2

there are worksheets that detail what is getting entered on those lines - review them because I have no access to your returns or documents.

Re: Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why?

Just_In_Thyme — Thu, 14 Sep 2023 17:00:28 GMT

I suspected 'glitch' in TT software, because all these particular K-1's are non-PTP and NONE are active participation. AND they are all being treated the same way with the SPLIT.

I thought MAYBE there is an accounting rule (for tax purposes, not GAAP) that allows certain rental real estate losses to be 're-characterized' from rental income (Box 2) to ordinary business income (Box 1), as paradoxical as that sound to me!, as they roll over from year to year.

Tax savvy enough to understand it doesn't make sense logically.

Going back through the worksheets, AGAIN, but they don't break down when/where the Box 1/2 SPLIT is occurring.

Re: Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why?

Just_In_Thyme — Thu, 14 Sep 2023 17:03:33 GMT

Re: Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why?

Anonymous_ — Thu, 14 Sep 2023 17:11:58 GMT

https://ttlc.intuit.com/community/business-taxes/discussion/i-have-a-schedule-k-1-llc-what-do-i-put-for-carryovers-for-box-2a-do-i-put-my-passive-activity/00/291956

Re: Passive loss carryover (Box 2 income ONLY) from prior years split between Box 1 and Box 2a automatically, why?

Just_In_Thyme — Sun, 17 Sep 2023 16:39:30 GMT

The link above explains the process behind my original question, for anyone reviewing this in the future.

Turbo tax automatically splits the "suspended loss carryover from prior year" into "Ordinary income (loss) for Schedule E" and "Ordinary income (loss) for Form 1040".

Look at worksheets for Section A and B "Passive Activity Adjustment to...." to see how the number break out. You wont be able to figure it out looking at the return pages by themselves.