topic K-1 Guarantee Payments in Investors & landlords

K-1 Guarantee Payments

pbmeye02 — Fri, 12 Mar 2021 15:32:51 GMT

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?)

Re: K-1 Guarantee Payments

Anonymous_ — Fri, 12 Mar 2021 15:42:43 GMT

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.

Re: K-1 Guarantee Payments

pbmeye02 — Fri, 12 Mar 2021 15:45:13 GMT

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?

Re: K-1 Guarantee Payments

Anonymous_ — Fri, 12 Mar 2021 16:02:41 GMT

@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.