Schedule K-1 losses

[taxquestion2016]

Hello, 

I received a schedule K-1 form 1065 from an investment club for tax year 2021. I am a passive partner in this investment  club; so the loss on this K-1 is a passive loss. I also have 1099-G unemployment income in year 2021. Can my passive loss from the partnership firm (loss on K-1) offset my 1099-G income? In other words, would I be able to deduct my passive loss as I have unemployment income in the same tax year? Many thanks in advance for helping with this question. 

[Vanessa A]

No, you cannot use passive loss income from an investment club to offset your other income. 

[taxquestion2016]

Thanks so much for the speedy response. To confirm, is 1099-G Box 1 income not considered as passive income?

I think TurboTax is following what you just suggested and doing the right thing but I’m here a different response from the CPA for the LLC that issues the schedule K-1. Kindly clarify whether 1099-G is considered passive income. 

[Vanessa A · Accepted solution]

No, unemployment is not considered passive income.  It would be unearned income, but not passive.  Two separate classes of income. Passive income is income you receive from an investment.  Unearned income is income you do nothing really to receive it.  Yes, you have to work to get unemployment, but you don't have to invest or perform a certain amount of labor while receiving unemployment.