Section 179 Carryover

[brscott]

I'm retired and have no active income.  A partnership we own invested in a new roof and TurboTax has accurately carried the resulting section 179 carryover for the past 2 years.  This year the software subtracted the carryover amount from income, even though I pressed the button for non material activity.  It does not appear that the tax code has changed in this area.  Will this issue be cleared before tax season is over?  Thanks!

[AliciaP1]

There are exceptions to passive activities that make the income or loss active.  You do not explain what business the partnership is engaged in but:

Per the IRS:

1. A working interest in an oil or gas well that you hold directly or through an entity that doesn’t limit your liability (such as a general partner interest in a partnership). It doesn’t matter whether you materially participated in the activity for the tax year. However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. See Temporary Regulations section 1.469-1T(e)(4)(ii).
2. The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental.
3. An activity of trading personal property for the account of those who own interests in the activity. See Temporary Regulations section 1.469-1T(e)(6).

[brscott]

AliciaP1,

Sorrowfully, our investment does not fall into those categories - it is commercial real estate and we have no involvement in the management of the project.  I don't think there is any way this category of income (or any other source we have) could be considered non-passive.  Just lazy I guess.  That being said, I remain confused why the software product utilized the S179 carryover.  Thanks for your response and any other info you might be able to offer.  

[AliciaP1]

You may have reported enough basis in your passive investment for the loss to be allowed or the property was sold for a gain so you had enough basis to deduct the loss.  You may want to double-check your K-1 entries into TurboTax to ensure everything is calculating correctly.

@brscott