Discussion:Self-Rental Passive Losses and Gains

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{{ForumReplyPost|UserID=Larry0434|Date=8 May 2009|Text=Without looking it up for you, prior tax court cases ruled that a loss in self-renting is passive and gain is material participating.}} {{ForumReplyPost|UserID=Larry0434|Date=8 May 2009|Text=Without looking it up for you, prior tax court cases ruled that a loss in self-renting is passive and gain is material participating.}}
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 +{{ForumReplyPost|UserID=Johnhuddleston|Date=8 May 2009|Text=That is my understanding.}}

Revision as of 23:24, 8 May 2009

Discussion Forum Index --> Advanced Tax Questions --> Self-Rental Passive Losses and Gains
Discussion Forum Index --> Tax Questions --> Self-Rental Passive Losses and Gains

PAULHA (talk|edits) said:

8 May 2009
T/P presently operates a lawn mower sales and repair business. The business is an LLC classified Sub-S Corp for federal tax purposes and the husband is the sole stockholder.

T/P's own some land and want to construct a new building on the property for the lawn mower business.Their plan is to set-up an LLC and elect to be taxed as a partnership. Ownership will be 50/50. The land that they presently own will be transferred into the partnership. At the end of the day the partnership will own the land and the building.The partnership will then rent the land and building back to the Sub-s Corp.

The partnership will be a passive activity whereas the lawn mower business will be a nonpassive activity. The husband and wife will actively participate in the operation of the rental property.

From my research, net rental income Reg. 1.469-2(f)(6) is treated as not from a passive activity. This income will then flow to the T/P's 1040 and be omitted from Form 8582.It can not be used to offset net rental losses.

If there is a net rental loss of the partnership- my thinking is such: The passive loss of the partnership will flow through from the K-1 and be reported on the T/P's 8582 as an unallowed suspended loss. The loss and any other subsequent losses (of the partnership) will just build over time or until the T/P's have passive gains from another'different activity' other than the partnership to net against or dispose of the property.

Appreciate your insight.

Larry0434 (talk|edits) said:

8 May 2009
Without looking it up for you, prior tax court cases ruled that a loss in self-renting is passive and gain is material participating.

Johnhuddleston (talk|edits) said:

8 May 2009
That is my understanding.
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