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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121563  
Subject: Re: Passive Activity Loss Limitations Date: 3/18/2000 9:42 PM
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<<I know the rules are very complicated because I have been reading them - and I am comfused!! I have tried to contact my accountant but that is virtually impossible at this time of year. Anyway, I want to try and make sure that I handle the partnership loss appropriately. I am pretty sure that the two rental houses are considered passive activity and have coded them as such. >>

I would respectfully disagree. If your husband is a qualified real estate professional (and it sounds like he is), then the rental property is no longer a passive loss. And all bets are off regarding the $25k special exclusion for rental real estate losses. Your losses can then be unlimited.

<<However, if my husband is 1/3 partner in this property and as such performs leasing functions, negotiations with buyers and sellers, management services, etc. for this property than wouldn't this qualify as "not passive activity"?>>

Very likely yes. But not necessarily for the reasons that you describe...but because he qualifies as a real estate professional.

<< I believe that he meets the requirements of real estate professional as defined by the IRS. If I check "other passive exceptions" on the TurboTax form than I am allowed to deduct the full amount of the losses on this one property; the loss is not reduced due to our AGI being over $100,000.>>

Right...and if you find the same box to check for the rental properties, TurboTax will also pull the limitations off of those properties also.

<<It makes a HUGE difference in the bottom line and obviously I would like to take this route but want to make sure I understand what I am doing.>>

I can't confirm that...one way or the other. But from the limited information that you have provided, it would appear to me that you would meet the test as a real estate professional, and the limitations would be remove from the partnership losses and the rental losses. They are no longer passive activities, and therefore don't trigger the limitation.

TMF Taxes
Roy

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