[maria10]

I have two general questions regarding Schedule E and Limited Partners compared to General Partners.

First, when someone is a limited partner, is it just that the ordinary income is treated as passive income, and that any other separately stated items are treated as they are; so portfolio income will always be portfolio income to that party regardless of whether or not they materially participate?

Also, in regards to Schedule E – one of the Becker simulations on the final exam asked a question regarding what the total on Schedule E would be reported as on line 17 on schedule 1041. However, they combine ordinary business income from passive and nonpassive activities on the same line. I guess my question is – you’re not allowed to take a passive loss deduction, so how does that play in here if you’re combining passive and nonpassive income together – I thought passive could only offset passive?

Net rental income (passive): $5,000

Partnership 1 (active): 5,000

Section 179 depreciaton: (3,000)

partnership 2 (passive): (6,000) —> why do we deduct this passive loss against the active ordinary income from partnership 1?

Thanks for your help guys! My test is on monday I am desperate and just trying to finish up!!

[Roxwella]

The income from the partnership gets passed through to the personal 1040 on a K1 which has many many lines other than what is showed in combination on that line. Then, on the 1040, where all this info for partnerships ends up in one way or another (funneled through a schedule E), you can take up to $25K rental loss against ordinary income (under, and reduced above .. I believe its 100k AGI up to 150k.. someone correct me on those numbers if I'm wrong).

Just to see it: https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf

[Anonymous]

I'm not sure I follow your whole question, but my understanding is that a limited partner's income is passive.

[Author]

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