how do I classify k-1 partnership rental income as non-passive

Forum|Forum|1 year ago
April 29, 2025
2 replies
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TaxGuyBill

Level 15

It sometimes depends. What makes it non-passive?

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Terry53029

Intuit Community Champion

If you are sure it is non-passive you have to check box on information worksheet that your client is a real estate professional, and on K1 line 2 check box Materially Participated. that will make the income non-passive. Most rental income is passive income. Why is your clients not ?

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terrymedoAuthor

Level 2

Prior year returns CPA preparer classified as Non-Passive and took the QBI deduction.........

I am trying to understand why it is non-passive also..............

Taxpayer is a 50% General partner.............business is a single tenant office building........

Other general partner is closer geographically and more involved in day to day decisions, which are minimal.

I never did figure out how to follow prior years by classifying as non-passive so I classified as passive,,,,,,,,,,,

I appreciate your reaching out to answer my question

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TaxGuyBill

Level 15

Based on what you have said, it seems like it should be passive, unless there are circumstances that we don't know about. Maybe the prior preparer did something incorrectly. Unless you find out circumstances that make it non-passive, you should treat the rental as passive.

It can still possibly qualify for QBI, even if it is passive. Although many/most tax preparers will claim QBI for just about any rental, it is my personal opinion that a single rental (with a single tenant) rarely rises to the level of a Trade or Business to qualify for QBI. But many disagree with me.

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