Passive Loss and SE income - Non GP

[jasdlm]

Client has $300k income on line 1 from 1065.  Large Passive Loss (bonus depreciation on equipment that is leased).  ATX offsets the SE income by the passive loss so $300k ordinary income but no SE income.  I know the IRS is coming after this when passive losses are used to offset SE on Guaranteed Payments.  Anyone have thoughts on offsetting General Partner Non-guaranteed payment SE income?  (i.e. Box 14 is negative)   Is the IRS after that, also?

Thanks much.

[Lee B]

Does your client have equipment rental or equipment leasing income?

If your client has leasing income, are they capital or operating leases?

Where does the income on line 1 come from?

r

[jasdlm]

Equipment leasing income.  Line 1 comes from operations of the business.  They usually sell, but they have a large piece of equipment that they just finished that they got a lease offer (it's actually a pass-through from another entity but they're connected).  So ... normal business activity (sales) on line 1, bonus depreciation on equipment being leased (huge) on line 3.  Operating lease.

[Lee B]

Is operating equipment leasei income and the related depreciation passive?

[jasdlm]

Yes.

 

[Sara EA]

Do they need all that depreciation?  Opt out of bonus and use just enough 179 to offset operating income.  You don't mention guaranteed payments, but I believe they are always subject to SE because the partner actually received that money.