Self-rental income

[Ocean26]

My client has an S-Corporation for their dental office and an LLC that owns the building. The dental S-Corp pays rent to the LLC, which is considered self-rental. This income should be active and qualify for QBI, not subject to Net Investment Income Tax. However, when I imported K-1 from the LLC into 1040, ATX is placing the K-1 under Schedule E as passive income. Is there a correct way to report the LLC income as active on Schedule E?

[jklcpa]

If taxpayer materially participated, income from the self-rental is considered nonpassive. Did you check the box D for "nonpassive" on the K-1 input? I suspect that you checked box A for "active" instead. Is that correct?

[Ocean26]

Yes, that is correct! Problem solved, thank you so much!!!

[mircpa]

@jklcpa

Question:

If this person has dental office drawing salary and income, can he take position of materially participating in rental activity ? 

[jklcpa]

17 minutes ago, mircpa said:

@jklcpa

Question:

If this person has dental office drawing salary and income, can he take position of materially participating in rental activity ? 

Sure, as long as he meets any one of the 7 tests for material participation. Probably one of the easier test to meet would be the 100 hour rule and where his participation is at least as much as others including nonowners.