Vendor Mall Income Reporting on 1065

[gfizer]

I have a client who started a new business with a friend in 2024.  They opened a vendor mall where they rent spaces to local crafters and such.  The two of them run the shop daily and all sales are run through the main register.  My clients collect and remit all sales tax and then pay each vendor their net sale amount after sales tax on a monthly basis.  They do not collect a commission on sales so their only income is the space rental fees.  They also do not own the building they operate out of.   Am I thinking correctly that this is a non-passive activity and that the income and expenses would be reported on page 1 of the 1065?  What are your thoughts?

[kathyc2]

I can't see that it's passive as they are providing substantial services and don't have an investment due to not owning building.

[Abby Normal]

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