AGI >150k, IRS disallowing Partnership Losses?

[ILLMAS]

Client was notified that she cannot take a loss from a partnership because her AGI is over 150K by the IRS Auditor, we were surprised to hear this, can someone confirm this? Background: Client owns a rental property that is a partnership, her part of the loss was 46K, I am surprised that ATX didn't catch this for this correct??

[imjulier]

I have this same case for a client. Since ATX allowed the loss, I went ahead and let it pass through to the 1040. The 150K limit does apply to Sch E rental properties and I am guessing would also apply to P-ship losses that are real estate specific on the K-1 (line 2) but ATX does not catch this. I passed the loss through and haven't heard from the IRS yet. It will be interesting to see if anyone knows if real estate losses in a pship or scorp are limited the same way as if reported on the Sch E.

Julie

[NECPA in NEBRASKA]

Did she have any passive income? Was the K-1 entered in her 1040 as passive and/or rental actively participating? The program won't catch it if the K1 isn't entered with all of the necessary information. The IRS auditor may be correct, because if your joint AGI is over 150,000, passive losses will be disallowed. See Form 8582 and instructions.