Partnership K-1 losses and gains

Both positions are correct, but in different circumstances. In a family partnership where capital is a material income-producing factor you can have spouses as partners where one contributes capital and has passive income while the other provides services to the partnership and has nonpassive income. In a consulting practice, where services are the source of income, a spouse cannot receive passive income when the other spouse provides the services. (Note that there are special rules for family partnerships, a topic which hasn't been raised yet in this thread.)

Ira Smilovitz

Reply to
ira smilovitz
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Actually I think it means the opposite of that. Temporary Regulation

1.469-5T(f)(3) says,

"In the case of any person who is a married individual (within the meaning of section 7703) for the taxable year, any participation by such person's spouse in the activity during the taxable year (without regard to whether the spouse owns an interest in the activity and without regard to whether the spouses file a joint return for the taxable year) shall be treated, for purposes of applying section 469 and the regulations thereunder to such person, as participation by such person in the activity during the taxable year."

Sounds to me like that means if one spouse materially participates, the other spouse is treated as materially participating irrespective of what the other spouse actually does.

Reply to
Stuart Bronstein

You and lotax are in agreement. Lotax's unfortunate use of a double negative can be confusing. "...[C]an't not..." implies "is".

Ira Smilovitz

Reply to
ira smilovitz

I think that's what he said. Maybe you didn't notice the double negative "can't not be a material participant".

Reply to
Barry Margolin

Thank you, Ira.

LoTax

Reply to
lotax

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