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@HN wrote:

  Example: business income is $50,000.  Passive loss is $2,000.  The K-1 automatically reports $48,000 ordinary business income (line 1) where it should only be $50,000.

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Why do you think it should show $50,000?  

If that $48,000 consists of $2,000 of passive loss and $50,000 of potentially non-passive income, that would be included as a note with the K-1.

With that being said, I'm not entirely sure if the passiveness automatically passes through like that.