I have never been down that road, but wouldn't you just show the rental receipts on the K-1, report the property taxes and mortgage interest on the K-1, and then show the other expenses as nondeductible?

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@loricpa100 wrote:
Seems should be similar to a vacation property that would have expenses limited to the amount of income received. 

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No, except for mortgage interest, real estate tax, and casualty losses, the expenses are not allowed at all. The non-allowed expenses shouldn't be on Form 8825.  

After doing that, is there still a loss?

Good morning and thank you both for your thoughts.

I was going to stop the depreciation.  There is still a loss with mortgage interest and property taxes.  Do I have to manually put in a negative expense or other income to offset to zero?  I cannot find a way for Lacerte to self limit.  

I tried 366 personal days - to force it as a personal rental - nope.  I tried calling it a vacation rental.  Nope.

I am also discussing with the client this issue as going forward it is a personal property and not a rental and to reconsider the 2025 (and future handling).  

As this year is mixed FMV and non FMV, I am going to keep on the 8825 and limit to zero -again doable with just interest and prop tax.  Guess manually adjust the expenses to equal the income as cannot find a way to do within Lacerte.

If I make a footnote - doubt the partners will self limit to zero - prefer to show $0 for the rental on the K1 this year.

Thoughts?

"Do I have to manually put in a negative expense or other income to offset to zero? "

Yes. I don't know of any software that does this for partnerships.

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@loricpa100 wrote:

There is still a loss with mortgage interest and property taxes. 

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Have you determined if this is a not-for-profit rental?  If it is, I don't think it should even be on a 8825.  If a not-for-profit rental were on a 1040, it would be on Schedule 1, not Schedule E (and mortgage interest and real estate tax might be on Schedule A).

If it is a not-for-profit rental, I would think the gross income would be on page 1 of the 1065 (comparable to Schedule 1 of the 1040).  The mortgage interest and real estate tax would not be allowed, but might be able to be passed to the partners (which might possibly be allowed a deduction on Schedule A of their 1040s).