Mixing passive income from personal real estate and real estate syndicate

[Roy Mitle]

I have 2 different types of investments

a) rental - keeps on giving me passive losses because of depreciation

b) K1 syndicates - give me passive losses till they liquidate at which time I get a Long-term capital gain and a cumulative passive loss that I can now realize as income loss on schedule 1 that ultimately flows onto 1040.

If I invest in an asset that gives me passive income (call it c), can I use that passive income to offset (a) rather than (b).

Why am I asking?

I plan to keep (a) and pass onto heirs. If I can offset my passive income (c) vs (a), then my passive income will be totally tax free. With (a) I don't worry about depreciation re-capture since I pass onto heirs. 

Examples of passive income

* Invest in ATM machines - I get income every month, after 8 years my capital is gone so I get Long term capital loss after 8 years. The income I get every month is passive income.

BTW, on a separate question - do you guys know any places to get passive income without headaches. Real estate - difficult to get passive income stress-free.

[Ian Ippolito]

I'm not a tax advisor and the below is just my personal opinion. Always consult with your own tax advisor before making any text.

In general you can't because your directly owned rentals are actually considered nonpassive to the IRS. And nonpassive and passive cannot offset each other.

Regarding where to find passive real-estate investments, there are actually hundreds of new ones that come out each month. If you're not familiar with them at all, then you can go to a site like Crowd Street where you can start reviewing them in detail and learn to come up with your own personal due diligence strategies. Investors also find new deals and sponsors from investor clubs and by networking with others (either in person or via a site like BiggerPockets). Good luck.

[Chris Seveney]

Quote from @Roy Mitle:

I have 2 different types of investments

a) rental - keeps on giving me passive losses because of depreciation

b) K1 syndicates - give me passive losses till they liquidate at which time I get a Long-term capital gain and a cumulative passive loss that I can now realize as income loss on schedule 1 that ultimately flows onto 1040.

If I invest in an asset that gives me passive income (call it c), can I use that passive income to offset (a) rather than (b).

Why am I asking?

I plan to keep (a) and pass onto heirs. If I can offset my passive income (c) vs (a), then my passive income will be totally tax free. With (a) I don't worry about depreciation re-capture since I pass onto heirs. 

Examples of passive income

* Invest in ATM machines - I get income every month, after 8 years my capital is gone so I get Long term capital loss after 8 years. The income I get every month is passive income.

BTW, on a separate question - do you guys know any places to get passive income without headaches. Real estate - difficult to get passive income stress-free.

 Roy

To get passive income you can check out funds and syndications, for example we run a mortgage note fund that pays distributions monthly and do not issue K-1's but 1099 DIV's. 

That is truly the only way in my mind to be passive, as owning anything like a rental even with a property manager is still not passive

[Ashish Acharya]

Quote from @Roy Mitle:

I have 2 different types of investments

a) rental - keeps on giving me passive losses because of depreciation

b) K1 syndicates - give me passive losses till they liquidate at which time I get a Long-term capital gain and a cumulative passive loss that I can now realize as income loss on schedule 1 that ultimately flows onto 1040.

If I invest in an asset that gives me passive income (call it c), can I use that passive income to offset (a) rather than (b).

Why am I asking?

I plan to keep (a) and pass onto heirs. If I can offset my passive income (c) vs (a), then my passive income will be totally tax free. With (a) I don't worry about depreciation re-capture since I pass onto heirs. 

Examples of passive income

* Invest in ATM machines - I get income every month, after 8 years my capital is gone so I get Long term capital loss after 8 years. The income I get every month is passive income.

BTW, on a separate question - do you guys know any places to get passive income without headaches. Real estate - difficult to get passive income stress-free.

The losses will be released pro rata from all the sources that were limited before, not from one specific unallowed loss. 

Any business you don't get involved in is passive. e.g. Restaurant, store, or any other business. 

[Basit Siddiqi]

Passive income is offset by passive losses.

[Carlos Ptriawan]

Quote from @Roy Mitle:

BTW, on a separate question - do you guys know any places to get passive income without headaches. Real estate - difficult to get passive income stress-free.

 US CD or saving with 5% income.
I also agree with Chris above. Anythingwith K1 is headache. Any 1099-DIV investment is truly passive and no headache. Lot of CEF to invest as well .

[Greg O'Brien]

@Carlos Ptriawan passive in life but portfolio for tax!