Can multiple partners use depreciation to offset active income?

[Donald F.]

If my brother and I hypothetically invested in an income producing property together, would only one of us be able to claim material participation in order to allow us to use bonus depreciation to offset our active income? we are both RE professionals as defined by IRS. If so, what would be the requirements that we would both need to fulfill in order to do this legally? I’m afraid that if one of us were able to meet the requirements, it would eliminate the other to be able to fulfill the requirement.

[Donald F.]

@David M. Thanks for trying to help. I think you need to understand bonus depreciation to know what I am trying to ask though. With bonus depreciation I’m able to accelerate a bunch of depreciation to the first year.. the accelerated depreciation would create a paper loss for the property for that first year. Typically you can only use passive losses to offset passive income. However, if you are a real estate professional and meet the material participation requirement, you can use the passive loss and use it to offset your active income. The material participation requirement is very strict, so I’m looking to understand if it’s even possible (and if so, how?) to have multiple partners use that against their active income. If it’s possible to have multiple partners meet the material participation requirement, it seems very tough. Yes, meeting with CPA about this — figured I’d ask if anyone knew the answer in the meantime though.