Schedule K-1 (Form 1065), box 2
Box 2: Net rental real estate income (loss)
Your share of net income or loss from the partnership's rental real estate, usually a passive item on Schedule E, Part II.
What box 2 reports
Your share of the net income or loss from rental real estate activities of the partnership, after the partnership's rental expenses.
Rentals of things other than real estate (equipment, for example) are reported in box 3.
Where it goes on your return
Schedule E, Part II
The common case
Reported on Schedule E (Form 1040), Part II, line 28. Rental real estate is generally a passive activity, so a loss normally goes through Form 8582 before it reaches Schedule E. If you are a real estate professional who materially participated, the Partner's Instructions send box 2 to the nonpassive columns instead.
When it depends on you
The special allowance for rental real estate activities, the income phase-outs, basis limits and at-risk limits all apply before a loss is usable. See the Instructions for Form 8582 and the Partner's Instructions.
A real example line
Below, a line written the way the document text arrives, run through the same reader as your upload. The reader matches the box number and the IRS label, then reads the amount, so it still finds the line when the scan is noisy.
| Line as the engine reads it | Box | Recorded value | Status |
|---|---|---|---|
2 Net rental real estate income (loss) (3,150) | 2 | -3,150 | Read |
Check before you enter it
- Real estate syndications and funds often show a loss here while paying cash distributions (box 19). The two are unrelated numbers.
- Depreciation is a common reason for a loss in box 2; the partnership's statement may break it down.
In the K1 FastTax output
CSV column: box_2. In the checklist a line looks like Schedule K-1 (1065) screen, box 2. All CSV columns.
Official source
The IRS text for every box is in the Partner’s Instructions for Schedule K-1 (Form 1065). Use the edition for the tax year printed on your K-1, because box wording and code lists change.
Plain answers
Questions about box 2
Where does box 2 of a Form 1065 K-1 go on my return?
In the common case box 2 is reported on Schedule E (Form 1040), Part II, line 28. Rental real estate is generally a passive activity, so a loss normally goes through Form 8582 first. If you are a real estate professional who materially participated, the Partner's Instructions send box 2 to the nonpassive columns instead.
Why does box 2 show a loss when the partnership paid me cash?
Depreciation and other deductions can create a tax loss in a year when the property still produces cash. The cash you received is a distribution (box 19), a separate number that is not income by itself. A loss in box 2 does not mean the investment lost money, and the partnership's statement may show what caused it.
Can I deduct a loss shown in box 2?
Not automatically. The passive activity rules (Form 8582), the special allowance for rental real estate activities and its income phase-outs, your basis and the at-risk limits all apply before a loss is usable, and an unused loss may carry forward. See the Instructions for Form 8582 and the Partner's Instructions for Schedule K-1 (Form 1065).
What is the difference between box 2 and box 3?
Box 2 is net income or loss from rental real estate. Box 3 is net income or loss from other rentals, such as leased equipment. Enter them separately: tax software asks for them on different lines, so do not add them together.
Does box 2 affect self-employment tax?
Rental real estate income is generally not self-employment income. The partnership reports any self-employment earnings in box 14, code A, so look there and in the Instructions for Schedule SE if you are unsure.
Box 2 shows a code or STMT instead of a number. What do I enter?
Box 2 does not normally have codes. STMT or an asterisk means the amount is on a statement attached to the K-1, so read the statement for the figure. K1 FastTax does not guess: it leaves that CSV cell empty, names the box in needs_review and adds the line to the review list. A code letter printed next to an amount in a box that has no codes is held for review the same way, so check it against the paper K-1 and the Partner's Instructions for Schedule K-1 (Form 1065).
Which CSV column holds box 2?
Box 2 is in the box_2 column as a plain number, for example 3150, negative for a loss. If the box is blank on your K-1 the cell is empty, not zero, and a value whose sign could not be read is held out of the cell and listed in needs_review.
Is box 2 the same on a Form 1120-S or Form 1041 K-1?
Box 2 is also net rental real estate income (loss) on a Form 1120-S K-1. On a Form 1041 K-1 it is box 7. Box numbers differ between forms, so match the label, not just the number.
Related boxes
Read box 2 from your own K-1
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