Discussion:Can Anyone Explain (Passive Losses)?
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Discussion Forum Index --> Basic Tax Questions --> Can Anyone Explain (Passive Losses)?
Discussion Forum Index --> Tax Questions --> Can Anyone Explain (Passive Losses)?
| 14 October 2009 | |
| If you have say 10 residential rental properties each with passive loss carryovers of 10,000 dollars and you sell one of the rentals for say a profit of 100,000 dollars... do all of the 100,000 in carryover losses get used up by the gain on the sale of just one of the properties. Or would only the losses that apply to that particular unit be used?
I believe all losses would be used up but really am unclear on this. | |
Death&Taxes (talk|edits) said: | 14 October 2009 |
| Yes, you are right. Do a Form 8582 by hand, with the backup worksheets and I believe you will see this in action. Seems amazing that 20+ years have gone by and Reg. 1.469-6 has never been issued. A passive gain unlocks unused losses to the extent of that gain. | |
Southparkcpa (talk|edits) said: | 15 October 2009 |
| Agreed, I use proseries and "sort of blew" a projecion in this area 469.
Client collected 100K of rent and I projected a liability of 20K. The tax was ZERO because of D and T's observation, it freed up losses on several other passive entities. I failed to consider this when we filed his extension. He was happy to get a refund, understood HOW and WHY I over estimated. But a surprise none the less. | |
| 15 October 2009 | |
| Agreed. If the taxpayer has capital loss and PAL carryforward, the capital loss can offset the gain resulting from the sale of passive activity loss first, and still get the PAL as a deduction. | |
| 15 October 2009 | |
| Those rules can also be read to allow all current and carryover passive losses on the one unit being sold as a separate NON PASSIVE loss. Then the netting process on form 8582 includes the gain on sale with current and carryover numbers for the other 9 activities only. | |
Death&Taxes (talk|edits) said: | 15 October 2009 |
| Only if the sale produced a loss would the availability of carryovers be limited to the property that was sold. | |
| 15 October 2009 | |
| Agree with D&T. Sale at a loss allowed in full and treated as Non Passive. Current year loss and carryover loss for that one property allowed in full and treated as Non passive. Other 9 properties flow to form 8582. | |
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