Discussion:Regaining suspended passive losses when converting from rental to personal
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Discussion Forum Index --> Tax Questions --> Regaining suspended passive losses when converting from rental to personal
| 22 April 2007 | |
| Hello, I have a client who rented out their home in Northern California for 8 months out of the year, and it was managed by a company so her losses from last year are suspended because of passive involvement in the business. She has another $10K of losses this year that I want to be able to use, as she moved back into the property for the last 4 months of '06. I know I can't just take the mortgage interest and property taxes on her schedule A, but how do I make ProSeries release the suspended losses, and understand that she lives there now? Can I do this? I know I have to stop the depreciation, but she needs those losses. Thanks.
Jeremy | |
| 22 April 2007 | |
| Passive losses are suspended until complete disposal...I guess you are saying you completely disposed of the passive activity in 06? Have you put a checkmark by the complete disposition in Proseries? | |
Michaelstar (talk|edits) said: | 22 April 2007 |
| No - you can not take those losses at this time. You must dispose of the property - as in sell it. One can not just move back into the property and claim they disposed of the passive activity and then realize all previously suspended losses. That is not what congress intended when they brought this passive activity deal into law back in 1986.
Checking the box in proseries, lacrete or any other program this case would be incorrect. | |
| 30 January 2008 | |
| Please help me out on this one.
In 2006 taxpayer had 2 schedule E's. # 1 was 2 condo units one of which wasaquired in 2002 in a 1031 exchange and the other purchased. #2 was a 65% interest in a rental house. There are carryover passive activity losses on both schedule E's. in late 2006 taxpayer sold one of the condo units and converted the other to personal residence. Can I take the PAL carryover from condo's to the rental house? | |
| 30 January 2008 | |
| wouldn't the loss from the activity been freed up to the extent of gain upon the sale in 2006? In other words, Ray, check to see that you didn't already do this last year. | |
| 30 January 2008 | |
| There was not a complete disposition last year. Some was taken to the extent of the $25,000 limit but there is about $10,000 carryover. | |
| 30 January 2008 | |
| Ray, are you saying that the taxpayer aggregated his activities? | |
Death&Taxes (talk|edits) said: | 30 January 2008 |
| Or were both the condos listed as one property, which is what I suspect. (same thing as Kevin is saying, I think) | |
| 30 January 2008 | |
| The two condo's were being run and reported as a single activity. The 65% ownership rental is run and reported as a seperate activity. | |
| 30 January 2008 | |
| In thinking on this I guess the question really is what happens to passive loss carryovers when the property is converted to personal use? | |
| 30 January 2008 | |
| It appears then that the losses would be suspended until taxpayer disposes of the property. | |
| 30 January 2008 | |
| one of the downsides of the aggregating rule. Not your fault, it is the client's. If he had told you he intended to move into one of the units, you would probably never let him aggregate. | |
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