Question

On my accumulative losses from my prior years in form 8582, line 21, as a result of my sale of rental property. Can I offset it against my wages/ordinary income?

Forum|Forum|7 years ago
June 3, 2019
2 replies
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This is a continuity of your response "Did you have any unallowed losses from prior years that you were not able to take advantage of? The losses accumulate on Form 8582 until such time as you can take advantage of them. Line 21 will show the loss from deducting expenses from income. Line 22 draws from Form 8582."

TurboTax Premier Online

V

Employee

Passive losses are generally deductible only to the extent of passive income. However, current and suspended losses are fully deductible if there is a “qualifying disposition.” Under IRC § 469(g), a “qualifying disposition” requires three criteria:

1. Disposition of an entire interest (or substantially all[1])

2. In a fully taxable event (where all gain/loss is realized and recognized).

3. To an unrelated party.

If these three tests are met, losses are fully deductible against non-passive income (unless the taxpayer has basis limitations). Thus, in the year of disposition, losses allocable to the passive activity may offset portfolio and other investment income or may become part of a net operating loss."

The passive losses flow to line 17 of the 1040, you can review the 1040 ..

J

JDR1

Hello -

We have two rental properties that both have unallowed losses that have carried over. We sold one of those properties and TurboTax is combining both unallowed property losses for the gain calculation. Is there a way in Turbo Tax to isolate the unallowed losses on form 8582 for the specific property sold?

Carl11_2

Employee

I've spent the last hour looking through IRS publication 544 and I can't find it. It would take me hours to read the entire publication. It is my experience, when you sell a rental property, gains from the sale first have to be offset by "all" passive losses from like-kind activities first. Then if there are any remaining losses those losses are taken against "other ordinary income". But that's only after all passive losses have been taken against that gain.

Critter

Employee

Passive losses on the sold rental are reported on the Sch E in the year of sale which is how you recoup them ... they should not be mingled with the second rental property. Review the return carefully ... did the prior year passive loss carryforward show up on the Sch E ?