Looking for some help:My Schedule E has 4 rental properties and I sold one in 2023. I have been carrying passive activity loss for several years. In my 2022 return, passive activity loss carryover for all rental properties is $52,000 totalFor 2023, real estate loss is 23,000 for all properties on Schedule EFor the rental property I sold, the total gain including depreciation recapture is $100,000 (line 24 on form 4797). Schedule D shows $100,000 as net long-term capital gain (line 15)Question: Where does accumulated passive activity come into play? I am assuming, I can deduct all of the accumulated passive activity carryover loss from all properties (that is $52,000) from the $100,000 gain. As well as $23,000 loss from 2023. Is this the right assumption? If so, where does it all come together? Schedule D or E? Thanks for your help

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harrashid

Question

passive activity loss carryover

Forum|Forum|2 years ago
February 26, 2024
1 reply
0 views

Looking for some help:

My Schedule E has 4 rental properties and I sold one in 2023.
I have been carrying passive activity loss for several years. In my 2022 return, passive activity loss carryover for all rental properties is $52,000 total
For 2023, real estate loss is 23,000 for all properties on Schedule E
For the rental property I sold, the total gain including depreciation recapture is $100,000 (line 24 on form 4797).
Schedule D shows $100,000 as net long-term capital gain (line 15)

Question: Where does accumulated passive activity come into play? I am assuming, I can deduct all of the accumulated passive activity carryover loss from all properties (that is $52,000) from the $100,000 gain. As well as $23,000 loss from 2023. Is this the right assumption? If so, where does it all come together? Schedule D or E?

Thanks for your help

ThomasM125

You can deduct your suspended losses to the extent you have a gain on sale of rental property and rental income in the current year.

You prior year unallowed losses would appear on Form 8582 Passive Activity Loss Limitations, on line 1(c). The gain from sale of your property would appear on line 1(a) and on line 1(b) you may see losses on rental activity in the current year. The net amount of these would appear on line 1(d). That number will factor into the allowed passive loss for the current year that will show up on line 22 of Schedule E, page 1. In my scenario here, there was a suspended loss of $77,777 from the prior year, that gets added to the loss in the current year of $11,500 the sum of which appears on line 22 of schedule E as $89,277, the deductible rental loss for this year.