Married filing jointly: I sold 12 rental properties in June of 2022 that long term capital gains tax will apply. I qualify as a real estate professional and in the 6 months I can show where I have materially participated in my rental business rehab activities. I will have aproximately 600K taxable as long term capital gains and this same year have purchased into LP multifamily syndications of real-estate (non 1031 exchange) that will create about 600k of cost segregation depreciation loss on my redeployment of capital from my rental properties sales this year. Can I offset my LP syndications 600k loss against my rental property long term 600k capital gains because I am a real estate professional that actively participated in the same year? I do not have a W2 job Real-Estate is it.

TurboTax

File with experts
File your taxes
Experts at your fingertips

An expert helps with your taxes, or does them for you
TurboTax Expert Full Service

TurboTax Expert Assist

TurboTax Self-Employed
Prior year taxes
File myself
File myself
Do it yourself

We'll guide you step-by-step
TurboTax Do It Yourself

TurboTax Self-Employed

TurboTax Desktop
TurboTax Free

Activate your product

Prior year taxes
Business
Business
Business taxes

Get your T2 corporate return done right, your way
TurboTax Business

TurboTax Business Desktop
Tax situations
Tax situations
Tax situations

Find extra guidance for your big life moves
For investors

For 25 and younger

For self-employed

For new to Canada

For life changes
Resources
Resources
Resources

Explore tax tools, get tips, and read reviews
Personal income tax calculator

RRSP savings calculator

Learning hub

TurboTax support (FAQ)

TurboTax community
Pricing

Community

Ms8172

Question

Using passive activity losses in other investments to offset rental property sale gains

Forum|Forum|3 years ago
November 18, 2022
1 reply
0 views

Married filing jointly: I sold 12 rental properties in June of 2022 that long term capital gains tax will apply. I qualify as a real estate professional and in the 6 months I can show where I have materially participated in my rental business rehab activities.
I will have aproximately 600K taxable as long term capital gains and this same year have purchased into LP multifamily syndications of real-estate (non 1031 exchange) that will create about 600k of cost segregation depreciation loss on my redeployment of capital from my rental properties sales this year.

Can I offset my LP syndications 600k loss against my rental property long term 600k capital gains because I am a real estate professional that actively participated in the same year? I do not have a W2 job Real-Estate is it.

Not A Product Question

Critter-3

Yes but not directly ... they will both be reported on the form 1040 eventually using different paths ( Sch D and the Sch E page 2 ) and net out in the end.

Ms8172 Author

I was told by my current CPA that because an LP position is strictly passive at the 6 month mark of 2022 that when I sold my single families the IRS would not let me write any 55% depreciation loss (from my LP positions) which is 1.1 million invested and let me apply that to my 600k LT capital gain from the sale of my singke family rentals. I will owe roughtly 180-200k to the IRS.

He said the IRS will not let me offset my long term capital gains using 1 year cost seg depreciation loss on my LP position because the IRS will see that money as passive only. It honestly makes no sense because I don't believe the IRS differentiates rental real estate. I might be wrong... Again, I am considered a material participation Real Estate Professional in 2022.

Critter-3

Ok... part of asking for tax advice on a public intenet forum is when you don't post all the information needed to give a full answer. I gave a very generic answer based on your limited information that the LP was going to pass thru a deductible loss. I would seek local professional guidance if you want a second opinion ... someone who can review all the information available. Ask them to provide references to IRS regs for their position.