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Discussion:Character of Rental Loss Carryforward

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Discussion Forum Index --> Advanced Tax Questions --> Character of Rental Loss Carryforward


Discussion Forum Index --> Tax Questions --> Character of Rental Loss Carryforward

DonPriebe (talk|edits) said:

13 March 2014
MFJ couple had rental house, filed Schedule E showing loss for several years. AGI over limit for special allowance, so no loss allowed, but carried forward. Now retired and no longer renting out house, also AGI dropped below limit. Does passive loss carried into this year retain its character as rental loss, and so is (partially) allowed, or does it become general passive loss deductible only against passive income. [Former rental house was NOT sold.] Have two software programs available; get opposite results. No help from yellow box.

Terry Oraha (talk|edits) said:

13 March 2014
Look at form 8582. notice the three categories. Now either your softwares have different form 8582s or you get opposite results because of they are not coded properly.

Ckenefick (talk|edits) said:

13 March 2014
...and the answer is....what about that, do we get the loss? Can we actively participate in no activity? Is there a lookback rule?

DonPriebe (talk|edits) said:

13 March 2014
OK - I reread the instructions for the 8582 and came across this in the instructions for completing Worksheet 1 (the RENTAL worksheet) ...

Do not enter a prior year unallowed loss in column (c) of Worksheet 1 unless you actively participated in the activity in both the year the loss arose and the current tax year. If you did not actively participate in both years, enter the prior year unallowed loss in column (c) of Worksheet 3.

So it does come down to Can we actively participate in no activity?. I don't think so. Looks like the loss looses its character as rental loss and becomes generic passive loss (to the extent that instructions are authoritative.) Score one for TaxWise!

Ckenefick (talk|edits) said:

13 March 2014
This is a bit like Marcilio's recent post...but in Don's case, IRS wins this one easily. They might win Marcilio's too, but...

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