Capital Gains and Losses
Capital Gains Tax Questions? Ask a Tax Advisor for Answers ASAP
Hi, my name is Mark. I will be happy to help you with your questions. Unfortunately the long-term loss from the capital gain generated from the sale would be able to offset the Passive Activity Loss. Is this a 2015 return? Is it possible to sell one of the investment with passive losses to be able to apply these to the gain?
As I understood your question the client has suspended passive losses. The capital gain from the sale of the partnership interest cannot by offset by the suspended losses. You would need to have passive income or sell the passive activity to be able to utilize these losses.
That is the way I interpret it as well. Since the gain will be reported as capital (reflected on schedule D or Form 4797), it cannot be used to offset the suspended passive losses.