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Mark D
Mark D, Enrolled Agent
Category: Tax
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Experience:  MBA, EA, Specializing in Business and Individual Tax Returns and Issues
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Hi, I have $2800 income for 2008, $13,000 in capital losses

Customer Question

Hi,

I have $2800 income for 2008, $13,000 in capital losses and $61,000 in passive losses. I went through all the worksheets and my passive loss limitation is $25,000 (the maximum.) But I obviously don't want to use it or my $3000 capital loss limitation. Do I have to use both the $3000 capital loss and the $25,000 passive loss despite the fact that it doesn't help me for 2008? Also, what do I carry over for 2009? $10,000 in captal losses and $36,000 in passive losses?
Submitted: 5 years ago.
Category: Tax
Expert:  Mark D replied 5 years ago.
Customer

 

Based off of the above information, here is what you have:

 

- $22,200 Net Operating Loss carryover (or carryback)

- $36,000 Unallowed passive loss carryover

- $13,000 Capital loss carryover

 

Regards,

 

Mark D

Customer: replied 5 years ago.
Thank you so much for the answer. I had never heard of carrybacks before, so if you don't mind just clarifying:

1. The Net Operating Loss carryover (or carryback) is essentially what is left over from my allowed passive losses, which can then be carried over to offset active gains or carried back to offset active income.

2. A portion of the Unallowed passive loss carryover might become allowed in 2009, according to the worksheets on Form 8582, but either way, they can always be applied against passive gains even if they remain in excess of the yearly limitation.

3. Lastly, I have to take the 2800 out of the allowed passive losses despite that fact that my deductible and/or exemptions would offset this income, correct? In essence, I have to take as many allowed losses as I have income to offset them.

Once again, thank you so much for clarifying this. I had a friend tell me that was going to lose 3000 of the capital loss and 25000 of the allowed passive loss. Your answer is certainly more satisfactory!!!
Expert:  Mark D replied 5 years ago.

Illiani,

 

1) A net operating loss (NOL) can be used to offset any type of taxable income. It can be carried back up to 3 years to claim a refund in a previous year that you paid tax. It can also be carried forward 20 years to offset future taxable income.

 

2) Prior year unallowed passive losses may indeed offset future taxable ordinary income is passive activity rules allow it. They may also create an additional NOL in future years if there is less taxable income than allowed passive losses.

 

3) You are essentially using $2800 of your current year passive loss to offset the other income.

 

Regards,

 

Mark D

Customer: replied 5 years ago.
on 2,

Prior year unallowed passive losses, even if passive activity rules do not allow it, can always be used to offset passive income.

Is this correct?
Expert:  Mark D replied 5 years ago.
Correct, passive losses can always off set passive income.

Regards,

Mark D
Mark D, Enrolled Agent
Category: Tax
Satisfied Customers: 989
Experience: MBA, EA, Specializing in Business and Individual Tax Returns and Issues
Mark D and 5 other Tax Specialists are ready to help you
Customer: replied 5 years ago.
Thank you so much for clarifying this, Mark!

Best,Customer
Expert:  Mark D replied 5 years ago.
Thank you!
Customer: replied 5 years ago.
0
Expert:  Mark D replied 5 years ago.

Line 13 will say -3,000

 

Line 17 is -25,000

 

Correct, actual losses reported on D & E. Please don't let the negative $3K on line 13 confuse you. Since you received no benefit, it still carries forward.

 

Regards,

 

Mark D

Customer: replied 5 years ago.
Thank you so much!

I'm really looking forward to filing this carryback. I had big passive gains (i think they were passive) in 2007. I can only carry back 22,800, correct? The remainder of the 61,000 (36,000) has to just carry over to 2009 and enter the allowed limitation calculations?

How do a file a carryback? 2007 1040 and Schedule E addendum?
Customer: replied 5 years ago.
Hi,

I realize this carryback question really does qualify as a separate question. In that case, I am willing to pay another $15.

I am currently attempting to fill out a Form 1045. It is very complicated. Schedule A to figure out my NOL, and Schedule B is to apply it to 2007-2006-2005.

1. On Schedule A (1045), line 1, do I put in -10900 since I am married filing jointly?

2. Where do I put in my 2800 income (2775 was partnership dividends and 25 was personal interest)?

3. Where do I enter my 25,000 (or 61,000) in passive partnership losses (rental losses)?

4. Where do I enter my 13000 capital losses (again partnership)?

It kind of looks like I might have 74000 in partnership losses that can be applied against partnership capital gains from the previous three years.
Customer: replied 5 years ago.
Nevermind Mark,

I found the information somewhere. I needed to make sure that negatives were entered on lines 22, 37, 38, and 41, Form 1040. I was putting zeros and that was leaving me without an NOL on the Schedule A, Form 1045.

Thank you once again for walking me through this!!!!!!

Expert:  Mark D replied 5 years ago.

Great, thank you.

Customer: replied 5 years ago.
Hi Mark,

I'm sorry to keep bugging you with this same issue, but I just noticed that rental property losses in a limited partnership are generally not allowed under the passive loss limitation rules. But the rules also state that if the filer owns more than 10% of the propery (I do), and participated actively in decisions regarding the propery (I do, with my parents), the partner is considered actively involved in the rental property and can therefore take up to $25,000 in loss allowance. It seems like this is quite open to interpretation.

Many thanks for your help.

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Mark D
Mark D
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MBA, EA, Specializing in Business and Individual Tax Returns and Issues