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PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 4152
Experience:  35 years tax experience, including four years at a Big 4 firm.
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I have been renting out a condo in a soft real estate market

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I have been renting out a condo in a soft real estate market with a high mortgage and have been losing money for 4 years. Do the losses simply get added from year to year on form 8582 and eventually realized upon sale of the property or at some point are disallowed losses that roll over from year to year disallowed upon sale? I have been able to refinance the property and the market has improved so I am hoping both to start breaking even if not turning a profit and eventually selling the unit at a profit. Please advise.

PDtax :

Welcome to the site. I will be helping you today.

PDtax :

The losses, if limited by the passive activity limitations, will be suspended and realized when you sell the property.

PDtax :

I like to try and convert these types of losses to currently usable, by making sure you might meet the active participation test. If you do, then you will be able to deduct up to $25,000 of these losses.

PDtax :

To summarize, the losses get suspended and recognized upon sale of the property, unless you can deduct them currently through the active participation exception to the passive activity limitations.

PDtax :

Thanks for asking at Just Answer/Pearl.

Customer:

Thanks. So there is no cut off after x many years or $y dollars in losses that can be realized upon sale?

PDtax :

no limitation. whatever the loss is, you can claim it in the year of sale.

Customer:

Thanks!

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