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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4007
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I sold a vacation rental property. I have $144,596 of loss

Resolved Question:

I sold a vacation rental property. I have $144,596 of loss carried over from 2000. I am not a real estate professional but I have managed the property. My agi income each year is over $150k. Can the passive activity losses carried forward these years be deducted from my sales price less depreciation taken (about $72,000) when calculating taxable gain
Submitted: 9 months ago.
Category: Tax
Expert:  Stephen G. replied 9 months ago.

Stephen G. :

Hello, my name isXXXXX & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.

Stephen G. :

You can't do that, but when you dispose of a property the passive losses are "freed up" and can be used against your income.

Stephen G. :

How do you prepare your tax returns?

Stephen G. :

You need to make sure the property is coded as a complete disposition.

Stephen G. :

When you say you have a "vacation" rental property, exactly what do you mean?

Stephen G. :

Do you mean that you only rented it for part of the year for short term rentals?

Customer:

I am working on Turbo Tax. I sold a house (basis at 300k) we rent for most of the year and use up to 14 days a year. I also filed a 1031 when I bought a new house (800K) but I am not sure whether to use the 1031 and take the lower base or just take the deductions now.

Stephen G. :

I can't give you a definitive answer about that because I don't know enough about your financial/tax situation; however, generally my feeling is when there's a tax benefit to be realized, all things being equal, it generally makes sense to take the tax savings as soon as possible.

Customer:

Thanks. I take your answer to suggest I take the deductions now which give me a big break this year and leave the 1031 asside.

Stephen G. :

Yes. I don't know the details of the "1031", but I don't think that matters given what you are trying to decide.

Stephen G. :

Are you renting the 800K property also?

Stephen G. :

I presume you have made an allocation between land & building and are only depreciating the building over 27.5 years (straight line) if it is residential rental property?

Customer:

yes land not depreciated, only bldg. I am likely to rent the 800k property. The Sect.1031 like kind exchange, would postpone gains on the sale. But the gain and the carried over loss are about the same amount. SO no point in decreasing the base of the new house.

Stephen G. :

I agree.

Stephen G. :

If you need to contact me again with any tax or financial questions, you can just ask for "Steve G" at the beginning of your question. Thanks again for using us for your tax and financial questions. You may get a short survey from the site; if it isn't too much trouble I would appreciate it if you would answer it; the survey results are used to rate our performance;

Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 4007
Experience: Extensive Experience with Tax, Financial & Estate Issues
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