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How do I carry forward an ordinary loss from rental property

sale to future years. The loss...
How do I carry forward an ordinary loss from rental property sale
to future years. The loss far exceeds this years ordinary income.
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Answered in 2 minutes by:
2/20/2012
Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1,408
Experience: JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Jax Tax : Welcome to just answer.
Jax Tax : Your unused loss from sch E is carried forward on sch E each year.
Jax Tax : You should only show the loss equal to your other income up to $25k on your 1040 line 1.
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Customer reply replied 5 years ago

Now this loss was from the sale of rental property reported on form 4797 of -162,000.

Our combined income income for 2011 is around 75,000.00 so does that full loss

get put against our 75K and the loss balance get carried forward to future years or just

only 25K of that? The sale of the property was in 2011.

Thanks

Brian

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,146
Experience: Taxes, Immigration, Labor Relations
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Hi and welcome to Just Answer!
Please be sure that correctly determine the loss realized from the sale of your rental property.

Generally - yes - losses may be carried to other years - but there are some rules how to accomplish that.

If you have significant losses this year - most likely - you will have a NOL - Net Operating Loss. Please see for reference the IRS Publication 536

Generally, if you have an NOL for a tax year, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carry back period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carry forward period).

You can, however, choose not to carry back an NOL and only carry it forward. See Waiving the Carry back Period in the publication referenced above.

You cannot deduct any part of the NOL remaining after the 20-year carry forward period.

Claiming a NOL is relatively complex area of the tax - so most likely you would need a help from the tax professional - but considering total amount of losses - it might worth trying.

Let me know if you need any help or clarification.

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Customer reply replied 5 years ago

 

Hi Lev,

 

Can I carry the loss forward only? If so what paperwork is involved this year and subsequent years to do so?

Can I carry the loss forward only?
Yes - as you can choose not to carry back an NOL and only carry it forward.

If so what paperwork is involved this year and subsequent years to do so?

To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. This statement must show that you are choosing to waive the carryback period under section 172(b)(3) of the Internal Revenue Code.

If you do not file this statement on time, you cannot waive the carryback period.

Let me know if you need any help.
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Customer reply replied 5 years ago

Thank You very much for your help. In closing, next years loss

can be deducted for the full remaining balance or is it limited?

Thanks

Brian

Generally - it is only limited by the amount of your income.
Unused NOL is carried to following years.
Lev
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