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Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2430
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I had a 50% long term interest in real estate with an "at risk"

Customer Question

I had a 50% long term interest in real estate with an "at risk" basis of $280,000 that was sold in 2012 for a net long term gain of $1,100,000. We also had a cumulative operating loss of $1,000,000 in the senior housing facility that had a lease on the property. My interest in the operating facility was terminated upon sale of the real estate.

Can my operating loss for the senior housing facility be offset against the property?
Submitted: 4 years ago.
Category: Tax
Expert:  Anne replied 4 years ago.

Thank you for using justanswer.

If you have unallowed losses every year that you own a rental property, you can take a deduction for all of the loss that you carried forward in the year that you sell the property. For example, if you have unallowed losses for five years, you can deduct all five years' worth of losses if you sell the rental property within the last year. There is no limitation on how many years you may carry your losses forward as of July 2011
Please see page 10 of 2011 Publication 925 for more in depth information.

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

Customer: replied 4 years ago.

I am not certain that my question was clearly described. I (believe I know} that the losses on the real estate were limited to the "at risk" exposure. I have a tax basis of $280,000 for the real estate. My taxable gain on the real estate was $$820,000. However, I also had more than $1,000,000 loss on operations. If you are saying that the "unallowed" losses from operations are also treated as deductible up to the full amount of those losses, then, based my predictable income from other sources will be free of income tax for the remainder of my expected life time (I am 79 years of age) and I would be happy to send you a nice bonus relative to my local tax consultant. Otherwise, I must sign a substantial check to our friends at IRS.


Pending my reading of Publication, I will consider a favorable response to my question.


Thanks for your courtesy and prompt response.


Jack Sullivan


Expert:  Anne replied 4 years ago.
If you look at page 2 of, specifically under the instructions for lines 2a, 2b, and 2c, it tells you to "combine long term and short term capital gains and losses and ordinary gains and losses from the sale or other disposition of activivities."

It goes on the say "Enter gains and losses without regard to the at risk limitations, the limitations of capital losses , or the passive activity limitations. "

This is because in the year of sale, passive losses that you have been carrying over from year to year due to income limitations , now become fully deductible as non passive losses in the year of sale.

I hope this helps.
Customer: replied 4 years ago.

I cannot locate the file

I have searched BING and GOOGLE CHROME. Am I missing something?

Expert:  Anne replied 4 years ago.

Hi Jack

No , I don't think you're doing anything wrong. I normally include 2 different ways to get to the information. One way is the address that I gave you. Here's the other:

Instruction 6198 (Rev. November 2009)

The information that you want starts on page 2 of the right had side, and again its concerning line 2.

Please let me know if you have any other concerns or questions, and I apologize for not giving you both options in my previous answer.

Expert:  Anne replied 4 years ago.
Just checking back in with you to see if the other link worked and if you had any other questions. Again, in the year of sale,. the previously unallowed losses due to basis or passive activity become non passive losses for the year of disposition, allowing you to take these losses in full

Please let me know if you have any follow up questions.