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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15328
Experience:  15years with H & R Block. Divisional leader, Instructor
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Taxpayer rented out investment property and qualified loss

Customer Question

Taxpayer rented out investment property and qualified for 25k loss deduction over the last 3 years due to AGI under 100k. Even with the deductible loss, taxpayer still has over 50k in suspended losses. For 2016, the taxpayer will convert property to mixed use since will use the rental property for over 10% of the days rented. The personal use will be 30% and will rent out 70%. My question is two part: 1) are deductions limed to rental income due to mixed use or can the taxpayer still utilize the 25k loss deduction (net rental loss after allocating 70% of the vacation home expenses to rental expenses is estimated at 35k) 2) If in 2017, taxpayer only uses the property for personal use and then sells the property the following year, is the loss not deductible?
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.
HelloDeductions are still allowed on mixed use but only for the actual rental portion of the use.You can continue to deduct the suspended passive-activity losses from passive income. The suspended losses remain suspended. Carry them forward until you sell the home in a fully taxable transaction.Current and suspended losses are fully deductible if there is a “qualifying disposition.” Under IRC § 469(g), a “qualifying disposition” requires three criteria:1. Disposition of an entire interest (or substantially all[1])2. In a fully taxable event (where all gain/loss is realized and recognized).3. To an unrelated party.