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I have a loss when I sold rental property. Also, I have

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I have a loss...

I have a loss when I sold rental property. Also, I have unallowed losses from previous year. How is the unallowed losses treated in the year of sale? what form to use?

Accountant's Assistant: The Expert will know how to help. Please tell me more, so we can help you best.

Unallowed losses in previous year which was reported in Schedule E, how to treat those in the year of sale

Accountant's Assistant: Is there anything else the Expert should be aware of?

There are other rental properties which are in Schedule E seperately

Submitted: 8 months ago.Category: Tax
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10/4/2017
Tax Professional: Richard, Tax Attorney replied 8 months ago
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 56,897
Experience: 29 years of experience as a tax, real estate, and business attorney.
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Hi! My name is Richard & I will be helping you today! It will take me a few minutes to type a response to your question. Thanks for your patience!

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Tax Professional: Richard, Tax Attorney replied 8 months ago

Good morning. You will not be able to take those previouslly disallowed losses. Pursuant to the IRS Tax Topic 425 (https://www.irs.gov/taxtopics/tc400/tc425):

"Disposition of Entire Interest

  • Generally, you may deduct in full any previously disallowed passive activity loss in the year you dispose of your entire interest in the activity.
  • In contrast, you may not claim unused passive activity credits merely because you disposed of your entire interest in the activity. However, you may elect to increase the basis of the credit property in an amount equal to the portion of the unused credit that previously reduced the basis of the credit property.

Where to Report

Use Form 8582 (PDF), Passive Activity Loss Limitations, to summarize income and losses from passive activities and to compute the deductible losses. Use Form 8582-CR (PDF), Passive Activity Credit Limitations, to summarize the credits from passive activities and to compute the allowed passive activity credit. You may also use Form 8582-CR to make an election to increase the basis of credit property when you dispose of the property."

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Tax Professional: Richard, Tax Attorney replied 8 months ago

Hi. Just following up. My screen indicates that you have not reviewed my response. Please let me know if you did not receive it so I can re-send it if necessary. Thank you! Richard

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