Hello,
In 2022 we received $4000 from a former tenant to pay a court judgement for unpaid rent. The judgement was awarded in 2022 for rent owed from 2020. In the 2020 tax year we did not claim a loss or anything special; our rental income was just lower due to the unpaid rent. In 2021 we converted the rental to our primary home (this question is not about that). We have suspended passive activity losses of about $5000 from the time the house was a rental.
For 2022 I entered the $4000 in TT as rent for the house, with 0 rental days, 0 personal use days, and $0 expenses. I thought the suspended PAL would offset the rent so that they would zero out on Schedule E. However, the allowed loss from Form 8582 exceeds the rent, which seems too good to be true. Did I do this correctly? Is there a different/better way?
Many thanks in advance for your time and attention.
