Background:
In 2021, I performed a 1031 like-kind exchange and sold one rental property and used the proceeds to buy two. I used TurboTax Home & Business which automatically generated a 8824 Like-Kind Exchange form and the process seemed successful.
Now, while working on 2022 taxes, TurboTax has automatically imported the sold property. It said “We need to keep these income items… even though we can’t remove them, don’t worry” and referred to rent from the sold property. When clicking through the sold property, TurboTax had automatically selected Carryovers “I have passive activity real estate losses carried over from a prior year.” and proceeded to list last year's passive losses . Continuing to click through leads to a prompt that says “since this property was not a rental at all in 2022, you should delete it as a rental” (because I sold it). Continuing will delete the property.
These steps have caused a lot of confusion and I’m not sure how to proceed. I double checked my 2021 taxes and they seemed reasonable but I’m not an expert. I suspect TurboTax knows the property is sold but has kept it in place due to the carryover loss.
Questions:
- Why is the sold property still in showing in TurboTax?
- Is this caused by a mistake made when filling 2021 via TurboTax?
- Should I follow the prompts and remove the sold property?
- What happens to the carryover loss this year and next year?
- What are the next steps?
