1. If the entire gain or loss from the sale of the property is recognized, the current-year loss from the activity (including all suspended losses) can be offset in full against any gain from disposing of the property or combined with the loss from such disposition.
2. If gain remains after item 1, it can be offset against any losses (including suspended losses) from all other passive activities. Any remaining gain is reported in the normal manner. However, any loss remaining is carried forward as a suspended passive loss.
3. If the result of item 1 is a loss, this loss can be offset against any net income or gain from all other passive activities (net of suspended losses carried from earlier years). If any of the loss from the disposed activity remains, it can then be deducted as a nonpassive loss.
Source: https://www.thetaxadviser.com/issues/2008/may/disposingofanactivitytoreleasesuspendedpassivelosses.h...
