Hello DianeW777 and thank you for your response to my question. The challenge I face is that the apartment building was sold in 2023 and the return of the balance of reserves set aside for post closing costs did not occur until 2024. So for 2024, I do not have an apartment building investment to create a Schedule E for.
For my research, what I am seeing is that once the apartment building sells, you no longer have any passive activity such as taxable income from that apartment building, especially if the activity occurs in a subsequent tax year. So it seems I have to suck it up and report the return of post closing reserves as "Other Income" on our 2024 Tax Return. Other Income is not passive income (and can never be). This does not seem fair, however, that is how it seems the tax rules work.
Thanks again for your response, Think57
