I had two rental properties A and B. Property A was sold and resulted in $50K capital gains after recaptured depreciation and expenses. I have no other sources of income.
Property A has accumulated Unallowed PAL of $5K and 2021 year loss of $2K.
Property B has accumulated Unallowed PAL of $15K and 2021 year loss of $1K.
The losses from one property has in the past been used to offset the gain of the other.
Long term capital gain up to $40,400 is taxed at 0%.
My questions are:
1. Can I use the PAL from Property B to offset the capital gains from the sale of Property A?
2. Do I have to use all the Unallowed PAL and losses to offset the capital gains? i.e. $50K - $7K(from Property A) - $16K (from Property B) = $27K capital gains.
3. Can I choose to only use part of the Unallowed PAL from Property B to reduce my capital gains to $40,400? i.e. Use all of the Unallowed PAL and losses $7K(from Property A), but only use $1600 and the $1000 loss (from Property B) = $40,400 capital gains.
