Hi Carl,
Thank you for your explanation regarding PAL on a rental property:
"Basically, all of your carry over losses are "released" in the tax year you sell the rental property.
First, losses are deducted from any gain realized on the sale.
Next, if the losses get your taxable gain on the sale to $0 and there's a loss amount left over, the remaining amount is deducted from other ordinary income in the same tax year of the sale.
Then if that gets your taxable ordinary other income to zero and there's still some loss left over, it gets carried forward to the next tax year." All this makes perfect sense to me.
Some website states "the owner could 1031 exchange the property to defer the gain and continue to carryforward the PALs until they can be used." This statement seem logical to me but I don't quite understand if this will be done by Turbo Tax or what's the technic details to "carryforward the PALs until they can be used. Do we need to include the exchanged out property in all subsequent tax returns until the PALS are used.
Thanks,
Lily
