Based on your follow-up facts, here are my comments:
- Passive activity losses can only be taken to the extent that you have (1) tax basis, (2) at-risk basis, and (3) passive activity income.
- The way this will work is that if you have passive activity losses and no passive activity income, the losses will be suspended; no current year tax benefit. These losses will be carried forward indefinitely until you liquidate your investment. These carried forward losses will be reflected on form 8582 and the worksheets accompanying that form.
- If you do have passive income in a year, any current or carried forward passive activity losses will offset that income. The income can be offset by any passive activity. TT will be able to handle this computation.
- There are exceptions to the above general rule for (1) rental real estate and (2) publicly traded partnerships (PTPs)
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
