In the current year, I have suspended passive activity
losses (PALs) that should be released due to the disposition of a residential
rental property. TurboTax is reporting
the entire amount of previously suspended PALs on Form 1, line 7. Additionally, TurboTax is properly ignoring
the Sections 1245 & 1250 recapture related to the gain on the sale of the
residential rental property for MA income tax purposes. My issue is that the PALs are in excess of
the Form 1 income that I am reporting.
Additionally, the sale of the residential rental property has triggered
a long-term capital gain. Therefore, I
have a deficit reported on Form 1, line 10 and a long-term capital gain subjected
to the 5.15% tax rate. It is my
understanding that any excess PAL reported on Form 1 may be used to offset
income reported on Schedule B and Schedule D following certain ordering rules. Does TurboTax automate these adjustments or
will I need to deal with this manually?
Also, does anyone disagree with my interpretation of MA income tax law
with respect to offsetting Schedule B and D income with excess losses/deductions
from Form 1?
