No, you don't need to make corrections, and definitely shouldn't do so in Forms.
As for your other questions:
- Yes, when you sell a rental property it is reported on Form 4797 to calculate the portion of the sale that is ordinary income (due to depreciation).
- If your gain is larger than the amount that is ordinary income, the rest goes to Schedule D as long term capital gain, where it is netted with other gains and losses, so in most cases you will have a 4797 and Schedule D.
- When you sell your rental property, your passive losses from prior years are allowed in the year of the sale. This number is not limited to $3000, because it is a rental loss, not a capital loss. Also, because you sold the property, it is not a passive loss.
This is a complex situation, so you should review the return until you are comfortable with it. Nothing you included in your question is unusual for the sale of a rental property where you had a lot of un-allowed rental losses in prior years.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
