In 2018, I did a 1031 exchange for a rental property. The prior property sold in the exchange was previously reported on Schedule E and had significant carryover of passive losses. I'm using the new property acquired in the exchange for short term rentals (typically less than 7 days), so it is reported on Schedule C. I use a management company to run all aspects of the rental business for this property and I don't materially participate, so it is passive income even though it is reported on Schedule C. Can I use the Schedule E passive loss carryover from the prior property to offset the passive income from this Schedule C rental? What is the rule that allows or prevents it?
