Mike,
To clarify, I'm planning to write this investment off in the 2023 tax year, but am using a copy of my 2022 TurboTax return to "test" how this will work when I file early next year (if that makes sense).
My goal is to report a $5,000 ordinary loss on the $5,000 investment made in 2010. I have not materially particpated in the operation.
Reporting as abandoned interest, and leaving the sales price and basis as zero does not do anything with the passive loss in TurboTax. I was expecting to see a $5,000 loss showing up on Schedule D, line 12 - "net long-term gain (loss) from partnerships, s-corporations, estates, and trusts from Schedule K-1's". I'm just not sure how to get Turbotax to turn the passive loss into an ordinary loss.
Turbotax help dialog box says "There is another way to turn passive losses into ordinary losses that will become fully deductible: When you completely dispose of a passive activity there is a final accounting of whether you actually made or lost money on this investment. See completely disposed".
When I open that dialog box, it says:
"DISPOSITION OF AN ENTIRE INTEREST
If you disposed of your entire interest in a passive activity or a former passive activity to an unrelated person in a fully taxable transaction during the tax year, your losses allocable to the activity for the year are not limited by the passive loss rules and any passive loss carryovers are allowed in full. A fully taxable transaction is a transaction in which you recognize all of your realized gain or loss.
If a passive activity or former passive activity is involved in a like-kind exchange, the activity should NOT be considered fully disposed of and current year losses and passive carryovers are still subject to the passive activity loss rules.
If you are using the installment method to report this kind of disposition, figure your allowed loss for the current year by multiplying your overall loss (which DOES NOT include losses allowed in prior years) by the following fraction:
Gain recognized in the current year
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Unrecognized gain as of the beginning of the current year
A partner in a publicly traded partnership (PTP) is not treated as having disposed of an entire interest in an activity of a PTP until there is a complete disposition of the partner's entire interest in the PTP."
Thoughts? And thank you again for taking time to assist me, I really appreciate it!!!
