If you made the election to group all of your rental activities as one activity after January 24th, 2010, then all rental properties are considered one activity. If this is the case then you have not disposed of your entire interest which limits the passive loss deduction until full disposal.
-
New grouping. You must file a written statement
with your original income tax return for the
first tax year in which two or more activities are
originally grouped into a single activity.
Grouping is important for a number of reasons.
If you group two activities into one larger
activity, you need only show material participation
in the activity as a whole. But if the two activities
are separate, you must show material
participation in each one. On the other hand, if
you group two activities into one larger activity
and you dispose of one of the two, then you
have disposed of only part of your entire interest
in the activity. But if the two activities are
separate and you dispose of one of them, then
you have disposed of your entire interest in that
activity.
There are many questions that you have relating to the various options, choices and requirements. This is detailed and complex information so I will provide the publication link for you to review several options, such as disclosure requirements as well as regrouping options. Publication 925-Passive Activity Rules
If you have not carried the unallowed passive losses consistently on your tax returns they will be lost. You can go back as far as 2014 (due April 15, 2018) to complete the correct carryover losses that were unallowed. Then correct each return going forward. This will allow you to have the correct amount on your 2017 tax return.
- Options and/or requirements:
- Amend the tax returns for 2014 forward to capture the unallowed losses.
- Regroup your initial grouping election. A statement must be attached to your return for the year of the change.
- Complete any required disclosures if necessary.
